CLA-2 RR:TC:MM 958914 RFA
Mr. Dennis Heck
Tower Group International, Inc.
Castelazo & Associates
5420 W. 104th Street
Los Angeles, CA 90045-6069
RE: Mini Compact Disc Stereo Systems; Stereo Integrated
Amplifiers/Tuners; Dual Stereo Cassette Decks/Compact Disc
Players; Remote Controls; Flat Cables; "Goods Put Up In Sets
For Retail Sale"; Composite Goods; GRI 3(b); Explanatory
Note 3(b)(X); Incomplete or Unfinished Functional Units;
Legal Note 4 to Section XVI; Headings 8520, 8527; HQs
957150, 950882, 950218, 087077; HQ 956284, revoked
Dear Mr. Heck:
This is in reference to HQ 956284, issued to you on July 7,
1994, in which Customs classified the mini compact disc stereo
systems under the Harmonized Tariff Schedule of the United States
(HTSUS). In the course of ruling on similar merchandise, we have
determined that HQ 956284 is incorrect. Pursuant to section
625(c)(1), Tariff Act of 1930 (19 U.S.C. 1625(c)(1)), as amended
by section 623 of Title VI (Customs Modernization) of the North
American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057)(1993), notice of the proposed revocation of
NY 810627 was published on March 20, 1996, in the Customs
Bulletin, Volume 30, Number 12. No comments were received in
response to the notice.
FACTS:
The merchandise consists of three types of mini compact disc
stereo systems, all with a remote control. After importation,
the systems will be repackaged with U.S.-sourced speakers and
then sold to the public. System NSX-D603 consists of a stereo
integrated amplifier/tuner (model no. RX-N603), with a clock, and
a dual stereo cassette (player/recorder) deck/compact disc player
(model no. FD-N603). System NSX-D606 consists of a stereo
integrated amplifier/tuner (model no. RX-N606), with a clock, and
a dual stereo cassette (player/recorder) deck/compact disc player
(FD-N606). System NSX- D707 consists of a stereo integrated
amplifier/tuner (model no. RX- N707), with a clock, and a dual
stereo cassette (player/recorder) deck/compact disc player (model
no. FD-N707). The systems' components are designed for either
horizontal or vertical placement. In each system, connection of
the amplifier/tuner to the cassette deck player is effected by a
specially designed flat cable included with each system. There
are no common "RCA type jacks" available to interconnect the
stereo components. Because the stereo system can send signals
only through the flat cable, the stereo system components cannot
be sold separately. The consumer must purchase the entire sound
system.
ISSUE:
Whether the mini compact disc stereo systems are
classifiable as functional unit, as "goods put up in sets for
retail sale", as a composite good, or are the components
classifiable separately under the HTSUS?
LAW AND ANALYSIS:
Classification of merchandise under the HTSUS is in
accordance with the General Rules of Interpretation (GRI's). GRI
1 provides that classification shall be determined according to
the terms of the headings and any relative section or chapter
notes.
The following subheadings are under consideration:
8520: Magnetic tape recorders and other sound recording
apparatus, whether or not incorporating a sound reproducing device:
8520.33.00: Other magnetic tape recorders incorporating
sound reproducing apparatus: [o]ther,
cassette type. . . . .
Goods classifiable under this provision have
a column one, general rate of duty of 2.3
percent ad valorem.
8520.90.00: Other. . . . . .
Goods classifiable under this provision have
a column one, general rate of duty of 2.3
percent ad valorem.
8527.32.50: Reception apparatus for radiotelephony,
radiotelegraphy or radiobroadcasting, whether
or not combined, in the same housing, with
sound recording or reproducing apparatus or a
clock: [o]ther radiobroadcast receivers,
including apparatus capable of receiving also
radiotelephony or radiotelegraphy: [n]ot
combined with sound recording or reproducing
apparatus but combined with a clock: [o]ther.
. . .
Goods classifiable under this provision have
a column one, general rate of duty of 4.8
percent ad valorem.
It is claimed that the stereo systems are functional units
as defined by Legal Note 4 to section XVI, HTSUS, which states
that: "[w]here a machine (including a combination of machines)
consists of individual components (whether separate or
interconnected by piping, by transmission devices, by electric
cables or by other devices) intended to contribute together to a
clearly defined function covered by one of the headings in
chapter 84 or chapter 85, then the whole falls to be classified
in the heading appropriate to that function."
In HQ 956284, dated July 7, 1994, Customs determined that
the mini compact disc stereo systems imported without their
speakers, cannot be classifiable as functional units because they
are not "intended to contribute together to a clearly defined
function covered by one of the headings in chapter 84 or chapter
85." We further note that the stereo systems imported without
their speakers are incomplete. Customs has consistently held
that incomplete or unfinished articles cannot be classified as
unfinished functional units. See HQ 957150 (January 30, 1995); HQ
950218 (April 17, 1992); HQ 087077 (March 27, 1991). Therefore,
the mini compact disc stereo systems fail the test as set forth
under Legal Note 4 to section XVI, HTSUS.
Because each of the stereo components are prima facie
classifiable in two or more headings, classification under GRI 1
fails, and we must apply the other GRIs. GRI 3(a) states that if
a product is prima facie classifiable in two or more headings by
application of GRI 2(b), or for any other reason, then the
"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
materials or substances contained in mixed or composite goods or
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."
GRI 3(b) provides that "mixtures, composite goods consisting
of different materials or made up of different components, and
goods put up in sets for retail sale, which cannot be classified
by reference to 3(a), 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 official
interpretation of the HTSUS. While not legally binding nor
dispositive, 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). To determine what is a "set put up for
retail sale", EN X to GRI 3(b), page 4, states that:
[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;
(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).
The mini compact disc stereo system consist of at least two
different articles which are prima facie classifiable in
different headings, and they are put up together to meet the
particular need of audio entertainment. However, both systems
fail to meet the third criterion because after importation, they
are repackaged with speakers into a master carton before they are
put up for sale to the public.
Because the mini compact disc stereo systems are not
classifiable as functional units, or as "goods put up in sets for
retail sale", the issue to be determined is whether the stereo
systems are composite goods or whether each component must be
separately classified. EN (IX) to GRI 3(b), page 4, states that:
For the purposes of this Rule, composite goods made up
of different components shall be taken to mean not only
those in which the components are attached to each
other to form a practically inseparable whole but also
those with separable components, provided these
components are adapted one to the other and are
mutually complementary and that together they form a
whole which would not normally be offered for sale in
separate parts.
Examples of the latter category of goods are:
(1) Ashtrays consisting of a stand incorporating a
removable ash bowl.
(2) Household spice racks consisting of a specially
designed frame (usually of wood) and an appropriate number of empty
spice jars of suitable shape and size.
As a general rule, the components of these
composite goods are put up in common packing.
The subject stereo systems consist of two separable
components (an amplifier/tuner and dual cassette decks/CD player)
which are adapted one to the other (through the flat cable) and
are mutually complementary and that together they form a whole
which is not normally offered for sale as separate components.
Because of the specially designed flat cable which connects the
components to form a complete stereo system, consumers cannot
purchase the components separately. Based upon all these
factors, we believe that the subject stereos in their condition
as imported, are composite goods under the application of GRI
3(b). We further find that the essential character of the
composite good is imparted by the tuner/amplifier component.
Therefore, the subject stereo systems are classifiable under
subheading 8527.32.50, HTSUS, as reception apparatus for
radiobroadcasting. Based upon the above analysis, HQ 956284
(which classified the components separately) is incorrect.
HOLDING:
The mini compact disc stereo systems are classifiable under
subheading 8527.32.50, HTSUS, which provides for: "[r]eception
apparatus for radiotelephony, radiotelegraphy or
radiobroadcasting, whether or not combined, in the same housing,
with sound recording or reproducing apparatus or a clock: [o]ther
radiobroadcast receivers, including apparatus capable of
receiving also radiotelephony or radiotelegraphy: [n]ot combined
with sound recording or reproducing apparatus but combined with a
clock: [o]ther. . . . " Goods classifiable under this provision
have a column one, general rate of duty of 4.8 percent ad
valorem.
EFFECT ON OTHER RULINGS:
HQ 956284, dated July 7, 1994, is hereby revoked. In
accordance with 19 U.S.C. 1625(c)(1), this ruling will become
effective 60 days after publication in the Customs Bulletin.
Publication of rulings or decisions pursuant to 19 U.S.C.
1625(c)(1) does not constitute a change of practice or position
in accordance with section 177.10(c)(1), Customs Regulations [19
CFR 177.10(c)(1)].
Sincerely,
John Durant, Director
Tariff Classification Appeals
Division