CLA-2 RR: CR: GC 966270 TPB
Lee Silberzahn
Sony Electronics, Inc.
123 Tice Boulevard, MD: T1-3
Woodcliff Lake, NJ 07675
RE: LCD Display; Multifunctional Monitor.
Dear Mr. Silberzahn:
This is in response to your letter dated February 3, 2003, to the Director, National Commodity Specialist Division, New York, requesting classification of the Sony Model SDM-V72 17-inch LCD monitor under the Harmonized Tariff Schedule of the United States (“HTSUS”). Your request was sent to this office for consideration.
FACTS:
The Sony SDM-V72W is a 17.1” wide format liquid crystal display (“LCD”). It has four video inputs: HD15 for PC (analog RGB), Composite video, S-Video, and Y/Pb/Pr Component video. There are also microphone and audio inputs on the unit, as well as built in speakers. The SDM-V72W has a WXGA (Wide Extended Graphics Array) native resolution of 1280 x 768 and 0.29 mm pixel pitch. The overall dimensions are 19 x 14 x 3 inches. The monitor weighs 13 pounds.
The LCD panel is a type a-Si TFT active matrix with a horizontal scan range of 28-70 Khz and a vertical scan range of 48-85 hz. The control panel includes: menu buttons for controlling the on screen menu; WIDE button for selecting size modes for both PC and Video; and input button for switching between input sources. An infrared remote control is included with the display.
In its imported condition model SDM-V72W can display standard computer generated signals as well as five video signals: NTSC in 4 x 3 aspect ratio, NTSC with letterbox movie content, 480p (progressive scan), 720p (progressive 16 x 9 aspect ratio) and 1080I (interlaced 16 x 9 aspect ratio).
You indicate that while the marketing materials for model SDM-V72W emphasize the video capabilities of the monitor, Sony Electronics Inc. (“SEL”) believes that the principal function of this device is that of an automatic data processing (“ADP”) machine monitor.
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (“GRIs”). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied.
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System at the international level. While not legally binding, the ENs provide a commentary on the scope of each heading of the HTSUS and are thus useful in ascertaining the classification of merchandise under the System. The Bureau of Customs and Border Protection (“Customs”) believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The HTSUS provisions under consideration are as follows:
Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included:
Input or output, whether or not containing storage units in the same housing:
Other:
Display units:
Other:
Other:
8471.60.4580 Other.
Reception apparatus for television, whether or not incorporating radiobroadcast receivers or sound or video recording or reproducing apparatus; video monitors and video projectors:
Video monitors:
Color:
With a flat panel screen:
Other:
8528.21.7001 Other.
You indicate that the SDM-V72W is a composite machine that has the functions of both an ADP machine monitor and a video monitor. In order to be classified under heading 8471, HTSUS, the monitor must meet the criteria set forth in Legal Note 5(B) to Chapter 84, which provides guidance regarding units of automatic data processing machines. It states that “[a]utomatic data processing machines may be in the form of systems consisting of a variable number of separate units.” A unit is to be regarded as a part of the complete system if it meets all of the following conditions:
It is of a kind solely or principally used in an automatic data processing system;
It is connectable to the central processing unit whether directly or through one or more other units; and
It is able to accept or deliver data in a form (codes or signals) which can be used by the system.
The SDM-V72W is of a kind used in an ADP system, it is directly connectable to the CPU and it can accept data in a form which can be used by the system.
The SDM-V72W is also capable of displaying a variety of video signals through its various video inputs, which is provided for, eo nomine, under heading 8528, HTSUS, as a video monitor.
The Model SDM-V72W is therefore considered a composite machine that has the functions of both an ADP machine monitor and a video monitor. Classification of composite machines is regulated by Note 3 to Section XVI, HTSUS, which provides that:
Unless the content otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.
You indicate that SEL believes that Additional U.S. Rule of Interpretation 1(a) which addresses “principal use” can provide guidance in determining “principal function.” Additional Rule of Interpretation 1(a) reads:
In the absence of special language or context which otherwise requires - -
a tariff classification controlled by use (other than actual use) is to be determined in accordance with the use in the United States at, or immediately prior to the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use.
You indicate that it can be established that the monitor’s “principal function” is the computer function because it can be shown that the monitor is “principally used” with computers, and therefore is properly classifiable under heading 8471, HTSUS, as opposed to heading 8528, HTSUS.
In order to establish principal use, SEL contacted a market research firm that tracks LCD monitor and television products. They provided a letter stating that Model SDM-V72W is considered a LCD [computer] monitor for industry reporting purposes because of three main reasons:
It is sold through the personal computer channels and not the consumer television channel;
An electronic retailer confirmed it exclusively markets and sells the monitor as an LCD [computer] monitor; and
It does not contain an integrated television tuner or optional external tuner.
The market research firm concluded that shipments of the monitor would be part of the LCD computer monitor category and not the LCD television category.
Further, SEL referred to an independent web based market survey performed by Answers Research, Inc., for Sony in November of 2002. The survey consisted of a series of questions and was offered to participants meeting certain criteria. There were 383 participants to the survey.
Results showed that 64% of the participants selected “computers” as the primary use. Additionally, 74% of the participants who would consider purchasing the monitor would connect it to a desktop PC. No other device in the survey exceeded 47%.
Based on the above information, SEL believes that it has established principal use of the monitor as an ADP display unit, and that it can be reasoned that the principal function is also that of ADP display.
Having considered the above information, we do not find it persuasive in determining the principal function of the Sony Model SDM-V72W monitor for the following reasons.
The letter from the market research firm finds that the LCD monitor is a computer monitor for three main reasons: 1) it is marketed through personal computer channels rather than the consumer TV channels; an electronic retailer confirmed that it exclusively markets and sells the monitor as an LCD [computer] monitor; and 3) it does not contain an integrated television tuner or optical external tuner. However, information on Sony’s website, as well as the website of the electronics retailer, markets the merchandise as a “Personal Entertainment Display” with multifunctional video capabilities. Also, it is not necessary for a video monitor of heading 8528 to contain an integrated television tuner or optical external tuner. See HQ 964506, dated January 8, 2002. Finally, the letter included in your submission from the market research firm dated October 16, 2002 concludes that the SDM-V72W would be attributed to LCD [computer] monitors and not LCD television. “Television” is not the provision under consideration here, but rather “video monitor.”
While the study conducted by Answers Research, Inc. is useful in showing the principal use of the Sony Model SDM-V72W monitor, the survey was limited to just that one specific monitor, and therefore is very limited. Also, the study did not answer whether 17” wide format multimedia LCD displays are a separate class or kind of merchandise from 17” LCD ADP system displays and 17” LCD TVs and video monitors. It is the principal use of the class or kind of goods to which the imports belong at or immediately prior to the time of importation and not the principal use of the specific import that is controlling under the General Rules of Interpretation. See Group Italglass U.S.A., Inc. v. United States, 17 C.I.T. 1177, 1177, 839 F. Supp. 866, 867 (1993)
The courts have provided factors, which are indicative but not conclusive, to apply when determining whether merchandise falls within a particular class or kind. They include: (1) general physical characteristics; (2) expectation of the ultimate purchaser; (3) channels of trade; (4) environment of sale (accompanying accessories, manner of advertisement and display); and (5) usage of the merchandise. See Lenox Collections v. U.S., 20 CIT 194, 196 (1996). See also U.S. v. Carborundum Co., 63 CCPA 98, 102, 536 F. 2d 373, 377 (1976), cert denied, 429 U.S. 979 (1976); Kraft, Inc. v. U.S., 16 CIT 483, 489 (1992); and G. Heileman Brewing Co. v. U.S., 14 CIT 614, 620 (1990).
General Physical Characteristics
The first factor the court considers is the physical characteristics of the merchandise. In this case, the SDM-V72W is a 17” LCD monitor mounted on a base, which can tilt 3° forward, and 15° backward. It has four video inputs (analog RGB, Composite, S-video and Component video) a microphone input and an audio input. It has the components necessary to display standard computer generated signals as well as five different video signals: NTSC in 4 x 3 aspect ratio, NTSC with letterbox movie content, 480p (progressive scan), 720p (progressive 16 x 9 aspect ratio) and 1080I (interlaced 16 x 9 aspect ratio). The monitor also comes with a remote control to control viewing from a distance.
The monitor clearly has the physical attributes of both an ADP system monitor and a video monitor at the time of its importation.
Expectations of the Purchasers
The second factor to consider concerns the expectations of the purchasers of the SDM-V72W monitor. Again, referring to your survey, the majority of the participants indicated that if they purchased this LCD panel, they would mainly use it as a desktop PC (74%). The next most common use would be as a DVD player (47%) followed by other video applications. The entertainment factor of the monitor would appear to be secondary to its use as an ADP system monitor, although, clearly, the appeal of this device is its ability to also display DVD, VCR, satellite, video game and various other video displays. Otherwise, less expensive, single purpose LCD monitors could be purchased.
Channels of Trade
The next factor to consider is the channels of trade in which the merchandise moves. The channels of trade for this device appear to be large consumer electronic retailers that sell not only computers, but television and video monitors as well.
Environment of Sale
The next factor that the court considers is the environment in which the merchandise is advertised and displayed. The Sony Model SDM-V72W is referred to on Sony’s website and in Sony’s promotional material as a “Personal Entertainment Display.” Its advertising indicates that:
Driving entertainment beyond the PC extreme performance for advanced multi-media applications. Sony's Personal Entertainment Display connects directly to game consoles, video players, digital cameras and camcorders, PCs and more. True 16:9 wide screen format is optimized for superior video performance so you can enjoy everything from watching DVD’s to immersing yourself in video games in intense color, full sound and panoramic view.
The advertising for the SDM-V72W stresses the multifunctional video capabilities of the monitor.
Usage of the Merchandise
Finally, the court would have us examine the usage of the merchandise. As noted above, your survey indicated that if those participants were to purchase the monitor, a majority would use it primarily as a desktop PC and the video capabilities would be secondary. We have not, however, received any information on how purchasers use the monitor.
Based on the information above, we find that a principal use can not be determined. The SDM-V72W has the physical characteristics of both an ADP system monitor and a video monitor; its prospective purchasers would expect to use it primarily as an ADP system monitor; it is sold in consumer electronics retail stores that cater to computer and television and video monitor purchasers; it is advertised primarily for its video capabilities; and we do not have any information as to the usage of this product. We therefore find that you have not been able to establish a principal use for the merchandise. Consequently, based on the information we have, we cannot establish a principal function in accordance with Note 3 to Section XVI.
The General ENs to Section XVI that deal with multi-functional machines reads, in pertinent part, as follows:
(VI) MULTI-FUNCTION MACHINES
AND COMPOSITE MACHINES
(Section Note 3)
In general, multi-function machines are classified according to the principal function of the machine.
….
Where it is not possible to determine the principal function, and where, as provided in Note 3 to the Section, the context does not otherwise require, it is necessary to apply General Interpretative Rule 3(c)….
Having been unable to determine the principal function of the Model SDM-V72W monitor, we apply GRI 3(c), as per the EN above, and classify the merchandise under the heading which occurs last in numerical order among those which equally merit consideration. Therefore, the Sony Model SDM-V72W falls to be classified under heading 8528, HTSUS, specifically, subheading 8528.21.70, HTSUS.
HOLDING:
For the reasons set forth above, the Sony Model SDM-V72W monitor is classified under subheading 8528.21.70, HTSUS, which provides for other flat panel video monitors.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division