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HQ 967866




November 21, 2005

CLA-2-RR:CTF:TCM 967866 IOR

CATEGORY: CLASSIFICATION

Tariff No.: 8543.89.96

Larry T. Ordet, Esq.
Sandler, Travis & Rosenberg, P.A.
5200 Blue Lagoon Drive
Miami, FL 33126-2022

RE: FLYTM Pentop Computer

Dear Mr. Ordet:

This is in response to your request of July 19, 2005, to the Customs and Border Protection (CBP), National Commodity Specialist Division (NCSD) in New York, for a binding ruling on the classification under the Harmonized Tariff Schedule of the United States (HTSUS), of the FLYTM Pentop Computer (“FPC”), on behalf of LeapFrog Enterprises, Inc. (“LeapFrog”). Your ruling request was forwarded to this office by the NCSD for reply. Originally you had submitted to CBP a ruling request dated June 10, 2005, which was returned to you for lack of information sufficient to issue a ruling. Subsequently you made submissions dated July 19, 22 and 29, 2005, supplementing the June 10, 2005 submission. This decision follows a meeting between you, a representative of Leapfrog and members of my staff, which included a demonstration of the FPC, on November 4, 2005.

FACTS:

The FPC is asserted to be a computer integrated into a pen. The FPC measures 7” in height by 1.18” in width by 1.09” in depth. It employs the FLY Operating System version 1.0 (FLYTM OS) that controls the running of programs and standard applications such as the fully functioning calculator, scheduler, notepad, games, music and alarm clock, which are stored in saved memory and executed upon demand. The games include geography of North America, matching proverbs with phrases, multiple choice logic puzzle, word-search, and an English quiz, all of which require use of the interactive printed pages included with the FPC. Other functions include cards and stickers which result in a sound when the pen tip is tapped on certain pictures. For example, a tap on a drawing of a cash register, results in the sound of a cash register ring. The music applications include keyboard and drum sounds when using the pen tip to tap a drawing of a keyboard or drums. A sequence played on the keyboard or drums can be recorded and played back. The FPC uses a microprocessor Central Processing Unit (CPU), and comes with 128 Kb of installed Random Access Memory (RAM) and 16 Mb of installed Read Only Memory (ROM).

The FPC uses Anoto scanning technology, to receive input data, and converts it into signals that it can process into an intelligible form and provide as output to the user. The FPC captures an image using the OM3, which consists of a plastic barrel/housing, mirror, light-emitting diode (LED) and lens, housed on the FPC barrel, near the tip of the pen. The OM3 reads X,Y coordinates within a unique 6x6 grid of dots in a 2mm square pattern on paper specially printed with a large number of microdots (FLYTM paper). The OM3 captures the image, and a dot pause chip, which functions as a charge-coupled device, captures the image from the OM3 and sends it to the FPC’s CPU. The OM3 is activated by depressing the pen tip onto the paper. The CPU determines what character was written by its location with respect to the microdots on the paper using character recognition. It does not read what was written in ink, and would work even if the pen had run out of ink. The ink in the FPC is a carbonless ink which enables the OM3 to read the dots on which the user makes a character. If regular ink were used, the OM3 would not be able to read the dots through the ink in order to determine the character written. The pen tip can be replaced with a pencil point, which is also carbonless.

As an example of an application, the user can draw a “C” with a circle around it and the icon will act as a “calculator” button. Using the “C” function, the user can draw a calculator on the specialized paper, tap the handwritten digits and function keys with the pen tip and the device will audibly announce the answers through its internal speaker. In order to receive any data from the user, the FPC requires everything to be written on the pre-printed FLYTM paper. The FPC has no display screen.

The FPC has a first in first out memory with respect to data added by the user. For example, using the calculator example, once a calculator is drawn by the user, the user is able to come back to that calculator anytime and touch the pen tip to the numbers and enter a calculation for the FPC to solve. However, once the memory has been filled, the FPC will delete items previously added in order to accommodate the newest item added, without prompting the user that a particular item is being deleted. Once the previously drawn calculator has been deleted from the memory, the FPC would no longer recognize that particular calculator.

The FPC includes a text–to-speech engine, processor (speech synthesizing firmware), and an internal speaker. The FPC uses speech synthesis technology licensed from Scansoft and customized for the FPC and FLYTM OS. The software, contained on the 16 Mb ROM chip, includes both “phoneme-to-speech” capability for 70,000 words and the ability to synthesize true “text-to-speech” capability for any words or letter combinations that fall outside of the 70,000 word library. In text-to-speech, algorithmic rules generate the pronunciation, however with the phoneme-to-speech part of the engine, LeapFrog is able to choose a specific sound to ensure the American accented pronunciation.

The FPC will either be imported by itself, or with a specially designed charger, AC adapter, rechargeable battery and a pad of the FLYTM paper, in a single cardboard package, packaged for retail sale.

The charger is used to charge the FPC’s rechargeable AAA battery. The FPC can be set into the charger and the battery can be charged while inside or outside of the pen. The charger also provides a universal serial bus (USB) pass-through connection to a personal computer (PC), which permits the user to download software to the FPC. Using standard C++ programming language and commercially available development tools (such as Microsoft Visual Studio, Metaware Complier, etc.), the user can program the FPC by typing code onto the PC and then downloading it onto the FPC. These programs can then be stored, retained and executed on demand. LeapFrog offers FPC users and developers the ability to purchase a “developer’s package.” The developer’s package includes a charger, USB cable, re-writable 4MB flash cartridges, and a flash utility program for the PC, for rewriting the flash cartridges.

While it is technically possible to upload that which has been written with the FPC to a PC, there are no applications available for such a function. In addition, certain license agreements prohibit such application.

The FPC can accept additional software in the form of flash cartridges for specialized applications, such as Spanish translation, spelling, and testing in math, science and social studies, at the 5th to 8th grade levels. Other applications include a journal (which prompts writing by asking questions), quiz games and kit, slumber party pack, baseball fantasy and a Batman card game. We have been provided with a list of 11 software applications that have been developed by Leapfrog, and are available for sale.

It is asserted that the FPC can perform a variety of complex arithmetic and logical algorithms, including, but not limited to, full calculator functionality. In certain math applications, available on flash cartridges, the user is prompted to take the correct steps in resolving math problems, as opposed to being simply given the correct answer.

The output device is the small speaker on the FPC. The FPC receives input data and converts it into signals that it can process. The FPC then converts these signals into an intelligible form and provides an audible output to the user. It is asserted that this data output is identical to the data that would appear on a monitor or printer. Using the calculator example above, the answer provided through the speaker, is the data output.

According to Leapfrog, the current market for the FPC is middle school age children, however the Leapfrog website indicates the FPC is for ages 8 and up. According to the Leapfrog.com website, the FPC teaches math, reading and language, and science.

ISSUE:

What is the HTSUS classification of the FLYTM Pentop Computer.

LAW AND ANALYSIS:

Merchandise is classifiable under the HTSUS in accordance with the General Rules of Interpretation (GRIs). The systematic detail of the HTSUS is such that most 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 2 through 6 may then be applied in order.

In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes may be utilized. The Explanatory Notes (ENs), although not dispositive nor legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

The HTSUS provisions under consideration for the FPC are as follows:

8470 Calculating machines and pocket-size data recording, reproducing and displaying machines with calculating functions: 8470.10.00 Electronic calculators capable of operation without an external source of electric power and pocket-size data recording, reproducing and displaying machines with calculating functions.

8471 Automatic data processing machines and units thereof; : Other digital automatic data processing machines: 8471.41.00 Comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined..

8520 Magnetic tape recorders and other sound recording apparatus, whether or not incorporating a sound reproducing device: 8520.90.00 Other..

8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and apparatus:
Other:
Other:
Other:
Other.

9608 Ball point pens;:
9608.10.00 Ball point pens..

Automatic data processing (“ADP”) machines are within the broad category of machines commonly and commercially known as computers. Note 5(A) to chapter 84, HTSUS, provides a definition for the term “automatic data processing machines” for the purposes of heading 8471. The definition is expressed in terms of the abilities an ADP machine possesses. Chapter 84, Note 5(A)(a) states that ADP machines are digital machines which must be capable of (1) storing the processing program or programs and at least the data immediately necessary for execution of the program; (2) being freely programmed in accordance with the requirements of the user; (3) performing arithmetical computations specified by the user; and (4) executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run.

CBP has addressed the requirement that an ADP machine must be freely programmable, (Chapter 84, Note 5(A)(a)(2)) in HQ 964880, dated December 21, 2001, and HQ 952862, dated November 1, 1994. In HQ 964880, after an examination of the evolution of computers and personal computers, citing HQ 952862, CBP concluded that “a freely programmable ADP machine is one that applications can be written for, that does not impose artificial limitations upon such applications, and that will accept new applications that allow the user to manipulate the data as deemed necessary by the user.” Both HQ 964880 and HQ 952862, defined a freely programmable computer as a “[g]eneral-purpose machine that processes data according to a set of instructions that are stored internally either temporarily or permanently.” In HQ 952862, it was determined that personal computers that can perform any of the typically used applications, such as word processing, spreadsheets, database management, various graphics-based programs (such as computer-aided design and desktop publishing), invoicing, payroll, ledger, as well as games, and education applications used at home, are considered to be “freely programmable.” In HQ 952862, it was determined that because the data collection devices at issue were designed for certain specific applications, and could not by themselves perform the typical applications of computers or personal computers, they were determined not to be capable of “being freely programmed in accordance with the requirements of the user,” and therefore not “freely programmable,” for tariff purposes. In addition, the data collection devices at issue in HQ 952862, did not provide the general purpose display capability of a standard desktop terminal.

The FPC cannot be said to be a general purpose machine. Its functions, as imported, are limited to the calendar, scheduling, games, calculator and music applications. The FPC can only operate using the specially pre-printed FLYTM paper, or other pre-printed interactive materials, such as the map of North America, and the stickers and cards used to produce specific sounds. The games are limited to acknowledgement of correct responses and indication of incorrect responses with prompts to aid in providing the correct answer. The FPC has no apparent word processing functions. Even the other available software applications, such as spelling tests and fantasy baseball, are limited to the very specific functions set forth in those programs.

While the FPC may be capable of manipulating data, any applications are limited to those which have a relatively brief audible result, such as games, educational programs, and a scheduler. Any applications which could be written for the FPC are limited in this respect. The application must rely on either data which can be handwritten onto the pre-printed FLYTM paper, using the special ink (or special pencil point) or the use of a pre-printed interactive material. These limitations, as such preclude use of the FPC for the typical applications associated with ADP machines, such as word processing, spreadsheets, graphics-based programs, and business applications. The applications are further limited in use by the fact that older data is automatically deleted in order to accommodate newer data, without providing the user the opportunity to recall the specific data. Because information cannot be uploaded onto a PC, the user is not able to retain older data on a PC or in any other manner, in order to retrieve it later. Further, the output, consisting only of sound, further limits the use of the FPC to games, educational, scheduling, calculating and sound producing applications. This is a similar limitation to that in HQ 952862 (lack of a display), which was a factor in determining that the data collection devices at issue therein were not “general purpose” machines, but were designed for specific applications.

We find that the FPC, due to its limitations, cannot perform the typical applications of computers or personal computers, and because of those limitations, cannot be freely programmed in accordance with the requirements of the user. The FPC can only accept applications that allow the user to manipulate the data as deemed necessary by the user, if the needs of the user fit within the limitations of the device, ie., can be limited to the pre-printed FLYTM paper, or other pre-printed material, and requires only audible output.

For the foregoing reasons, we find that the FPC is not “freely programmable” as required by Note 5(A)(a)(2) to Chapter 84, HTSUS. As the FPC cannot therefore meet all of the requirements of Note 5(A)(a) to Chapter 84, HTSUS, it cannot be classified in heading 8471, HTSUS.

The FPC is distinguishable from the Palm units which were determined to be freely programmable, in HQ 964880, supra. The Palm units had display screens, did not rely on an pre-printed materials for their operation, and with the Palm units, data could be uploaded as well as downloaded, to and from a PC. While the FPC technically can upload to a PC, there is no current application for which this capability can be put to any use. The Palm also, like typical general purpose machines, did not delete data automatically when the memory was filled.

The FPC is also distinguishable from the digital pen which was classified under subheading 8471.60.90, as an ADP input unit, in NY J89440, dated October 23, 2003. The digital pen considered in NY J89440, digitized information written on specialized paper, however, that data captured therein could be downloaded to a PC, and other devices. There was no issue of whether the article was an ADP machine. The FPC, while technically capable of uploading data to a PC, is legally precluded from such application, and has no application in which such a download is used.

The FPC is a composite article, consisting of a ball point pen, calculating, sound recording (used with the keyboard and drum application), sound reproducing features (used with the pre-printed cards and stickers), and electronic educational games and exercises. When no single heading covers an article, classification must be accomplished by other than GRI 1. Goods that are, prima facie, classifiable under two or more headings, are classifiable in accordance with GRI 3. GRI 3(a) states in part that when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods, 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 composite goods made up of different components shall be classified as if they consisted of the component which gives them their essential character. The factor or factors which determine essential character will vary with the goods. EN Rule 3(b)(VIII) lists as factors the nature of the material or component, their bulk, quantity, weight or value, and the role of a constituent material in relation to the use of the goods.

In this case, the prevalent feature of the FPC is the educational games and exercises component. As stated in the FACTS section, the FPC is capable of performing without ink in the pen. In addition, the FPC can perform its functions using the pre-printed materials just by depressing the pen tip and activating the OM3, without functioning as a pen at all. The calculating, sound recording and sound reproducing features are each limited to one application, whereas the educational games and exercises incorporate the foregoing features, and the FPC’s purpose, composition, and advertising is that of an educational device to aid children’s learning progress in math, vocabulary, logic, and geography. The Leapfrog website promotes the FPC as an article that teaches math, reading and language, and science. The article is not promoted on the basis of the other functions, but on the basis of the combined functions. Although not imported with the FPC, there are eleven other applications identified as available for use with the FPC. Of those eleven applications, five are educational in that they consist of specific school subjects or promote writing (Fly Through Spelling; Fly Through Math: Mult/Div.; Fly Through Tests: 5th -8th Grade Math, Science, Social Studies; Fly Journal; and Spanish Translator). Of the applications available for sale on the “Fly” website, four of eight are educational.

Educational devices are not specifically provided for in the HTSUS. Heading 8543, HTSUS, provides for other electrical machines and apparatus having individual functions not specified or included elsewhere in the chapter. The EN to heading 85.43 states that all electrical appliances and apparatus having individual functions not falling in any other heading in Chapter 85 and not covered more specifically in any other Chapter of the Nomenclature falls under that heading. Accordingly, the FPC is described in heading 8543, HTSUS.

We conclude that the essential character of the FPC is not that of a ball point pen, calculator, sound recording, or sound reproducing device, but of “[e]lectrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter.” Therefore the classification of the FPC is under heading 8543, HTSUS, specifically in subheading 8543.89.96, HTSUS, which provides for “[e]lectrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and apparatus: Other: Other: Other.”

Similar items have been classified in subheading 8543.89.96, HTSUS. In HQ 965319, dated February 4, 2002, several electronic educational devices were determined to be classified under subheading 8543.89.96, HTSUS. Those devices each varied in their features, but generally included liquid crystal displays, mini word processors, QWERTY keyboards, and electronic data banks with educational games and activities. See also, HQ 964463, dated Match 7, 2002 for further rulings on educational devices being classified under heading 8543, HTSUS.

As indicated in the Facts section, supra, the FPC could be imported by itself, or with a charger, AC adapter, rechargeable battery and a pad of the FLYTM paper, in a single cardboard package, packaged for retail sale.

The classification of goods put up in sets for retail sale is governed by GRI 3(b). GRI 3(b) provides, in relevant part, that goods put up for retail sale shall be classified as if they consisted of the material or component which gives them their essential character. According to the ENs for GRI 3(b), “goods put up in sets for retail sale” refers to goods which “consist of at least two different articles which are, prima facie, classifiable in different headings; consist of products or articles put up together to meet a particular need or carry out a specific activity; and are put up in a manner suitable for sale directly to users without repacking.”

The FPC sets meet the EN criteria for “goods put up in sets for retail sale.” First, the sets consist of articles which if imported alone would be classifiable under different headings. Second, as stated in your June 10, 2005 submission, all of the components in the set permit the user to effectively use, recharge and store the FPC. Third, in their imported condition, the FPC set is packaged in a manner suitable for retail sale to the ultimate purchaser, without the need for further repackaging. Accordingly, pursuant to GRI 3(b), the FPC sets with the charger, are properly classified under heading 8543.89.96, HTSUS, the classification for the FPC, which provides the essential character to the set.

HOLDING:

By application of GRI 3(b), the FPC is classified in heading 8543, HTSUS, specifically subheading 8543.89.9695, HTSUSA, which provides for “[e]lectrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and apparatus: Other: Other: OtherOther” with a column one, general duty rate of 2.6% ad valorem. Under subheading 9902.85.43, “[e]ducational devices (provided for in subheading 8543.89.96)” entered on or before December 31, 2006, have a general duty rate of 1.67% ad valorem. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usits.gov/tata/hts/.

Sincerely,


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