CLA-2 CO:R:C:M 956654 DWS
Mr. Frank R. Samolis
Patton Boggs, L.L.P.
2550 M Street, N.W.
Washington, D.C. 20037-1350
RE: Zing Interactive System; Signal Reading and Transmitting
Device; Hand-Held Receiving, Viewing, and Transmitting Unit;
Telephone Dialing Device; Explanatory Notes 85.17, 3(b)
(VIII) and (X); GRIs 3(a), 3(b), and 6; Functional Unit;
Section XVI, Note 4; HQ 955845; 8517.81.00; 8543.80.60
Dear Mr. Samolis:
This is in response to your letters of May 24, 1994, to the
Area Director of Customs, New York Seaport, and October 7, 1994,
to this office, on behalf of Zing Systems, LP, concerning the
classification of the Zing interactive system and each of its
components under the Harmonized Tariff Schedule of the United
States (HTSUS).
FACTS:
The merchandise consists of the Zing interactive system,
designed to enable cable-TV customers to participate in interactive
programming. It is a three-part system consisting of a signal
reading and transmitting device, a hand-held receiving, viewing,
and transmitting unit, and a telephone dialing device.
The reading device is connected to a television or video
cassette recorder (VCR), and reads data encrypted on the vertical
blanking interval of the television picture or video cassette,
transmitting the data via infrared signal to the hand-held unit.
The device is not similar to a cable-TV converter or decoder, and
it does not receive or transmit an RF signal; its signal must be
in baseband form. Also, the device is able to function with
programming appearing on encrypted video cassettes; television
reception is therefore not necessary.
The hand-held unit emits a sound when data is being
transmitted to it, and displays the data received in the form of
a text message on a 4-line liquid crystal display (LCD) screen.
It can hold twelve such screens of data in its display memory.
The user responds to the displayed message through the unit's
keypad. The response is stored in a memory chip in the unit, and
the user can use the unit to transmit stored information via
infrared signal to the telephone dialing device. The hand-held
unit does not control any functions; it only serves to receive,
store, and transmit data.
The telephone dialing device utilizes a modem to establish a
telephone link, and transmits the user's response back to the
television programmer or a Zing company database. The user may
respond to a variety of prompts from television advertisers and
programmers. However, the device cannot be connected to a computer
and is not designed to function as a two-way communications link.
Also, the device cannot be used to dial any telephone number in
that it will only dial pre-programmed telephone numbers based upon
the information it receives via infrared signal from the hand-held
device.
You have asked for a classification of the components imported
individually as well as together in sets. The first set includes
the signal reading and transmitting device and the hand-held
receiving, viewing, and transmitting unit. The second set includes
both of those components and the telephone dialing device.
The subheadings under consideration are as follows:
8517.40.50: [e]lectrical apparatus for line telephony or
telegraphy, including such apparatus for
carrier-current line systems; parts thereof:
[o]ther apparatus, for carrier-current line
systems: [o]ther: [t]elephonic.
The general, column one rate of duty for goods classifiable
under this provision is 8.5 percent ad valorem.
8517.81.00: . . . : [o]ther apparatus: [t]elephonic.
The general, column one rate of duty for goods classifiable
under this provision is 8.5 percent ad valorem.
8543.80.60: [e]lectrical machines and apparatus, having
individual functions, not specified or included
elsewhere in this chapter; parts thereof:
[o]ther machines and apparatus: [a]rticles
designed for connection to telegraphic or
telephonic apparatus or instruments or to
telegraphic or telephonic networks.
The general, column one rate of duty for goods classifiable
under this provision is 3.9 percent ad valorem.
8543.80.95: . . . : [o]ther machines and apparatus: [o]ther:
[o]ther.
The general, column one rate of duty for goods classifiable
under this provision is 3.9 percent ad valorem.
ISSUES:
Whether the telephone dialing device is classifiable under
subheading 8517.40.50, as an other telephonic apparatus, for
carrier-current systems; under subheading 8517.81.00, HTSUS, as an
other telephonic apparatus; or under subheading 8543.80.60, HTSUS,
as an other electrical machine, having an individual function, not
specified elsewhere under chapter 85, HTSUS, for connection to
telephonic networks.
Whether the signal reading and transmitting device and the
hand-held receiving, viewing, and transmitting unit are
classifiable under subheading 8543.80.95, HTSUS, as other
electrical machines, having individual functions, not specified
elsewhere under chapter 85, HTSUS.
Whether the Zing interactive system constitutes a functional
unit classifiable under subheading 8543.80.95, HTSUS.
Whether the two types of sets proposed by you are, for
classification purposes, sets 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 is determined according to the
terms of the headings and any relative section or chapter notes.
We will first deal with the classification of the components
of the Zing interactive system, commencing with the telephonic
dialing device.
In understanding the language of the HTSUS, the Harmonized
Commodity Description and Coding System 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 85.17
(pp. 1360, 1363) states that:
[t]he term "electrical apparatus for line telephony or line
telegraphy" means apparatus for the transmission between two
points of speech or other sounds (or of symbols representing
written messages, images or other data), by variation of an
electric current or of an optical wave flowing in a metallic
or dielectric (copper, optical fibres, combination cable,
etc.) circuit connecting the transmitting station to the
receiving station.
The heading covers all such electrical apparatus designed
for this purpose, including the special apparatus for
carrier-current line systems.
(I)-(II) xxx
(III) SPECIAL APPARATUS FOR CARRIER-CURRENT LINE SYSTEMS
This system, used in both telephony and telegraphy, is based
on the modulation of an optical source or of an electrical
frequency by impulses representing speech, messages or other
data. The apparatus of this group consists, in the
transmitting section, of oscillators, modulators, etc., and
in the receiving station, of filters, demodulators, etc.
This group includes combined modulators-demodulators
(modems).
It is our position that the telephone dialing device is
specifically classifiable under subheading 8517.40.50, HTSUS. The
device modulates an electrical carrier-current line through the use
of impulses representing data. It is our understanding, as stated
by counsel, for the purposes of the above definition, that the
device acts similar to a modem except that it is not designed to
function as a two-way communications link. However, for
classification under subheading 8517.40.50, HTSUS, such a
characteristic is not required.
In part, GRI 3(a) states that:
[t]he heading which provides the most specific description
shall be preferred to headings providing a more general
description. . .
GRI 6 states that:
[f]or legal purposes, the classification of goods in the
subheadings of a heading shall be determined according to
the terms of those subheadings and any related subheading
notes and, mutatis mutandis, to the above rules, on the
understanding that only subheadings at the same level are
comparable. For the purposes of this rule, the relative
section, chapter and subchapter notes also apply, unless
the context otherwise requires.
Compared to subheading 8517.81.00, HTSUS, subheading
8517.40.50, HTSUS, is more specific. It provides for "other
telephonic apparatus for carrier-current line systems", whereas
subheading 8517.81.00, HTSUS, provides for the more general "other
telephonic apparatus."
With regard to classification under subheading 8517.40.50,
HTSUS, because the telephone dialing device is classifiable under
subheading 8517.40.50, and therefore provided elsewhere under
chapter 85, HTSUS, it is precluded from classification under
subheading 8543.80.60, HTSUS.
With regard to the classification of the signal reading and
transmitting device and the hand-held receiving, viewing, and
transmitting unit, because they are not described or classifiable
elsewhere under the HTSUS, it is our position that they are
classifiable under subheading 8543.80.95, HTSUS.
We will now deal with whether the Zing interactive system is
a functional unit classifiable under subheading 8543.80.95, HTSUS.
Section XVI, note 4, HTSUS, 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.
It is our position that the interactive system is not a
functional unit classifiable under subheading 8543.80.95, HTSUS.
The components in the system must "contribute together to a clearly
defined function covered by one of the headings in chapter 84 or
chapter 85." Heading 8543, HTSUS, only describes, in a generic form, articles which are not classifiable elsewhere
under chapter 85, HTSUS. It is not, by definition, a provision
which specifically describes any type of merchandise or components
forming a unit of merchandise. Consequently, we find that heading
8543, HTSUS, cannot cover any clearly defined function.
We will now deal with whether the two combinations of devices,
for classification purposes, form sets, commencing with the
combination of the signal reading and transmitting device and the
hand-held receiving, viewing, and transmitting unit.
GRI 3(b) states that:
[m]ixtures, 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, insofar as this criterion is
applicable.
Explanatory Note 3(b)(X) (p. 4) states that:
[f]or the purpose 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).
The first combination of components does not constitute a set
under the HTSUS, as both components are classifiable under the same
provision, subheading 8543.80.95, HTSUS. As Explanatory Note
3(b)(X) states, a set must consist of at least two different
articles classifiable under different headings. This combination
consists of only two articles which are classifiable under the same
HTSUS heading. Therefore, the two articles are separately
classifiable under subheading 8543.80.95, HTSUS.
The second combination of components consists of all three of
the components forming the Zing interactive system. It is our
position that this combination does constitute a set. It consists
of two articles classifiable under different headings (8517.40.50
and 8543.80.95, HTSUS), the components are put together to carry
out the interaction between the user and television and advertising
programmers, and it is put up for sale directly to users.
We must now determine what component imparts the essential
character of the set. Explanatory Note 3(b)(VIII) (p. 4) states
that:
[t]he factor which determines essential character will vary
as between different kinds of goods. It may, for example,
be determined by the nature of the material or component,
its bulk, quantity, weight or value, or by the role of a
constituent material in relation to the use of the goods.
You cite HQ 955845, dated August 22, 1994, in support of the
view that the hand-held unit imparts the essential character of
the system. That case involved the "Quiz Wiz" educational
electronic module with a question booklet and answer cartridge.
A user enters a question number and an answer choice (from the
booklet) on a keypad module. The module, with the cartridge
inserted into it, indicates whether the answer is correct by a red
or green flashing light, or by a simulated vocal response of
"yes/no" or "right/wrong." We held that the components in that
case formed a set, with the keypad module imparting its essential
character.
It is our position that the holding in HQ 955845 has no
bearing on the essential character of the subject set. The
components of the Zing interactive system are quite different from
and more sophisticated than the components forming the "Quiz Wiz"
set.
It is our position that none of the components impart the
essential character of the Zing interactive system set. Without
any of the items of the set, the user could not use the system
effectively. It is true that the telephone dialing device need
not be used, however, without the other two components, the system
is unusable.
GRI 3(c) states that:
[w]hen goods cannot be classified by reference to 3(a) or
3(b), they shall be classified under the heading which
occurs last in numerical order among those which equally
merit consideration.
Because subheading 8543.80.95, HTSUS, occurs last in numerical
order between it and subheading 8517.40.50, HTSUS, under GRI 3(c),
the set is classifiable under that provision.
HOLDING:
The telephone dialing device is classifiable under subheading
8517.40.50, HTSUS, as an other telephonic apparatus, for carrier-
current systems.
The signal reading and transmitting device and the hand-held
receiving, viewing, and transmitting unit are classifiable under
subheading 8543.80.95, HTSUS, as other electrical machines, having
individual functions, not specified elsewhere under chapter 85,
HTSUS.
The Zing interactive system does not constitute a functional
unit classifiable under subheading 8543.80.95, HTSUS.
The combination of the signal reading and transmitting device
and the hand-held receiving, viewing, and transmitting unit does
not constitute a set, and both components must be separately
classifiable under subheading 8543.80.95, HTSUS.
The combination of all three of the components of the system
constitutes a set classifiable under subheading 8543.80.95, HTSUS.
Sincerely,
John Durant, Director