CLA-2 CO:R:C:M 956970 KCC
Wesley K. Caine, Esq.
Stewart and Stewart
808 Seventeenth Street, N.W.
Washington, D.C. 20006-3910
RE: Cable-television signal-converter; remote-control device;
HRL 952293; HRL 952302; HRL 952441; set; GRI 3(b); essential
character; EN Rule 3(b); NAFTA; Article 509; originating
good; General Note 12(b)(ii(A); change in tariff
classification; non-originating materials; General Note
12(t)/85.77
Dear Mr. Caine:
This is in regards to your letter dated August 26, 1994, on
behalf of Sigmatron International, Inc., concerning the tariff
classification under the Harmonized Tariff Schedule of the United
States (HTSUS), and preferential tariff treatment under the North
American Free Trade Agreement (NAFTA) for a cable-television
signal-converter and remote-control device.
FACTS:
The article under consideration is the "TV-86" cable-television signal-converter (converter) manufactured in Mexico.
It is a household appliance for converting cable-television
signals into signals recognizable by television sets so that
users can access cable television. It enables any television set
to receive cable-television channels 0 through 84 on ordinary
television channel 3. Sigmatron enters the articles at issue
under subheading 8525.10.2030, HTSUS, as "converters."
Currently the converter is packaged together with a hand-operated remote-control device which permits the user to change
cable channels at a distance from the converter. The remote-control device is made in Korea and when entered with the
converter is classified under subheading 8525.10.2030, HTSUS. You
state that the converter and remote-control device's packaging
identifies both goods and their country of origin. If separately
imported, you state that the remote-control device is
classifiable under subheading 8525.10.2040, HTSUS.
The converter is manufactured in Mexico from approximately
222 parts of U.S. (approximately 112), Mexican (approximately 5)
and foreign origin (approximately 105). Your submission
identified all the parts and their HTSUS tariff provisions. As
given, the following is a list of the non-originating NAFTA
parts, their HTSUS tariff provision and country of origin::
PART
SCREW PANHD PHIL
SPACER THREADED
BRASS
XFORMER PWR FUSED
RES. OHM various
CAP various
SWITCH various
CRYSTAL
DIO HOT CAR MIX,
DIO SIL SWITCH,
RECT., UHF HI
RATIO
DIO IR AMPEREX &
LED LOW INTENSITY
DSPLY
TRANS MOT., TRANS
& TRANS FET N CHAN
DUAL G
CONN AC CORD
CONN CHASSIS
COIL CHOKE SHLD
IC OP AMP 8 PIN,
IC MOT, IC PLL &
REVR AMP
POT OHM PIHER
RADIAL
CAP various
IC REGULATOR & IC
12 VOLT V-REG
CONN AC RECPTACLE
HTSUS
7318.15.60
7415.30.00
8504.31.40
8533.10.00
8532.23.00
8536.50.80
8541.60.00
8541.10.00
8541.40.20
8541.21.00
8544.51.80
8536.69.00
8504.50.00
8542.11.00
8533.40.80
8532.22.00
8542.19.00
8536.90.00
COUNTRY
Taiwan
Taiwan
China
Taiwan
Taiwan, South
Korea
Taiwan, Hong Kong
Taiwan
Taiwan, Japan
Taiwan, South
Korea
Taiwan, Germany,
South Korea
Taiwan
Taiwan
Taiwan
foreign, Japan
Spain
South Korea
South Korea
South Korea
ISSUE:
I. What is the tariff classification of the "TV-86" converter
and remote-control device under the HTSUS?
II. Is the "TV-86" converter eligible for preferential tariff
treatment under the NAFTA pursuant to General Note 12(b), HTSUS?
LAW AND ANALYSIS:
I. Tariff Classification
The classification of merchandise under the HTSUS is
governed by the General Rules of Interpretation (GRI's). GRI 1,
HTSUS, states, in part, that "for legal purposes, classification
shall be determined according to the terms of the headings and
any relative section or chapter notes...." The subheadings at
issue are:
8525.10.2030 Transmission apparatus for radiotelephony,
radiotelegraphy, radiobroadcasting or television,
whether or not incorporating reception apparatus
or sound recording or reproducing apparatus;
television cameras...Transmission apparatus...
Television...Other...Converters, decoders,
preamplifiers, line amplifiers, distribution
amplifiers and other amplifiers; directional
couplers and other couplers; all the foregoing
designed for cable or closed-circuit television
applications.
8537.10.9070 Boards, panels (including numerical control
panels), consoles, desks, cabinets and other
bases, equipped with two or more apparatus of
heading 8535 or 8536, for electric control or the
distribution of electricity, including those
incorporating instruments or apparatus of chapter
90, other than switching apparatus of heading
8517...For a voltage not exceeding 1.000
V...Other...Other.
In this case, two different components are imported together
in the same package; the converter and the remote-control device.
We agree that the converter is classified under subheading
8525.10.2030, HTSUS, as a "converter."
However, Customs position is that the remote-control device
is classified under subheading 8537.10.9070, HTSUS, as other
boards, panels, equipped with two or more apparatus of heading
8535 or 8536, for electric control or the distribution of
electricity, for a voltage not exceeding 1.000 V. See,
Headquarters Ruling Letter (HRL) 952293 dated October 31, 1994,
HRL 952302 dated November 2, 1992, and HRL 952441 dated November
2, 1992. With regard to the remote control, similar merchandise
is the subject of an action before the U.S. Court of
International Trade in Universal Electronics Inc. v. U.S. (Court
No. 93-11-00740).
When, by application of GRI 2, HTSUS, goods are prima facie
classifiable under two or more headings, GRI 3, HTSUS, is
applicable. In this case, classification is determined by
application of GRI 3(b), HTSUS, which provides:
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, insofar as this criterion is applicable.
In understanding the language of the HTSUS, the Harmonized
Commodity Description and Coding System Explanatory Notes (ENs)
may be utilized. The ENs, although not dispositive, provide a
commentary on the scope of each heading of the HTSUS and are
generally indicative of the proper interpretation of the HTSUS.
See, T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). EN
Rule 3(b)(X) (pg. 4), provides a three-part test for "goods put
up in sets for retail sale":
For 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 facia, 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 repackaging (e.g., in boxes or cases or
on boards).
In the present situation, the merchandise consists of two
different articles, which, as stated above, are classified under
two different headings. The converter and remote-control device
are used together to view cable television from an ordinary
television set. The remote-control device allows a user to
operate the converter from a distance. The articles are put up
together to meet a particular need or carry out a specific
activity, i.e. viewing of cable television. Additionally, both
articles are packaged together for sale directly to the consumer
without repackaging. Therefore, the converter and remote-control
device are a set for tariff purposes. To determine the proper
classification, the essential character of the set needs to be
determined.
In general, essential character has been construed to mean
the attribute which strongly marks or serves to distinguish what
an article is; that which is indispensable to the structure, core
or condition of the article. In addition, EN Rule 3(b) (pg. 4),
provides further factors which help determine the essential
character of goods. Factors such as bulk, quantity, weight or
value, or the role of a constituent material in relation to the
use of the goods are to be utilized, though the importance of
certain factors will vary between different kinds of goods.
We are of the opinion that the essential character of the
set is imparted by the converter. It is the component which
converts cable television signals into signals recognizable by a
television set. Therefore, the set, i.e. the converter and
remote-control device, are classified under subheading
8525.10.2030, HTSUS.
II. NAFTA Eligibility
To be eligible for tariff preferences under the NAFTA, goods
must be "originating goods" within the rules of origin in General
Note 12(b), HTSUS. Because the converter set is made from parts
imported from non-NAFTA countries, to be "goods originating in
the territory of a NAFTA party" the goods must be "transformed in
the territory of Canada, Mexico and/or the United States"
pursuant to General Note 12(b)(ii)(A), HTSUS, which states:
except as provided in subdivision (f) of this note, each of
the non-originating materials used in the production of such
goods undergoes a change in tariff classification described
in subdivision (r), (s) and (t) of this note or the rules
set forth therein....
In this case, we must examine whether the converter set is
"transformed in the territory of Canada, Mexico and/or the United
States" pursuant to General Note 12(b)(ii)(A), HTSUS. The
converter set is imported into the U.S. under subheading
8525.10.2030, HTSUS, as a converter.
As the converter set is classified under subheading 8525.10.2030,
HTSUS, a transformation is evident when a change in tariff
classification occurs that is authorized by General Note
12(t)/85.77, HTSUS. General Note 12(t)/85.77, HTSUS, states:
A change to subheadings 8525.10 through 8525.20 from any
subheading outside that group, provided that, with respect
to printed circuit assemblies (PCAs) of tariff items
8529.90.01, 8529.90.03, 8529.90.06, 8529.90.09, 8529.90.13,
8529.90.16, 8529.90.19 or 8529.90.23:
(A) except as provided in subparagraph (b), for each
multiple of nine PCAs, or any portion thereof, that is
contained in the good, only one PCA may be a non-originating PCA, and
(B) if the good contains less than three PCAs, all of the
PCAs must be originating PCAs.
None of the non-originating parts are classified as PCAs
under the subheadings of 8525, as listed in General Note
12(t)/85.77, HTSUS. Therefore, we can disregard that portion of
the transformation rule. However, any non-originating parts of
the converter must come from a subheading outside subheadings
8525.10 through 8525.20. None of the described non-originating
parts listed in the FACTS section of this ruling, including the
remote-control device, are classified within subheadings 8525.10
through 8525.20. A change in tariff classification does occur
for the converter set. Therefore, the "TV-86" converter set is
eligible for preferential tariff treatment under the NAFTA
pursuant to General Note 12(b)(ii)(A), HTSUS, upon meeting all
other applicable requirements.
HOLDING:
Pursuant to GRI 3(b), HTSUS, the "TV-38" converter and
remote-control device are classified as a set under subheading
8525.10.2030, HTSUS, which provides for converters.
The "TV-86" converter set is considered an "originating
goods" pursuant to General Note 12(b)(ii)(A), HTSUS, upon meeting
all other applicable requirements.
Sincerely,
John Durant, Director
Commercial Rulings Division