CLA-2 OT:RR:CTF:TCM H083277 GC

Benjamin H. Shanbaum, Esq.
Katten Munchin Rosenman LLP
525 West Monroe Street
Chicago, IL 60661-3693

RE: Tariff classification of the Zoom Q3 Handy Video Recorder

Dear Mr. Shanbaum:

This is in response to your request submitted on October 7, 2009, to the National Commodity Specialist Division, U.S. Customs and Border Protection (CBP), on behalf of your client Samson Technologies Corp. (Samson) for a binding ruling on the classification of the Zoom Q3 Handy Video Recorder under the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The product at issue is identified as the Q3 Handy Video Recorder, manufactured by Zoom Corp. and distributed by Samson. Its features include:

Built-in stereo condenser microphones with X/Y configuration; 2.4" LCD display with a resolution of 320 x 240; Video resolution of 640 x 480 at 30 frames/sec.; Video Format: MPEG-4 SP; Optics Lens - Fixed Focus (0.8m to infinity) with 2x digital zoom; Audio formats with video include 44.1/48kHz 16/24-bit Linear PCM WAV or MP3 up to 320kbps; Audio only formats include 96kHz 16/24-bit Linear PCM WAV; NTSC/PAL TV output, USB 2.0 with built-in cable, Built-in speaker and tripod mount; Windows and Mac OS compatible on-board editing software, YouTube uploader software, Apple Quicktime; 2GB SD card for up to 1 hour of video recording) (also accepts up to a 32GB SDHC card for up to 16 hours of recording time); and Auto Record Level that automatically adjusts audio levels during recordings. At importation, the Q3 Handy Video Recorder is packaged together with an AV cable, softcase, windscreen, 2GB SD card, and two AA Batteries. LAW AND ANALYSIS:

Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods 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 2 through 6 may then be applied in order.

The HTSUS provisions under consideration are as follows:

8519 Sound recording or reproducing apparatus: Other apparatus: 8519.81 Using magnetic, optical or semiconductor media: 8519.81.40 Other: * * * 8525 Transmission apparatus for radio-broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras, digital cameras and video camera recorders: 8525.80 Television cameras, digital cameras and video camera recorders: 8525.80.50 Other …..

Legal Note 3 to Section XVI, HTSUS, which includes Chapter 85, provides:

Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed 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 (ENs) constitute the official interpretation of the Harmonized System. 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 Fed. Reg. 35127 (Aug. 23, 1989). The General EN to Section XVI, HTSUS, provides, in pertinent part:

(VI) MULTI-FUNCTION MACHINES AND COMPOSITE MACHINES (Section Note 3)

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. * * * Note 3 to Section XVI need not be invoked when the composite machine is covered as such by a particular heading….

You argue that the Q3 is a multifunction machine consisting of an audio recording or reproducing device of heading 8519 (8519.81.40), HTSUS, as well as a video camera recorder of heading 8525 (8525.80.50), HTSUS, that is designed to perform two or more complementary or alternative functions. As such, you assert that the Q3’s classification is governed by Note 3 to Section XVI, HTSUS. You are of the view that the Q3 is not entirely described by heading 8525, HTSUS, because that heading does not include any reference to video camera recorders “incorporating audio recording or reproducing apparatus.” You cite Headquarters Ruling Letter (HQ) H003374 (Jan. 30, 2007) and New York Ruling Letter (NY) I83939 (July 11, 2002), in which karaoke machines fitted together with video cameras were classified pursuant to Note 3 to Section XVI, HTSUS, as support for your position.

The Q3 consists of a video camera recorder of heading 8525, HTSUS, and an audio recording and reproducing apparatus of heading 8519, HTSUS. For this reason, we agree that the Q3 is a multifunctional machine described by Note 3 to Section XVI, HTSUS.

CBP has found the analysis developed and utilized by the courts in relation to “principal use” (the “Carborundum factors”) to be a useful aid in determining principal function. Generally, the courts have provided several factors, which are indicative but not conclusive, to apply when determining whether merchandise falls within a particular class or kind. They include: (1) general physical characteristics, (2) expectation of the ultimate purchaser, (3) channels of trade, environment of sale (accompanying accessories, manner of advertisement and display), (4) use in the same manner as merchandise which defines the class, (5) economic practicality of so using the import, and (6) recognition in the trade of this use. See United States v. Carborundum Co., 63 CCPA 98, 102, 536 F.2d 373, 377 (1976), cert denied, 429 U.S. 979 (1976); Lennox Collections v. United States, 20 Ct. Int’l Trade 194, 196 (1996); Kraft, Inc. v. United States, 16 Ct. Int’l Trade 483, 489 (1992); and G. Heileman Brewing Co. v. United States, 14 Ct. Int’l Trade 614, 620 (1990). See also Headquarters Ruling Letter (“HQ”) W968223, dated January 12, 2007, and HQ 966270, dated June 3, 2003.

You believe, based on the Carborundum factors, that the principal function of the Q3 is to record and reproduce sound, and is classified under heading 8519 (8519.81.40), HTSUS.

General Physical Characteristics and Use

You state that the physical characteristics of the Q3 are very similar to those of other audio recorders sold by your company and that this demonstrates that the Q3 is primarily designed to capture high-quality audio. Specifically, you note that portable audio recording devices are generally shaped to fit the palm of the hand with the controls in front of the user. Also, the microphones are prominently located on the top of the Q3 to “minimize the possibility that the user may inadvertently cover the microphones with his or her hand while recording. For stereo recorders, the microphones are generally positioned in patterns that minimize phasing or that pick up varying directional fields … the Q3 recreates these physical characteristics ….”

In addition, you note that the Q3 allows the user to monitor audio levels as the device is recording, adjust the gain levels to compensate for particularly soft or loud audio sources, and to record audio at different sampling or frequency rates, which allows the user to balance audio recording quality against storage capacity when recording videos. These features are designed primarily for the purpose of recording audio, and are nonexistent in traditional camcorders.

On the other hand, you note, the Q3 has relatively few features devoted to the capture of video. For example, it does not have optical zoom or manual focus and can record only in a single video format. You also posit that the product’s video output is limited to 640 x 480 resolution while a device principally used as a camcorder would record at higher resolutions. You also state that the video with audio function is subsidiary to the audio-only function because the video feature can be turned off altogether.

We note that the device features a video camera, LCD screen, microphone and video playback, all of which are general characteristics of a video camera recorder. In addition its video capability is based on the MPEG-4 SP standard, which is a simple video coding profile designed primarily for low processing power coding, low latency and use in less than ideal transmission circumstances. See www.mpegif.org/public/documents/vault/m4-out-30037.pdf. The video recorded on the Q3 is displayed at the standard video resolution of 640x480 at 30 frames per second, when shown on a separate display such a television, and at a video resolution of 320 x 240 on the built-in LCD display, which is the usual standard for handheld electronics featuring built-in displays, including goods of heading 8525, HTSUS. In addition, the Q3 has Handyshare (editing software), YouTube uploader software and Apple Quicktime, which allow the purchaser to upload video files onto different media.

Channels of Trade, Environment of Sale

You note that the manufacturer of the recorder primarily makes high-end audio recording and live sound devices and does not make any products traditionally viewed as cameras or camcorders. Further, as its distributor, your company is not in the business of distributing camcorders. You also state that Samson is the exclusive distributor of Zoom products in the United States and that most of Samson’s products are intended for the professional audio community. As such, the Q3 will be sold primarily through retailers specializing in professional audio equipment. In addition, you state that Samson markets the recorder as combining “a little bit of video and whole lot of audio” in one handheld device, and has primarily marketed it in music and audio-focused publications

According to the information submitted, there are three retail scenarios for the Q3: (1) it is sold by retailers that sell only professional audio equipment; (2) it is sold by retailers that sell both audio and video equipment but the retailers market them as audio equipment. For example, J&R offered the Q3 under the category “portable audio” on its website when viewed on 8/24/09 (www.jr.com); and, (3) it is sold by retailers that sell both audio and video equipment but the retailers market them as camcorders and emphasize their audio recording capability. For example, the B&H Photo and Video website describes the Q3 as a “high-quality portable audio recorder with an integrated digital camera.” When combined with the fact that most of the retailers of the Q3 are also focused on selling professional audio equipment, you believe that this creates a strong inference in favor of classification under heading 8519, HTSUS.

We note that the product is marketed and sold as the “Handy Video Recorder.” Furthermore, CBP has found no evidence that “most retailers” which sell the Q3 are focused on selling professional audio equipment. While you demonstrated that such retailers exist, by your own admission, there are also Q3 retailers that sell a variety of electronics including audio recording and video recording equipment. In addition, CBP accessed both referenced websites on November 30, 2009, and found that the Q3 is advertised on the J&R website under the “camcorder” category, and on the B&H website under the “video” category. However, on the Best Buy website the Q3 is advertised under the “audio” category. We also found that Sam Ash, a music supply retailer, refers to the device as a video recorder. On cnet.com, a product review website, the Q3 is considered a camcorder with an emphasis on audio.

This is consistent with the manner in which Samson promotes the product on its website. While Samson advertises both the audio and video recording capabilites of the Q3, the emphasis is on how taken together the audio will improve the recorded video:

Brilliant stereo recording … now on your videos

The Q3 uses the same microphone capsules as our industry-leading H4n Handy Recorder and is perfect for recording anything where great audio and video are a must. From live musical performances and rehearsals, interviews, conferences to video podcasts, journalism, education, recitals, weddings or sports, the Q3's pristine audio quality takes your videos to another level.

Designed with everything you need to make your movies right out of the box, the Q3 includes HandyShare software for editing, and a 2GB SD card for up to 1 hour of video recording time. And the Q3 will also accept up to 32GB SDHC cards for a staggering 16 hours of moviemaking! * * * With its high-quality, MPEG-4 SP video format at 30 frames per second, the Q3 renders crystal-clear video at 640 x 480 resolution. And the Q3's large, 2.4" LCD screen with a resolution of 320 x 240 makes viewing easy on the go. Its display also includes audio meters so you can quickly set and monitor your levels as you shoot.

Noting the considerable overlap between the environment of sale and channels of trade for audio and video equipment, and in light of the fact that the instant Q3 Handy Video Recorder clearly is advertised for its capacity as a video recorder, we do not find that this factor weighs in favor of a conclusion that the merchandise principally functions as an audio recorder.

Expectations of the Ultimate Purchaser

According to your submission, because the Q3 can record audio without video, that will be its expected use. You point out that when in the audio only recording mode, the recording can be up to the level of 96 kHz at a 24-bit resolution, which is in line with professional audio recording devices. You anticipate that purchasers of the Q3 will be the same ones who are attracted by other products in the Zoom “Handy Recorder” line of audio recording products because they will likely be aware of Zoom’s reputation as a manufacturer of audio products and will consider the Q3, with its video recording capability, to be the evolution of handheld audio recording devices.

You do not believe that the video functionality of the Q3 will be the primary reason why consumers purchase the Q3 and refer to other audio recording devices that have unique features. For example, the Zoom H2 Handy Recorder has four microphone capsules in two distinct polar patterns, the Zoom H4n allows for simultaneous recording with both the built-in stereo microphones and external microphones or direct line inputs, and the Tascam GT-R1 audio recorder has a built-in amplifier and effects processor. The common thread between these products is that they principally function as audio recorders and their additional features perform secondary roles.

However, it is noteworthy the Zoom H2 Handy Recorder, Zoom H4n and Tascam GT-R1 are all audio-only devices and are not part of the class or kind of good at issue. Moreover, because they only have one function – to record audio – they are not proper subjects of a principal function analysis. The Q3 fits into the class or kind of goods at issue, goods which perform a video recording function along with the recording of audio, and the ultimate purchaser would expect to use the product accordingly.

Economic Practicality of Principal Use as a Camcorder or Audio Recorder

Samson believes that this factor should be used to determine whether the price of a product places it in a competitive position with other prices that perform the function individually. You note that the Q3 is “priced very competitively in comparison to other audio recording devices with similar capabilities” (other Zoom Handy Recorders). For example the 4-microphone Zoom H2 cost $179, the Zoom Q3 cost $249, and the Zoom H4n cost $299. In addition, you state that it is also competitively priced with other manufacturer’s audio recording devices, which range in price from $179 to $500. This makes the Q3 attractively priced as a stand-alone handheld audio recorder.

With respect to the camcorder function, you believe that the Q3 is less attractively priced for use as a camcorder because many camcorders in the $250 price range have features lacking in the Q3, such as high-def or widescreen format, optical zoom, image stabilization, the ability to capture still images, ergonomic design, and multiple options for media storage. When compared to other camcorders having similar features, the price of the Q3 would place it at the upper end of the range, e.g., compared with the Flip camcorder. You thus argue that it is economically impractical to purchase for use principally as a camcorder.

Given the relative similarity of price ranges for mini camcorders and audio recorders, we find that the economic practicality factor is not determinative of whether the product is principally used as one apparatus over the other. The fact that the Q3 falls towards the upper end of the price range for mini camcorders does not dictate a finding that it is economically impractical to purchase the item for that purpose. The purchaser reasonably could conclude that it is more important to record video with a device that features a higher quality microphone than the high resolution optical features found with other camcorders.

Recognition in the Trade of Use

According to the information submitted, the Q3 was first introduced to the U.S. market at a music industry conference in January 2009, along with other audio devices. You note that one website, Gearlog, noted that the product was “aimed at audiophiles who care about the difference between a cheap onboard dynamic mic and the Q3’s two stereo condensors”. The electronics industry website CNet introduces the Q3 by stating that the “Zoom Q3 camcorder puts emphasis on audio.” Based on these statements, you believe that industry recognizes the Q3 primarily as an audio recorder and not as a camcorder.

We find that the recognition in the trade is that the Q3 principally functions as a camcorder. A camcorder that puts emphasis on audio, as described in the cited CNet review, still principally functions as a camcorder. The Gearlog review you cited also mentions that the Q3 is for “aspiring concert filmmakers, video-podcasters and anyone who wants a little more in the audio department”. While the Q3 is designed to occupy a niche in the audio/visual recording market that demands enhanced audio recording quality, that quality serves to augment the video recording function of the Q3. The available evidence leads to the conclusion that the trade recognizes the Q3 accordingly.

In light of the foregoing, we find that the subject Q3 Handy Video Recorder principally functions as a video camera recorder and is thus classified under heading 8525, HTSUS.

HOLDING:

By application of GRI 1 and Note 3 to Section XVI, HTSUS, the instant Q3 Handy Video Recorder is classified under heading 8525, HTSUS. It is specifically provided for under subheading 8525.80.50, HTSUS, which provides for, in pertinent part: “…video camera recorders: Television cameras, digital cameras and video camera recorders: Other…” The column one, general rate of duty for merchandise of subheading 4016.10.00, HTSUS, is 2.1 percent ad valorem.

Duty rates are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov/tata/hts.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.


Sincerely,

Gail A. Hamill, Chief
Tariff Classification and Marking Branch