CLA-2 CO:R:C:M 956960 RFA
Mr. Douglas W. Sirinek
Sharp Electronics Corporation
Sharp Plaza
P.O. Box 650
Mahwah, NJ 07430-2135
RE: Software Programs; Computer Disks; Software Manual; Cable
Link; Goods put up in sets for retail sale; Headings 8524,
8544; Legal Note 6 to Chapter 85; GRI 3(b); EN X to GRI
3(b); HQs 950925, 951887, 952154, 956490
Dear Mr. Sirinek:
This is in response to your letter dated July 25, 1994, to
the Area Director of Customs in New York, concerning the tariff
classification of the Organizer Links, Models OZ895 and OZ892,
under the Harmonized Tariff Schedule of the United States
(HTSUS). Your letter was referred to this office for response.
FACTS:
The Sharp Organizer Links, Models OZ895 and OZ892, contain
the Organizer Link II (OL2) Version 2.1 operating system computer
software, instructional or operational manuals, and a level
converter for IBM-compatible or Macintosh personal computers
(PCs). It is entered in retail boxes, ready for sale.
According to the information provided, the OL2 software
integrates a user's desktop PC applications with Sharp's entire
line of Organizer pocket computers (sometimes referred to as the
"Wizard" organizer series) in order to: archive and restore
Organizer data files; upload data file to OL2's various editors
and viewers and download your changes back to the Organizer;
view, search, and edit data on the PC as the user would with the
Organizer; generate a wide variety of reports for each
application; export and import Organizer files in formats
compatible with the most popular PC desktop applications,
including "Lotus 1-2-3", "dBase", and other common data base
programs.
The level converter is a cable with a thin, 15-pin interface
connector on one side for connection to the Organizer, and a
thicker, 25-pin RS-232C connector on the other side for
connection to the PC.
ISSUE:
Whether the Organizer Link II (OL2) Version 2.1 operating
system computer software and a level converter for IBM-compatible
or Macintosh personal computers (PCs), sold in a retail 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 or 5.25 inch
floppy disks which are provided for under heading 8524, HTSUS; a
level converter cable which is provided for under heading 8544,
HTSUS; and instruction manuals which are provided under heading
4901, 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 operating software, level converter cable, 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 FR
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 level converter
cable, 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 suitable
for sale directly to end-users.
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. The OL2 operating system
software integrates a user's desktop PC applications with Sharp's
entire line of Organizer pocket computers (sometimes referred to
as the "Wizard" organizer series) in order to: archive and
restore Organizer data files; upload data file to OL2's various
editors and viewers and download your changes back to the
Organizer; view, search, and edit data on the PC as the user
would with the Organizer; generate a wide variety of reports for
each application; export and import Organizer files in formats
compatible with the most popular PC desktop applications,
including "Lotus 1-2-3", "dBase", and other common data base
programs.
To operate the software programs, the user must connect the
Organizer to the PC by the level converter cable. The cable
allows for the interaction of instructions and commands between
the two units. Because the cable is needed to use the OL2
Version 2.1 operating system computer software, 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 integrate a
user's desktop PC applications with the Organizer pocket
computers. See HQ 951887 (October 26, 1992).
In HQ 956490, dated August 19, 1994, Customs determined that
the Microsoft "Windows 3.1" operating system computer software
and a digitizer unit (commonly known as a computer "Mouse"), met
the definition of "goods put up in sets for retail sale" because
it carries out the specific activity of utilizing the software
operating system. Customs further noted that:
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.
Based upon HQ 956490, we find that the essential character
of the subject merchandise is the software. The end-user
purchases the merchandise because of the software capabilities of
linking the Organizer with the desktop PC. Therefore, the
subject merchandise is classifiable under subheading 8524.90.40,
HTSUS, which provides for other recorded media.
HOLDING:
The Organizer Link II (OL2) Version 2.1 operating system
software and a level converter 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