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HQ 956518



September 22, 1994

CLA-2 CO:R:C:M 956518 DWS

CATEGORY: CLASSIFICATION

TARIFF NO.: 8524.23.10; 9801.00.10

Mr. Paul S. Anderson
Sonnenberg, Anderson & Rodriguez
200 South Wacker Drive, 33rd Floor
Chicago, IL 60606

RE: Video Learning Aids Known As "Toby and His Wonder Bone"; and "Toby's Wonder Bone"; GRI 3(b); Set; Explanatory Notes 3(b)(VIII) and (X); T.D. 91-7; HQs 952560, 951507, and 088694; 9503.41.10; 8543.80.95

Dear Mr. Anderson:

This is in response to your letter of May 25, 1994, on behalf of Tiger Electronics, Inc., concerning the classification of video learning aids known as "Toby and His Wonder Bone" and "Toby's Wonder Bone" under the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The merchandise consists of "Toby and His Wonder Bone" and "Toby's Wonder Bone" video learning aids, imported from China. "Toby and His Wonder Bone" consists of a stuffed dog named "Toby", a video cassette, and a plastic "Wonder Bone" module. "Toby's Wonder Bone" consists of a video cassette and the "Wonder Bone" module.

"Toby" is a brown, black, and white stuffed dog wearing a satin jacket and a collar with a pendant. A computer chip is housed inside the pendant which receives signals from the accompanying video cassette when played on a video cassette recorder (VCR). The chip transmits the signals received to a mechanical apparatus housed within the body of the dog. Through this transmittal, "Toby" is able to respond to actions, scenes, and conversations appearing on the video cassette by speaking, barking, moving its mouth, and wagging its tail.

The "Wonder Bone" unit consists of a plastic bone-shaped module, containing three numbered key pads of different shapes and colors with a cord and attachment harness. The "Wonder Bone" is connected by fitting the harness over "Toby" and inserting an attached cartridge into a slot located below the battery compartment. As the instructions state, the "Wonder Bone" is to be used by children ages 3 to 6 to answer questions posed by "Toby" and other characters in the accompanying video cassettes by pressing one of the three pads on the "Wonder Bone". The "Wonder Bone" is used in this way in conjunction with "Toby" and the video cassette as part of an educational and entertaining interactive system designed for children.

The video cassette is manufactured in its entirety and shrink-wrapped in the U.S., and then is exported abroad. In China, the various components are packaged together in China, and then are imported into the U.S. for retail sale.

The subheadings under consideration are as follows:

9503.41.10: [o]ther toys; . . . : [t]oys representing animals or non-human creatures (for example, robots and monsters) and parts and accessories thereof: [s]tuffed toys and parts and accessories thereof: [s]tuffed toys.

The general, column one rate of duty for goods classifiable under this provision is 6.8 percent ad valorem.

8543.80.95: [e]lectrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: [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.

8524.23.10: [r]ecords, tapes and other recorded media for sound or other similarly recorded phenomena, including matrices and masters for the production of records, but excluding products of chapter 37: [m]agnetic tapes: [o]f a width exceeding 6.5 mm: [v]ideo tape recordings.

The general, column one rate of duty for goods classifiable under this provision is 0.66› per linear meter.

9801.00.10: [p]roducts of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad.

Goods classifiable under this provision receive duty-free treatment.

ISSUES:

Whether "Toby and His Wonder Bone" and "Tony's Wonder Bone" constitute sets under the HTSUS.

If so, whether the video cassette imparts the essential character of each set.

Whether the U.S.-origin video cassettes are entitled to duty-free treatment under subheading 9801.00.10, HTSUS, as products of the U.S. when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad.

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.

The components in each set are classifiable as follows: "Toby" is classifiable under subheading 9503.41.10, HTSUS, as a stuffed toy; the "Wonder Bone" module is classifiable under subheading 8543.80.95, HTSUS, as an other electrical apparatus, having an individual function, not specified elsewhere under the HTSUS; and the video cassette is classifiable under 8524.23.10, HTSUS, as a video tape recording, of a width exceeding 6.5 mm.

The merchandise, as complete goods, are not described under any headings of the HTSUS, and therefore cannot be classifiable solely by authority of GRI 1. The merchandise is not classifiable as toys under heading 9503, HTSUS, because, in our view, it is not principally designed for the amusement of children, but for the education of children. It is our position that the "Toby and His Wonder Bone" and "Toby's Wonder Bone" are educational learning devices and not toys. See HQ 088694, dated July 10, 1991, and HQ 951507, dated July 2, 1992, for rulings in which we distinguish educational devices from toys.

To determine whether "Toby and His Wonder Bone" and "Toby's Wonder Bone" constitute sets, we must consult GRI 3(b). It 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.

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

[f]or 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 facie, 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 repacking (e.g., in boxes or cases or on boards)."

It is our position that "Toby and His Wonder Bone" and "Toby's Wonder Bone" are sets for classification purposes. They fully satisfy all three requirements of Explanatory Note 3(b)(X), HTSUS. They consist of at least two different articles which are classifiable under different headings of the HTSUS; they consist of articles put up together to meet a particular need, namely the education of young children; and they are packaged for sale directly to users without repacking.

We must now determine which of the articles imparts the essential character of each 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.

Further, it is our position that the video cassettes impart the essential character of "Toby and His Wonder Bone" and "Tony's Wonder Bone". Without the video cassette, each set would not be able to perform its intended use. The recording on the video cassette performs the program which is necessary for the children to use "Toby" the dog and the "Wonder Bone" module as marketed by the importer. Children cannot respond to questions posed by "Toby" without the video cassette playing. Therefore, the video cassettes perform a primary function in relation to the use of each set.

In T.D. 91-7, dated January 8, 1991, 25 Cust. Bull. 7, we stated that:

[t]he "conditions and requirements" of subheading 9801.00.10, HTSUS are (1) that the article be a product of the U.S.; and (2) that it not be advanced in value or improved in condition by any means while abroad.

In Superscope, Inc. v. U.S., 13 CIT 997, 727 F.Supp. 629 (1989), the court held that certain glass panels of U.S. origin that were exported, repacked abroad with certain foreign components, and returned to the U.S. as part of unassembled audio cabinets, were entitled to duty free treatment under item 800.00, Tariff Schedules of the United States (TSUS) (now subheading 9801.00.10 (HTSUS). This was based on the fact that the U.S. panel portion of the imported article was "not 'advanced in value or improved in condition . . . while abroad,' but [was] merely repacked." id. at 631.

Finally, it is our position that the video cassettes meet the requirements of subheading 9801.00.10, HTSUS, and are therefore classifiable therein. They are products of the U.S., and, under Superscope, they are not "advanced in value or improved in condition by any means" while in China. Consequently, the video cassettes are classifiable under subheading 9801.00.10, HTSUS. See HQ 952560, dated October 20, 1992.

Because the video cassettes impart the essential character of the subject sets, we must determine how the other articles within each set are dutiable. In T.D. 91-7, we stated that:

. . . we conclude that the use of GRI 3(b) or, if applicable, 3(c), to classify sets or mixed or composite goods should be accomplished without reference to the eligibility of certain of the materials or components contained therein for subheading 9801.00.10, HTSUS, treatment. . . Our position on this issue is best understood by applying it to a specific example. A battery charger kit is imported consisting of a battery charger of U.S. origin and two rechargeable batteries and a charger adapter module of Korean origin. . . Because we determine that the battery charger gives the set its essential character, the entire set is classified in the Chapter 1-97, HTSUS, heading applicable to the battery charger. Next, it is necessary to determine whether any of the items in the set are entitled to free treatment under subheading 9801.00.10, HTSUS. In consideration of Superscope and U.S. Note 1, Chapter 98, HTSUS, we find that only the battery charger meets the "conditions and requirements" of this tariff provision and, therefore, a classification allowance (from the full value of the set) is made for the cost or value of the charger alone. The practical effect of applying GRI 3(b) in this manner is that the foreign-made batteries and adapter are assessed duties at the rate applicable to the battery charger as if this item were ineligible for subheading 9801.00.10, HTSUS, treatment.

Therefore, for the purposes of the subject merchandise, because the video cassettes impart the essential character of the sets, the foreign-made articles of "Toby and His Wonder Bone" and "Toby's Wonder Bone" are dutiable at the rate under subheading 8524.23.10, HTSUS. The sets in their entirety are also classifiable under subheading 8524.23.10, HTSUS.

HOLDING:

"Toby and His Wonder Bone" and "Toby's Wonder Bone" are, for classification purposes, sets, and, because the video cassette imparts the essential character of each set, they are classifiable under subheading 8524.23.10, HTSUS, as video tape recordings, of a width exceeding 6.5 mm.

The U.S.-origin video cassettes are classifiable under subheading 9801.00.10, HTSUS, as products of the U.S. when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad. Articles classifiable under this provision receive duty-free treatment provided that the documentation requirement of section 10.1, Customs Regulations (19 CFR 10.1), are satisfied.

Sincerely,

John Durant, Director
Commercial Rulings Division

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