CLA-2 CO:R:C:G 086407 JBW 828929
Mr. Murray Shulman
Vice President, Operations
AMAV Industries Ltd.
2345 Lapierre Street
Lasalle, Qubec
CANADA H8N 1B7
RE: Reconsideration of New York Ruling Letter (NYRL) 828929
and Headquarters Ruling Letter (HRL) 085801 Regarding
Respectively the Classification of "Arts, Crafts &
Activities" and "String Art"
Dear Mr. Shulman:
This letter is in response to your request of January
31, 1990, in which you seek reconsideration of NYRL 828929 that
classified the components of your product, "Arts, Crafts &
Activities," separately under the Harmonized Tariff Schedule of
the United States Annotated (HTSUSA). At this time, we are also
reconsidering the classification in HRL 085801 of your "String
Art" kit and the eligibility of both of these items under the
United States-Canada Free Trade Agreement (FTA).
FACTS:
"Arts, Crafts & Activities," item number 3202, consists
of the following components, manufactured in Canada or the
countries noted:
Six double sided game boards, thirty six
playing pieces, two dice (Hong Kong), five
jars of poster paint (Israel), five felt tip
marking pens (United States or Italy), two
poster art sheets, two collage sheets, "self-
stick" stickers, three spools of thread
(Taiwan), "string art" pins and board, velour
paper, stencils, tray of sixteen water color
paints (Israel), brush (United States or
Italy), calligraphy pen and grid, paper pad,
two mixing cups, three sheets of colored
paper, tissue paper, three grid art sheets,
three color by number sheets, six origami
sheets, construction paper, and an
instruction book.
These components are packaged in a retail package that permits
the user of the product to carry out the 202 activities listed in
the instruction book. These activities may be generally
categorized as crafts, arts, games, puzzles, and magic.
"String Art," item number 4671, includes sewing thread,
pins, black flocked paper, corrugated cardboard, pins, and
instructions to permit the user to create two designs. The
thread is made in Taiwan, and the other components are made in
Canada or the United States.
ISSUES:
(1) Whether a product, which is capable of different
activities, but is designed principally for amusement, is
classifiable under the provision for "other toys, put up in
sets"?
(2) Whether a product that consists of diverse
components and an instruction book to permit the user to create
"art" and to learn an "artistic" technique is a toy under the
HTSUSA?
(3) Whether these articles, which include components
of Canadian, United States, and other country origin, are
eligible for preferential treatment under the FTA?
LAW AND ANALYSIS:
I. Classification of "Arts, Crafts & Activities"
The General Rules of Interpretation (GRI's) set forth
the legal framework in which merchandise is to be classified
under the HTSUSA. GRI 1 requires that classification be
determined first according to the terms of the headings of the
tariff and any relative section or chapter notes and, unless
otherwise required, according to the remaining GRI's.
Subheading 9503.70, HTSUSA, provides for other toys, put up
in sets. The first question that arises in the analysis of the
scope of this provision is whether the term put up in sets
carries the same requirements as the term is used in GRI 3(b).
For the purposes of GRI 3(b), goods put up in sets for retail
sale are defined to be goods that: (a) consist of at least two
different articles that are classifiable in different headings;
(b) consist of products put up together to meet a particular
need or carry out a specific activity; and (c) are put up in a
manner suitable for sale directly to users without repackaging.
All goods classified in subheading 9503.70, HTSUSA,
will not meet the GRI 3(b) set requirements. For example,
subheading 9503.70.60, HTSUSA, is a provision for other toys, put
up in sets, toy alphabet blocks. However, such blocks do not
consist of at least two different articles classifiable in two
different headings. Likewise, their use is susceptible to a
variety of purposes or activities. A child may use the blocks to
build or to spell. These two different activities serve
different purposes: amusement and education. In sum, one may
conclude that the requirements for sets established in GRI 3(b)
are not correlative requirements for classification of items in
subheading 9503.70, HTSUSA.
The term set is defined to mean: "A group of things of
the same kind that belong together and are so used ...." American
Heritage Dictionary 1122 (Second College Edition, 1985). The
Explanatory Notes, which provide the official interpretation of
the tariff at the international level, reflect in part this
definition by stating that collections of items, which are
classifiable in other headings if presented separately, are
classified in Chapter 95 if put up in a form clearly indicating
their use as toys. Reading these statements together, one may
conclude that the provision for other toys, put up in sets,
includes collections of items clearly identifiable as toys and
collections of diverse components that when used together engage
a child or an adult in an entertaining and pleasing activity.
For both types of sets, the components must possess some nexus to
suggest that the components belong together.
The use of "Arts, Crafts & Activities" is principally
as a toy. The instruction book emphasizes the play and
amusement value that the set provides. While the set is designed
in part to enhance artistic technique and creativity, these
objectives are achieved through activities designed to be fun.
The utilitarian value of the set is secondary to the play value.
Finally, although all of the components of the set will not be
used simultaneously and some will not be used together at all,
we determine that there exists a sufficient nexus, defined by the
interrelated use of the components in the diverse activities
outlined in the instruction book, to permit classification of the
components together. The item is therefore classified under
subheading 9503.70.80, HTSUSA, the provision for other toys, put
up in sets.
II. Classification of "String Art"
"String Art" includes a variety of components that
would ordinarily be separately classified if imported separately.
The kit, however, not only provides materials and instructions to
permit the user to engage in an amusing activity but also results
in a decorative item.
We determine that the "String Art" kit is designed
principally for the amusement of a child and therefore is
classified as a toy. In choosing to purchase the kit, a parent
or child is more likely to focus on the activity and not the
final result. "String Art" requires that the user engage in
intricate manipulations to create an artistic product from
ordinary materials. Such activity encourages a variety of
skills, including creativity and precision. At the same time,
the activity engaged in by the user is pleasing and
entertaining. Finally, although the final product is pleasing,
it does not appear as likely that the ordinary consumer would
purchase a completed string art product for use as a decoration.
Classification of the "String Art" kit may be
distinguished from other kits in which the activity is secondary
to the result. For example, a jewelry making kit, which includes
beads and a string to make a necklace, involves simple technique
and materials dedicated to a specific end. As described, such a
kit would more likely be purchased and used as a necklace and
would therefore be classified in Chapter 71 as imitation jewelry.
"String Art" meets the criteria set out above for
classification in the provision for other toys, put up in sets,
and is consequently classified under subheading 9503.70.80,
HTSUSA.
III. Eligibility of the Sets under the United States-
Canada Free-Trade Agreement
In HRL 085801, we determined that the "String Art" kit
is eligible for preferential treatment under FTA. Upon review,
we determine that this holding is incorrect.
General Note 3(c)(vii)(B), HTSUSA, defines "goods
originating in the territory of Canada" for purposes of
determining FTA eligibility. This note states, in relevant part,
that goods are considered to be of Canadian origin for FTA
purposes if they are (1) wholly obtained or produced in Canada or
the United States, or (2) they have been transformed in the
territory of Canada or United States so as to be subject to a
change in tariff classification under the rules of General Note
3(c)(vii)(R), HTSUSA. Further, General Note 3(c)(vii)(C),
HTSUSA, states:
(C) Goods shall not be considered to
originate in the territory of Canada pursuant
to subdivision (c)(vii)(B)(2) merely by
virtue of having undergone--
(1) simple packaging or, except as
expressly provided by the rules of
subdivision (c)(vii)(R) of this
note, combining operations....
The report of the House Committee on Ways and Means
lends some clarity to these provisions. This report states:
Goods containing materials from third
countries will qualify for preferential
treatment only if the materials undergo a
sufficient degree of processing or assembly
in one or both Parties to result in
physically and commercially significant
changes in the product that change its tariff
classification under the Harmonized System.
H. Rep. No. 816, Part 1, 100th Cong., 2d Sess.15 (1988) (emphasis
added). The approach of the Ways and Means Committee places
emphasis on the processing or assembly that the third-country
materials undergo. Stated differently, each of the materials or
components must undergo a processing or assembly that results in
a change in tariff classification to confer eligibility on the
good as a whole.
The packaging of components together in a set will
generally result in the assignment of a single classification to
components that, if imported separately, would be classified
under separate headings. Most, if not all, components of a set
undergo a classification change. However, applying General Note
3(c)(vii)(C), HTSUSA, a change in tariff classification resulting
from the combining and packaging of a good is not sufficient to
confer a transformation for FTA purposes. Thus, the rule that
may be derived is that the simple packaging or combining in a set
of a component of third-country origin, which is not subject to
processing or assembly in Canada or the United States that
results in a required classification change, will remove the set
as a whole from the definition of "goods originating in the
territory of Canada."
Applying this rule to "Arts, Crafts & Activities" and
to "String Art," the addition of articles of third-country origin
with articles of Canadian or United States origin works to deny
eligibility of the set for preferential treatment under the FTA.
Therefore, HRL 085801 is modified insofar as it granted FTA
eligibility to the "String Art" kit. Likewise, the holding in
NYRL 828929 insofar as it denies FTA eligibility to "Arts, Crafts
& Activities" is affirmed.
HOLDING:
"Arts, Crafts & Activities," item number 3202, is
classified under subheading 9503.70.80, HTSUSA, as other toys,
put up in sets. Because the set includes components of third
country origin, the set is not eligible for preferential
treatment under the FTA. NYRL 828929 is modified accordingly.
"String Art," item number 4671, is likewise classified
under subheading 9503.70.80, HTSUSA, as other toys, put up in
sets. Because the set includes components of third country
origin, the set is not eligible for preferential treatment under
the FTA. HRL 085801 is modified accordingly.
The modifications in this letter are made pursuant to
19 C.F.R. 177.9(d) (1989).
Sincerely,
John Durant, Director
Commercial Rulings Division