CLA-2 OT:RR:CTF:TCM H087337 RM
Port Director
Port of Dallas/Ft. Worth
U.S. Customs and Border Protection
P.O. Box 619050
DFW Airport, TX 75261-9050
RE: Semi-precious Gemstone Beads and Pendants; Application for Further Review of Protest No. 5501-09-100579
Dear Port Director:
The following is our decision regarding the Application for Further Review (“AFR”) of Protest No. 5501-09-100579, timely filed on behalf of Hobby Lobby Stores, Inc., concerning the classification of certain semi-precious gemstone beads and pendants under the Harmonized Tariff Schedule of the United States (“HTSUS”). Samples of the merchandise were included with the request.
FACTS:
This protest concerns Jasper, Amethyst, Jade, Turquoise, Tiger’s eye, and other semi-precious gemstone beads and pendants imported from China. The beads are strung together with beads of like color, shape, size, value and quality. The pendants are individually strung. As imported, the beads and pendants are attached to a cardboard backing and packaged for sale in plastic bags. Samples of both are pictured below.
Pictured: blister-packed strung semiprecious stone beads (left) and semi-precious stone pendants (right)
On April 21, 25 and 29, 2008, Protestant entered the beads under subheading 7103.99.10, HTSUS, as “[S]emi-precious stones, whether or not worked or graded but not strung, mounted or set; …: Otherwise worked: Other: Cut but not set, and suitable for use in the manufacture of jewelry” and the pendants under subheading 7117.90.90, HTSUS, as “Imitation jewelry: Other: Other: Valued over 20 cents per dozen pieces or parts: Other: Other.”
On June 26, 2009, U.S. Customs and Border Protection (“CBP”) liquidated the beads and the semi-precious stone pendants under subheading 7103.99.50, HTSUS, as “[S]emi-precious stones, whether or not worked or graded but not strung, mounted or set; …: Otherwise worked: Other: Other.”
Protestant filed the instant protest and AFR on September 18, 2009. Protestant avers that the subject beads are classified under subheading 7116.20.30, HTSUS, as “Articles of … semiprecious stones …: Of precious or semiprecious stones (natural, synthetic or reconstructed): Other: Graded semiprecious stones strung temporarily for convenience of transport” and the pendants under subheading 7116.20.05, HTSUS, as “Articles of … semiprecious stones …: Of precious or semiprecious stones (natural, synthetic or reconstructed): Articles of jewelry: Valued not over $40 per piece.”
ISSUE:
What is the correct tariff classification under the HTSUS of the subject semi-precious stone beads and pendants?
LAW AND ANALYSIS:
Initially, we note that the matter is protestable under 19 U.S.C. § 1514(a)(2) as a decision on classification. The protest was timely filed, within 180 days of liquidation for all involved entries (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)).
Further Review of Protest No. 5501-09-100579 was properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(a) because the decision against which the Protest was filed is alleged to be inconsistent with a ruling of the Commissioner of Customs or his designee with respect to substantially similar merchandise. Specifically, Protestant submits that the port’s decision in this case is inconsistent with New York Ruling Letter (“NY”) 805861, dated January 27, 1995, and Headquarters Ruling Letter (“HQ”) H007450, dated July 16, 2007. Protestant alleges that in those rulings, “[CBP] ruled that similar temporarily-strung multi-colored semi-precious stones were graded and were properly classified in subheading 7116.20.3000[.]”
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.
GRI 6 provides that 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 GRIs 1 through 5, 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.
The 2008 HTSUS headings under consideration are as follows:
7103 Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience of transport:
* * *
Otherwise worked:
* * *
Other:
Cut but not set, and suitable for use in the manufacture of jewelry …
Other …
* * *
7116 Articles of natural or cultured pearls, precious or semiprecious stones (natural, synthetic or reconstructed):
* * *
7116.20 Of precious or semiprecious stones (natural, synthetic or reconstructed):
Articles of jewelry:
Valued not over $40 per piece …
* * *
Other:
Of semiprecious stones (except rock crystal):
7116.20.30 Graded semiprecious stones strung temporarily for convenience of transport …
* * *
7116.20.40 Other …
* * *
The Notes to Chapter 71, HTSUS, provide in relevant part as follows:
9. For purposes of heading 7113, the expression “articles of jewelry” means:
(a) Any small objects of personal adornment (for example, rings, bracelets, necklaces, brooches, earrings, watch chains, fobs, pendants, tie pins, cuff links, dress studs, religious or other medals and insignia); and
(b) Articles of personal use of a kind normally carried in the pocket, in the handbag or on the person (for example, cigar or cigarette cases, snuff boxes, cachou or pill boxes, powder boxes, chain purses or prayer beads).
* * *
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the HTSUS. While not legally binding or dispositive, the ENs 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 (August 23, 1989).
EN 71.03 provides, in relevant part:
Because of their colour, brilliance, resistance to deterioration, and often also because of their rarity, these stones, which are usually crystalline, are used by jewellers, goldsmiths and silversmiths for making articles of adornment or ornamentation …
* * *
The stones of this heading may be strung for convenience of transport, provided this method of assembly is temporary and that the stones have not been graded and are not directly suitable for use as jewellery. Precious or semi-precious stones which have been set or mounted fall in heading 71.13, 71.14 or 71.16 (see the related Explanatory Notes) unless they are included in other headings, under the provisions of Note 1 to this Chapter.
The heading includes the precious or semi-precious stones listed in the Annex to this Chapter, the name of the mineralogical species being given with the commercial names; the heading is, of course, restricted to those stones and varieties of a quality suitable for use in jewellery, etc.
* * *
Subheadings 7103.91 and 7103.99
Subheadings7103.91 and 7103.99 cover polished or drilled stones, engraved stones (including cameos and intaglios) and stones prepared as doublets or triplets.
EN 71.16 provides, in relevant part :
This heading covers all articles (other than those excluded by Notes 2 (B) and 3 to this Chapter), wholly of natural or cultured pearls, precious or semi-precious stones, or consisting partly of natural or cultured pearls or precious or semi-precious stones, but not containing precious metals or metals clad with precious metal (except as minor constituents) (see Note 2 (B) to this Chapter).
It thus includes :
(A) Articles of personal adornment and other decorated articles (e.g., clasps and frames for handbags, etc; combs, brushes; ear-rings; cuff-links, dress-studs and the like) containing natural or cultured pearls, precious or semi-precious stones (natural, synthetic or reconstructed), set or mounted on base metal (whether or not plated with precious metal), ivory, wood, plastics, etc.
It includes pearls or stones graded according to size, quality, shade, etc., and constituting an article ready for use as jewellery. But the heading excludes ungraded or graded pearls and ungraded stones merely temporarily strung for facility of transport without any setting or fitting of metal or other material; these fall in heading 71.01, 71.03 or 71.04 (see Explanatory Notes to headings 71.01 to 71.03).
* * *
The Strung Semi-Precious Stone Beads
At the outset, we note that the beads are precluded from classification under heading 7103, HTSUS, as “[S]emiprecious stones whether or not worked or graded but not strung, mounted or set” because they are imported strung. Further, they are precluded from classification as “[U]ngraded precious stones … and semi-precious stones, temporarily strung for the convenience of transport” because they are “graded” (i.e., sorted and strung according to their size, color, quality and shade). See HQ H007450, dated July 16, 2007 (citing The Gemological Institute of America Diamond Dictionary (3rd ed., Gemological Institute of America 1993).
Inasmuch as the strung semi-precious stone beads are excluded from heading 7103, HTSUS, they are classified in heading 7116, HTSUS, specifically, in subheading 7116.20.40, as “Articles of … semiprecious stones …: Of … semiprecious stones…: Other: Of semiprecious stones (except rock crystal): Other.” Though graded, we find that the beads are not “strung temporarily for convenience of transport” (and thus not classifiable in subheading 7116.20.30, HTSUS, as argued by Protestant), because as imported, they are attached to a cardboard backing and packaged for sale in plastic bags.
The Semi-Precious Stone Pendants
The pendants are semi-precious stones manufactured into articles suitable for use as jewelry (i.e., as a necklace ornament) See Note 9 to Chapter 71, HTSUS (“For the purposes of heading 7113, the expression “articles of jewelry” means “any small objects of personal adornment (for example … pendants …)). However, they are also susceptible to other uses. According to the promotional literature on Protestant’s website, the pendants can be used to “[c]oordinate and design beautiful bracelets, necklaces, earrings, key chains and other craft projects … [They are] also great for adding special touches to projects such as painted jewelry boxes, handmade picture frames, candles and so much more.” As such, they are classified in subheading 7116.20.40, HTSUS, as “Articles of … semiprecious stones …: Of … semiprecious stones …: Other: Of semiprecious stones (except rock crystal): Other.” As noted above, the pendants are not “strung temporarily for convenience of transport” because as imported, they are already packaged for retail sale.
HOLDING:
By application of GRI 1, the semi-precious stone beads and the semi-precious stone pendants are classified under heading 7116, HTSUS, specifically, in subheading 7116.20.40, as “Articles of … semiprecious stones …: Of … semiprecious stones …: Other: Of … semiprecious stones (except rock crystal): Other.” The 2008 column one, general rate of duty was 10.5% ad valorem at the time of entry.
Since the rate of duty under the classification indicated above is the same as the rate for the liquidated classification, you are instructed to DENY the protest in full. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter.
Sixty days from the date of the decision the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division