HQ 0956654 - Zing Interactive System; Signal Reading and Transmitting Device; Hand-Held Receiving, Viewing, and Transmitting Unit; Telephone Dialing Device; Explanatory Notes 85.17, 3(b) (VIII) and (X); GRIs 3(a), 3(b), and 6; Functional Unit; Section XVI, Note 4; HQ 955845; 8517.81.00; 8543.80.60 - United States International Trade Commision Rulings

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HQ 956654
November 3, 1994

CLA-2 CO:R:C:M 956654 DWS

CATEGORY: CLASSIFICATION

TARIFF NO.: 8517.40.50; 8543.80.95

Mr. Frank R. Samolis
Patton Boggs, L.L.P.
2550 M Street, N.W.
Washington, D.C. 20037-1350

RE: Zing Interactive System; Signal Reading and Transmitting Device; Hand-Held Receiving, Viewing, and Transmitting Unit; Telephone Dialing Device; Explanatory Notes 85.17, 3(b) (VIII) and (X); GRIs 3(a), 3(b), and 6; Functional Unit; Section XVI, Note 4; HQ 955845; 8517.81.00; 8543.80.60

Dear Mr. Samolis:

This is in response to your letters of May 24, 1994, to the Area Director of Customs, New York Seaport, and October 7, 1994, to this office, on behalf of Zing Systems, LP, concerning the classification of the Zing interactive system and each of its components under the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The merchandise consists of the Zing interactive system, designed to enable cable-TV customers to participate in interactive programming. It is a three-part system consisting of a signal reading and transmitting device, a hand-held receiving, viewing, and transmitting unit, and a telephone dialing device.

The reading device is connected to a television or video cassette recorder (VCR), and reads data encrypted on the vertical blanking interval of the television picture or video cassette, transmitting the data via infrared signal to the hand-held unit. The device is not similar to a cable-TV converter or decoder, and it does not receive or transmit an RF signal; its signal must be in baseband form. Also, the device is able to function with programming appearing on encrypted video cassettes; television reception is therefore not necessary.

The hand-held unit emits a sound when data is being transmitted to it, and displays the data received in the form of a text message on a 4-line liquid crystal display (LCD) screen. It can hold twelve such screens of data in its display memory. The user responds to the displayed message through the unit's keypad. The response is stored in a memory chip in the unit, and the user can use the unit to transmit stored information via infrared signal to the telephone dialing device. The hand-held unit does not control any functions; it only serves to receive, store, and transmit data.

The telephone dialing device utilizes a modem to establish a telephone link, and transmits the user's response back to the television programmer or a Zing company database. The user may respond to a variety of prompts from television advertisers and programmers. However, the device cannot be connected to a computer and is not designed to function as a two-way communications link. Also, the device cannot be used to dial any telephone number in that it will only dial pre-programmed telephone numbers based upon the information it receives via infrared signal from the hand-held device.

You have asked for a classification of the components imported individually as well as together in sets. The first set includes the signal reading and transmitting device and the hand-held receiving, viewing, and transmitting unit. The second set includes both of those components and the telephone dialing device.

The subheadings under consideration are as follows:

8517.40.50: [e]lectrical apparatus for line telephony or telegraphy, including such apparatus for carrier-current line systems; parts thereof: [o]ther apparatus, for carrier-current line systems: [o]ther: [t]elephonic.

The general, column one rate of duty for goods classifiable under this provision is 8.5 percent ad valorem.

8517.81.00: . . . : [o]ther apparatus: [t]elephonic.

The general, column one rate of duty for goods classifiable under this provision is 8.5 percent ad valorem.

8543.80.60: [e]lectrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: [o]ther machines and apparatus: [a]rticles designed for connection to telegraphic or telephonic apparatus or instruments or to telegraphic or telephonic networks.

The general, column one rate of duty for goods classifiable under this provision is 3.9 percent ad valorem.

8543.80.95: . . . : [o]ther machines and apparatus: [o]ther: [o]ther.

The general, column one rate of duty for goods classifiable under this provision is 3.9 percent ad valorem.

ISSUES:

Whether the telephone dialing device is classifiable under subheading 8517.40.50, as an other telephonic apparatus, for carrier-current systems; under subheading 8517.81.00, HTSUS, as an other telephonic apparatus; or under subheading 8543.80.60, HTSUS, as an other electrical machine, having an individual function, not specified elsewhere under chapter 85, HTSUS, for connection to telephonic networks.

Whether the signal reading and transmitting device and the hand-held receiving, viewing, and transmitting unit are classifiable under subheading 8543.80.95, HTSUS, as other electrical machines, having individual functions, not specified elsewhere under chapter 85, HTSUS.

Whether the Zing interactive system constitutes a functional unit classifiable under subheading 8543.80.95, HTSUS.

Whether the two types of sets proposed by you are, for classification purposes, sets under the HTSUS.

LAW AND ANALYSIS:

Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRI's), taken in order. GRI 1 provides that classification is determined according to the terms of the headings and any relative section or chapter notes.

We will first deal with the classification of the components of the Zing interactive system, commencing with the telephonic dialing device.

In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes may be utilized. The Explanatory Notes, although not dispositive or legally binding, 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, 35128 (August 23, 1989). In part, Explanatory Note 85.17 (pp. 1360, 1363) states that:

[t]he term "electrical apparatus for line telephony or line telegraphy" means apparatus for the transmission between two points of speech or other sounds (or of symbols representing written messages, images or other data), by variation of an electric current or of an optical wave flowing in a metallic or dielectric (copper, optical fibres, combination cable, etc.) circuit connecting the transmitting station to the receiving station.

The heading covers all such electrical apparatus designed for this purpose, including the special apparatus for carrier-current line systems.

(III) SPECIAL APPARATUS FOR CARRIER-CURRENT LINE SYSTEMS

This system, used in both telephony and telegraphy, is based on the modulation of an optical source or of an electrical frequency by impulses representing speech, messages or other data. The apparatus of this group consists, in the transmitting section, of oscillators, modulators, etc., and in the receiving station, of filters, demodulators, etc. This group includes combined modulators-demodulators (modems).

It is our position that the telephone dialing device is specifically classifiable under subheading 8517.40.50, HTSUS. The device modulates an electrical carrier-current line through the use of impulses representing data. It is our understanding, as stated by counsel, for the purposes of the above definition, that the device acts similar to a modem except that it is not designed to function as a two-way communications link. However, for classification under subheading 8517.40.50, HTSUS, such a characteristic is not required.

In part, GRI 3(a) states that:

[t]he heading which provides the most specific description shall be preferred to headings providing a more general description. . .

GRI 6 states that:

[f]or legal purposes, 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 the above rules, 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.

Compared to subheading 8517.81.00, HTSUS, subheading 8517.40.50, HTSUS, is more specific. It provides for "other telephonic apparatus for carrier-current line systems", whereas subheading 8517.81.00, HTSUS, provides for the more general "other telephonic apparatus."

With regard to classification under subheading 8517.40.50, HTSUS, because the telephone dialing device is classifiable under subheading 8517.40.50, and therefore provided elsewhere under chapter 85, HTSUS, it is precluded from classification under subheading 8543.80.60, HTSUS.

With regard to the classification of the signal reading and transmitting device and the hand-held receiving, viewing, and transmitting unit, because they are not described or classifiable elsewhere under the HTSUS, it is our position that they are classifiable under subheading 8543.80.95, HTSUS.

We will now deal with whether the Zing interactive system is a functional unit classifiable under subheading 8543.80.95, HTSUS.

Section XVI, note 4, HTSUS, states that:

[w]here a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function.

It is our position that the interactive system is not a functional unit classifiable under subheading 8543.80.95, HTSUS. The components in the system must "contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85." Heading 8543, HTSUS, only describes, in a generic form, articles which are not classifiable elsewhere under chapter 85, HTSUS. It is not, by definition, a provision which specifically describes any type of merchandise or components forming a unit of merchandise. Consequently, we find that heading 8543, HTSUS, cannot cover any clearly defined function.

We will now deal with whether the two combinations of devices, for classification purposes, form sets, commencing with the combination of the signal reading and transmitting device and the hand-held receiving, viewing, and transmitting unit.

GRI 3(b) states that:

[m]ixtures, 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.

Explanatory Note 3(b)(X) (p. 4) states that:

[f]or the purpose 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 facie, classifiable in different headings. Therefore, for example, six fondue forks cannot be regarded as a set within the meaning of this Rule;

(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 repacking (e.g., in boxes or cases or on boards).

The first combination of components does not constitute a set under the HTSUS, as both components are classifiable under the same provision, subheading 8543.80.95, HTSUS. As Explanatory Note 3(b)(X) states, a set must consist of at least two different articles classifiable under different headings. This combination consists of only two articles which are classifiable under the same HTSUS heading. Therefore, the two articles are separately classifiable under subheading 8543.80.95, HTSUS.

The second combination of components consists of all three of the components forming the Zing interactive system. It is our position that this combination does constitute a set. It consists of two articles classifiable under different headings (8517.40.50 and 8543.80.95, HTSUS), the components are put together to carry out the interaction between the user and television and advertising programmers, and it is put up for sale directly to users.

We must now determine what component imparts the essential character of the set. Explanatory Note 3(b)(VIII) (p. 4) states that:

[t]he factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.

You cite HQ 955845, dated August 22, 1994, in support of the view that the hand-held unit imparts the essential character of the system. That case involved the "Quiz Wiz" educational electronic module with a question booklet and answer cartridge. A user enters a question number and an answer choice (from the booklet) on a keypad module. The module, with the cartridge inserted into it, indicates whether the answer is correct by a red or green flashing light, or by a simulated vocal response of "yes/no" or "right/wrong." We held that the components in that case formed a set, with the keypad module imparting its essential character.

It is our position that the holding in HQ 955845 has no bearing on the essential character of the subject set. The components of the Zing interactive system are quite different from and more sophisticated than the components forming the "Quiz Wiz" set.

It is our position that none of the components impart the essential character of the Zing interactive system set. Without any of the items of the set, the user could not use the system effectively. It is true that the telephone dialing device need not be used, however, without the other two components, the system is unusable.

GRI 3(c) states that:

[w]hen goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

Because subheading 8543.80.95, HTSUS, occurs last in numerical order between it and subheading 8517.40.50, HTSUS, under GRI 3(c), the set is classifiable under that provision.

HOLDING:

The telephone dialing device is classifiable under subheading 8517.40.50, HTSUS, as an other telephonic apparatus, for carrier- current systems.

The signal reading and transmitting device and the hand-held receiving, viewing, and transmitting unit are classifiable under subheading 8543.80.95, HTSUS, as other electrical machines, having individual functions, not specified elsewhere under chapter 85, HTSUS.

The Zing interactive system does not constitute a functional unit classifiable under subheading 8543.80.95, HTSUS.

The combination of the signal reading and transmitting device and the hand-held receiving, viewing, and transmitting unit does not constitute a set, and both components must be separately classifiable under subheading 8543.80.95, HTSUS.

The combination of all three of the components of the system constitutes a set classifiable under subheading 8543.80.95, HTSUS.

Sincerely,

John Durant, Director

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