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HQ 965101




November 5, 2001

CLA-2 :RR:CR:GC DBS

Category: CLASSIFICATION

Tariff No: 7326.20.0050

Ms. Annette McCormack
Meijer, Inc.
2929 Walker Avenue, N.W.
Grand Rapids, MI 49544-9428

RE: NY Ruling A83438 modified; Key chains with attached doll and toy musical instrument

Dear Ms. McCormack:

This letter is to inform you that Customs has reconsidered New York Ruling (NY) A83438, issued to you on June 5, 1996, concerning the tariff classification of the “Barbie” key chain and the “Etch-A-Sketch” key chain under the Harmonized Tariff Schedule of the United States (HTSUS). Customs ruled that the subject key chain was classified under subheading 9503.90.0030, HTSUS, the provision for other toys (except models) not having a spring mechanism. We have reviewed this ruling and determined that the classification of the “Etch-A-Sketch” key chain is incorrect. For the reasons that follow, this ruling modifies NY A83438. The instant ruling has no effect on the classification of the “Barbie” key chain that was also classified in NY A83438.

Pursuant to section 625(c), Tariff Act of 1930 (19 U.S.C. 1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North America Free Trade Agreement Implementation Act, Pub. L. 103-182, 107, Stat. 2057, 2186 (1993), notice of the proposed modification of NY A83438 was published on September 19, 2001, in the Customs Bulletin, Volume 35, Number 38. Two comments were received. The essence of the arguments opposing the proposal and Customs response are included in the LAW AND ANALYSIS portion of this ruling.

FACTS:

The sample “Etch-A-Sketch” key chain classified in NY A83438 consists of a miniature-sized working “Etch-A-Sketch” and attached steel key chain with a steel key ring (hereinafter “steel key chain”). The turning of two knobs on the “Etch-A-Sketch” creates a picture, in outline form, on the screen. In order to erase the picture and begin again one must shake the article to clear the screen.

We note that subheading 9503.90.0030, HTSUS, is now renumbered as subheading 9503.90.0080, HTSUS, and reworded to provide for “Other toys; reduced-size (‘scale”) models and similar recreational models, working or not; puzzles of all kinds; parts and accessories thereof: other: other.”

ISSUE:

Whether the key chain should be classified under heading 9503, HTSUS, as a toy, or under heading 7326, HTSUS, as other articles of iron or steel.

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 and any relative Section or Chapter Notes. In the event that 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.

In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) may be utilized. ENs, though not dispositive or legally binding, provide commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. Customs believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

The HTSUS provisions under consideration are as follows:

7326 Other articles of iron or steel:
7326.20.00 Articles of iron or steel wire 7326.20.0050 Other

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

Other
9503.90.0080 Other

The term “toy” is also not defined in the HTSUS. However, the general EN for Chapter 95 states that the “Chapter covers toys of all kinds whether designed for the amusement of children or adults.”

GRI 1 provides that articles are to be classified by the terms of the headings and relative Section and Chapter Notes. For an article to be classified in a particular heading, the heading must describe the article, and not be excluded therefrom by any legal note.

The subject articles are novelty items consisting partly of a toy under heading 9503, HTSUS, and partly of a steel split ring key chain under heading 7326, HTSUS. As such, the items are not specifically provided for in any one heading. Thus, for tariff purposes, they constitute goods consisting of two or more substances or materials. Accordingly, they may not be classified solely on the basis of GRI 1. Further, GRI 2(a) is inapplicable because it applies to incomplete or unfinished articles, and the key chains are imported in a finished complete condition. GRI 2(b) states that 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 subject key chains are 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 good its essential character. We must determine whether the toy or the steel key chain imparts the essential character to these articles.

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." Recent court decisions on the essential character for 3(b) purposes have looked primarily to the role of the constituent material in relation to the use of the goods. See Better Home Plastics Corp. v. U.S., 915 F. Supp. 1265 (CIT 1996), aff’d 119 F. 3d 969 (Fed. Cir. 1997); Mita Copystar America, Inc. v. U.S., 966 F.Supp. 1245 (CIT 1997), rehear’g denied, 994 F. Supp. 393 (1998); Vista Int’l Packing Co. v. U.S., 890 F. Supp. 1095 (CIT 1995). See also Pillowtex Corp. v. U.S., 893 F. Supp. 188 (CIT 1997), aff’d 171 F. 3d 1370 (CAFC 1999).

Moreover, we have consistently held that where a composite good contains both functional and non-functional components, the functional component gives the item its essential character. See HQ 087831, dated November 27, 1990 (holding that under a GRI 3(b) analysis, the essential character of a split key ring with a non-utilitarian vinyl attachment was the steel element); HQ 950636, dated September 16, 1992 (following HQ 087831 to conclude that the essential character of a key ring with a plastic ornament in which a logo or photo could be placed was the steel element, and revoking numerous rulings that did not follow that analysis); HQ 960118, dated January 28, 1999 (holding that the key ring imparted the essential character because of its function, as opposed to the voice synthesizer that merely played prerecorded sounds). See also HQ 959473, dated April 8, 1997 (holding that flashlight on key ring is not subordinate to the key ring, as a toy would be, for purposes of determining essential character). In HQ 087831, we stated, in pertinent part, that “the steel component is what makes up the utilitarian portion of the key ring, whereas the plastic component is present primarily for decorative purposes.” Hence, as a general rule, the steel component is the essential character, and this type of composite good is classified under heading 7326.

A commentor opposed the proposed revocation of NY 817268 and modification of NY A83438, contending that Customs should take no action pending the outcome of litigation on substantially similar articles. The action taken here is merely conforming to the longstanding position Customs has maintained on this issue, as shown in the paragraph above, and will be reviewed on the outcome of the litigation. Another commentor stated that essential character should be determined by the value of the constituent parts and by “purchase decision.” Customs believes as discussed above, that the functional component of a composite good usually imparts the essential character of that good.

However, Customs recognizes that where the doll or toy component has a significant amount of manipulative play value, the doll or toy imparts the essential character of the subject goods. See NY B85825, dated May 30, 1997. For example, in NY B85825, the toy component of a “Mr. Potato Head Key Ring” gave the good its essential character because the toy comes complete with attachable features, e.g. eyes, noses and ears, that are stored in the back of its head and can be repeatedly rearranged. The other key chains classified in that ruling had similar levels of manipulative play, constituting their classification in Chapter 95.

Here, the “Etch-A-Sketch” component is a miniature version of the “Etch-A-Sketch” drawing toy. As such, it would be classifiable under the residual subheading 9503.90, HTSUS, which provides for all other toys not previously enumerated. The steel chain and key ring component is commonly classified as other articles of iron or steel under heading 7326, HTSUS. According to the GRI 3(b) analysis enunciated above, the functional component imparts the essential character. The steel key chain performs the function of holding keys. However, the toy has function, as well, because it has manipulative play value. One can turn the knobs to create a picture in outline form, then shake to erase the picture.

Although this process may be done repeatedly, it does not possess the level of manipulative play as the key chains classified in NY B85825, supra at 4, or of the “Barbie” key chain classified in the ruling at issue, NY A83438. The key chains whose essential character is that of a doll or toy due to significant manipulative play value comes with various pieces that can be repeatedly rearranged. Moreover, the toys possess a level of manipulative play more comparable to their full-size counterparts. Not only is the “Etch-A-Sketch a single unit, but the mobility of the miniature “Etch-A-Sketch” knobs is far more limited than a full-size “Etch-A-Sketch.” It has only a limited level of manipulative play, not the significant amount required to define the essential character. Thus, the essential character is that of a key chain and not of an “Etch-A-Sketch” toy.

We conclude that NY A83438 was in error because the function over form and significant manipulative play analyses were not applied to determine the essential character. The essential character of a key chain with an “Etch-A-Sketch” toy attached is the key chain. It is accordingly classifiable in subheading 7326.20.0050, HTSUS.

HOLDING:

The “Etch-A-Sketch” key chain is classifiable in subheading 7326.20.0050, HTSUS, which provides for: “other articles of iron or steel, articles of iron or steel wire, other.”

EFFECT ON OTHER RULINGS:

NY A83438, dated June 5, 1996, is hereby modified with respect to the classification of the “Etch-A-Sketch” key chain as set forth herein. In accordance with 19 U.S.C. 1625(c) this ruling will become effective 60 days after its publication in the Customs Bulletin.

Sincerely,

John Durant, Director
Commercial Rulings Division


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