CLA-2: OT:RR:CTF:TCM H083275 TNA
Mr. Steven W. Baker
250 Bel Martin Keys Blvd, Suite B-6
Novato, CA 94949-5707
RE: Modification of NY M86614; Classification of media optical discs
Dear Mr. Baker:
This letter concerns New York Ruling Letter (“NY”) M86614, which the National Commodity Specialist Division of U.S. Customs and Border Protection (“CBP”) issued to you on behalf of your client, Nintendo of America, Inc., on October 11, 2006. In NY M86614, a Nintendo Wii video game system, wireless controllers and “proprietary media optical disks” were classified in heading 9504, Harmonized Tariff Schedule of the United States (HTSUS), as a video game, its parts and accessories, “whether imported separately or together.” We have reconsidered this ruling and now believe that it is incorrect with respect to the classification of the media optical discs when imported separately.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. §1625(c)(1)), as amended by section 623 of Title VI, notice proposing to modify NY M86614 was published on March 31, 2010, in Volume 44, Number 14, of the Customs Bulletin. CBP received one comment in response to this notice, which is addressed in the ruling.
FACTS:
The optical discs at issue are slightly less than 5 inches in diameter and are produced using single-layer technology. They contain proprietary Wii software and can only be used with Wii game consoles and not with personal computers (“PCs”) or other gaming machines.
ISSUE:
Whether optical discs that contain video game software should be classified under heading 8523, HTSUS, as optical discs, or under heading 9504, as parts and accessories of video games?
LAW AND ANALYSIS:
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification shall be determined 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 may then be applied.
The HTSUS headings at issue are as follows:
8523 Discs, tapes, solid-state non-volatile storage devices, "smart cards" and other media for the recording of sound or of other phenomena, whether or not recorded, including matrices and masters for the production of discs, but excluding products of Chapter 37:
9504 Articles for arcade, table or parlor games, including pinball machines, bagatelle, billiards and special tables for casino games; automatic bowling alley equipment; parts and accessories thereof:
Note 3 to Chapter 95, HTSUS, states, in pertinent part:
Subject to note 1 above, parts and accessories which are suitable for use solely or principally with articles of this chapter are to be classified with those articles.
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System. While not legally binding, and therefore not dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System at the international level. CBP believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).
The EN to heading 8523, HTSUS, states, in pertinent part:
This heading covers different types of media, whether or not recorded, for the recording of sound or of other phenomena (e.g., numerical data; text; images, video or other graphical data; software). Such media are generally inserted into or removed from recording or reading apparatus and may be transferred from one recording or reading apparatus to another.
In particular, this heading covers:
(B) OPTICAL MEDIA
Products of this group are generally in the form of discs made of glass, metal or plastics with one or more light-reflective layers. Any data (sound or other phenomena) stored on such discs are read by means of a laser beam. This group includes recorded discs and unrecorded discs whether or not rewritable.
This group includes, for example, compact discs (e.g., CDs, V-CDs, CD-ROMs, CD-RAMs), digital versatile discs (DVDs).
The EN to heading 9504, HTSUS, states, in pertinent part, that:
This heading includes:
(2) Video game consoles and other electronic games which can be used with a television receiver, a video monitor or an automatic data processing machine monitor…
The heading also includes parts and accessories of video game consoles (for example cases, game cartridges, game controllers, steering wheels), provided they fulfil the conditions of Note 3 to this Chapter.
The heading excludes:
(b) Optical discs recorded with game software and used solely with a game machine of this heading (heading 85.23).
Heading 9504, HTSUS, provides for, among other things, parts and accessories of video games. Note 3 to Chapter 95, HTSUS, requires that parts and accessories which are suitable for use solely or principally with articles of the chapter are to be classified with those articles. The Court of Appeals for the Federal Circuit has found that “an imported item dedicated solely for used with another article is a ‘part’ of that article within the meaning of the HTSUS.” Bauerhin Technologies v. United States (“Bauerhin”), 110 F.3d 774, 779 (citations omitted), (Fed. Cir. 1997). An accessory is a subordinate article that bears “a direct relationship to the primary article that it accessorizes.” Rollerblade Inc. v. United States (“Rollerblade”), 282 F.3d 1349, 1352 (citations omitted) (Fed. Cir. 2002), citing with approval the Court of International Trade’s consultation of the common (dictionary) meaning of the term “accessory.” See id.; 116 F. Supp. 2d 1247, 1253 (Ct. Int’l Trade 2000).
In the case of optical discs containing video game software, the good to be classified is the disc itself and not the software recorded on it. There is nothing inherent in an optical disc that makes it a part or accessory of a game system. Optical discs are not solely used with video game consoles and do not bear a direct relationship to them. Such discs can also be used with, for example, CD players, DVD players, and ADP machines. As such, we find that they are not provided for in heading 9504, HTSUS, and that Note 3 to Chapter 95, HTSUS, is not applicable to their classification. This finding is supported by EN 95.04 2(b), which explains that optical discs recorded with game software and used solely with a game machine of heading 9504, HTSUS, are classified in heading 8523, HTSUS. The ENs are especially persuasive “when they specifically include or exclude an item from a tariff heading.” H.I.M./Fathom, Inc. v. United States, 981 F. Supp. 610, 613 (1997).
Heading 8523, HTSUS, provides eo nomine for discs for the recording of sound and other phenomena. The discs at issue here have software recorded on them. Thus, they are described by heading 8523, HTSUS, and must be classified there.
CBP received one comment in response to the proposed modification. The commenter argues that, contrary to CBP’s position, anyone who purchases the subject optical discs buys them, not as optical discs, but for the game software programmed on it. Citing to Data General v. U.S., 4 CIT 182 (1982) and HQ 651011, dated September 22, 1998, the commenter argues that the programming of electronic media has long been held to substantially transform the blank media into an article with a specific function. In response, we note that Data General and HQ 651011 are marking cases that discuss whether the programming of media optical discs is a substantial transformation for the purposes of country of origin marking under 19 C.F.R. §10.14(b), the precursor to 19 C.F.R. Part 134, the current country of origin marking regulations. The rules for country of origin marking do not apply to the classification of merchandise.
The commenter also noted that CBP has previously taken up the issue of reclassifying video game software from heading 9504, HTSUS, as parts of video games, to heading 8523, HTSUS, as media optical discs in HQ 965759, dated August 30, 2002. There, CBP published a notice in Customs Bulletin Volume 36, No. 33, on August 14, 2002 proposing to modify NY 813932, which classified a memory card that plugs into the front of the PlayStation in heading 9504, HTSUS, in order to reclassify the memory card in heading 8523, HTSUS. The proposed modification never went into final form, however, and NY 813932 remained unchanged. The commenter argues that this outcome speaks against reclassification of the subject media optical discs. In response, we note that the merchandise at issue in proposed HQ 965759 was a memory card for video game machines, distinguishable in form from the subject optical discs, which are provided for eo nomine in heading 8523, HTSUS.
HOLDING:
Under the authority of GRI 1, the media optical discs are provided for in heading 8523, HTSUS. Specifically, they are classified in subheading 8523.40.40, HTSUS, which provides for “Discs, tapes, solid-state non-volatile storage devices, ‘smart cards’ and other media for the recording of sound or of other phenomena, whether or not recorded…: Optical media: Recorded optical media: Other: … proprietary format recorded discs.” The 2010 column one, general rate of duty is free.
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.usitc.gov/tata/hts/.
EFFECT ON OTHER RULINGS:
NY M86614, dated October 11, 2006, is modified with respect to the classification of optical discs when imported separately. The classification of the other items described therein remains unchanged.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division