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HQ 961398




November 20, 1998

CLA-2 RR:CR:GC 961398 MMC

CATEGORY: CLASSIFICATION

TARIFF NO.: 7326.20.0050

Ms. Jennifer F. Kessinger
Mr. Mark E. Roll
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, IL 60661

RE: NYRL C82644 Modified; Keychain Toyz

Dear Ms. Kessinger and Mr. Roll:

This is in reference to your February 13, 1998, letter, on behalf of M-B Sales, requesting reconsideration of New York Ruling Letter (NYRL) C82644 dated January 5, 1998, concerning the classification of four different articles all described as "Keychain Toyz" under the Harmonized Tariff Schedule of the United States (HTSUS). Samples were submitted for our examination. In preparing this decision consideration was also given to arguments presented by counsel in a meeting held on July 20, 1998, and a supplemental submission of August 18, 1998.

In NYRL C82644 dated January 5, 1998, the "Show N Grow", "Color Changer" and "Removable Transformer Doggie" where classified in heading 7326, HTSUS, which provides, in pertinent part, for other articles of iron or steel. The "Flash-A-Gotchi" was classified in heading 8513, HTSUS, which provides, in pertinent part, for flashlights. Upon further examination, we are of the opinion that the "Flash-A-Gotchi" is classifiable not as a flashlight but rather as a key chain under heading 7326, HTSUS.

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, 2186), notice of the proposed modification of NYRL C82644 was published, on October 14,1998, in the Customs Bulletin, Volume 32, Number 41.

FACTS:

The subject articles consist of a steel chain with a steel key loop attached to one end and four different egg-shaped plastic articles to the other. Those articles are described as:

1) Show 'N Grow: The egg's upper and lower halves pull apart to reveal a character on a color label.

2) Flash-A-Gotchi: The egg's front features a screen area with a translucent label with a row of three buttons beneath. When the screen is depressed, a red LED light is emitted from a hole at the bottom of the egg. The light is powered by a non-replaceable battery.

3) Color Changer: The egg's front is a thermochromatic color label. When heat is applied to the label (e.g., by rubbing the label), the thermochromatic label changes to depict a character.

4) Removable Transformer/Doggie: A plastic dog figure which is attached to the end of the key chain. The dog's legs may be pulled down manually. A button on the front of the dog opens and closes the dog's mouth. The figure is encased in an egg-shaped, hinged, plastic item which opens and closes allowing the key chain to be removed from the egg-shaped case. The egg features a label on the outside. Inside the egg is a plastic dog-shaped figure.

ISSUE:

Whether the "Keychain Toyz" are classifiable as toys for tariff purposes. Whether the "Flash-A-Gotchi" is classifiable as a flashlight for tariff purposes.

LAW AND ANALYSIS:

Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). The systematic detail of the Harmonized System is such that virtually all goods are classified by application of GRI 1, that is, according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied. The headings under consideration are as follows:

9503 Other toys; reduced-size ("scale") models and similar recreational models, working or not; puzzles of all kinds; parts and accessories thereof

7326 Other articles of iron or steel

8513 Portable electric lamps designed to function by their own source of energy (for example, dry batteries, storage batteries, magnetos), other than lighting equipment of heading 8512; parts thereof

No one heading of the HTSUS, specifically provides for the "Keychain Toyz" as a whole. The plastic egg-like component, and the plastic dog of the "Keychain Toyz" are described by heading 9503, HTSUS. The light component of the "Flash-A-Gotchi" is described by heading 8513, HTSUS. The ring and chain components are described by heading 7326, HTSUS. As no one heading describes the articles as a whole, the "Keychain Toyz" are considered composite goods consisting of both toy, metal, and, in the case of the "Flash-A-Gotchi", flashlight components. As such, they cannot be classified according to GRI 1.

GRI 2(a) is inapplicable because it applies to incomplete or unfinished articles, and the key chain is imported in a finished complete condition. GRI 2(b) states, in pertinent part, that any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. The classification of goods consisting of more than one material or substance shall be according to the principles of
GRI 3.

GRI 3(a) states that when, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, 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. As the key chain is a composite good, we must apply rule 3(b), which provides that composite goods are to be classified according to the component that gives the goods their essential character.

In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See, T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).

EN VIII to GRI 3(b) explains 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 the constituent material in relation to the use of the goods." We must determine whether the egg-shaped plastic/ figurine component or the metal key ring component imparts the essential character to this article.

You claim that the essential character of the key ring is imparted by the egg-like component because it comprises the substantial majority of the weight, value and bulk of the article. We disagree. We believe that, in this instance, these factors do not resolve the issue of essential character. It is the role of the constituent materials in relation to the use of the goods that imparts the essential character.

Customs has consistently held that, when a key chain has both a functional and non- functional component it is the functional component which provides the article's essential character. See Headquarters Ruling Letter (HRL) 950636, dated January 16, 1992. Further, in HRL 960118 dated July 28, 1997, we determined that a functional key chain/ring, not a voice synthesizer comprised a key ring's essential character. See also, HRL 959473 dated April 8, 1997 and HRL 958452 dated July 3, 1996.

Concerning the subject articles, it is the ring/chain component which makes up the utilitarian portion of the article. In the case of the "Flash-A-Gotchi" we are of the opinion that while it functions as a light, the light component does not provide the article with its essential character. Rather, like the other the egg-like components, it is primarily placed at the end of the key chain for decorative purposes. Moreover, we believe that all of the articles will be used predominantly to hold keys. We recognize that these articles are purveyed to the public as a "prize" in a child's meal box. However, they are marketed and displayed and even named as key chains. Furthermore, they are not designed principally to amuse, but rather to hold keys. Finally, we note that you cite several New York Ruling Letters in which Customs determined that the essential character of a toy/key chain combination was the toy component. It is our understanding that in those instances, the manipulative play value of the toy so outweighed any potential functional aspect of the key chain, that the toy component provided the article with its essential character. Such is not the case in this instance.

We therefore, find that it is the metal key ring component that imparts the "KeychainToyz" essential character. As such all of the "Keychain Toyz" are classifiable in heading 7326, HTSUS.

HOLDING:

All of the "Keychain Toyz" are classifiable in subheading 7326.20.0050, HTSUS, as "[o]ther articles of iron or steel: [a]rticles of iron or steel wire: [o]ther," with a column one duty rate of 4.3 percent ad valorem. NYRL C82644 is modified to reflect this position.

In accordance with 19 U.S.C. ?1625(c)(1), this ruling will become effective 60 days after its 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
Commercial Rulings Division

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