HQ 958914 - Mini Compact Disc Stereo Systems; Stereo Integrated Amplifiers/Tuners; Dual Stereo Cassette Decks/Compact Disc Players; Remote Controls; Flat Cables; "Goods Put Up In Sets For Retail Sale"; Composite Goods; GRI 3(b); Explanatory Note 3(b)(X); Incomplete or Unfinished Functional Units; Legal Note 4 to Section XVI; Headings 8520, 8527; HQs 957150, 950882, 950218, 087077; HQ 956284, revoked - United States International Trade Commision Rulings

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HQ 958914

April 23, 1996

CLA-2 RR:TC:MM 958914 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 8527.32.50

Mr. Dennis Heck
Tower Group International, Inc.
Castelazo & Associates
5420 W. 104th Street
Los Angeles, CA 90045-6069

RE: Mini Compact Disc Stereo Systems; Stereo Integrated Amplifiers/Tuners; Dual Stereo Cassette Decks/Compact Disc Players; Remote Controls; Flat Cables; "Goods Put Up In Sets For Retail Sale"; Composite Goods; GRI 3(b); Explanatory Note 3(b)(X); Incomplete or Unfinished Functional Units; Legal Note 4 to Section XVI; Headings 8520, 8527; HQs 957150, 950882, 950218, 087077; HQ 956284, revoked

Dear Mr. Heck:

This is in reference to HQ 956284, issued to you on July 7, 1994, in which Customs classified the mini compact disc stereo systems under the Harmonized Tariff Schedule of the United States (HTSUS). In the course of ruling on similar merchandise, we have determined that HQ 956284 is incorrect. Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. 1625(c)(1)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057)(1993), notice of the proposed revocation of NY 810627 was published on March 20, 1996, in the Customs Bulletin, Volume 30, Number 12. No comments were received in response to the notice.

FACTS:

The merchandise consists of three types of mini compact disc stereo systems, all with a remote control. After importation, the systems will be repackaged with U.S.-sourced speakers and then sold to the public. System NSX-D603 consists of a stereo integrated amplifier/tuner (model no. RX-N603), with a clock, and a dual stereo cassette (player/recorder) deck/compact disc player (model no. FD-N603). System NSX-D606 consists of a stereo integrated amplifier/tuner (model no. RX-N606), with a clock, and a dual stereo cassette (player/recorder) deck/compact disc player (FD-N606). System NSX- D707 consists of a stereo integrated amplifier/tuner (model no. RX- N707), with a clock, and a dual stereo cassette (player/recorder) deck/compact disc player (model no. FD-N707). The systems' components are designed for either horizontal or vertical placement. In each system, connection of the amplifier/tuner to the cassette deck player is effected by a specially designed flat cable included with each system. There are no common "RCA type jacks" available to interconnect the stereo components. Because the stereo system can send signals only through the flat cable, the stereo system components cannot be sold separately. The consumer must purchase the entire sound system.

ISSUE:

Whether the mini compact disc stereo systems are classifiable as functional unit, as "goods put up in sets for retail sale", as a composite good, or are the components classifiable separately under the HTSUS?

LAW AND ANALYSIS:

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

The following subheadings are under consideration:

8520: Magnetic tape recorders and other sound recording apparatus, whether or not incorporating a sound reproducing device:

8520.33.00: Other magnetic tape recorders incorporating sound reproducing apparatus: [o]ther, cassette type. . . . .

Goods classifiable under this provision have a column one, general rate of duty of 2.3 percent ad valorem.

8520.90.00: Other. . . . . .

Goods classifiable under this provision have a column one, general rate of duty of 2.3 percent ad valorem.

8527.32.50: Reception apparatus for radiotelephony, radiotelegraphy or radiobroadcasting, whether or not combined, in the same housing, with sound recording or reproducing apparatus or a clock: [o]ther radiobroadcast receivers, including apparatus capable of receiving also radiotelephony or radiotelegraphy: [n]ot combined with sound recording or reproducing apparatus but combined with a clock: [o]ther. . . .

Goods classifiable under this provision have a column one, general rate of duty of 4.8 percent ad valorem.

It is claimed that the stereo systems are functional units as defined by Legal Note 4 to section XVI, HTSUS, which 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."

In HQ 956284, dated July 7, 1994, Customs determined that the mini compact disc stereo systems imported without their speakers, cannot be classifiable as functional units because they are not "intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85." We further note that the stereo systems imported without their speakers are incomplete. Customs has consistently held that incomplete or unfinished articles cannot be classified as unfinished functional units. See HQ 957150 (January 30, 1995); HQ 950218 (April 17, 1992); HQ 087077 (March 27, 1991). Therefore, the mini compact disc stereo systems fail the test as set forth under Legal Note 4 to section XVI, HTSUS.

Because each of the stereo components are prima facie classifiable in two or more headings, classification under GRI 1 fails, and we must apply the other GRIs. GRI 3(a) states that if a product is prima facie classifiable in two or more headings by application of GRI 2(b), or for any other reason, then the "heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods."

GRI 3(b) provides that "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". The Harmonized Commodity Description and Coding System Explanatory Notes (EN) constitute the official interpretation of the HTSUS. While not legally binding nor dispositive, the ENs 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 FR 35127, 35128 (August 23, 1989). To determine what is a "set put up for retail sale", EN X to GRI 3(b), page 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).

The mini compact disc stereo system consist of at least two different articles which are prima facie classifiable in different headings, and they are put up together to meet the particular need of audio entertainment. However, both systems fail to meet the third criterion because after importation, they are repackaged with speakers into a master carton before they are put up for sale to the public.

Because the mini compact disc stereo systems are not classifiable as functional units, or as "goods put up in sets for retail sale", the issue to be determined is whether the stereo systems are composite goods or whether each component must be separately classified. EN (IX) to GRI 3(b), page 4, states that:

For the purposes of this Rule, composite goods made up of different components shall be taken to mean not only those in which the components are attached to each other to form a practically inseparable whole but also those with separable components, provided these components are adapted one to the other and are mutually complementary and that together they form a whole which would not normally be offered for sale in separate parts.

Examples of the latter category of goods are:

(1) Ashtrays consisting of a stand incorporating a removable ash bowl.
(2) Household spice racks consisting of a specially designed frame (usually of wood) and an appropriate number of empty spice jars of suitable shape and size.

As a general rule, the components of these composite goods are put up in common packing.

The subject stereo systems consist of two separable components (an amplifier/tuner and dual cassette decks/CD player) which are adapted one to the other (through the flat cable) and are mutually complementary and that together they form a whole which is not normally offered for sale as separate components. Because of the specially designed flat cable which connects the components to form a complete stereo system, consumers cannot purchase the components separately. Based upon all these factors, we believe that the subject stereos in their condition as imported, are composite goods under the application of GRI 3(b). We further find that the essential character of the composite good is imparted by the tuner/amplifier component. Therefore, the subject stereo systems are classifiable under subheading 8527.32.50, HTSUS, as reception apparatus for radiobroadcasting. Based upon the above analysis, HQ 956284 (which classified the components separately) is incorrect.

HOLDING:

The mini compact disc stereo systems are classifiable under subheading 8527.32.50, HTSUS, which provides for: "[r]eception apparatus for radiotelephony, radiotelegraphy or radiobroadcasting, whether or not combined, in the same housing, with sound recording or reproducing apparatus or a clock: [o]ther radiobroadcast receivers, including apparatus capable of receiving also radiotelephony or radiotelegraphy: [n]ot combined with sound recording or reproducing apparatus but combined with a clock: [o]ther. . . . " Goods classifiable under this provision have a column one, general rate of duty of 4.8 percent ad valorem.

EFFECT ON OTHER RULINGS:

HQ 956284, dated July 7, 1994, is hereby revoked. In accordance with 19 U.S.C. 1625(c)(1), this ruling will become effective 60 days after publication in the Customs Bulletin. Publication of rulings or decisions pursuant to 19 U.S.C. 1625(c)(1) does not constitute a change of practice or position in accordance with section 177.10(c)(1), Customs Regulations [19 CFR 177.10(c)(1)].

Sincerely,

John Durant, Director
Tariff Classification Appeals

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