CLA-2 CO:R:C:M 955881 DWS
Mr. Robert P. Schaffer
Livingston Trade Services
The Willard Office Building, Suite 1150
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
RE: Reconsideration of NY 893262; Video Magnetic Tape; Imported
in Rolls; Prepared Unrecorded Media; Additional U.S. Rule of
Interpretation 1(a); Principal Use; Explanatory Note
85.23(4); HQs 955346, 088125, 084219, 086624, 085367, and
087299; Nestle Refrigerated Food Co. v. U.S.; 8523.20.00;
3926.69.00
Dear Mr. Schaffer:
This is in response to your letters of February 10, August
19, and August 24, 1994, on behalf of Maxell Corporation of
America, requesting reconsideration of NY 893262, dated January
7, 1994, concerning the classification of video magnetic tape
under the Harmonized Tariff Schedule of the United States
(HTSUS).
FACTS:
The merchandise consists of video magnetic tape, imported in
rolls. The rolls measure approximately 1 m x 0.019 mm x 10,000
m. Production of the tape in Japan includes the following steps:
a magnetic pigment, binder, and additives are mixed with a
solvent to form a paste; the paste is homogenized and dispersed;
the solid/solvent ratio is adjusted, and the binder, lubricants,
and hardener solution is added; the polyester film base is coated
with the magnetic material; and the merchandise is calendared.
In the U.S., the rolls are cured in a heated room (149
degrees Fahrenheit) for 35 hours. During the curing process, the
high temperature enhances the chemical reaction of crosslinking
binders which surround the magnetic particles. This creates a
strong, structured magnetic layer. The result of curing slightly
reduces the flexibility of the tape.
The purpose of curing the merchandise for the U.S. market is
because 30.4 percent of the video magnetic tape is sold for video
duplication. This involves the recording of video cassettes for
24 hours per day, without frequent maintenance of the video
cassette recorder (VCR). Therefore, the tape must be quite
durable.
After the curing process, each individual roll is cut in 78
pieces and then wound onto hubs (pancakes). The hubs are then
loaded into cassettes. Each loaded cassette is then packaged.
You note that 69.6 percent of the video magnetic tape is
sold to U.S. consumer market. For such usage, the curing process
of the tape is not necessary. In fact, the your client exports
similar merchandise into the United Kingdom (U.K.) for their
consumer market, and no curing process is performed once the tape
is imported into that country.
The subheadings under consideration are as follows:
3920.69.00: [o]ther plates, sheets, film, foil and strip, of
plastics, noncellular and not reinforced,
laminated, supported or similarly combined with
other materials: [o]f polycarbonates, alkyd
resins, polyallyl esters or other polyesters:
[o]f other polyesters.
The general, column one rate of duty for goods classifiable
under this provision is 4.2 percent ad valorem.
8523.90.00: [p]repared unrecorded media for sound recording
or similar recording of other phenomena, other
than products of chapter 37: [o]ther.
The general, column one rate of duty for goods classifiable
under this provision is 4.2 percent ad valorem.
ISSUE:
Whether the video magnetic tape, imported in rolls, is
classifiable under subheading 3920.69.00, HTSUS, as other film of
other polyesters, or under subheading 8523.90.00, HTSUS, as other
prepared unrecorded media.
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 is determined
according to the terms of the headings and any relative section
or chapter notes.
In NY 893262, issued by the Area Director of Customs, New
York Seaport, the subject merchandise was held to be classifiable
under subheading 8523.90.00, HTSUS.
In HQ 955346, dated February 9, 1994, which concerned the
classification of coils of stainless steel curved wire designed
for the manufacture of piston rings for automobile engines, we
stated that:
[u]nder a longstanding Customs principle, goods which are
material when entered are not classifiable as a particular
article unfinished. See Sandvik Steel, Inc. v. U.S.,
321 F.Supp. 1031, 66 Cust. Ct. 12, C.D. 4161 (1971) (shoe
die knife steel in coils and cutting rules in lengths,
without demarcations for cutting or bending, held to be
material rather than unfinished knives or cutting blades);
The Harding Co. v. U.S., 23 Cust. Ct. 250 (1936) (rolls of
brake lining held to be material because the identity of
the brake lining was not fixed with certainty); Naftone,
Inc. v. U.S., 67 Cust. Ct. 340, C.D. 4294 (1971) (rolls of
plastic film without demarcations for cutting despite
having only one use held to be insulating material).
You claim that because the tape, in its condition as
imported into the U.S., is in rolls and has not undergone the
curing process, it is unfinished and must be classifiable as
material under subheading 3920.69.00, HTSUS.
You cite Harmonized Commodity Description and Coding System
(HCDCS) Explanatory Note 85.23 as a basis for classification of
the merchandise under chapter 39, HTSUS. In understanding the
language of the HTSUS, the HCDCS Explanatory Notes may be
utilized. The Explanatory Notes, although not dispositive or
legally binding, 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). In part, Explanatory Note 85.23
(p. 1372) states that:
[t]he heading excludes:
(a) Articles intended for use as media for recording sound
or other phenomena but not yet prepared as such; these
are classified in their respective headings (for
example, in Chapter 39 or 48, or Section XVI).
Additional U.S. Rule of Interpretation 1(a), HTSUS, states
that:
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.
With regard to the subject merchandise, 69.6 percent of the
video magnetic tape sold in the U.S market is sold to consumers.
Only 30.4 percent of the merchandise is sold to duplicators,
whose needs require that the tape undergoes the curing process.
Therefore, based upon information provided to us, the tape is
principally used for a purpose not requiring a curing process.
You have noted that in the U.K., similar merchandise is sold for
consumer use, not requiring a curing process. You have stated
that such tape imported into the U.K. is classifiable under
heading 8523, HTSUS.
In part, Explanatory Note 85.23(4) (p. 1372) states that:
(1) - (3) xxx
(4) Media for magnetic recording, e.g., discs or cards (of
plastics or paper), tapes, strips or films (of plastics
or metal) or metal wire, either capable of being
magnetised or so rendered by coating with a lacquer
containing dispersions of magnetic powder or by
electrolytic deposit of a ferromagnetic coating (e.g.,
for magnetic wire).
These media may also be used for recording phenomena
other than sound, previously converted into electric
impulses, such as the light intensity of an image
(television signals, facsimile transmission) . . .
In HQ 088125, dated February 12, 1991, we held that
sputtered (magnetic plated) cast aluminum platters, for automatic
data processing (ADP) hard disc drives, was classifiable under
subheading 8523.20.00, HTSUS, as prepared unrecorded magnetic
disks. The issue in that ruling was whether the platters were
"prepared". In stating that they were "prepared", we stated
that:
[i]n HQ 084219, dated July 7, 1989, Customs held that the
term "prepared" as used in this heading "requires that the
discs classified in heading 8523 be physically finished
with a magnetic surface." There is no requirement that the
disc be mounted or housed in order to be considered
"prepared". Therefore, since the discs at issue are
finished and magnetically coated, they are specifically
provided for under heading 8523. See HQ 086624
(May 4, 1990), HQ 085367 (December 19, 1989), HQ 087299
(August 3, 1990), for similar holdings on similar
merchandise.
Although, for the purpose of being manufactured into video
cassettes, the merchandise enters the U.S. in an unfinished
state, it is our position that the rolls of video magnetic tape
are finished articles of prepared unrecorded media. Because the
merchandise is finished for the purposes of classification under
heading 8523, HTSUS, our long-held view with regard to unfinished
articles imported in material lengths does not apply. Because
the tape is magnetically coated prior to importation into the
U.S., and because it will be principally used in the consumer
market not requiring the curing process, we find that the tape is
prepared unrecorded media and is classifiable under subheading
8523.90.00, HTSUS. As was stated in HQ 088125, the video
magnetic tape does not have to be mounted or housed to be
considered "prepared".
You have cited Nestle Refrigerated Food Co. v. U.S., Slip
Op. 94-118 (1994), to demonstrate that because the merchandise
has not undergone the curing process prior to importation into
the U.S., it cannot be "prepared". The issue in that case was
whether the imported tomato product was a sauce or a preparation
for a sauce. You have cited the following language from that
case:
. . . Whether a product is fit for use as a sauce depends
upon more than the mere possibility of use, rather,
substantial use as a sauce must be demonstrated.
It is our position that the Nestle case is irrelevant to the
classification of the subject merchandise under the HTSUS. Nestle
does not involve similar merchandise nor similar legal issues. A
"substantial use" test is not the proper test; you have
demonstrated that the merchandise, once imported into the U.S.,
will be principally used in the consumer market. As stated
above, the "principal use" test is the one to be applied. We
have cited precedential rulings which involve the classification
of merchandise under heading 8523, HTSUS, and those rulings lend
credence to classification of the video magnetic tape under
heading 8523, HTSUS.
HOLDING:
The rolls of video magnetic tape are classifiable under
subheading 8523.90.00, HTSUS, as other prepared unrecorded media.
EFFECT ON OTHER RULINGS:
NY 893262 is affirmed.
Sincerely,
John Durant, Director
Commercial Rulings Division