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HQ 561037




September 21, 1998

MAR-O5 RR:TC:SM 561037 BLS

CATEGORY: MARKING

Mr. Alastair Moran, Senior Trade Advisor
Livingston Trade Services
405 The West Mall
Toronto, Ontario Canada M9C 5K7

RE: Country of origin marking of wireless PC card kits

Dear Mr. Moran:

This is in reference to your letter dated June 11, 1998, on behalf of Research in Motion Limited ("RIM"), requesting a ruling regarding the country of origin marking of certain wireless PC card kits. A sample was included with your submission.

FACTS:

The subject good consists of a wireless modem PC card kit, comprised of a wireless modem PC card with an attached antenna assembly, alkaline battery, rechargeable NiCad battery, reference guides, warranty card, and an installation diskette with paper pouch. The NiCad battery is a product of Japan and the alkaline battery is of U.S. origin. You state that the other components of the kit are of Canadian origin. Each component is marked with its particular country of origin, and the Reference Guide, Quick Reference, warranty card, and paper pouch are marked “Printed in Canada.” The kit is packaged in Canada and exported for sale to the U.S.

ISSUE:

What are the country of origin marking requirements for the imported PC card kit?

LAW AND ANALYSIS:

The marking statute, section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part

134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

The country of origin marking requirements for a “good of a NAFTA country” are also determined in accordance with Annex 311 of the NAFTA, as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103182, 107 Stat. 2057) (December 8, 1993) and the regulations set forth in 19 CFR Parts 102, 134.

Section 134.1(b) (19 CFR 134.1(b)) of the regulations defines “country of origin” as:

The country of manufacture, production, or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin”; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.

Section 134.1(j) provides that the “NAFTA Marking Rules” are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) defines a “good of a NAFTA country” as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.

Part 102 of the regulations (19 CFR Part 102), sets forth the “NAFTA Marking Rules” for purposes of determining whether a good is a good of a NAFTA country. Section 102.11 of the regulations (19 CFR 102.11) sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) provides that “[t]he country of origin of a good is the country in which:

(1) The good is wholly obtained or produced;

(2) The good is produced exclusively from domestic materials; or

(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.”

“Foreign Material” is defined in section 102.1(e) of the regulations as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.”

Based on the information submitted, we will assume that the reference guides, warranty card, and installation disk with paper pouch are of Canadian origin. With respect to the NiCad battery and the alkaline battery, as these components are of Japanese and U.S. origin, respectively, and therefore are considered "foreign" pursuant to 19 CFR 102.1(e), they are neither “wholly obtained or produced," nor "produced exclusively from domestic (Canadian) materials." Thus, for purposes of determining the origin of the imported PC cards, section 102.11(a)(3) is the applicable rule that must be applied. Under this rule, the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20.

Section 102.20 of the rules sets forth the specific tariff classification changes and/or other operations which are specifically required in order for the country of origin to be determined on the basis of operations performed on the foreign materials contained in a good. However, to apply this rule, we must first determine the tariff classification of the foreign materials and the completed good. An additional issue is whether the kit constitutes a set within the meaning of GRI. In this regard, the General Classification Branch, Commercial Rulings Division, has addressed the classification issue as follows:

The merchandise consists of a wireless modem PC card kit, which is comprised of a wireless modem PC card with an attached antenna assembly, alkaline battery, rechargeable NiCad battery, reference guides, and an installation diskette. The modem PC card is in a PCMCIA compliant format, and it plugs into a slot of a portable PC so as to provide a modem connection. Unlike a line-based modem, the subject modem card sends and receives signals through the use of the antenna. Based upon the provided information, it is our understanding that the modem card functions strictly as a modem, and is not intended for use in a wireless local area network (LAN) system.

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

The HTSUS provisions under consideration are as follows:

8517 Electrical apparatus for line telephony or line telegraphy, including line telephone sets with cordless handsets and telecommunication apparatus for carrier-current line systems or for digital line system; videophones; parts thereof:

8517.50 Other apparatus, for carrier-current line systems or for digital line systems:

8517.50.10 Modems, of a kind used with data processing machines of heading 8471.

8524 Records, 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:

Other:

8524.99 Other:

Other:

8524.99.90 Other.

8525 Transmission apparatus for radiotelephony, radiotelegraphy, radiobroadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras; still image videocameras or other video camera recorders:

8525.20 Transmission apparatus incorporating reception apparatus:

8525.20.90 Other.

It is claimed that the items making up the wireless PC modem card kit constitute a set in accordance with GRI 3(b), which 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). In part, 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. 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).

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.

As the contents of the subject kit consist of at least two different articles classifiable in different headings, consist of articles put up together to perform the function of a modem, and are put up in a manner suitable for sale directly to users without repacking (all contents are
packaged together in a box), we find that they constitute a set in accordance with GRI 3(b). We also find that the modem card itself, which plugs into a slot of a portable PC to provide the modem connection, imparts the essential character of the set.

As it imparts the essential character of the set, we must now determine the proper classification of the PC modem card. Line-based PC modem cards are classifiable in heading 8517, HTSUS, specifically under subheading 8517.50.10, HTSUS. See NY A82184, dated April 8, 1996.

However, in part, Explanatory Note 85.17 (p. 1475) states that:

[t]he heading also excludes:

(e) Separately presented cordless handsets (heading 85.25) and radiotelegraphic or radiotelephonic transmission and reception apparatus (heading 85.25 and 85.27).

In part, Explanatory Note 85.25 (p. 1487) states that:

[t]his apparatus is used for the transmission of signals (representing speech, messages or still pictures) by means of electro-magnetic waves which are transmitted through the ether without any line connection.

Although without precedential value in this case, we note that in NCR 086353, dated July 5, 1996, Revenue Canada held wireless digital modems to be classifiable in heading 8525, HTSUS, under subheading 8525.20, HTSUS. Because the PC modem utilizes radiotelegraphic technology to transmit and receive signals, it is precluded from classification in heading 8517, HTSUS, but meets the terms of heading 8525, HTSUS. Therefore, we find that the subject wireless PC modem card is classifiable under subheading 8525.20.90, HTSUS.

It has been suggested that the holding in NY 804249, dated November 30, 1994, may be contrary to the classification of wireless modem cards in heading 8525, HTSUS. In that ruling, Customs held a wireless messaging device (WMD) to be classifiable in heading 8471, HTSUS, as an automatic data processing (ADP) unit. The WMD is a board incorporated into a portable computer which can receive information (incapable of transmitting information), store the information (128 KB of
memory), and function as a pager. As the subject wireless PC modem card, a device for the transmission and reception of signals, is intended for use only as a modem without storage or paging capability, it is our position that it is distinguishable from the WMD and the holding in NY 804249 is inapplicable.

Consequently, as the wireless PC modem card imparts the essential character of the subject set, the set is also classifiable under subheading 8525.20.90, HTSUS.

We also find that the NiCad battery is classifiable under subheading 8507.30 and the alkaline battery under heading 8506.

As the PC card kit is classified under subheading 8525.20.90, HTSUS, the change in tariff classification must be made in accordance with the applicable rule set forth in section 102.20(o), Customs Regulations (19 CFR 102.20(o)), Section XVI: Chapters 84 through 85. This rule provides as follows:

A change to subheading 8525.10 through 8525.20 from any other subheading outside that group.

Therefore, there is a change in tariff classification of the foreign materials pursuant to 19 CFR 102.20.

Section 102.17(c) (19 CFR 102.17(c)), provides that “[a] foreign material shall not be considered to have undergone the applicable change in tariff classification set out in 102.20, or satisfy the other applicable requirements of that Section by reason of: (c) simple packing, repacking or retail packaging without more than minor processing....” In this case, the NiCad and alkaline batteries undergo a mere packaging operation so that by virtue of 19 CFR 102.17(c) these components will not undergo the applicable tariff shift.

However, foreign materials that do not undergo the applicable change in tariff classification set out in 19 CFR 102.20 shall be disregarded in determining the country of origin of the good, as provided in 19 CFR 102.13, if the value of those materials is no more than 7 percent of the transaction value of the good. You indicate that the combined value of the batteries is 2.2 percent of the value of the selling price of the imported good.

Since the value of each of the foreign components which are merely packaged with
the good is no more than 7 percent of the transaction value of the PC card kit, these components may be disregarded in determining the country of origin of the imported good. Therefore, the country of origin of the imported article as determined under section 102.11(a)(3) will be Canada.

HOLDING:

Based upon the information provided, although the Japaneseorigin NiCad battery and U.S.-origin alkaline battery do not satisfy the applicable tariff shift rule in 19 CFR 102.20 as a result of being packaged with the Canadian-origin PC card kit, these foreign materials may be disregarded in determining the country of origin of the kit pursuant to 19 CFR 102.13 provided that at the time of importation their collective value does not exceed 7 percent of the transaction value of the PC card kits. Under these circumstances, the country of origin of the imported article as determined under 19 CFR 102.11(a)(3) will be Canada, the country of origin of the PC cards. As a result, the retail package containing the PC card kit must be marked indicating Canada as the country of origin.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director
Commercial Rulings Division


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