CLA-2 OT:RR:CTF:TCM H019899 GC
David Montoya
Tyco International Management Company
One Town Center Road, 6th Floor
Boca Raton, Florida 33486
RE: Tariff classification of magnetic security tags or labels
Dear Mr. Montoya:
On November 15, 2007, this office received your correspondence dated the same day requesting modification of several New York Letter Rulings pertaining to certain security tags and security labels.
The rulings mentioned in your letter classified the subject merchandise in heading 8543, of the Harmonized Tariff Schedule of the United States (HTSUS), as an electrical machine or apparatus. The merchandise was specifically provided for in subheading 8543.81, HTSUS, which provides for “proximity cards and tags.” In fact, these rulings were revoked by operation of law. Pursuant to Title 19 United States Code, Section 3005, the HTSUS was amended to reflect the changes recommended by the World Customs Organization. The proclaimed changes are effective for goods entered or withdrawn from warehouse for consumption on or after February 3, 2007. See Presidential Proclamation 8097, 72 FR 453, Volume 72, No. 2 (January 4, 2007). As part of the proclaimed changes, subheading 8543.81, HTSUS, was deleted from the Nomenclature.
Consequently, we will treat your letter as a request for a prospective ruling on the classification of the subject merchandise under the HTSUS. In addressing this request, we also considered the email submission that you made on December 10, 2007, which contained the specifications for the merchandise at issue here.
FACTS:
Sensormatic Electronics Corporation (Sensormatic) imports the security tags and labels, which are part of an alarm system that incorporates Electronic Article Surveillance (EAS) technology to prevent shoplifting of various goods for sale. Your submitted materials indicate that Sensormatic utilizes four different types of EAS technology. Per your email on December 10, 2007 clarifying your ruling request, this ruling discusses the tariff classification of security tags and labels used only in the EAS systems utilizing Acousto-Magnetic technology.
Acousto-Magnetic systems create a surveillance zone by using a transmitter, typically positioned at one end of a doorway or checkout area, to send a specific radio frequency in pulses, which is detected by a narrow band receiver positioned at the opposite end of the doorway or checkout area. The receiver turns on and off at the same rate as the pulse emitted by the receiver. When the security tag or label passes through the surveillance zone, the pulse signal causes the magnetic resonators within the tag or label to react in a manner similar to a tuning fork, which results in the emanation of the same frequency but in a constant rate. Consequently, the receiver, which does not detect the pulse frequency emanating from the transmitter, picks up the steady frequency coming from the security tag and label. The alarm is thus triggered after a micro-computer verifies the signal.
The subject merchandise referred to as labels are housed in plastic, within which there are (from top to bottom) two magnetic acoustic resonators, a low density plastic laminate, a semi-hard magnetic bias, another low density plastic laminate, adhesive, and a release liner. The tags are similarly housed in plastic, and are composed of two magnetic acoustic resonators, a bias, a clamp of high strength spring steel, and a tack composed of high strength nylon, and a stainless steel pin.
ISSUE:
What is the proper classification under the HTSUS for the subject merchandise?
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 2 through 6 may then be applied in order. The HTSUS provisions under consideration in this case are as follows:
8523 Discs, tapes, solid-state non-volatile storage devices, “smart cards” and other media for the recording of sound or other phenomena, whether or not recorded, including matrices and masters for the production of discs, but excluding products of Chapter 37:
* * *
Semiconductor media:
* * *
8523.52.0000 “Smart cards”…
* * *
8531 Electric sound or visual signaling apparatus (for example, bells, sirens, indicator panels, burglar or fire alarms), other than those of heading 8512 or 8530; parts thereof:
* * *
8531.90 Parts:
* * *
Other:
* * *
8531.90.9000 Other…
* * *
8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof:
* * *
8543.90 Parts:
* * *
Other:
* * *
Other:
* * *
8543.90.88 Other,
* * *
8543.90.8880 Other
In addition to removing subheading 8543.81, HTSUS, in 2007, heading 8523, HTSUS, was amended to cover “smart cards”. In determining whether the subject security tags and labels fit within the scope of the new term in the heading, we must first examine Legal Note 4 to Chapter 85, HTSUS, which states, in pertinent part:
(b) The term “smart cards” means cards which have embedded in them one or more electronic integrated circuits (a microprocessor, random access memory (RAM) or read-only memory (ROM)) in the form of chips. These cards may contain contacts, a magnetic stripe or an embedded antenna but do not contain any other active or passive circuit elements.
From the submitted material and specifications, the subject security labels and tags do not contain any embedded integrated circuits in the form of chips. In fact, the security tags and labels appear to contain only magnetic strips, which are used to generate the frequency required to trigger the alarm. Consequently, the subject merchandise does not meet the definition of “smart cards” articulated in Legal Note 4 to Chapter 85, HTSUS, and thus cannot be classified in heading 8523, HTSUS.
As noted above, the subject security tags and labels are parts of an alarm system incorporating the EAS technology. As parts, the subject security tags and labels are provided for in either heading 8543, HTSUS, or 8531, HTSUS, per Legal Note 2 to Section XVI of the HTSUS, which sets out the rules pertaining to tariff classification of parts of machines, and states, in pertinent part:
(a) Parts which are goods included in any of the headings of chapter 84 or 85 … are in all cases to be classified in their respective headings;
(b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading… are to be classified with the machines of that kind…
The facts of this case indicate that the subject security tags and labels do not contain an electronic circuit, or anything of that nature, which would qualify them as “electrical machines and apparatus” under heading 8543, HTSUS. Indeed, the security tags and labels at issue here are entirely passive, thus making classification as electrical machines or apparatus inappropriate.
The Harmonized Commodity Description and Coding System Explanatory Note (EN) to heading 8543, HTSUS, supports this conclusion. In understanding the language of the HTSUS, the ENs may be utilized. The ENs, though not dispositive or legally binding, may provide commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. CBP believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).
The EN to 8543 notes that most appliances of the heading consist of “an assembly of electrical goods and parts (valves, transformers, capacitors, chokes, resistors, etc.) operating wholly electrically” (emphasis added). As noted above, the subject security tags and labels do not operate electrically at all. Consequently, they are not classifiable in heading 8543, HTSUS as electrical machines or apparatus. It is also clear based on how they function that the subject merchandise, alone, does not fit the terms of heading 8531, HTSUS, as an electric visual or signaling apparatus, or any other heading within chapters 84 or 85. Therefore, classification cannot be determined by application of Note 2(a) to Section XVI.
However, according to Note 2(b) to Section XVI, parts, if suitable for use solely or principally with a particular kind of machine of the same heading are to be classified with the machines of that kind. In this case, the subject security tags and labels are indeed suitable for use solely with the alarm system described above. Thus, if the alarm system is specifically provided for in a heading of Section XVI, HTSUS, then security tags and labels are classifiable in the same heading.
In this regard, the alarm system incorporating the security tags and labels fit squarely in the terms of heading 8531, HTSUS. The EN to heading 8531 supports this conclusion that the alarm system qualifies as an electronic sound or visual signaling apparatus. It notes that the alarm systems described by the heading contain two main functions: detection and signaling. The theft alarm system incorporating the Acousto-Magnetic technology described above clearly shares this characteristic. Because the subject security tags and labels are designed solely or principally for use in an alarm system of heading 8531, HTSUS, application of Note 2(b) to Section XVI, HTSUS, requires that the subject merchandise be classified in heading 8531, HTSUS.
HOLDING:
By application of GRI 1 and Legal Note 2(b) to Section XVI, HTSUS, the subject security tags and labels are classified under heading 8531, HTSUS, and are specifically provided for in subheading 8531.90.9000, HTSUSA, which provides for: “Electric sound or visual signaling apparatus…; parts thereof: …Parts: …Other: …Other.” The column one, general rate of duty is 1.3 percent ad valorem.
Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov.
Sincerely,
Gail A. Hamill, Chief
Tariff Classification and Marking Branch