CLA-2 CO:R:C:M 951044 AJS
Judith K. Matta
William F. Joffroy, Inc.
Customs Broker
P.O. Box 21041
Phoenix, AZ 85036
RE: Business information recorded on magnetic computer discs; ENs
85.24 (8); H. Conf. Rep. No. 576; General Note 4(c); HQ 079847;
HQ 220988.
Dear Ms. Matta:
This is in response to your letter of December 16, 1991, on
behalf of International Computing Systems, Inc., to the Regional
Commissioner of Customs in New York, requesting the tariff
classification of magnetic computer discs from El Salvador under
the Harmonized Tariff Schedule of the United States (HTSUS).
Your letter has been referred to this office for reply. We
regret the delay in responding.
FACTS:
The subject merchandise consists of business information
recorded on magnetic computer discs. Your client intends to
contract with U.S. companies to export their written or hard copy
business records to El Salvador where these records will be
transcribed onto magnetic computer discs. The discs will be of
U.S. origin and shipped to El Salvador blank. The magnetic discs
with the transcribed information will then be returned to the
U.S. The written or hard copy business records will either be
returned to the U.S. or destroyed after transcription in El
Salvador.
ISSUE:
Whether the subject discs are entitled to a duty exemption
as "[r]ecords, diagrams and other data with regard to any
business, engineering or exploration operation whether
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on paper, cards, photographs, blueprints, tapes or other media."
pursuant to General Note 4(c), HTSUS; or classifiable within
subheading 8524.90.40, HTSUS, which provides for "other" recorded
media.
LAW AND ANALYSIS:
Classification of merchandise under the HTSUS is in
accordance with the General Rules of Interpretation (GRIs), taken
in order. GRI 1 provides that classification shall be determined
according to the terms of the headings and any relative section
or chapter notes.
Heading 8524, HTSUS, provides for records, tapes and other
recorded media for sound or other similarly recorded phenomena.
The Harmonized Commodity Description and Coding System
Explanatory Notes (ENs) state that this heading covers media on
which phenomena other than sound or image have been recorded
(e.g., magnetic tapes, disc packs, diskettes and cassettes for
machines of headings 84.69 to 84.72). ENs 85.24 (8), p. 1373.
The subject discs satisfy this description. They are magnetic
discs (i.e., recorded media) for computers (i.e., a machine of
heading 8471) with information transcribed upon them. While the
ENs are not dispositive, they provide a commentary on the scope
of each heading, and offer guidance for interpretation of the
HTSUS. H. Conf. Rep. No. 576, 100th Cong., 2d Sess. p. 549,
reprinted in 1988 U.S. CODE CONG. & ADMIN. NEWS p. 1582.
Accordingly, we consider the above ENs instructive for
determining that the subject discs satisfy the terms of heading
8524, HTSUS. More specifically, they are described within
subheading 8524.90.40, HTSUS, which provides for "other" recorded
media.
The HTSUS does, however, contain a duty exemption for
certain business records contained on magnetic discs. General
Note 4(c), HTSUS, provides that "[r]ecords, diagrams and other
data with regard to any business, engineering or exploration
operation whether on paper, cards, photographs, blueprints, tapes
or other media." are exempt from duty and entry. The subject
discs will contain business records. Accordingly, they satisfy
the terms of General Note 4(c) in that they will be records with
regard to a business operation contained on media. Therefore,
the subject discs are exempt from duty pursuant to General Note
4(c).
The question has also arisen concerning instances in which
discs will contain information that does not concern a business
operation, but rather commercial information which is intended
for sale to third parties. In these instances
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the discs cannot be considered business records because they are
a commercial product intended for sale to third parties and not
information related to business operations. Therefore, these
types of discs are not business records exempt from entry and
duty pursuant to General Note 4(c), HTSUS, but instead media
subject to duty within subheading 8524.90.40, HTSUS.
This conclusion regarding discs containing commercial
information intended for sale to third parties is supported by
previous Customs decisions. In HQ 079847 (10/28/87), we
addressed the scope of the predecessor provision of General Note
4(c), HTSUS, (i.e., General Headnote 5(e), Tariff Schedules of
the United States (TSUS)). This ruling involved the
classification of magnetic tapes which contained information
acquired by the U.S. Government Landsat satellite system outside
the U.S. In some instances, these tapes were sold to private
industry, private individuals or foreign governments (i.e., third
parties). We ruled that these tapes did not qualify for
treatment as business records because they were not for inter-
corporate use. Instead, the tapes were classified as recorded
media. This situation is very similar to one in which discs
containing commercial information are intended for sale to third
parties.
In HQ 079847, we also reviewed the legislative history of
Headnote 5(e), TSUS, and its predecessor (i.e., item 870.10,
TSUS). We concluded that these provisions were not intended to
exempt from duty information sold to a third party because they
are not business records for inter-corporate use. Discs
containing commercial information intended for sale to third
parties are also not information for inter-corporate use, but
rather a commercial product intended for sale to other
businesses. Based on this decision, discs containing commercial
information intended for sale to third parties would also not
qualify as business records exempt from duty and entry pursuant
to General Note 4(c), HTSUS.
Congress has indicated that earlier tariff rulings must not
be disregarded in applying the HTSUS. The conference report to
the 1988 Omnibus Trade Bill states that "on a case-by-case basis
prior decisions should be considered instructive in interpreting
the HTS[US], particularly where the nomenclature previously
interpreted in those decisions remains unchanged and no
dissimilar interpretation is required by the text of the HTS[US].
H. Conf. Rep. No. 576, 100th Cong., 2D Sess. 548, 550 (1988). HQ
079847 is an earlier tariff ruling which satisfies this
description. General Note 4(c), HTSUS, is identical to Headnote
5(e),
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TSUS, and no dissimilar interpretation is required by the text of
the HTSUS. Accordingly, we find this decision instructive for
determining that discs containing commercial information intended
for sale to third parties are not business records exempt from
duty pursuant to General Note 4(c), HTSUS.
In HQ 220988 (8/29/89), Customs once again discussed the
applicability of General Note 4(c), HTSUS. This case involved
used airline tickets and credit card forms which
were exported from the U.S. for processing onto magnetic tape,
microfiche or microfilm (i.e., recorded media). We ruled that
the used airline tickets and credit card forms which were
returned to the U.S. are business records within the meaning of
General Note 4(c), HTSUS. However, we did not specifically
address the issue of whether the recorded media itself was also
included within the meaning of General Note 4(c), HTSUS.
Accordingly, we do not view the decision rendered in HQ 220988
dispositive for the resolution of this case.
HOLDING:
The subject magnetic computer discs containing business
records are exempt from entry and the payment of duty as records
with regard to a business operation contained on media pursuant
to General Note 4(c), HTSUS. However, if the discs contain
commercial information intended for sale to third parties they
are not business records exempt from duty. They are recorded
media classifiable within subheading 8524.90.40, HTSUS, which
provides for "other" recorded media.
Sincerely,
John Durant, Director
Commercial Rulings Division