CLA-2 RR:CR:GC 960354 RFA

Port Director
U.S. Customs Service
300 S. Ferry Street
Terminal Island, CA 90731

RE: Internal Advice 6/1997; Data Monitor and Vision Boxes; Automatic Data Processing (ADP) Display Units; Television Receivers; Constructive Segregation; Composite Machine; Principal Use; Headings 8471 and 8528; GRI 1; Legal Note 3 to Section XVI; GRI 3; EN 84.71(I)(D)

Dear Port Director:

The following is our response to your memorandum (CLA-1-LA:S:T:1:5 FM/kp), dated February 10, 1997, which forwarded the request for Internal Advice (IA) 6/1997. IA 6/1997 was filed on behalf of USA Megapower Technology Inc., and concerns the classification of 29" data monitors and vision boxes under the Harmonized Tariff Schedule of the United States (HTSUS). In preparing this ruling, we also considered the information provided in our meeting with counsel for the internal advice requestant on September 17, 1998, as well as the information submitted on August 13, 1997 and October 12, 1998. We regret the delay.

FACTS:

The merchandise, a 29" SVGA Monitor/TV Two in One, is described as being a model number DM-5938V data monitor and a model number CT-1860 visionbox. The data monitor contains a cathode-ray tube display with a 0.75mm dot pitch and has SVGA (1024 x 768 pixel configuration) and NTSC/PAL display capabilities. It also has a 48 MHZ bandwidth with horizontal scanning frequencies of 15/31.5-38KHz and vertical scanning frequencies of 50-100 Hz. The visionbox contains an NTSC/PAL television tuner and provides the signal to the video monitor. The visionbox can be used with a remote control. According to the entry documents, an equal number of data monitors and visionboxes were imported. The merchandise is capable of being used as both a computer monitor and as a television receiver. ISSUE:

Are the 29" Data Monitors entered with an equal number of visionboxes, classifiable as separate goods, or together under the HTSUS? If classifiable together, is the merchandise classifiable as an automatic data processing (ADP) display unit or as a television receiver 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 1996 subheadings under consideration are as follows:

8471.60.35: Automatic data processing machines and units thereof; . . .: [i]nput or output units, whether or not containing storage units in the same housing: [o]ther: [d]isplay units: [o]ther: [w]ith color cathode-ray tube (CRT). . . . .

Goods classifiable under this provision have a column one, general rate of duty of 2.2 percent ad valorem.

8525.10.20: Transmission apparatus for radiotelephony, radiotelegraphy, radiobroadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus. . .: [t]ransmission apparatus: [t]elevision. . . .

Goods classifiable under this provision have a column one, general rate of duty of 2.9 percent ad valorem.

8528.12.32: Reception 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: [n]on-high definition, having a single picture tube intended for direct viewing (non-projection type), with a video display diagonal exceeding 35.56 cm: [o]ther. . . .

Goods classifiable under this provision have a column one, general rate of duty of 5 percent ad valorem.

Counsel for the internal advice requestant states that the goods, even though imported together, should be classified separately under their eo nomine provisions. As support for this claim, the requestant states as support the fact that the invoices and packing lists shows separate listings for an equal number of both articles. This concept is also known as "constructive segregation". In narrow circumstances, the doctrine of "constructive segregation" has been used to grant preferential duty treatment to articles of commerce consisting of U.S. components assembled into articles abroad. The test was whether the U.S. components could be removed from the imported article "without injury" to the components or to the article, or whether the components had not been advanced in value or otherwise changed by incorporation into the articles as imported. Superscope, Inc. v. United States, 13 CIT 997, 1004, 727 F.Supp. 629, 634 (1989); Nassau Smelting and Refining Co. v. United States, 13 CIT 941, 945, 725 F.Supp. 544, 548 (1989); United States v. Baylis Brothers Co., 59 CCPA 9, C.A.D. 1026, 451 F.2d 643 (1971).

In all previous uses of this doctrine, the issue was not how the finished good imported into the U.S. should be classified for tariff purposes, but whether preferential duty treatment should be given for the merchandise which contained U.S. goods. Expanding the doctrine of "constructive segregation" to allow for separate tariff treatment of individual goods which were imported together would violate a long-standing classification principle enunciated by the Supreme Court in United States v. Citroen, 223 U.S. 407, 414-415, 32 S.Ct. 259, 56 L.Ed. 486 (1911), which stated that:

The rule is well established that "in order to produce uniformity in the imposition of duties, the dutiable classification of articles must be ascertained by an examination of the imported article itself, in the condition in which it is imported." (cites omitted) This, of course, does not mean that a prescribed rate of duty can be escaped by resort to disguise or artifice. When it is found that the article imported is in fact the article described in a particular paragraph of the tariff act, an effort to make it appear otherwise is simply a fraud on the revenue and cannot be permitted to succeed. (cite omitted)

Accordingly, Customs cannot apply the constructive segregation doctrine to the goods under current law. Based upon the long-standing principle set forth in Citroen, Customs must examine articles of commerce in their condition as imported and classify them under the HTSUS in accordance with the GRI's. GRI 1 provides that for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes. Legal Note 3 to Section XVI, HTSUS, which covers the goods in chapters 84 and 85, states that: "[u]nless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function."

The Harmonized Commodity Description and Coding System Explanatory Notes (EN) constitute the official interpretation of the HTSUS. While not legally binding or 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). General EN (VI) to Section XVI, states the following guidelines in determining whether merchandise is a multi-function machine and/or a composite machine:

In general, multi-function machines are classified according to the principal function of the machine.

* * * * * * Where it is not possible to determine the principal function, and where, as provided in Note 3 to the Section, the context does not otherwise require, it is necessary to apply General Interpretative Rule 3 (c); such is the case, for example, in respect of multi-function machines potentially classifiable in several of the headings 84.25 to 84.30, in several of the headings 84.58 to 84.63 or in several of the headings 84.69 to 84.72. Composite machines consisting of two or more machines or appliances of different kinds, fitted together to form a whole, consecutively or simultaneously performing separate functions which are generally complementary and are described in different headings of Section XVI, are also classified according to the principal function of the composite machine.

The subject merchandise meets the definition of "composite machines" because it consists of two or more machines (e.g., the monitor and the visionbox) which when fitted together perform two complementary or alternative functions (e.g., displaying computer images and television images). Therefore, the subject merchandise must be classified as if consisting only of that component or as being that machine which performs the principal function.

The courts have provided factors, which are indicative but not conclusive, to apply when determining the principal function of the merchandise. The factors include such things as general physical characteristics, expectation of the ultimate purchaser, channels of trade, environment of sale (accompanying accessories, manner of advertisement and display), use in the same manner as merchandise which defines the class, economic practicality of so using the import, and recognition in the trade of this use. See Lenox Collections v. United States, 19 CIT 345, 347 (1995); Kraft, Inc. v. United States, 16 CIT 483 (1992); G. Heileman Brewing Co. v. United States, 14 CIT 614 (1990); and United States v. Carborundum Company, 63 CCPA 98, C.A.D. 1172, 536 F.2d 373 (1976), cert.denied, 429 U.S. 979 (1976).

Counsel for the internal advice requestant states that the monitor has the general physical characteristics of ADP display units under heading 8471. EN 84.71(D) for heading 8471 states that:

Among the constituent units included are display units of automatic data processing machines which provide a graphical presentation of the data processed. They differ from the video monitors and television receivers of heading 85.28 in several ways, including the following:

(1) Display units of automatic data processing machines are capable of accepting a signal only from the central processing unit of an automatic data processing machine and are therefore not able to reproduce a colour image from a composite video signal whose waveform conforms to a broadcast standard (NTSC, SECAM, PAL, D-MAC, etc.). They are fitted with connectors characteristic of data processing systems (e.g., RS-232C interface, DIN or SUB-D connectors) and do not have an audio circuit. They are controlled by special adaptors (e.g., monochrome or graphics adaptors) which are integrated in the central processing unit of the automatic data processing machine.

(2) These display units are characterized by low electromagnetic field emissions. Their display pitch size starts at 0.41 mm for medium resolution and gets smaller as the resolution increases.

(3) In order to accommodate the presentation of small yet well-defined images, display units of this heading utilize smaller dot (pixel) sizes and greater convergence standards than those applicable to video monitors and television receivers of heading 85.28. (Convergence is the ability of the electron gun(s) to excite a single spot on the face of the cathode-ray tube without disturbing any of the adjoining spots).

(4) In these display units, the video frequency (bandwidth), which is the measurement determining how many dots can be transmitted per second to form the image, is generally 15 MHZ or greater. Whereas, in the case of video monitors of heading 85.28, the bandwidth is generally no greater than 6 MHZ. The horizontal scanning frequency of these display units varies according to the standards for various display modes, generally from 15 kHz to over 155 kHz. Many are capable of multiple horizontal scanning frequencies. The horizontal scanning frequency of the video monitors of heading 85.28 is fixed, usually 15.6 or 15.7 kHz depending on the applicable television standard. Moreover, the display units of automatic data processing machines do not operate in conformity with national or international broadcast frequency standards for public broadcasting or with frequency standards for closed-circuit television.

(5) Display units covered by this heading frequently incorporate tilt and swivel adjusting mechanisms, glare-free surfaces, flicker-free display, and other ergonomic design characteristics to facilitate prolonged periods of viewing at close proximity to the unit.

The subject merchandise is capable of displaying a CPU signal and a composite video signal whose waveform conforms to a broadcast standard. While the data monitor can be fitted with ADP connectors, its display pitch size exceeds the 0.41mm standard cited in the EN. We further note that the video frequency and horizontal frequency do not indicate a firm conclusion as to whether it is a good of heading 8471 or heading 8528. The expectation of the ultimate purchaser is for use in both the home and office for displaying both ADP and television signals.

According to the information presented, the subject merchandise moves in channels of trade in both the audio-visual and computer distributors. The environment of sale and manner in which the merchandise is advertised and displayed as well as the use is that the subject merchandise is displayed, sold and used as a large screen multimedia monitor. All of these factors indicate classification in both headings. Regarding the economic practicality of using the product as an ADP display unit or as a television/video monitor, it is noted that the television quality of the image is the same as that of a normal television while the computer image is not as clear as a regular ADP monitor. Because the subject merchandise can be used for displaying both computer and television images, we find that no principal function can be determined. By application of Legal Note 3 to Section XVI, we must apply the principles of GRI 3(c) and classify the merchandise under the heading which occurs last in numerical order among those which equally merit consideration. Therefore, the subject merchandise is classifiable under heading 8528, as a television receiver. They are provided for under subheading 8528.12.32, HTSUS, as other television receivers with a video display diagonal exceeding 35.56 cm.

As support of its claim for separate classification of the goods, the internal advice requestant cites the following rulings: HQ 089317 (September 4, 1991), in which Customs classified personal computers, keyboard, CRT monitor, and a mouse separately; HQ 960046 (August 5, 1997), in which Customs classified an alarm device and a carrying case separately; NY 810798 (June 14, 1995), in which Customs classified a shoe upper and shoelaces separately; and, HQ 544824 (May 4, 1993), in which Customs classified printed circuit boards, joystick controllers and wiring harnesses for video arcade games separately under the Tariff Schedules of the United States (TSUS), the precursor to the HTSUS. We have reviewed each of these rulings and find that they are not dispositive to the classification of the merchandise in the present case.

In HQ 089317, Customs classified the goods in separate provisions in accordance with GRI 1 because no one provision provided for the imported goods. In the present situation, the imported goods are classified in accordance with GRI 1 and Legal Note 3 to Section XVI as a composite machine. HQ 960046 and NY 810798 are not dispositive, because in these rulings Customs determined that the two components were not mutually complementary nor specially adapted to be used together and therefore did not meet the terms of a composite good or a set in accordance with GRI 3. However, in the present situation, the vision boxes are specially designed for use only with the DM-5938V monitor and cannot be operated alone or be used with other similar monitors. Therefore, we find that the goods are adapted to be used together to provide the end-users with the abilitiy of viewing both computer and television images. HQ 544824 is also not dispositive to the present situation, because unlike the equal number of data monitors and visionboxes which meet the terms of composite machines, the merchandise in HQ 544824 did not meet the requirements to be classified as if they were unfinished articles or complete articles of commerce under the "entireties" doctrine and were therefore classified as separate goods.

Finally, we note that, in the alternative, the internal advice requestant argues that the goods should be considered a composite good in accordance with GRI 3(b). However, because the goods can be classified in accordance with GRI 1 and Legal Note 3 to Section XVI, we find that there is no basis to apply the other GRI's.

HOLDING:

In accordance with GRI 1 and Legal Note 3 to Section XVI, the subject merchandise are classifiable under subheading 8528.12.32, 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: [n]on-high definition, having a single picture tube intended for direct viewing (non-projection type), with a video display diagonal exceeding 35.56 cm: [o]ther. . . ." Goods classifiable under this provision have a column one, general rate of duty of 5 percent ad valorem.

Please advise the internal advice requestant of this decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division