CLA-2 RR:CR:SM 562812 KSG
Port Director
U.S. Customs and Border Protection
610 S. Canal Street
Chicago, IL 60607
RE: Request for Internal Advice; Nairobi Protocol; hearing aid parts; microphones, speakers and other components originally designed for hearing aids
Dear Director:
This is in reference to a Request for Internal Advice by your office. The importer involved, Knowles Electronics LLC, has asked about the eligibility of certain imported hearing aid parts, parts originally designed for hearing aids but currently sold to the general public and parts modified from parts originally designed for hearing aids and marketed to the general public for duty-free treatment under subheading 9817.00.96, of the Harmonized Tariff Schedule of the United States ("HTSUS").
FACTS:
Knowles Electronics manufactures microphones, speakers and other parts for the hearing aid market and also for the general public. The various parts are imported from Malaysia, China and Taiwan.
This case involves three categories of imported products. We note that there appear to be some factual inconsistencies between the submission of Knowles Electronics and the preliminary audit report prepared by Customs. For the purposes of this internal advice request, where inconsistencies exist, we will rely on the CBP report.
The first category of goods consists of imported hearing aid parts that are designed for hearing aids and actively marketed to hearing aid manufacturers (listed in Audit Findings Summary, Attachment A). However, we note that in Attachment A, there are two lines of parts that are listed as being sold only to hearing aid manufacturers (BF, BK) and two lines that are sold to both hearing aid manufacturers and the general public (BT, CA). The lines BF and BK will be discussed in the first category, while the lines BT and CA will be discussed in the second category.
An example of a product in the first category is a telecoil, a product that enables a hearing aid user to hear on a telephone. Counsel states that over fifty Knowles product families fall in this category. Counsel argues that these products are specially designed for the needs of the hearing-impaired community. Counsel states that these requirements include: small transducer packages; special characteristics of transducer packages; minimum use of electrical power by the microphone and receiver; high microphone sensitivity; low internal noise for hearing aid microphones; receiver design that accommodates amplifier designs of many different hearing aid manufacturers and varying requirements of persons with different types and degrees of hearing loss; and the technology to limit feedback oscillation and vibration feedback.
The second category of goods consists of twelve product lines of parts originally designed for hearing aids but modified from pre-existing hearing aid design and currently sold primarily to the general public. The same two lines of parts that are listed in Attachment A as being sold to both hearing aid manufacturers and the general public are also listed in Attachment B. According to Knowles’ submission, 82% of the sales of the BT series are to hearing aid manufacturers and 18% to the general public. For the CA line, Knowles did not submit figures, but stated that there were low sales to hearing aid manufacturers.
The third category of goods consists of parts modified from parts originally designed for hearing aids which are marketed only to the general public. An example of the third category is a line of lapel microphones.
ISSUE:
Whether certain hearing aid parts in the three categories described above are eligible for duty-free treatment under subheading 9817.00.96, HTSUS?
LAW AND ANALYSIS:
The Agreement on the Importation of Educational, Scientific and Cultural Materials, known as the Florence Agreement, is an international agreement drafted by the United Nations Educational, Scientific, and Cultural Organization ("UNESCO") and adopted by it in Florence, Italy in July 1950 (17 UST 1835; TIAS 6129).
It provides for duty-free treatment and the reduction of trade obstacles for imports of educational, scientific and cultural materials in the interest of facilitating the international free flow of ideas and information. Materials falling within the coverage of the Florence Agreement include: books, publications and documents; works of art and collector's pieces; visual and auditory materials; scientific instruments and apparatus; and articles for the blind.
The Nairobi Protocol to the Florence Agreement on the Importation of Educational, Scientific, and Cultural Materials Act of 1982 expanded the scope of the Florence Agreement primarily by expanding duty-free treatment for certain articles for the use or benefit of the handicapped in addition to providing duty-free treatment for articles for the blind. The 97th Congress passed Pub. L. 97-446 to ratify the Nairobi Protocol in the U.S. The Senate stated in its Report that one of the goals of this law was to benefit the handicapped and show U.S. support for the rights of the handicapped. The Senate, however, did state that it did not intend "that an insignificant adaptation would result in duty-free treatment for an entire relatively expensive article…the modification or adaptation must be significant so as to clearly render the article for use by handicapped persons." S. Rep. No. 97-564, 97th Cong. 2nd Sess. (1982). The Senate was concerned that persons would misuse this tariff provision to avoid paying duties on expensive products.
Section 1121 of the Omnibus Trade and Competitiveness Act of 1988 and Presidential Proclamation 5978 provided for the implementation of the Nairobi Protocol by inserting permanent provisions, subheadings 9817.00.92, 9817.00.94, and 9817.00.96 into the HTSUS. These tariff provisions specifically state that “articles specifically designed or adapted for the use or benefit of the blind or other physically or mentally handicapped persons” are eligible for duty-free treatment.
The first issue raised in this case is whether the three categories of parts satisfy the requirement of being for “the use or benefit of blind or physically mentally handicapped persons” as required by the superior language in subheading 9817.00.96, HTSUS.
U.S. Note 4(a), Chapter 98, HTSUS (“U.S. Note 4(a)”), states that the term “blind or other physically or mentally handicapped persons” includes any person suffering from a permanent or chronic physical or mental impairment which substantially limits one or more major life activities, such as caring for one’s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, or working.
Hearing is listed in U.S. Note 4(a) as a major life activity. Therefore, persons who are hearing-impaired are considered handicapped within the meaning of U.S. Note 4(a). See Headquarters Ruling Letter (“HRL”) 556139, dated November 21, 1991. The first category of parts under consideration, those designed for use in hearing aids and used by persons who are hearing impaired, satisfy the requirement that the imported goods be for the use or benefit of handicapped persons.
The other two categories of imported parts involved, which are sold and marketed to the general public, do not satisfy the requirement that the article be for the use or benefit of “the blind, or other physically or mentally handicapped persons.”
With regard to the two lines of parts that are sold to both the hearing aid industry and to the general public, the parts would satisfy the U.S. Note 4(a) requirement because they benefit persons who are hearing impaired.
U.S. Note 4(b), Chapter 98, HTSUS (“U.S. Note 4(b)”), states that subheadings 9817.00.92, 9817.00.94 and 9817.00.96 do not cover (i) articles for acute or transient disability; (ii) spectacles, dentures, and cosmetic articles for individuals not substantially disabled; (iii) therapeutic and diagnostic articles; or (iv) medicine or drugs.
The superior text in subheading 9817.00.96 was amended in 1995 by Presidental Proclamation 6821, 60 Fed. Reg. 47663 at 47674, to provide for parts and accessories specifically designed or adapted for goods that are specifically designed or adapted for use of physically or mentally handicapped persons. The Court of International Trade held in Starkey Laboratories, Inc. v. United States, 6 F Supp 2d 910 (CIT 1998), that imported parts of hearing aids were eligible for duty-free treatment under subheading 9817.00.96, HTSUS.
The textual language of subheading 9817.00.96 requires that the hearing aid components must be "specially designed or adapted” to be used in articles that "specially designed or adapted" for the use or benefit of handicapped persons to qualify for duty-free treatment under subheading 9817.00.96.
The meaning of the phrase “specially designed or adapted” has been decided on a case-by-case basis. In Headquarters Ruling Letter (“HRL”) 556449, dated May 5, 1992, Customs set forth factors it would consider in making this case-by-case determination. These factors include: 1)the physical properties of the article itself, i.e., whether the article is easily distinguishable, by properties of the design, form, and the corresponding use specific to this unique design, from articles useful to non-handicapped persons; 2) whether any characteristics are present that create a substantial probability of use by the chronically handicapped so that the article is easily distinguishable from articles useful to the general public and any use thereof by the general public is so improbable that it would be fugitive; 3) whether articles are imported by manufacturers or distributors recognized or proven to be involved in this class or kind of articles for the handicapped; 4) whether the articles are sold in specialty stores which serve handicapped individuals; and 5) whether the condition of the articles at the time of importation indicates that these articles are for the handicapped.
In HRL 556449 CBP considered whether an assortment of 19 different products would be eligible for duty-free treatment under subheading 9817.00.96, HTSUS. CBP concluded that the two-handed mug and lid, nail file with a lightweight handle, pen with a wider base, angled container opener which is used to open milk and juice containers, cutlery that is lightweight and bent at different angles, scissors with springs for opening, brushes with extenders for bathing and plastic mixing bowl with an anti-slip base are not articles specially designed or adapted for the handicapped. This conclusion was based on whether the article had a common design often used by the general public, the probability of general public use (ex. the two-handed mug with a lid is commonly used by children or by adults as traveling mugs), whether the article would be convenient for the general public, and the packaging and conditions of sale of the article. Articles that CBP held were eligible for subheading 9817.00.96, HTSUS, treatment included a bedside toilet, a plate with a raised edge, potato peeler and nail brush with suction cups or clamps, kitchen knives that have a bend, cutlery with bending designs, the reachers and turners, toilet support arms, toilet seat raisers, grab rails, shower stools and a stocking aid.
A mini-van modified for use for the handicapped was held to be eligible for duty-free treatment under subheading 9817.00.96, HTSUS, even though it could also accommodate non-disabled individuals because it was specifically designed for and predominately used by or for the benefit of the handicapped person. See HRL 559416, dated February 21, 1996.
In HRL 561223, dated March 26, 1999, CBP held that hearing aid batteries were eligible for duty-free treatment under subheading 9817.00.96, HTSUS, because the batteries were designed for use solely with hearing aids, which were specially designed or adapted for the use of physically handicapped persons and because of their unique size and shape, would have only a fugitive use by the general public.
Other rulings have held that a cordless TV headset was not eligible for duty-free treatment under subheading 9817.00.96, HTSUS or a telephone with large size numbers sold to both the hearing-impaired and the general public. CBP also concluded that arthritis relief gloves with 20% spandex fabric content were similar to gloves sold to the general public and therefore, were not eligible for duty-free treatment under subheading 9817.00.96, HTSUS. See HRL 558684, dated December 14, 1994, HRL 951004, dated March 3, 1992, and HRL 960967, dated January 22, 1999. All of the above rulings conclude that imported articles that would be marketable and sold to the general public in significant number are not eligible for duty-free treatment under subheading 9817.00.96, HTSUS, even if there might also be a use for a handicapped person.
Rulings that have held that the imported article was eligible for duty-free treatment under subheading 9817.00.96, HTSUS, include: HRL 559439, dated January 3, 1996, (a product line of remote control devices that control the operation of electrical appliances sold specifically for the physically disabled and with special features that would only be useful to a physically handicapped person); HRL 560278, dated October 7, 1997, (imported adult waterproof pull-on underwear designed for incontinent adults that had features of marginal utility to a non-handicapped person); HRL 560114, dated October 9, 1997, (imported reading assistance machine which was marketed to severely sight impaired persons which had features designed specially for such persons), and HRL 556139, dated November 21, 1991, (imported listening device designed to increase access to television programming for deaf and hearing-impaired persons which had features specially designed for hearing-impaired persons). All of the above rulings concluded that the imported article was eligible for duty-free treatment under subheading 9817.00.96, HTSUS, because their features were specially designed for handicapped persons that would be of marginal utility to a non-handicapped person.
The first category of hearing aid parts involved in this case are similar to HRL 561223. The hearing aids parts in this category are designed for use in hearing aids and are marketed to hearing aid manufacturers. Customs stated in HRL 556449 that “if an article is dedicated to a sole use for the handicapped, e.g., pacemakers or hearing aids, then this is conclusive evidence that the articles are specially designed or adapted for the handicapped for purposes of the Nairobi Protocol.” Based on the information presented, the first category of imported hearing aid parts would satisfy the “specially designed or adapted” requirement. We find that the hearing aid parts designed for hearing aids and marketed solely to hearing-impaired persons are eligible for duty-free treatment under subheading 9817.00.96, HTSUS.
The second and third categories of imported parts involved in this case would not satisfy the “specially designed or adapted” requirement.
Counsel for the importer argues that legislative history supports its argument that Congress intended to include products within subheading 9817.00.96, HTSUS, originally designed for the handicapped that later developed general use.
We find that the legislative history does not support the importer's position. In fact, in Senate Report 97-564, Congress stated its intent that "in order for an entire modified article to be accorded duty-free treatment, the modification or adaptation must be significant, so as clearly to render the article for use by handicapped person." The Congress was very clear that the purpose of this duty-free provision was to assist handicapped persons. Nowhere in the legislative history or in any Customs rulings is there any reference to the "originally designed" criteria. We note that Starkey was specifically limited to goods specifically designed or adapted for use in hearing aids and listed certain design limitations that would make the goods improbable for general use. While Customs has allowed subheading 9817.00.96 treatment for goods that are specially designed or adapted for handicapped people that have a fugitive use to the general public, duty-free treatment under this provision has not been allowed for goods that are useful and sold and marketed to the general public. Based on the above, we find that imported parts originally designed for hearing aids but marketed and sold in a significant quantity or solely to the general public are not eligible for duty-free treatment under subheading 9817.00.96, HTSUS. We note that with regard to the two product lines with dual use, the BT line, of which 18% of its sales are to the general public and the CA line, which is mainly sold to the general public, are sold in a significant quantity to the general public and also do not satisfy the requirement that they be “specially designed or adapted” for the benefit or use of handicapped persons.
Lastly, we also find that imported parts modified from parts designed for hearing aids and marketed and sold primarily to the general public are not within the group of imported articles that Congress intended to be eligible for duty-free treatment under subheading 9817.00.96, HTSUS. As discussed above, Customs rulings have consistently held that articles found to have a significant use to the general public and marketed to the general public are not eligible for duty-free treatment under subheading 9817.00.96, HTSUS.
HOLDING:
Imported hearing aid parts designed for hearing aids and marketed to hearing-impaired persons are eligible for duty-free treatment under subheading 9817.00.96, HTSUS.
Imported parts originally designed for hearing aids but marketed and sold to the general public, either in significant number or primarily, are not eligible for duty-free treatment under subheading 9817.00.96, HTSUS. We also find that the BT and CA product lines are not eligible for duty-free treatment under subheading 9817.00.96, HTSUS.
Further, imported parts modified from parts designed for hearing aids and marketed and sold to the general public are not eligible for duty-free treatment under subheading 9817.00.96, HTSUS.
This decision should be mailed by your office to the internal advice requester no late than sixth days from the date of this letter. On that date the Office of Regulations and Rulings will take steps to make the decision available to Customs
personnel and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other means of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division