>> CHRISSI GUTH: Good afternoon. I am
Chrissi Guth with CBP. This webinar is
part of the 2023 webinar series.
Please be mindful that you will be on
mute during the presentation, therefore
we ask that you please submit any
questions that you have in the chat
feature.
If you plan to request the optional
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educational institute, please check the
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throughout the webinar.
Now I would like to pass it over to
national import specialist, Arthur
Purcell.
>> ARTHUR PURCELL: Well thank you,
Chrissi. And good day to everyone.
My name is Arthur Purcell and I'm
national import specialist 104. I will
be presenting today on the
classification of automatic goods
vending machines of heading 8476.
This presentation should run about 50
minutes or so, and I'll try to leave
some time for questions at the end. But
if you do have questions, please enter
them in the chat box and I'll try to get
to those either during, but really more
likely at the end of the presentation
because I have a fair amount of material
to cover.
First, some preliminary items. Here is
CBP's mission statement which concerns
safeguarding our borders and enhancing
our country's economy.It's
the role of Office of Trade of which we
are a part to enforce laws, especially
those that include moving products
across our borders.
This slide sets forth a disclaimer.
This seminar is intended to be
informational only and providing useful
guidance to the trade rather than
concrete statements as to particular
factual situations.
The tariff law is governing imported
items frequently changed by legislative
or administrative action.
Additionally, courts issue various
interpretations of law, particularly the
court of international trade, and those
interpretations can change over time.
Most of you are aware that CBP has a
robust program, and that's the avenue
that members of the trade should be
pursuing to receive a determination on
your particular facts.
Whether or not you seek a binding
ruling, importers of the trade must
exercise reasonable care which includes
consulting with experts such as
attorneys, customs brokers or trade
professionals. And finally, by tuning in
to NCSD's webinars, you should be aware
that more is usually needed to fulfill
your reasonable care obligations.
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don't endorse or approve of any of the
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These images are in the public domain
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know I saw a commercial saying that, but
we are required to cover this.
Okay. So this slide contains a web
link to a site describing the binding
rulings could prom.
-- program. If you need to see the link
again, perhaps we can post it in the
chat box.
Here's my contact information. I'm
based at the World Trade Center in New
York.
Really the quickest and best way to reach
me is email. I definitely will respond
to your email as timely as I can.
All right, so let's get started. Why
would anyone want to hear a webinar
about a run of the mill candy machine or
vending machine? It sounds somewhat
dull, doesn't it?
But as I will explain, heading 8476
discover a range of interesting vending
machines, and that will be on a typical
coke machine or candy machine, but more
importantly, heading 8476 presents
interesting challenges for tariff
classification. Particularly the
commercial meaning in dealing with a
changing economy.
First I'll go some history of vending
machines just to give you context for
our discussion.
Next, I'll discuss what it means to
vend something and what purchasing a
product means versus purchasing a
service. And what does a product mean?
And how about machines that provide only
information or machines that provide
amusement or entertainment, are these
really vending machines?
And what if the machine provides a
product I will borrow or use only on a
short-term basis rather than on it?
Keeping these questions in mind, let's
get started.
Just a little background here to give
you an idea of the type of goods I
handle in NIS 104.
These headings include a range including
textile machinery 8444 to 8466. Power
tools for working in the hand, 8467.
Mineral processing, vending machines, and of course
the catch joul residual provision which
keeps me most busy.
And of course I handle vending
machines of 8476. Here's the current
version of heading 8476. The language
for this heading has remained unchanged
since it came into being. It addresses 2
types of broad vending machines. The
first type is automatic beverage
machines, 8476.21 and 29, depending
whether they have heat organize
refrigeration devices. These are your
soda and coffee machines.
The other groups, 8476.89 include those
with heating and those without. Most of
the things I'll be discussing fall into
8476.89. So it covers money machines,
which are freestanding machines
including coin deposit and they allow
you to change coins for bank notes,
change bank notes to coins, large
denominations into smaller ones and so
on.
I won't really be addressing these
today as they're not truly automatic
goods vending machines. The heading
itself, as you can see, provide only a
few examples of automatic good vending
machines. However, the expire Tori notes
cover more that I'll get into later. We
have 8476.90 at the bottom here and at
the end I'll address vending machine
parts.
One excellent sources of information
for vending machines with 8476 can be
found in CBP's informed compliance
publication entitled vending machines
and their parts under the HTSUS.
Keep in mind that this guidance was
published in 2004 and revised in 2009,
so it may not capture certain new
machines and mechanisms or addressee
involving notions of what constitutes
vending and products for that matter.
Also useful is the website of the
national automatic merchandising
association or NAMA. Their website is
NAMA now.org. This has about a thousand
member companies and represents the U.S.
convenience services industry. Lots of
good information in there as well.
All right. So vending machines, as you
can see from the slide, have been around
a very, very long time. They've had a
long and interesting history. Here's
some important milestones.
As you can see, the use of a device or
a machine to automatically provide or
dispense a product dates back to really
ancient times. But the first modern day
vending machine was invented in 1867 in
England.This
was a machine for customers to purchase
postcards from the machine by inserting
coins and the machine actually dispensed
the postcards.
U.S. cigarette machines appeared in
1905 and 1906, respectively. And then
there was the auto mat which came at the
use of the 21st Century. Perhaps you've
seen them in movies or heard an older
relative talk about them. They were sort
of cabinet-like machines, you could find
them in cafeterias or restaurants, and
they provided customers with a sandwich
or other food item. You dropped a coin
in the machine, lifted the small glass
window, and then removed the food item.
And so by 1930, there are
technological innovations including slug
rejectors, and these really kind of
helped thieves from grabbing a free
lunch, if you will.
And today many vending machines have
bill validators to prevent the use of
counterfeit bills.
And finishing up this line of thought
here, the '70s to the '90s, you see
advanced payment systems develop to
allow customers to pay with contract and
their debit cards. Software allowed
vendors to electronically track
inventory and automatically reorder
product for restocking machines.
And you could see at the bottom half
of this slide, this gives you a flavor
of some of the newer machines that are
often referred to as vending machines
but aren't really necessarily vending
machines.
One is NFT or non-Fungible token vending
machines, it was dispense cryptographic
assets based on Blockchain technology.
Digital collectibles and the like. And
there are these car vending machines
which you probably have seen advertised,
eBike, these eScooter kiosks that you'll
see around the city, we'll get into
those a bit, and library book vending
machine.
These aren't necessarily vending
machines, but these things are called
that at times and we'll get into that.
Okay. So now let's get some
definitions out of the way.
First, the tariff terms vend, vending
machine, are not defined in the tariff.
And as most of you know, when they're
not defined, tariffs terms are not
defined, we apply the common or
commercial meaning of the term which are
really presumed to be the same. They're
not always, but we presume them to be
the same as a starting point.
The common and commercial meanings may
be obtained from ordinary dictionaries,
encyclopedias and industry maybe
consulted. To vend means to sell goods.
In other words, a sale is required.
A vending machine is defined as a coin
or payment operating machine that
dispenses merchandise. Some dictionary
definitions state that vending machine
can provide either a product or a
service, however, as I'll explain over
and over again here, machines that
provide services are clearly not covered
by 8476.
The vending machine trade association
NAMA defines vend more broadly as any
state that vending involves the
provision of a service and authenticity
unintended point of sale.
The ENs provide other examples of
vending machines.
These are railway ticket machines,
machines that sell toilet products,
newspaper vending machines. They seek to
explain the meaning of the term
vending.
But the ENs are really --
they're not binding. They're intended to
provide guidance to the trade and
customs to classify merchandise. The
courts are often guided by them as well,
and CBP will always consult the EN as
these constitute the official
interpretation of the tariff at the
six-digit level.
Vending refers to a monetary exchange
between the purchaser and the machine in
order to acquire a product. Keep that
definition in mind.
The ENs also state that 8476 does not
cover machines that provide services
such as shoe shining machines or coin
laundry. So the key takeaway from these
definitions is that there must be a
monetary exchange involving a product or
merchandise. In other words, a sale is
required.
And there must be a device or
mechanism to accept payment. If there's
no payment, there's no vending.
Finally, the purchase of a product
must be at the point of sale. What do I
mean by this, point of sale?
This means a monetary transaction that
be occurs at the machine itself. That is
when you put money into the machine, not
before you engage the machine or
sometime after you engage the machine.
Okay. So even if a machine is well
known and understood in the industry as
being a vending machine, and meets some
of or all of the physical and functional
criteria for vending machine, it may not
fall in heading 8476 on account of
section note exclusions or EN
exclusions.
Here you can see the ENs provide
example of machines an apparatus that
dispense or provide something and might
resemble and behave like vending
machines, but they're either excluded by
the Section notes or classified in other
headings.
For example, a coin operated
observation telescopes that you see at
the roadside stops or on the top of tall
builds are Chapter 90.
Another example is coin operated lock
for lockers that you might see in an
airport. Or public pay toilets.
Telephone apparatus that accept
payment are generally covered by 8517,
but this exclusion does not include
phone card calling machines. They're
you're getting a product, you're getting
a phone card in exchange for payment.
Game machines of skill or chance are
covered by Chapter 95. Such machines are
sometimes confused with vending
machines, especially where physical
prizes are involved and dispensed.
In a few moments I'll spend some time
discussing the differences.
Let's look at Section XVI exclusions
that impact vending machine
classification.
So as I said, Section XVI contains a
number of exclusions that impact
classification for 8476. One example is
Section XVI know the 1-L and this
includes section 17 including aircraft,
vessels or transport equipment.
So you're thinking what could section 17
have to do with vending machine
classification?
The New York ruling H 67575 customs
considered the so-called mobile bank,
which is basically a vehicle outfitted
as a mobile banking facility, and that
included an ATM machine and a portable
computer. These drove around and stopped
and served the public with customer
deposits, check cashing, utility
payments, payroll, money orders, and the
like.
And the user could which exchange
money with the machine.But
here we have no product being dispensed
to the user.
This was classified in 8705.90 as a
special purpose motor vehicle, not a
vending machine of 8476. ATM machines
are classified in heading 8472.90.
Additionally ATM machines provide a
service and they don't involve the sale
of a product.
So here we have your typical photo
booth. All of you have seen its
machines, I'm sure in arcades, shopping
malls, various events. Let's look at some
of the features of the photo booth.
This is a machine that automatically
takes and provides you with a photo. So
far so good, right? There's a payment
mechanism.
This is a substantial machine. It has
-- it provide you, as I said, with a
product and it provides it at the point
of sale. You put the money in and you
get your photo handed to you. And
they're typically located in busy,
high-traffic areas.
So what do you think? Is this a
vending machine? You can enter an answer
in the chat box if you want here.
I'm seeing some yeses. That seems to
be what most people are saying. Let's go
to the next slide and find out.
So the answer is it is a vending
machine, but the real question is whether
it's an 8476 vending machine. As with
many things in the tariff, the answer
is, it depends, right?
Let's take a look at Section XVI note
1-M. At 1-M excludes articles of Chapter
90 covering optical Fogt graphics,
cinema graphic apparatus. And customs
reviewed the classification of a photo
booth way fixed focus camera. These are
the type that you can't adjust the
focus.
And headquarters, that ruling
determined that the photo booth met the
requirements for a vending machine, but
it was precluded from 8476 by Section
note 1-M, instead of falling into 9006,
that covers fixed cameras specifically.
So there we have an exclusion. We have
something that's a vending machine, but
doesn't go in 8476.
And what about photo booths using
digital cameras? In this case note 1-M
the Chapter 90 exclusion doesn't apply.
Those digital cameras and CCD color
video cameras that produce photographs
are provided for in 8525, and therefore,
they're not covered by this exclusion.
Another example of the note 1-M
exclusion would be bill accepters that
are done separately. They check the
bills for counterfeits. Those are
heading 90 also.
Here's another Section XVI note
exclusion 1-N. This excludes articles of
Chapter 91 including clocks and watches
and time of day apparatus for measuring
intervals of time or a watch motors with
synchronous motor.
Parking meters that accept coins or
other payment are classified in Chapter
91, specifically 9106. I have a ruling
here that addresses that parking meter,
New York 806722.
But what if exclusion 1-N did not
exist at all? Would parking meters fall
into 8476? What do you think?
Seeing in nos. And in fact, the answer
is no. Because we don't have a sale of a
product here, there's no product being
dispensed. You're paying to occupy a
parking space for a limited amount of
time.
So we come to Section XVI note 1-P,
which excludes amusement articles of
Chapter 95. These are the machines found
in arcades, amusement parks, games of
skill or chance, shooting galleries,
merry go rounds and the like. We need to
be careful here. There are similarities
between certain vending machines and
amusement machines.
EN 9504 states that the heading covers
machines operated by coins, bank notes,
bank cards, tokens, other means of
payment of the kind used in amusement
arcades, fun fairs, et cetera, for games
of skill or chance.
So with that in mind, let's look at
the so-called coin pusher machine
addressed in New York A86779. This is
the Rubble Bubble machine. Many of you
have seen these machines before. They
involve the user inserting a coin in the
machine while aiming the shaft to a
particular location on the machine and
the coin will drop down on to one of
several tiered platforms that move. And
the moving platform pushes the coins
forward and, you know, push them into
each other and sometimes over the edge
of the platform.
And if the coin goes over the edge of
the platform, it will go into a shoot
and, you know, into the player, the
player will be able to retrieve the
quarters that drop or whatever
denomination is used. Or perhaps it will
register an amount and produce a ticket
and you can cash that in.
These are not vending machines, these
are amusement machines of Chapter 95. As
these don't -- these don't involve the
dispensation applied to the primary
function. And again, the primary function
of amusement machines of 95 is to amuse
the player rather than provide a
product.
Another example of the Chapter 95
exclusion is the tractor simulator in
New York R02266. This allows you to
operate a minute any excavator with a
hydraulic bucket. You can simulate
digging into the ground at a fair, state
fair or something like that. You'd put
coins in it and use the machine for a
particular amount of time.
And but like the Rubble Bubble
machine, the coin pusher machine, the
tractor simulator had elements of a
machine, but didn't provide you with a
product and the its main function was
amusement, not vending.
Other examples are pin ball machines,
9504, and kiddy rides of 9508.
So now we know what a vending machine
isn't. So what exactly is an automatic
vending machine?Here
are what I identified the four core
elements of an 8476 vending machine.
First, the machine must vend.As
noted, vend means to sell.
It's a monetary transaction resulting in
the purchase or obtaining a good, and
the sale must be made when the machine
is engaged, meaning at the point of sale.
Second, the machine must automatically
sell the product.
They must distribute the product
automatically or at least
semiautomatically. Automatically means
that the machine will dispense the
product to the consumer without further
action by that consumer. Think a coffee
machine, putting your cup in and the
coffee gets dispensed to you.
Semiautomatic machines might release a
lock mechanism on the machine's
compartment so the purchaser can lift
the window and there's just one step to
be take evening by the user.That's
a semiautomatic machine.
Third, the machine must provide a
product and thing and not service.
And fourth you obtain the product in
exchange for payment.Payment
mechanism is a must, as I said earlier,
and it is okay if the use of the machine
triggers the issuance of a bill or Ben
debit's the user's accounts.
We'll explore those going forward.
Before going into how elements have
been applied and rulings, it's helpful
to understand what types of articles
generally fit into this particular
heading. In other words, does my machine
share the same characteristics of goods
that fall in 8476? Are we even really in
the same ballpark?
So some common features with 8476
vending machines, again, these are aside
from the four elements I just mentioned,
are that they're usually located in
high-traffic, conspicuous locations.
They're rarely used in the home or for
household purposes. They're not
children's toys.
These are substantial machines that
have a strong lock mechanism. There's a
real payment mechanism also. And they're
usually not small or countertop-type
items.
And terminology can be really
confusing when we're talking about
vending machines, as I think I
suggested. A machine with the word
vending in its title is not necessarily
enough.Consider
the so-called reverse vending machine.
So these are machines, you all know what
these are, they're basically located in
supermarkets and recycling centers. And
they allow you to return your used
bottles and conditions in exchange -- in
exchange they dispense a ticket to you
or receipt for payment.
And these machines calculate the
number of items deposited and the amount
owed to the depositor. That's their
principal function. And this makes them
classifiable in heading 7480.90 with
other machines of a ticketing device.
You should be aware there's a recent
proposal now with the world customs
organization had these reverse vending
machines to 8476. So that's under
consideration now.
So one of our core elements is that
the machine involves products and not
services. The machines appearing on this
slide, this is some examples of machines
that do not sell or provide a product to
you, but rather dispense or provide
services.
For example, Coin-Op washing machines
or dryers or public toilets serve useful
functions to be sure but do not provide
products.
A dry-cleaning garment retrieval
system will help you retrieve your
clothing, but it's not providing a
purchase product to you. It's holding
and retrieving your clothes.
So machines listed here have one of
the four core elements of vending,
they're nevertheless providing a service
rather than a product.
If we're talking about a machine that
provide a can of soda or cup of coffee
or hair comb, maybe you buy it at an
airport, vending machine, we all know
we're dealing with some sort of physical
product.
But what about a machine that sells
and copies a computer program on to a
particular media such as a floppy disk
or burns a program on a CD or downloads
a product on to the handheld device? Is
the product being vended?North
Carolina 884182 was the Robosoft
computer program vending machine. In
this machine they put in their own
computer diskette, this was about in '93
when these were popular, and then
selected the desired program and
inserted payment and the machine would
copy or burn entertainment, educational
programs off the diskette.
Here, customs determined that the
purchase of a computer program
transferred a copy to storage media was
a sale of a product. So the takeaway
here is that a product is something that
you can acquire and use even if it's in
electronic or data form.
Another one of our four core elements
is whether the machine is actually
vending, meaning, selling your product
in exchange for payment rather than only
dispensing a product to you.
So merely dispensing or providing a
product to a consumer or customer is not
sufficient. Let's look at a couple of
examples.
One is an ice cream dispenser such as
one you may encounter at a party which
lacks a payment mechanism and, again,
dispensing alone is not enough for 8476.
So if you have an ice cream dispenser
without a payment mechanism, you don't
have a vending machine of 8476.
Another example is the Sure-Med system
which is used to distribute medications
to health care facilities. These were
behind the counter. Customs looked at
the product literature, which made no
reference to any sale function
functionality of this machine and
they're located in restricted areas
rather than high-traffic areas like most
vending machines.
So the Sure-Med system was not a right
fit for 8476.
All right. So let's take a look at
so-called automated industrial machines.
These are point of use cabinets that you
see on a shop floor in a company. You
know, people are working on things that
use tools and PPE equipment and
whatnot.
These track and manage stock,
maintenance repair operation and PPE
equipment and other consumables and
tools and so on.And
they dispense the product that's been
paid for by somebody at some point, but
do these machines truly vend? Let's look
at some of the general features of these
machines.
Typically a worker would select the
tool, PPE, or other item they need from a
touchscreen. They'd show their badge and
it would get them access to the machine
and the machine would then dispense the
product to them.
And some, but not all of these
machines actually generate a bill when
the product is dispensed. And even
automatically reorder inventory.But
for machines that do not charge the
consumer or generator, initiate a bill
for the sale of the goods, we don't have
a vending machine.
For instance, N204484, customs
classified an industrial vending machine
known as the Hybrid AccuCab as other
metal furniture of heading 9403. Why not
8476 in because the machine did not
generate a bill and there's no sale. No
product provided in exchange for payment
from the person who's actually engaging
the machine.
So if there is a payment mechanism on
the industrial vending machine, the bill
is automatically transmitted when the
user engages that machine, we might have
a vending machine of 8476, as was the
case in H269223 at the bottom of the
slide here.
To meet the core requirement of a
point of sale transaction, as I
suggested, it's not required that payment
be made instantaneously. As I noted,
customs ruled that it's sufficient that
when the machine is engaged, it debits
the user's account or generates a bill
to the user.
The second ruling on this slide
classified an in-room mini bar,
so-called Smart Tray. This was a tray,
you've seen them in your hotel rooms
perhaps or cruise ship state rooms, they
sit on top of a mini bar which is a
vending machine, and they sense when a
snack or beverage is removed from the
tray and then they charge the guest a
bill to their room.
And so as I said, they're used in
conjunction with the mini bar and it's
connected to it. And because this mini
bar tray was imported separately in this
case not with the mini bar, it was
classified as part of a vending machine,
8476.90. The takeaway here, 8476 vending
machines need not involve the payment.
So the generation of a bill that results
from the engagement with the machine may
be sufficient.
All right. Let's stay on the point of
sale concept for just another minute.
This slide describes the so-called
Packrobot machine at issue in H315458.
So the pack machine -- the Packrobot,
rather, was situated in a brick and
mortar store and held and dispensed
goods to a purchaser who previously
ordered the article online.
So here the actual money transaction,
as I said, occurred online before the
customer actually engaged the machine.
At the time of payment or shortly after,
the purchaser received a barcode or a QR
Code, and then they bring that code with
them to the store. And they put it into
the -- into the Packrobot and that
allowed them to retrieve the item from
the Packrobot at the store. This is sort
of like a lock. This had mechanisms in
it and your good would come down through
like an elevator and dispense the
product to you.
There's no vending here because the
monetary transaction did not take place
at the Packrobot. In short, we don't
have a point of sale transaction. We
basically have kind of a sophisticated
holding cabinet, mechanical function
capability. And with the mini bar tray
device with the payment mechanisms,
these are obviously different.
What do you think about the car
vending machine you see and hear
advertised these days? Is this a vending
machine? We don't have one of these
before us and we would need to confirm
more details about their operation.
But at least as I understand how they
typically work, one or more elements of
an 8476 vending machine may be missing.
First, it doesn't appear to be point of
sale transaction. In that there's no
true payment system at this machine.
One doesn't insert some sort of
novelty token, but not money.The
sale occurs before the customer even
arrives at the machine.
And second, arguably, we do have
automatic dispensation of something, the
car, but the car is really held for
pickup in a type of automated parking
garage. And beside, this machine is not
located in a high-traffic area that you
would walk up to and engage.
So you know, therefore, machine that
operates as described is really very
unlikely to qualify as a vending machine
of 8476.
So again, without a payment mechanism,
as I said, you can't have a vending
machine. So in ruling New York J86442,
they provide a good example of this core
requirement. These address various
Enoline dispensing machines, some of
which are refrigerated, some are not.
While some wine dispensers had payment
mechanisms, others didn't. So where were
these units classified?
Not as vending machines, unless they
have a payment mechanism. The ones with
a chip card payment mechanism were
considered vending machines, whether or
not they had refrigeration systems. But
the wine dispensers with no chip
mechanism -- no chip mechanism,
refrigerator or not, fell in 8418.
All right. Just to change gears for a
moment, let's suppose we have a machine
that in exchange for payment offers you
only a chance to win a prize. And
dispenses that prize to you only if you
win it.
And let's say the prize is, in fact, a
physical product, such as a toy or a
doll or jewelry of electronics and so
on.
And the dispensing machine is a sturdy
machine, has a strong lock mechanism,
it's in retail and high-traffic
location. And but again, remember, the
games of chance are precluded from
8476.
So what do you think? Is this --
something like this an 8476 machine?I
know I'm not providing you with lots of
information, but let's go to the next
slide and find out. I'm getting a lot of
nos.
Well, here we have the beloved Claw
machine. This is a device that's provided
lots of aamusement and produced grief
and tears for children of all ages.
They held prize articles like stuffed
animals including a payment mechanism
was determined to be an 8476 vending
machine.
With this machine, the player manipulated
a claw down into a bed of items and
tries to grip one of them and move the
product into an opening.
The prize then moves on to a delivery
chute and is dispensed.
While the player rarely does end up
with the product, the machine does
involve physical products that could be
obtained.And
I guess -- I suppose this distinguishes
The Claw from pure amusement and chance
machines of Chapter 95, but I do think
this one is a close call, especially
given how unlikely it is to actually
obtain a product from the machine.
Okay. So let's say you're alt -- at a
carnival or state fair and you come
across this mysterious figure encased in
a glass cabinet and he's hovering over
some sort of crystal ball.
And he promised to give you your fortune
only if you insert a coin into the slot.
Is this a vending machine? We have a
point of sale transaction, a payment
mechanism, it dispenses something to you,
your fortune.
It has a strong mechanism with a lock.
It's in a high-traffic area.
Let's see, I'm getting yeses.I'm
getting nos. I'm getting big. I'm
getting an LOL. Let's go to the next
slide and find out.
So, well, I'm not really sure about
the fortune teller dude in the class
cabinet, but in New York ruling 856362,
customs reviewed several coin-operated
machines that displayed various types of
information on LCD display lines on the
machines and they determined that these
machines are not automatically vending
machines of 8476.
One of the machines will display the
user's weight, love mood, horoscope and
luckny number. And so customs ruled that
a machine that provide only information,
even for payment, is not a vending
machine of 8476.
So to recap here, if the machine
provides you with information rather
than a product or merchandise, you
probably don't have a vending machine of
8476.
So now we come to an interesting and
somewhat sticky issue for heading 8476
classification.
You may recall the so-called red box
kiosks. I think some of these are still
around, I haven't really seen one, but
you could rent DVDs. They had a daily
rental charge and requirement to return
the DVDs by particular date and time.
They are considered a type of automated
retail vending kiosk or rental vending
machines. But are they really 8476
vending machines?
So these provide physical product to
you for payment, and a retro product to
use or borrow rather than sell you a
product for keeps. In other words, you
don't acquire ownership in that product.
But does this really matter?
After all, rental sales, you know, are
becoming more commonplace and accepted
and they do involve obtaining product
for payment.
So let's revisit the notes of the term
vending.
As I noted earlier, define the term
vending, ENs define it.They
state that the term vending refers to a
monetary exchange between the purchaser
and the machine in order to acquire a
product. They're using the term acquire
a product.
But does the term always mean sell a
product to somebody for keeps or for
permanent ownership?
Could the term vendor sale also
include a rental sale? The dictionary
definition speak of obtaining or
acquiring goods through a sale. And
renting a product is certainly different
than buying a service. Services are no
good here, as was mentioned. And we do
have an actual product discerned.
There doesn't seem to be any explicit
statement precluding rental sales. And
the as noted, the industry definitions
do appear broader than some of the more
common dictionary definitions.
So here is another common or
traditional definition of the term sale
suggesting a transfer of ownership. And
also I put up here the definition of
rent, which as you all know is paying for
the use of something.
So with these in mind, let's go back
to the 8476 ENs. And there the ENs
provide an example of a simple cover or
cabinet that holds opera glasses for use
during the opera, and also a baggage
locker both with coin-operated locks. So
both machines involve potential use of a
product but not the sale of one.
And these cabinets and lockers akugd
to the ENs are excluded from heading
8476 and classified in Section 15. Or in
Chapter 94. Given the opera glass, does
8476 preclude machines that be loan
merchandise rather than sell it?On
the one hand, the EN is not described in
a machine are that dispenses a product
or machine with a sturdy payment
mechanism or a machine with a complex or
substantial device or releasing a lock.
I don't think it suggests machines
that rent or loan you something are
included. As we will see, historically
it's not clearly required that the sale
transaction at the machine result in a
transfer of ownership of a product
versus the rental sale.
Let's look at a few rulings with
examples to machines. New York E81780
contain two freestanding machines and
one in particular was the distributor
vending machine. And here the customer
selected and made payment for videotape,
sale or rental, they did both. It sold
you something for keeps and it also
rented you the videotape.
And the machine dispensed the
videotape, but the machine rents the
videotape in addition to selling them.
So is that a problem for 8476?
And according to customs, it didn't
seem to be a problem. It didn't
specifically address the issue of
rentals there. The machine did both. And
they found these to be 8476 vending
machines.
So whether we'd have a different
result if the machine dispensed only
rental videos, we don't know yet at this
point of the presentation.
All right. New York K82080 is similar
to the ruling I just mentioned, rented
and sold videos, just a little more
current ruling.
And I wanted to mention at the bottom
here the driving range golf ball
dispenser. If any of you play golf or
practiced, you've seen these at the
driving range. You basically put some
sort of wire basket under the machine,
put money into it, and it dispenses a
number of golf balls into the bucket and
you take that to the driving range and
you hit the balls down on to a field
and, you know, you don't take these balls
home, right? They get knocked down the
field, they get collected again and
reused, probably put back into the
machine if they're still in good shape.
But here you're not owning the balls,
right? You're sort of -- you're just
using them while you're there. Customs
found this to be a vending machine of
8476.89. Again, it does deal with a
product, but again, it doesn't address
particularly the issue of owning or not
owning what you're purchasing. It just
-- it just found them to be vending
machines, presumably because we have a
product involved.
Okay. So here we have what's become a
very common sight in urban areas, the
eBike or eScooter kiosk. These units hold
or lock and unlock an eBike rental. On
the four elements of 8476 met here? The
units similar to the one shown in the
slide was recently before our office, as
a matter of fact. There is payment
charged to debit to an account. And
payment would trigger the docks lock
which automatically released the bike.
And the user returned the bike after
use. There's no transfer of ownership
here of the bike or scooter. They're
sturdy units, located on the street in
high traffic areas.
So do we have a sale of product here?
Is this really a vending machine? Feel
free to put your answer in the --
I'm getting nos, I'm getting nos. Some
yeses.
I should mention also that an argument
was made because of the mechanism that
-- that heading 8517 may have been
played because there's a transmission of
data going on.
So this got sent up to headquarters
for review, you know, we had some
questions about the renting aspect
versus the transfer of ownership
circumstance. And so just recently,
customs issued its decision here in
H328731 they determined that the lift
eBike, eScooter rental machine similar to
the one you see in the picture, not
exactly that, was classified as vending
machine in 8476.89.
So the elements of 8476 were satisfied
here, according to customs. It did cite
the rulings on DVD and video rental
machines as precedence for allowing
rental sales. And also cited the broad
industry definitions of the term rent.
And headquarters referenced the
industrial machine rulings, the ones
that, you know, payment didn't need to
be simultaneous or direct. Somebody said
they need a new career, they've gotten
all these wrong. Don't worry, I did as
well when I prepared for this, but for
this webinar, and I'm supposed to be the
expert. But this is a tricky area for
sure.
Again, the takeaway here, vending
machines of 8476 encompass machines that
make rental sales in addition to
ordinary sales. All right.
So final topic of our presentation
today, assuming I have time, I think I
do, I want to briefly address the
vending machine parts provision of
heading 8476.90. As most of you are
aware, the term parts is not defined in
the tariff but its meaning has been
addressed in various court decisions.
The ENs also remind us that the HTS
provisions in Section XVI must be
applied, specifically note 2 which I'll
be discussing.
But many general, all automatic
vending machines and parts are covered
under 8476.90.
Let's review note 2 to Section XVI
which sets forth the parts rule.
Note 2-A provides that parts that are
goods of any Chapter 84 or 85 heading
with some exceptions are classified in
those particular headings.
Know the 2(b) provides that all other
parts, if suitable for use with a
particular type of machine are
classified with those machines. You need
to keep this rule in mind as we go
through the parts provision here.
And given the absence of a statutory
definition for partscourts have put
together two distinct but reconcilable
tests for whether they think an item
qualifies as a part for classification
purposes.
The first is that an import item is a
part only if it's something necessary to
the completion of that article without
which the article to which it's to be
joined cannot function as such an
article.
That's the Willoughby case.
And the second test equates parts to
an im -- to an imported item dedicated
solely for use with another article. And
when applied to that use, the article
cannot function without the article in
question.
So really in short, to be a part of a
machine, the part must contribute to the
machine's function and be integral to it.
That's the key thing to understand for
the part tests.
I already mentioned the mini bar tray
as an example of being part of the mini
bar.
So let's look at a few examples. In
H269223, this concerned in addition to
the overall machine, it concerns
classification of parts that were
designated for use with the PPE and MRO
industrial vending machines. These
machines are designed to dispense
equipment and located in the compartment
of the machine.
At issue here were a company parts for
the machine, and these parts are really
essential to the dispensing function of
the machine. Customers had ruled out
potential classification of furnisher
with heading 9403. And found that these
-- the rotary drum and those
accompanying compartments to the vending
machine parts of 8476.
In ruling B87572 we have an iron
pedestal stand for candy and gum ball
machines. So here the item was not
considered to be integral to the
machine. If this is just an iron
pedestal stand, it doesn't contribute to
the machine's function and therefore
it's not a part of the vending machine.
It would fall in 7325.
So here we have N119815. This
concerned the classification of heat
exchangers that are installed in vending
machines.
They're used with only particular vending
machines, and they were found to be
parts of vending machines by default in
that the items did not meet the
definition of a heat exchanger of
heading 8419. If they had, Section XVI
02 would have controlled the
classification of articles under 8419.
So in the last ruling here is K89814,
addressing the so-called Dixie-elevator
dispenser. Here we have a multicomponent
linear motion system with a built-in
electrical motor. This was designed for
soda and candy machines, I think. It
received payment for the product and the
elevator dispenser collected the product
and delivered it to the dispenser unit.
So this is pretty integral to the
functioning of the machine.
So is the part classifiable as a good?
It was classified 8476.90 as a vending
machine part in accordance with Section
XVI note 2(b).
All right. So that concludes my
presentation on classification of
automatic goods vending machines. If you
have any questions, I'll try to answer
them now in the time we have left.
And thank you. Wanda Moore assists me
in the NIS line. You can reach out to us
at any time with questions.
And here if you're interested, I've
tried to be very detailed about listing
my public domain citations for all these
images and references. I don't think --
some of these had a question about
something about 3D printers, I didn't
quite catch that.
Let me see if I can make this chat box
larger to see. Sorry, having trouble
locating that question.
>> I don't think I saw a question on
3D printers.
>> ARTHUR PURCELL: It wasn't a
question.
>> I don't think so. If anyone has
one, if you could retype it in the chat
box. But I don't think I saw something on
that.
>> ARTHUR PURCELL: Okay.
Where does Coin Star machine fall under?
These machines kind of gives out a
service and in exchange for your coins
or dollars -- oh, for -- okay. So you
put -- I'm not sure exactly what this
machine is, but is it -- is it changing
the denomination of the machine in some
way? Feel like reducing a bill to a coin
and that sort of thing?
I mean, those could be 8476 under the
-- go back here a second. Try to figure
out a way to get back to the beginning
of this. These could be the money
changing machines that be fall there. If
that's what that is. I don't know. I'd
have to take a look at it.
Okay, I don't see any other slides --
oh, somebody asked what the HCS is for a
printer.Those
are 8485, the 3D printers.That's
in my line as well, as I mentioned.
That's a fairly new provision, came out
beginning of 2022.
Okay, I think that's all there is,
unless I'm missing a question. Thank you
all very much for tuning in.
>> This concludes our webinar for this
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