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HQ 559348




March 14,
1996

CLA-2 RR:TC:SM 559348 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10; 9503.70.80

Port Director
511 N.W. Broadway
Portland, OR 97209

RE: Application for Further Review of Protest No. 2904-95-100141

Dear Sir:

This is in reference to an Application for Further Review of Protest No. 2904-95-100141, timely filed by Tyco Manufacturing Company ("Tyco") on June 13, 1995.. The issues involve the classification of various items, the eligibility of certain merchandise for the Generalized System of preferences (GSP), and claims for duty-free treatment made under subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The concerned import specialist found that Item Nos. 42720 and 42725 ("Super Fast Slam Sets") were classifiable as toys under subheading 9503.70.80, HTSUS, and not as games, as entered, and that the Matchbox (MB) series was not entitled to duty-free treatment under the GSP, since applicable material and the direct costs of processing operations performed in Thailand did not meet the minimum 35 percent requirement. The entries were liquidated accordingly on March 17, 1995.

Protestant claims that Items 42720 and 42725 are properly classifiable as games under subheading 9504.90.90, HTSUS, as entered, and that the Matchbox (MB) series produced in Thailand is entitled to the benefits of the GSP. While not claimed upon entry, protestant now maintains that the 4", 18" and 24" Coex Track are of U.S.-origin and eligible for duty-free treatment under subheading 9801.00.10, HTSUS, since it is argued that these items were merely included in the export package and were not advanced in value. Additional documentation in support of this claim, reflecting sale of these articles to protestant in the U.S. by Oregon Polymer Systems, a manufacturer, has now been submitted.

LAW AND ANALYSIS:

A) Classification

For tariff purposes, the term "game" has come to refer to a competition or contest for recreation or amusement between two or more players or between one person and the game itself which involves skill, chance, or endurance, or any combination of these elements and which is played according to the rules, either expressed or self-evident, with the object of winning as a goal. See Mego Corp. V. United States, 62 CCPA 14, CAD 1137 (1971). Based on this and other judicial authorities, we have consistently maintained that an article will only qualify for inclusion within the scope of the game provisions if it possesses the necessary attributes of a game including challenge, competitiveness, ingenuity, skill, and contest. We have established the following set of criteria that an article must meet in order to secure tariff treatment as a game:

1. A competition or contest with the objective of winning.

2. Play activity between two or more people or between one person and the game itself.

3. Skill, chance or endurance, or a combination of these elements.

4. Some scoring method or system.

Based on the information in the file, we agree with the liquidation under subheading 9503.70.80, HTSUS, as toys. While a sample has not been submitted, we are assuming that the items are correctly classified as a set, as described, and as accepted by the concerned import specialist. (We note that the items would be classified under subheading 9503.90.60, HTSUS, if not considered to be a set.)

B) Applicability of Subheading 9801.00.10, HTSUS

Subheading 9801.00.10 HTSUS, provides for the free entry of products of the U.S. that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met.

Review of the documentary evidence recently submitted establishes that the Coex Track was manufactured by Oregon Polymer Systems in the U.S., and exported abroad. These articles were merely packaged with the other items for importation without having been advanced in value or improved in condition. The concerned import specialist concurs with these findings. Accordingly, these articles are entitled to duty-free treatment under subheading 9801.00.10, HTSUS, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are satisfied. While protestant has not submitted the shipper's declaration required under section 19 CFR 10.1(a), we note that this document may be waived by the Port Director, if that person is reasonably satisfied that the statutory requirements are satisfied. See 19 CFR 10.1(d).

C) GSP

Under the GSP, eligible articles the growth, product or manufacture of a designated beneficiary developing country (BDC) which are imported directly into the Customs territory of the U.S. from a BDC may receive duty-free treatment if the sum of (1) the cost or value of materials produced in the BDC, plus (2) the direct cost of the processing operations in the BDC, is equivalent to at least 35 percent of the appraised value of the article at the time of entry. See 19 U.S.C. 2463(b).

During the period in question, Thailand was a designated beneficiary BDC. See General Note 4, HTSUS. In addition, in 1994, the articles are classified under subheading 9503.70.80, HTSUS, "Other toys; reduced size ("scale") models, put up in sets, Other, Other", a GSP eligible provision. Accordingly, the imported merchandise is entitled to receive duty-free treatment if it is considered a "product of" Thailand, and provided the sum of the cost or value of materials produced in the BDC, plus the direct cost of processing operations in the BDC is equivalent to at least 35 percent of the appraised value of the article at the time of entry. In this regard, the concerned import specialist is of the opinion that the imported articles are "products of" Thailand for purposes of the GSP. The record contains no information that would be inconsistent with this determination. (See also Headquarters Ruling Letter (HRL) 556797/556798 dated September 23, 1993, where we held that U.S. components which qualify for duty-free treatment under subheading 9801.00.10, HTSUS, are to be excluded from a set for purposes of determining whether the set qualifies as a "product of" a country under the GSP.)

The concerned import specialist determined that the 35 percent requirement was not satisfied, based on the following analysis:

For Item No. 42720, Invoice No. TM14281 is noted. The Form A reflects 49.17% of the Thailand seller's invoiced ex-factory price as material and labor. The manufacturer's invoice included in the entry summary shows an FOB unit price of $2.942. The amount of Thailand material and labor included in this price is $1.44658
(49.17% of $2.942). The appraised price is $4.31521. The percent of the material and labor included in the appraised price is 33.523% ($1.44658 divided by $4.31521) which is less than the minimum 35% origin criteria.

For Item No. 42725, note Invoice No. TM14579. Form A shows 47.92% of the Thailand manufacturer's invoiced ex-factory price is Thailand material and labor. The Thailand manufacturer's invoice included in the entry summary shows a unit price of $5.689 FOB. The amount of Thailand material and labor included in this price is $2.72617 per unit (47.92% of $5.689). The appraised price is $9.251242 each. The percent of Thailand material and labor included in the appraised price is 29.47%
($2.72617 divided by $9.251242), which does not meet the required 35% minimum.

We concur with this analysis. Therefore, since the articles do not meet the minimum 35 percent requirement, the articles will not qualify for duty-free treatment under the GSP.

HOLDING:

1) In our opinion, Item Nos. 42720 and 42725 are classifiable under subheading 9503.70.80, HTSUS (1994), "Other toys; reduced size ("scale") models, put up in sets, Other, Other".

2) The evidence submitted supports the claim that the 4", 18" and 24" Coex Track are of U.S.-origin, and were exported to Thailand for packaging with the other items. Therefore, such articles are eligible for duty-free treatment under subheading 9801.00.10, HTSUS, provided the documentary requirements of 19 CFR 10.1 are satisfied or the Port Director waives these requirements.

3) The subject articles will not be eligible for duty-free treatment under the GSP, since the 35 percent value-content requirement has not been satisfied.

The protest should be granted in part and denied in part in accordance with the foregoing. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant attached to the Form 19, Notice of Action, no later than 60 days from the date of this letter. Any reliquidation of the entries in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Ruling Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,


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