CLA-2 RR:TC:MM 959853 RFA
Mr. Joseph Paul Forget
Compliance Coordinator
Recoton
2950 Lake Emma Road
Lake Mary, FL 32746
RE: Internet "Phone"; Internet Explorer and Net Meeting CD-ROM
Software for Automatic Data Processing (ADP) Machines;
"Goods Put Up In Sets For Retail Sale"; HQ 956490
Dear Mr. Forget:
In a letter dated September 16, 1996, to the Customs
National Commodity Specialists Division in New York, you
requested the tariff classification of an Internet "phone" with
CD-ROM software for a computer under the Harmonized Tariff
Schedule of the United States (HTSUS). Your letter and an
Internet "Phone" sample were referred to this office for a
response.
FACTS:
The merchandise consists of a gift box packaged ready for
retail sale, containing an Internet "Phone" SV-2030 and a
Microsoft Internet Explorer and Net Meeting CD-ROM software,
which are used with a computer. While the Internet "Phone"
resembles a telephone, it is not designed to connect directly to
the telephone network. It does not have a dialing selector, bell
or buzzer. The handset contains a microphone and a speaker. The
base contains a microphone, speaker, volume control, battery
case, switch for handset, switch for "speaker phone" setting, and
cable with two-pronged male jack connectors for use with a
computer equipped with voice/sound capabilities. This equipment
operates like other microphone and speaker equipment designed for
multimedia computer applications. The Internet "Phone" enables
the user to hold a microphone/speaker set to their ear and mouth
to hold comfortable, audible conversations over the Internet.
The actual Internet connection is made by means of the computer's
modem. The Microsoft Internet Explorer and Net Meeting CD-ROM
software allows the user to search for information on the
Internet.
ISSUE:
Whether the Internet "Phone" and Internet Explorer CD-ROM
software sold in a retail box are classified separately or as
"goods put up in sets for retail sale" under the HTSUS?
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.
The subject merchandise consists of: an Internet "Phone"
which is prima facie classifiable under heading 8518, HTSUS, as
a combined microphone/speaker set; and, the Microsoft Internet
CD-ROM software which is prima facie classifiable under heading
8524, HTSUS, as records tapes and other recorded media for sound
or other similarly recorded phenomena. Because the merchandise
is prima facie classifiable in more than one heading, we must
apply the other GRI's.
GRI 3(a) provides in pertinent part: "[t]he 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 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."
Because the software and the phone fall under separate
headings in the tariff schedule which describe only a portion of
the subject merchandise, the headings are to be regarded as
equally specific under GRI 3(a). Therefore, GRI 3(a) fails in
establishing classification, and GRI 3(b) becomes applicable.
GRI 3(b) provides that goods put up in sets for retail sale,
shall be classified as if they consisted of the material or
component which gives them their essential character.
The Harmonized Commodity Description and Coding System
Explanatory Notes (EN) constitute the official interpretation of
the HTSUS. While not legally binding nor dispositive, the ENs
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 FR 35127, 35128 (August 23,
1989). EN X to GRI 3(b), page 4, provides as follows:
[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).
According to EN X to GRI 3(b), a set must consist of at
least two different articles. The subject merchandise meets the
first criteria because it consists of software, and a combined
microphone/speaker set which are prima facie classifiable in
different headings. The subject merchandise also meets the third
criteria of being put up in a manner suitable for sale directly
to users, because it is packaged in a box ready for retail sale.
The only issue remaining is whether the articles meet the
second criteria of being put up together to meet a particular
need or carry out a specific activity. In HQ 956490, dated
August 19, 1994, Customs determined the classification of a
Microsoft "Mouse & Windows" retail set entered in a sealed
plastic wrap retail box, containing Microsoft "Windows 3.1"
operating system computer software on 3.5 inch disks, a digitizer
unit (commonly known as a computer "Mouse"), port adapters,
instruction software, instruction manuals, advertising material,
and warranty manuals. Because the Mouse is needed to use
"Windows 3.1", Customs held that these articles are put up
together to carry out the specific activity of utilizing the
software operating system. The "Mouse & Windows" was found to be
a retail set because it meets all three criteria as set forth
above. Customs further determined that the essential character
of the subject retail set was imparted by the software program
because the reason the end-user purchases the set was for the
ability to utilize the Microsoft "Windows 3.1" operating software
program.
Based upon the limited information provided, we find that
the Internet "Phone" and the Internet Explorer software are not
put up together to meet a particular need or carry out a specific
activity. The user can search the Internet for information using
the software without using the Internet "Phone". According to
our information, the Internet "Phone" operates like any other
microphone and speaker equipment designed for multimedia computer
applications. These multimedia applications do not require
access to the Internet. Without further evidence to prove the
contrary, we conclude that each article can be used independently
of the other and therefore the subject merchandise cannot be
classified as "goods put up in sets for retail sale". Unless
evidence can be presented at the time of entry that supports a
claim of "put up together to meet a particular need or carry out
a specific activity", each article must be classified separately.
The Internet "Phone" is classifiable under subheading
8518.30.20, HTSUS, which provides for: "[m]icrophones and stands
therefor; . . . ; headphones, earphones and combined
microphone/speaker sets . . . : [h]eadphones, earphones and
combined microphone/speaker sets: [o]ther. . . ." According to
the information provided, the subject merchandise is a CD-ROM
disc for a computer laser reading system which creates sound and
image phenomena on the user's computer screen and speakers.
Based upon these facts, we find that the CD-ROM software is
classifiable under subheading 8524.39.00, HTSUS, which provides
for: "[r]ecords, tapes and other recorded media for sound or
other similarly recorded phenomena. . . : [d]iscs for laser
reading systems: [o]ther. . . ."
HOLDING:
The Internet "Phone" is classifiable under subheading
8518.30.20, HTSUS, which provides for: "[m]icrophones and stands
therefor; . . . ; headphones, earphones and combined
microphone/speaker sets . . . : [h]eadphones, earphones and
combined microphone/speaker sets: [o]ther. . . ." The general,
column one rate of duty is 4.9 percent ad valorem.
The Internet Explorer software, is classifiable under
subheading 8524.39.00, HTSUS, which provides for: "[r]ecords,
tapes and other recorded media for sound or other similarly
recorded phenomena. . . : [d]iscs for laser reading systems:
[o]ther. . . ." The general, column one rate of duty is 3.7
percent ad valorem.
Sincerely,
John Durant, Director
Tariff Classification Appeals Division