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HQ 086171

March 22, 1990

CLA-2 CO:R:C:G 086171 JMH

CATEGORY: CLASSIFICATION

TARIFF NO.: 685.40, 684.58

District Director
U.S. Customs Service
511 N.W. Broadway Fed. Bldg.
Suite 198
Portland, OR 97209

RE: Protest 2904-8-000195, Code-A-Phone telephone answering machines

Dear Sir:

The following is our decision regarding the Protest for Further Review No. 2904-8-000195, dated October 7, 1988. At issue is the classification under the Tariff Schedules of the United States (TSUS) of Entry No. 062-2017327-9, which consists of Code-A-Phone Model 2650 telephone answering machines.

FACTS:

The U.S. Customs Service issued Headquarter's Ruling Letter 052602 (HQ 052602), dated August 9, 1977, to Ford Industries, now Code-A-Phone. HQ 052602 classified the Code-A- Phone Model 1600 telephone/telephone answering machine under item 685.40, TSUS, as "[t]ape recorders and dictation recording and transcribing machines..."

The functions of the Code-A-Phone Model 1600 include those of a regular telephone along with the abilities to answer an incoming call, transmit a prerecorded announcement, and record a message dictated by the calling party. Model 1600 has a capacity to receive 20 calls at a length of 30 seconds each. Other functions include fast forward, reverse, the monitoring of incoming messages, and remote access to messages by using a beeper device.

The shipment in question, Entry No. 062-2017327-9, was entered on May 25, 1988. The shipment consisted of Code-A-Phone Model 2650 telephone answering machines. Code-A-Phone Model 2650
includes the following features: dual recording on microcassettes, one-touch message playback, voice activated recording, conversation record, call screening, personal memo, fast forward, reverse, blinking message counter, ten-number speed dialer, last number redial, programmable pause, tone or pulse dialing, ringer volume control, beeperless remote control, repeat, toll saver, remote announcement change, remote turn on, save or cancel messages, security code, and announcement breakthrough.

During the ten years and nine months between the issuance of HQ 052602 and the present entry, at least fifteen models of Code- A-Phone telephone/telephone answering machines were entered and classified under item 685.40, TSUS. This progression of entries evidences a continual advancement in style and technology.

The first notice received by Code-A-Phone of a modification of the classifiication of these articles and a subsequent increase in duty was a U.S. Customs Service Form 29 Notice of Action, dated June 27, 1988. This Notice of Action informed Code-A-Phone that the classification of telephone answering machines had been modified to item 684.58, TSUS. This item describes "[t]elephone sets and other terminal equipment and parts thereof..."

This change in tariff classification first occurred in Headquarters Ruling Letter 553975 (HQ 553975), dated March 10, 1986. HQ 553975 was issued to Phone-Mate Inc.. The ruling classified models of telephone/telephone answering machines similar to the Code-A-Phone Models 1600 and 2650 within item 684.58, TSUS. This ruling was challenged in the Court of International Trade. In Phone-Mate, Inc. v. United States, 690 F. Supp. 1048 (CIT 1988), affirmed 867 F.2d 1404 (Fed. Cir. 1989), the Court ruled that telephone/telephone answering machines are properly classified within item 684.58, TSUS. This case was published in the Customs Bulletin, Vol. 22, No. 32, p. 42, on August 10, 1988.

Consequently, your office classified Entry No. 062-2017327-9 under item, 684.58, TSUS, the heading for telephone apparatus. Item 685.40, TSUS, dictates a rate of duty of 3.9% ad valorem, while item 684.58, TSUS, requires a rate of duty of 8.5% ad valorem. It is from this action the instant protest was filed.

ISSUE:

Whether Entry No. 062-2017327-9 should be classified under item 685.40, TSUS, as "[t]ape recorders and dictation recording and transcribing machines..." in accordance with HQ 052602, or whether the entry should be classified under item 684.58, TSUS,
as "[t]elephone sets and other terminal equipment and parts thereof..." in conformity with the U.S. Customs Service present position.

LAW AND ANALYSIS:

Section 177 of the Customs Regulations governs administrative rulings. 19 C.F.R. 177 (1989). A ruling letter issued by Customs Headquarters represents the official position of the Customs Service regarding the circumstances of that ruling. Such a ruling is binding upon all Customs personnel until notice of revocation or modification. 19 C.F.R. 177.9(a) (1989). A ruling letter applies not only to the merchandise which was the subject of the ruling, but also to all articles identical to those of the ruling and all articles with identical descriptions to those in the ruling. 19 C.F.R. 177.9(b)(2) (1989).

Should the position taken by the Customs Service change, notice must be given to the person to whom the original ruling was addressed. 19 C.F.R. 177.9(d)(1) (1989).

The modification or revocation of a ruling letter will not be applied retroactively with respect to the person to whom the ruling was issued, or to any person directly involved in the transaction to which that ruling related... 19 C.F.R. 177.9(d)(2) (1989).

Where a modification or revocation of a ruling letter will change a practice or position of the Customs Service, resulting in a higher rate of duty, such change must be printed in the Federal Register and interested parties must be afforded an opportunity to comment. 19 C.F.R. 177.10(c)(1) (1989).

When a judicial change in a tariff classification occurs which is favorable to the Government, the decision must be applied to all merchandise which is similar to the subject of the court case. However, the court decision's principles may only be applied after thirty days from the date of the decision's publication in the Customs Bulletin. 19 C.F.R. 152.16(b) (1989).

HQ 052602 was issued by Headquarters and represented the official position of the Customs Service in 1977. The ruling concerned only Model 1600 telephone/telephone answering machine, but was applied for over ten years to other telephone/telephone answering machines imported by Code-A-Phone. The model at issue, Model 2650, has the same features as Model 1600. Although the original features are advanced and additional functions have been included, the description of the Model 2650 is not materially different from the description of Model 1600.

On March 10, 1986, the Customs Service modified its position regarding the classification of telephone answering machines within HQ 553975, the Phone-Mate ruling. This change occurred in a ruling addressed to another party. The ruling was not published in the Customs Bulletin. Therefore, Code-A-Phone did not receive the required notice and HQ 553975 could not bind Code-A-Phone.

Code-A-Phone's shipment of Model 2650 telephone answering machines was entered on May 25, 1988, prior to the receipt of any notice regarding the change in tariff classification. The first notification received by Code-A-Phone was dated June 27, 1988. To apply this notice to the May 25, 1988, shipment would be a retroactive application which is prohibited by the Customs Regulations. 19 C.F.R. 177.9(d)(2).

Furthermore, despite the judicial approval that the modification received in Phone-Mate Inc. v. United States, 690 F. Supp. 1048 (CIT 1988), the court decision was not published in the Customs Bulletin until August 10, 1988. This decision was not applicable to similar merchandise for thirty days after the date of publication, approximately September 10, 1988. To bind Code-A-Phone's May entry to a decision unenforceable until September is a retroactive application of the law, which is prohibited. 19 C.F.R. 152.16(b).

It is the decision of this office that HQ 052602 governs Entry No. 062-2017327-9. The proper classification for the Code-A-Phone Model 2650 telephone answering machines entered on May 25, 1988, is under item 685.40, TSUS, as "[t]ape recorders and dictation recording and transcribing machines..." Only shipments entered after Code-A-Phone received notice of the modification are classified under 684.58, TSUS.

HOLDING:

The classification of Entry No. 062-2017327-9, a shipment of Code-A-Phone Model 2650 telephone answering machines, under item 684.58, TSUS, as "[t]elephone sets and other terminal equipment and parts thereof..." is a retroactive application of both Customs's modified position and the judicial change in tariff classification. Both retroactive acts are prohibited.

The proper classification for Entry No. 062-2017327-9 is under item 685.40, TSUS, as "[t]ape recorders and dictation recording and transcribing machines..."

The present position of the Customs Service is that telephone/telephone answering machines are classified under item item 684.58, TSUS, as "[t]elephone sets and other terminal equipment and parts thereof..."

The protest should be granted. A copy of this decision should be forwarded to the protestant with the Form 19, grant of protest.

Sincerely,

John Durant, Director
Commercial Rulings Division


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