CLA-2 CO:R:C:M 956490 RFA
John M. Peterson, Esq.
Neville, Peterson & Williams
80 Broad Street
Suite 3400
New York, NY 10004
RE: Software Programs; Computer Disks; Computer Mouse; Digitizer
Unit; Software Manual; Adapters; Goods put up in sets for
retail sale; Legal Note 6 to Chapter 85; GRI 3(b); EN X to
GRI 3(b); HQs 950925, 951887, 952154
Dear Mr. Peterson:
This is in response to your letters of May 18 and August 1,
1994, on behalf of Microsoft Corporation, concerning the tariff
classification of Microsoft "Mouse & Windows" retail set under
the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The Microsoft "Mouse & Windows" retail set is entered in a
sealed plastic wrap retail box, containing Microsoft "Windows
3.1" operating system computer software on 3.5 inch disks, a
digitizer unit (commonly known as a computer "Mouse"), port
adapters, instruction software, instruction manuals, advertising
material, and warranty manuals.
According to the information provided, the "Windows 3.1"
operating system permits a computer user to organize files and
software installed in a personal computer (PC), and allows the PC
to organize and execute other software programs. "Windows 3.1"
software incorporates numerous operational and data files and
functions. It allows users to open, modify, and save documents,
transfer data between various applications, obtain on-line help
and information concerning the use of the software, manage
computer files and directories and organize documents for
printing, either over isolated output devices or through
networks. The software also includes numerous accessories
designed to facilitate the use of the PC, including a calculator,
calendar, card file, character map, clock, media player, note
pad, paint brush, recorder, sound recorder, terminal and writing
manager.
The Mouse is a small, hand-held plastic input hardware
accessory featuring a serial port connector and cable. The Mouse
incorporates a small tracker ball which makes contact with a
"Mouse pad" or other flat surface. The tracker ball, in turn,
furnishes information to light-emitting diode arrays within the
Mouse which perform an orientation function. Working in
conjunction with "driver" software (included within "Windows 3.1"
operating system), the Mouse allows the user to position a cursor
on the PC monitor screen. By depressing a switch on the Mouse, a
user can transmit a signal to the PC's central processing unit
(CPU), directing the CPU to execute a program or instruction.
The port adapter is designed to allow the Mouse to interface
with computer input terminals other than those using a standard
9-pin terminal plug configuration.
ISSUE:
Whether the Microsoft "Windows" software and a computer
Mouse sold in a sealed plastic wrap box are classified separately
or as "goods put up in sets for retail sale" under the HTSUS?
LAW AND ANALYSIS:
Classification of merchandise under the HTSUS is in
accordance with the General Rules of Interpretation (GRI's),
taken in order. GRI 1 provides that classification shall be
determined according to the terms of the headings and any
relative section or chapter notes.
The subject merchandise consists of: 3.5 inch disks which
are provided for under heading 8524, HTSUS; a computer digitizer
unit (or "Mouse") which is provided for under heading 8471,
HTSUS; instruction manuals which are provided under heading 4901,
HTSUS; printed advertising material which are provided for under
heading 4911, HTSUS; and a terminal port adapter which is
provided for under heading 8544, HTSUS. Because the merchandise
is prima facie classifiable in more than one heading, we must
apply the other GRI's.
GRI 3(a) provides in pertinent part:
[t]he heading which provides the most specific
description shall be preferred to headings providing a
more general description. However, when two or more
headings each refer to part only . . . of the items in
a set put up for retail sale, those headings are to be
regarded as equally specific in relation to those
goods, even if one of them gives a more complete or
precise description of the goods.
Because the software, Mouse, and instructional manuals fall
under separate headings in the tariff schedule which describe
only a portion of the subject merchandise, the headings are to be
regarded as equally specific under GRI 3(a). Therefore, GRI 3(a)
fails in establishing classification, and GRI 3(b) becomes
applicable. GRI 3(b) provides that goods put up in sets for
retail sale, shall be classified as if they consisted of the
material or component which gives them their essential character.
The Harmonized Commodity Description and Coding System
Explanatory Notes (EN) constitute the Customs Cooperation
Council's official interpretation of the HTSUS. While not
legally binding, the ENs provide a commentary on the scope of
each heading of the HTSUS and are generally indicative of the
proper interpretation of these headings. See T.D. 89-80, 54
Fed.Reg. 35127, 35128 (August 23, 1989). EN X to GRI 3(b), page
4, provides as follows:
[f]or the purposes of this Rule, the term "goods put up
in sets for retail sale" shall be taken to mean goods
which:
(a) consist of at least two different articles which
are, prima facie, classifiable in different
headings. Therefore, for example, six fondue
forks cannot be regarded as a set within the
meaning of this Rule;
(b) consist of products or articles 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 repacking (e.g., in boxes or
cases or on boards).
According to EN X to GRI 3(b), a set must consist of at
least two different articles. The subject merchandise meets the
first criteria because it consists of software, a Mouse, and
instructional manuals which are prima facie classifiable in
different headings. The subject merchandise also meets the third
criteria of being put up in a manner suitable for sale directly
to users, because it is packaged in a box and sealed with plastic
wrap.
The only issue remaining is whether the articles meet the
second criteria of being put up together to meet a particular
need or carry out a specific activity. Microsoft "Windows 3.1"
is an operating system software which allows users to open,
modify, and save documents, transfer data between various
applications, obtain on-line help and information concerning the
use of the software, manage computer files and directories and
organize documents for printing, either over isolated output
devices or through networks.
To operate the software program easily, the user operates
the Mouse which positions a cursor on the PC monitor screen. By
depressing a switch on the Mouse, a user transmits a signal to
the CPU, directing it to execute a program or instruction.
Because the Mouse is needed to use "Windows 3.1", we find that
these articles are put up together to carry out the specific
activity of utilizing the software operating system. The subject
merchandise is a retail set because it meets all three criteria
as set forth above. The essential character of the subject
retail set is imparted by the software program because the reason
the end-user purchases the set is for the ability to utilize the
Microsoft "Windows 3.1" operating software program. See HQ 951887
(October 26, 1992).
Legal Note 6 to Chapter 85, HTSUS, states that: "[r]ecords,
tapes and other media of heading 8523 or 8524 remain classified
in those headings, whether or not they are entered with the
apparatus for which they are intended." In classifying retail
sets containing media of heading 8523 or 8524, HTSUS, Customs has
interpreted the meaning of Legal Note 6 to Chapter 85, as
requiring that software is to be broken out from a retail set and
classified separately. See HQ 952154 (November 17, 1992); HQ
950925 (May 12, 1992). In these situations, the essential
character of the retail sets, which contained the media of
headings 8523 or 8524, HTSUS, were held to be other than the
media. However, in the present case, the essential character of
the retail set is the software. The end-user purchases the
merchandise because of the software capabilities. Therefore, we
find that Legal Note 6 to Chapter 85 allows for a retail set,
whose essential character is the software, to be classified as
software.
HOLDING:
The "Microsoft Mouse & Windows" retail set is classifiable
under subheading 8524.90.40, HTSUS, which provides for:
"[r]ecords, tapes and other recorded media for sound or other
similarly recorded phenomena. . . : [o]ther: [o]ther. . . ." The
column one, general rate of duty is 9.7 cents per square meter of
recording surface.
Sincerely,
John Durant, Director
Commercial Rulings Division