CLA-2 RR:TC:MM 959073 RFA

Mr. William D. Outman, II
Baker & McKenzie
815 Connecticut Avenue, NW
Washington, D.C. 20006-4078

RE: Projection Television Module; Cathode-Ray Tubes (CRTs); Additional U.S. Notes 5 and 6 to Chapter 85; NAFTA "originating goods"; Headings 8528 and 8540

Dear Mr. Outman:

This is in response to your letter dated March 22, 1996, on behalf of Mitsubishi Consumer Electronics America, Inc., concerning the tariff classification of projection television modules under the Harmonized Tariff Schedule of the United States (HTSUS). In preparing this ruling, we also considered arguments provided in our meeting on September 13, 1996, and in your letter of October 23, 1996.

FACTS:

The merchandise, labeled as projection television (PTV) modules, consists of all of the parts of a complete, color, non-high definition projection television, except for the cabinet, back cover, screen and reflecting mirrors. A PTV uses three separate monochrome cathode-ray tubes (CRTs) each with a different color so that it can project a full-color image for viewing. The PTV modules will be assembled in Mexico from U.S., Japanese, Singapore, and Malaysian components. The PTV modules will contain Japanese-origin CRTs. At the time of importation, the PTV module contains the following components: three separate monochrome CRTs; video intermediate (IF) amplifying and detecting systems; video processing and amplification systems; synchronizing and deflection circuitry; tuners and tuner control systems; audio detection and amplification systems; and a power supply. After importation into the United States, the cabinet, back cover, screen and reflecting mirrors will be added to complete the PTV.

ISSUES:

I. Are cathode-ray picture tubes classified separately when incorporated into incomplete projection televisions under the HTSUS?

II. Is the subject merchanidise eligible for preferential duty treatment under the North American Free Trade Agreement (NAFTA)?

LAW AND ANALYSIS:

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

I. Classification:

The subject merchandise is an unfinished PTV which is provided for under chapter 85, HTSUS. Additional U.S. Note 5 to chapter 85, HTSUS, provides that:

Picture tubes imported in combination with, or incorporated into, other articles are to be classified in subheadings 8540.11 through 8540.12, inclusive, unless they are--

(a) incorporated into complete television receivers, as defined in additional U.S. note 6 below;

(b) incorporated into fully assembled units such as word processors, ADP terminals, or similar articles;

(c) put up in kits containing all the parts necessary for assembly into complete television receivers, as defined in additional U.S. note 6 below; or

(d) put up in kits containing all the parts necessary for assembly into fully assembled units such as word processors, ADP terminals, or similar articles.

Additional U.S. Note 6 to chapter 85, HTSUS, states that: "[f]or the purposes of additional U.S. note 5 above the term complete television receivers' means television receivers, fully assembled in their cabinets, whether or not packaged or tested for distribution to the ultimate purchaser(s)."

The subject merchandise does not meet the terms of a "complete television receiver" because it is missing the cabinet, back cover, screen and reflecting mirrors. Because the PTV is not a "complete television receiver", we must determine whether the picture tubes are to be classified separately from the PTV module or whether the entire merchandise must be classified under heading 8540, HTSUS.

In Rico Import Co. v. United States, 16 CIT 770, 797 F.Supp 1028 (1992), the court stated that "[i]t is well settled that tariff acts must be construed to carry out the intent of the legislature." See Nippon Kogaku (USA), Inc. v. United States, 69 CCPA 89, 92, 673 F.2d 380, 382 (1982)(citing Sandoz Chem. Works, Inc. v. United States, 43 CCPA 152, 156, C.A.D. 623 (1956)). The first place to look to establish the intent of Congress is the language of the statute itself. Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). The court may resolve ambiguities in the plain language of a statute by resorting to legislative history and other extrinsic sources. Sandoz Chem. Works, 43 CCPA at 156.

According to the legislative history for the above-referenced Additional U.S. Notes 5 and 6, Congress "intended to prevent importers from taking advantage of what the Committee believes to be a loophole in the TSUS [Tariff Schedules of the United States--the precursor to the HTSUS]. . . . The Committee believes that the picture tube portion of the entry should receive the . . . duty rate applicable to color television picture tubes." H.Rep No. 40, 100th Cong., 1st Sess. 217(1987) at 218. It is clear from the legislative intent that the picture tubes in incomplete assemblies must be classified separately from the rest of the merchandise. Therefore, we find that the three separate monochrome CRTs, each with a different color, are classifiable under subheading 8540.12.50, HTSUS, which provides for monochrome, non-high definition cathode-ray television picture tubes. Because the picture tubes are classified separately, we find that the remaining portion of the PTV module is classifiable under subheading 8528.12.08, HTSUS, which provides for incomplete or unfinished color reception apparatus for television, not incorporating a cathode-ray tube, flat panel screen or similar display device.

II. NAFTA Applicability:

You contend that the PTV module, which is classified without the Japanese-originated CRTs, is eligible for duty-free treatment under the NAFTA. To be eligible for tariff preferences under the NAFTA, goods must be "originating goods" within the rules of origin in General Note 12(b), HTSUS. General Notes 12(b)(i) and (ii)(A), HTSUS, state:

[f]or the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if --

(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or

(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that --

(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein . . .

Because the PTV module contains parts from countries other than Mexico, Canada, and/or the U.S., General Note 12(b)(i), HTSUS, does not apply. Therefore, we must resort to General Note 12(B)(ii)(A), HTSUS. General Note 12(t)85.91, HTSUS, states that: "[a] change to tariff items 8528.12.04 or 8528.12.08 from any other heading, except from tariff items 8529.90.43, 8529.90.46 or 8529.90.49."

Based upon this rule, any non-originating materials of the PTV module must come from a tariff heading other than heading 8528 or subheadings 8529.90.43, 8529.90.46 or 8529.90.49, HTSUS. We have examined the bill of materials which lists all of the components used in making the PTV module and find that the non-originating components are from headings other than heading 8528 and do not fall under any of the three subheadings listed earlier. Therefore, the PTV module incorporating non-originating components are eligible for preferential tariff treatment under the NAFTA.

HOLDING:

Based upon Additional U.S. Note 5 to Chapter 85, HTSUS, the cathode-ray tubes are classifiable under subheading 8540.12.50, HTSUS, which provides for: "[t]hermionic, cold cathode or photocathode tubes (for example, vacuum or vapor or gas filled tubes, mercury arc rectifying tubes, cathode-ray tubes, television camera tubes); parts thereof: [c]athode-ray television picture tubes, including video monitor cathode-ray tubes: [b]lack and white or other monochrome: [o]ther: [n]on-high definition. . . ." The general, column one rate of duty is 5.2 percent ad valorem.

The PTV module is classifiable under subheading 8528.12.08, HTSUS, which provides for: "[r]eception apparatus for television, whether or not incorporating radiobroadcast receivers or sound or video recording or reproducing apparatus; video monitors and video projectors: [r]eception apparatus for television, whether or not incorporating radiobroadcast receivers or sound or video recording or reproducing apparatus: [c]olor: [i]ncomplete or unfinished (including assemblies for television receivers consisting of all the parts specified in additional U.S. note 10 to this chapter plus a power supply), not incorporating a cathode-ray tube, flat panel screen or similar display device: [o]ther. . . . " The general, column one rate of duty is 3 percent ad valorem. The PTV module is eligible for preferential tariff treatment under the NAFTA.

Sincerely,

John Durant, Director
Tariff Classification Appeals Division