HQ 0954418 - Lewis Galoob Toys, Inc.; "Label Fun"; Label Maker; Toy; Office Machine; Label Tape; Set; GRI 3(b); EN X to GRI 3(b); Essential Character; EN Rule 3(b); Packaging; American Goods Returned; John V. Carr & Sons, Inc.; Superscope, Inc.; T.D. 91-7 - United States International Trade Commision Rulings

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HQ 954418

November 1, 1993

CLA-2 CO:R:C:M 954418 MBR/KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 8472.90.80; 9801.00.10

Ms. Natouchka Patrice Rampy
Sharretts, Paley, Carter & Blauvelt, P.C. Sixty-seven Broad Street
New York, N.Y. 10004

RE: Lewis Galoob Toys, Inc.; "Label Fun"; Label Maker; Toy; Office Machine; Label Tape; Set; GRI 3(b); EN X to GRI 3(b); Essential Character; EN Rule 3(b); Packaging; American Goods Returned; John V. Carr & Sons, Inc.; Superscope, Inc.; T.D. 91-7

Dear Ms. Rampy:

This is in response to your letter of May 28, 1993, on behalf of Lewis Galoob Toys, Inc., to the Area Director of Customs, New York, Seaport, requesting the tariff classification of the "Label Fun" label maker and tape set, under the Harmonized Tariff Schedule of the United States (HTSUS). Your letter and submitted sample were forwarded to this office for a response.

FACTS:

The "Label Fun" set consists of a label maker comprised of plastic (except for two metal springs, a metal hinge, and metal screws). It is rectangular shaped and has a dial on top depicting the letters of the alphabet, numbers 2 through 9, and a "space" selector. Numbers and letters may be chosen by rotating the dial and then, placing the label maker on a table, desk or similar surface, depressing the top section in order to print the desired character in relief on the inserted label tape. The label maker is entirely produced in China.

The label tape consists of a roll of plastic with an adhesive backing and a paper protective strip which is peeled off to expose the adhesive. The label tape is manufactured in the United States and exported to China for packaging with the label maker. The label tape is exported to China in rolled form ready for packaging with the label maker. Two rolls of label tape are included with the label maker which is blister-packed on a piece of cardboard with pictures of the article on the front and instructions for its use on the reverse side. The cardboard backing contains the statement "Ages 4 and Up" and "Warning: Contains Small Parts."

ISSUE:

I. What is the classification of the "Label Fun" set consisting of a label maker and two rolls of label tape, under the HTSUS?

II. Are the rolls of label tape eligible for the duty exemption available under the subheading 9801.00.10, HTSUS?

LAW AND ANALYSIS:

I. Classification

The General Rules of Interpretation (GRI's) to the HTSUS govern the classification of goods in the tariff schedule. GRI 1 states, in pertinent part:

...classification shall be determined according to the terms of the headings and any relative section or chapter notes...

The "Label Fun" is unequivocally packaged and marketed for children "Ages 4 and up." The Harmonized Commodity Description and Coding System Explanatory Notes (ENs), page 1585, regarding the classification of toys of chapter 95, HTSUS, state as follows:

GENERAL

This chapter covers toys of all kinds whether designed for the amusement of children or adults....

The Explanatory Notes, although not dispositive, are looked to for the proper interpretation of the HTSUS. 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).

However, there is nothing intrinsically "amusing" about the activity of making labels. The ENs, page 1588, further state that: "[c]ertain toys (e.g., electric irons, sewing machines, musical instruments, etc.) may be capable of a limited 'use'; but they are generally distinguishable by their size and limited capacity from real sewing machines, etc." The instant label maker is not of limited use or capacity, and in fact, only the packaging denotes its intention for children. Adults could just as likely use it to make labels. Therefore, since it is not designed for the amusement of children or adults and it is not of limited capacity, it is not classifiable in chapter 95, HTSUS.

Therefore, we must consider the alternative classifications. The Additional U.S. Rules of Interpretation state as follows:

1. In the absence of special language or context which otherwise requires--

(a) a tariff classification controlled by use (other than actual use) is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use.

It is Customs position that label makers in general are principally used in offices, shops, etc., as "office machines." The ENs to heading 84.72, page 1302, delineate, in pertinent part, as follows:

This heading covers all office machines not covered by the preceding three headings or more specifically by any other heading of the Nomenclature.

The term "office machines" is to be taken in a wide general sense to include all machines used in offices, shops, factories, workshops, schools, railway stations, hotels, etc. for doing "office work" (i.e., work concerning the writing, recording, sorting, filing, etc., of correspondence, documents, forms, records, accounts, etc.).

Therefore, since label makers are designed for use in schools, offices, shops, etc., for doing office work (filing, etc.), the instant label maker is classifiable in subheading 8472.90.80, HTSUS, which provides for: "[o]ther office machines...: [o]ther:

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....

To determine what is a "set put up for retail sale" the Explanatory Notes (EN) of the Harmonized Commodity Description and Coding System (HCDCS) may be utilized. EN X to GRI 3(b) (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 case, the "Label Fun" consists of a label maker (heading 8472), and 2 rolls of label tape (heading 3919) which are classified under different tariff provisions. The label maker and label tape are packaged together in a retail container for sale directly to the consumer without repackaging. Additionally, the label maker and label tape are put up together to meet a particular need or carry out a specific activity, to make labels. Therefore, the "Label Fun" is a set for tariff purposes. To determine the proper classification, the essential character of the "Label Fun" 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 kind of goods.

We are of the opinion that the essential character of the "Label Fun" set is imparted by the label maker. The label maker is the principal component of the set as it actually makes the labels. Therefore, the "Label Fun" set is classified under subheading 8472.90.80, HTSUS, which provides for "[o]ther office machines...: [o]ther: [o]ther."

II. 9801.00.10, HTSUS

Subheading 9801.00.10, HTSUS, provides for duty-free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any means while aborad. The packaging abroad of U.S.-made products will not preclude classification under this tariff provision when there is no improvement in condition or advancement in value of the products themselves, apart from their containers. See, United States v. John V. Carr & Sons, Inc., 69 Cust. Ct. 78, C.D. 4377 (1972), aff'd 61 CCPA 52, C.A.D. 1118 (1974) and Superscope, Inc. v. United States, 13 CIT 997, 727 F. Supp. 629 (1989).

The operations performed abroad consist merely of repackaging the U.S label tape with the foreign label maker. As the packaging of the U.S. item with foreign item does not advance in value or improve in condition the U.S. label tape, the portion of the "Label Fun" set consisting of the U.S. label tape will be eligible for the duty exemption under subheading 9801.00.10, HTSUS. See, T.D. 91-7, 25 Cust. Bull. 7 (1991). Therefore, the "Label Fun" set will be dutiable on its full value at the rate found in subheading 8472.90.80, HTSUS, with a classification allowance for the cost or value of the U.S. label tape. This assumes that the documentation requirement of section 10.1, Customs Regulations (19 CFR 10.1), are met and that the district director of Customs at the port of entry is satisfied of the U.S. origin of label tape claimed to be entitled to this duty exemption.

HOLDING:

The "Label Fun" is a set pursuant to GRI 3(b), HTSUS, classified under subheading 8472.90.80, HTSUS, which provides for: "[o]ther office machines...: [o]ther: [o]ther," at a 3.7% rate of duty.

The U.S. rolls of label tape will not be advanced in value or improved in condition while aborad as a result of the packaging operations. Therefore, the U.S. label tape will qualify for the duty exemption under subheading 9801.00.10, HTSUS, upon compliance with the documentary requirements of 19 CFR 10.1.

Sincerely,

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