ANALYSIS OF SECTION XVI OF THE HARMONISED SYTEM

Analysis of the Legal Notes to Section XVI of the Harmonized System

This document provides a note-by-note analysis of the legal notes governing Section XVI of the Harmonized System (HS) Nomenclature, which covers Machinery and Mechanical Appliances, Electrical Equipment, and parts thereof. Understanding these notes is crucial for the correct classification of goods within Chapters 84 and 85.

Note 1: Exclusions from the Section

This note’s primary function is to explicitly exclude certain goods from Section XVI, even if they are for technical use or could be considered parts of machinery. It directs these goods to other, more specific chapters of the nomenclature, generally based on their constituent material or a more specific function described elsewhere.

Analysis: This is a “scope-limiting” note. It prevents Section XVI from becoming a catch-all for any article used with machinery. The underlying principle is often that if an article is defined more precisely by its material (e.g., rubber, textile, leather) or falls into a specialized category (e.g., tools of Chapter 82, instruments of Chapter 90, vehicles of Section XVII), it should be classified there.

The Relationship Between Section Note 1 and GIR 3

The core reason Section Note 1 prevents the application of GIR 3 is found in the hierarchy of the Harmonized System’s classification principles, established by GIR 1.

GIR 1 states that classification is determined first and foremost by “the terms of the headings and any relative Section or Chapter Notes”. This means the legal notes (like Section Note 1) have the highest authority in the classification process. You only proceed to the other GIRs (2, 3, 4, etc.) if the headings and notes cannot resolve the classification on their own.

How the Prevention Works

1. GIR 3 is a Tie-Breaker: GIR 3 is designed to solve a specific problem: what to do when goods are, prima facie (at first glance), classifiable under two or more different headings. It provides methods (specificity, essential character, last in numerical order) to choose the single best heading from those options.
2. Section Note 1 Eliminates the “Tie”: Section Note 1 functions as a definitive directive, not a suggestion. It explicitly states that certain goods “are not covered” by Section XVI. By doing this, it removes one of the potential headings from consideration before a classification conflict can even occur.

In essence, for a good to be eligible for GIR 3 analysis, it must have a legitimate claim to at least two headings. Section Note 1 ensures that for the goods it lists, there is no legitimate claim to any heading within Section XVI.

Illustrative Example

Let’s consider a thermostat (an instrument for automatically regulating temperature) specifically designed and presented with a refrigerator of heading 84.18.

• Without Note 1: One might argue the thermostat could be classified in:
  • Heading 90.32 as an automatic regulating instrument.
  • Heading 84.18 as part of the refrigerator. This creates a classic classification problem that would seem to require GIR 3 to resolve.
• With Note 1: The analysis is stopped before it begins.
  • Section Note 1(m) explicitly states that Section XVI “does not cover… Articles of Chapter 90”.
  • A thermostat is an article of Chapter 90.
  • Therefore, the thermostat is legally excluded from all headings in Section XVI, including 84.18.
  • There is no longer a choice between two headings. The note dictates that the only possible classification is in Chapter 90. The classification is resolved by GIR 1 (by applying the Section Note), and there is no need to proceed to GIR 3.

Conclusion:

Section Note 1 acts as a gatekeeper for Section XVI. It preemptively resolves potential classification disputes by definitively excluding certain articles. This prevents the “prima facie classifiable under two or more headings” scenario from ever arising for those specific goods, thereby making the application of GIR 3 unnecessary and incorrect.

 

Examples:

(a) Articles of Plastic or Rubber:

1. A V-belt of vulcanised rubber for a car engine is classified in heading 40.10, not with engine parts.
2. A rubber seal for a hydraulic system is classified in heading 40.16.
3. A conveyor belt made of vulcanised rubber for a mining conveyor is classified in heading 40.10.
4. A textile conveyor belt coated with plastic is classified in heading 59.10, as per exclusion (e).

 

(g) Parts of General Use:

1. Steel screws used to assemble a laptop are classified in heading 73.18, not as computer parts in heading 84.73.
2. A generic steel spring used in a switching apparatus is classified in heading 73.20, not with the apparatus parts in heading 85.38.
3. An aluminium pipe fitting for a machine is classified in heading 76.09, not as a machine part in Chapter 84.
4. A steel chain used in a chain hoist is classified in heading 73.15, not as a part of the hoist.
5. A base metal lock for a machine’s access panel is classified in heading 83.01, not as a part of the machine.

 

(m) Articles of Chapter 90 (Measuring/Checking Instruments):

1. A pressure gauge for a steam boiler is classified in heading 90.26, not with the boiler in heading 84.02.
2. A thermostat used to regulate the temperature in a refrigerating unit is classified in heading 90.32, not with the refrigerator in 84.18.
3. A revolution counter (tachometer) for an engine is classified in heading 90.29, not with the engine.
4. A flow meter to measure liquid moving through a pipe in a chemical plant is classified in heading 90.26, not with the plant’s machinery.
5. An ammeter installed on a control panel to monitor current is classified in heading 90.30, not as part of the control panel in 85.37.

 

Note 2: Classification of Parts (Prevents Invocation of GIR3)

This is the most critical note for classifying parts within Section XVI. It establishes a hierarchical set of rules to determine the correct heading for a machine part.

Analysis: The note must be applied sequentially. First, check if the part is a good in its own right (Rule 2a). If not, check if it’s for a specific machine (Rule 2b). If it’s neither, it falls into a residual parts heading (Rule 2c).

(Rule 2a): If a part is itself an article covered by a heading in Chapter 84 or 85 (with some exceptions), it is always classified in that heading, even if it was specially designed for a particular machine. This rule “trumps” the others.

1. Example: An electric motor (heading 85.01) designed to power a specific conveyor is classified in 85.01, not as a part of the conveyor (84.28).
2. Example: A pump (heading 84.13) intended for use as a component in a water purification plant (84.21) is classified in 84.13.
3. Example: A valve (e.g., a gate valve of heading 84.81) made for a specific pipeline system is classified in 84.81.
4. Example: An electrical transformer (heading 85.04) designed to be built into a power supply unit for a computer is classified in 85.04.

 

(Rule 2b): If the part is not covered by Rule 2a and is suitable for use “solely or principally” with a particular machine (or a number of machines of the same heading), it is classified with that machine or in a specific parts heading (e.g., 84.09, 84.31, 85.03).

1. Example: The specially moulded plastic housing for a specific model of vacuum cleaner (heading 85.08) is classified in heading 85.08.
2. Example: A connecting rod for a piston engine of heading 84.07 is classified in the dedicated parts heading 84.09.
3. Example: The screen (display) for a specific smartphone (heading 85.17) is classified in the parts heading 85.17.
4. Example: A cutting blade specifically designed only for a lawnmower of heading 84.33 is classified in heading 84.33.
5. Example: A populated Printed Circuit Board (PCB) designed specifically for a television receiver is classified in the parts heading 85.29.

 

(Rule 2c): All other parts fall into the residual (“catch-all”) parts headings. These are parts that are not specific to one machine.

1. Example: A generic oil seal that is not identifiable for use with a particular machine is classified in heading 84.87.
2. Example: A simple, non-specific electrical connector that is not a plug or socket would be classified in heading 85.48.
3. Example: A handle made of base metal, not a “part of general use,” which could be fitted to various types of machinery, is classified in heading 84.87.
4. Example: A ship’s propeller is classified in heading 84.87.
5. Example: A generic oil seal that is not identifiable for use with a particular machine is classified in heading 84.87.

Note 3: Composite and Multi-Function Machines (Prevents Invocation of GIR3)

This note provides guidance on classifying machines that are combined or have multiple functions. The key principle is to identify the “principal function.”

Analysis:

Composite Machines: These are two or more machines fitted together to form a single unit. They are classified as if they consisted only of the component that performs the principal function.

1. Example: A printing press (heading 84.43) combined with a machine for folding the paper. The principal function is printing, so the entire machine is classified in heading 84.43.
2. Example: A machine for making cardboard boxes (heading 84.41) that includes a simple, subsidiary printing unit. The principal function is box-making, so the unit is classified in heading 84.41.
3. Example: An industrial furnace (heading 85.14) combined with lifting and handling equipment. The heating is the principal function, so classification is in 85.14.
4. Example: A cigarette making machine (heading 84.78) combined with a subsidiary packaging machine. The cigarette making is the principal function.
5. Example: An industrial oven (heading 84.17) combined with an internal conveyor to move the goods through it. The heating is the principal function

 

 

Multi-Function Machines: This refers to a single machine that can perform two or more different operations. It is also classified according to the principal function.

1. Example: A food processor that can mix, chop, and blend. The principal function is determined, and it’s classified accordingly, often as a mixer in heading 85.09.
2. Example: A combination printer-scanner-copier. The principal function is generally considered printing, so it is classified in heading 84.43.
3. Example: A machine tool that can perform both lathing and milling. If one function is not clearly principal, GIR 3(c) would be applied, leading to classification in the heading that occurs last in numerical order.
4. Example: A woodworking machine that can perform sawing, planing, and moulding. The principal function must be determined; if not possible, it would be classified under heading 84.65 by application of GIR 3(c).
5. Example: A cash register (heading 84.70) that incorporates a calculator and a credit card reader. Its principal function is that of a cash register.

 

Note 4: Functional Units (Prevents Invocation of GIR3)

This note addresses complex industrial plants or systems made of separate components that are interconnected and work together to perform one clearly defined function.

Analysis: The entire collection of components is classified together in the single heading that covers the overall function. This applies even if the components are shipped separately for convenience. The note only applies to components that are essential for the principal function, not auxiliary equipment.

Examples:

1. Air Conditioning System: Comprising an outdoor compressor/condenser unit and an indoor fan/evaporator unit, interconnected by piping. The whole system is classified as an air conditioning machine in heading 84.15.
2. Brewing Machinery: A brewhouse consisting of a mash tun, lauter tun, and wort kettle, all working together to produce wort. The entire system is classified as machinery for the manufacture of beverages under heading 84.38.
3. Radar Apparatus: Consisting of a separate antenna, transmitter, receiver, and display console, all designed to function as a single radar system. The whole is classified in heading 85.26.
4. Automated Milking System: An installation with separate vacuum pumps, pulsators, teat cups, and collection tanks interconnected by piping, all working together to milk cows. The whole system is classified as a milking machine in heading 84.34.
5. Asphalt Batching Plant: A plant consisting of separate feeders, dryers, vibrating screens, mixers, and a control unit, all arranged to work in concert to produce asphalt. The entire functional unit is classified in heading 84.74.

 

Note 5: Definition of “Machine”

This is a clarifying note that defines the term “machine” for the purposes of the preceding notes.

Analysis: It establishes that “machine” is a broad term encompassing any machine, machinery, plant, equipment, apparatus, or appliance described in the headings of Chapter 84 or 85. This ensures that Notes 2, 3, and 4 apply universally to all goods in the section.

Note 6: Electrical and Electronic Waste and Scrap (E-waste)

This note defines what constitutes “electrical and electronic waste and scrap” for classification purposes, specifically for heading 85.49.

Analysis: For an item to be classified as e-waste, it must meet both conditions of part (A): it must be unusable for its original purpose (broken or economically unviable to repair), AND it must be shipped in a manner not intended to protect it (e.g., bulk-shipped, not in retail packaging).

(A) E-waste Definition:

1. A container of broken computer motherboards that have been cut up is e-waste.
2. A bale of crushed mobile phones is e-waste.
3. A collection of obsolete, non-functional CRT monitors shipped loose on a pallet is e-waste.

(B) Mixed Consignments:

4. A shipment containing scrap copper wire mixed with broken power supplies is classified in heading 85.49.

(C) Exclusion of Municipal Waste:

5. Waste collected from household bins, which might contain a discarded toaster along with other refuse, is classified as municipal waste in heading 38.25.