CLA-2 OT:RR:CTF:TCM H252291 CkG
TARIFF NO: 4901.99.00, 8504.40.85, 8517.12.00
Mr. David Lim
Senior Director, Supply Chain Division
LG Electronics MobileComm U.S.A., Inc.
10101 Old Grove Road
San Diego, CA 92131
RE: Revocation of NY N049055; classification of mobile phone kits
Dear Mr. Lim,
This is in reference to New York Ruling Letter (NY) N049055, issued by Customs and Border Protection (CBP) on February 4, 2009, regarding the classification under the Harmonized Tariff Schedule of the United States (HTSUS) of mobile phone kits. We have reconsidered this decision, and for the reasons set forth below, have determined that classification of the mobile phone kits as unassembled GRI 3(b) sets in heading 8517, HTSUS, was incorrect.
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 revoke NY N049055 was published on July 1, 2015, in Volume 49, Number 26, of the Customs Bulletin. One comment was received in response to this Notice, and is addressed in the ruling below.
FACTS:
NY N049055 described the subject merchandise as follows:
The merchandise subject to this ruling is mobile phone kits. You indicate in your letter that the mobile phone kits will be imported in a single shipment with each of the components, accessories, and point of sale packing material imported in bulk in separate shipping boxes at the time of entry and subsequently assembled together into retail mobile phone kits immediately after entry into the United States
The items that comprise the mobile phone kits are mobile phone handsets, mobile phone batteries, mobile phone battery covers, mobile phone chargers, and mobile phone instruction manuals. Each of these items will be packaged with several other identical items in cardboard shipping cartons, i.e., one carton containing batteries, another carton containing handsets, etc. Each of the shipping cartons will be placed on separate pallets with several other shipping cartons containing identical items and shrink-wrapped, i.e., one pallet containing several shipping cartons full of batteries, another pallet containing several cartons full of handsets, etc. All of the pallets will be imported within the same shipment in proportionate quantities, i.e., 1,000 batteries, 1,000 handsets, etc. All of the five items will be imported in this manner for convenience of packing, handling, and transport. However, after importation the merchandise will only be sold as mobile phone kits each consisting of a handset, battery, battery cover, charger, and instruction manual.
ISSUE:
Whether the instant kits can be classified as unassembled GRI 3(b) sets in heading 8517, HTSUS.
LAW AND ANALYSIS:
The HTSUS provisions at issue are as follows:
4901: Printed books, brochures, leaflets and similar printed matter, whether or not in
single sheets:
Other:
4901.99: Other:
* * * * *
8504: Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof:
8504.40: Static converters:
8504.40.85: For telecommunication apparatus . . .
* * * * *
8507: Electric storage batteries, including separators therefor, whether or not rectangular (including square); parts thereof:
8507.60.00: Lithium-ion batteries . . .
* * * * *
8517: Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof:
Telephone sets, including telephones for cellular networks or for other wireless networks:
8517.12.00: Telephones for cellular networks or for other wireless networks:
* * * * *
GRI 2 provides, in relevant part:
Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this
rule), entered unassembled or disassembled.
GRI 3 provides, in pertinent part:
3. When, by application of rule 2(b) or for any other reason, goods are, prima facie,
classifiable under two or more headings, classification shall be effected as
follows:
…
(b) Mixtures, composite goods consisting of different materials or made up of
different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
* * * * *
The Harmonized Commodity Description and Coding System Explanatory
Notes (ENs), constitute the official interpretation of the Harmonized System at the international level. While neither 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 the headings. It is CBP’s practice to follow, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The EN to GRI 2(a) provides:
(VII) For the purposes of this Rule, “articles presented unassembled or disassembled” means articles the components of which are to be assembled either by means of fixing devices (screws, nuts, bolts, etc.) or by riveting or welding, for example, provided only assembly operations are involved. No account is to be taken in that regard of the complexity of the assembly method. However, the components shall not be subjected to any further working operation for completion into the finished state. Unassembled components of an article which are in excess of the number required for that article when complete are to be classified separately.
(IX) In view of the scope of the headings of Sections I to VI, this part of the Rule does not normally apply to goods of these Sections.
The EN to GRI 3(b) provides, in pertinent part:
(X) For the purposes of this Rule, the term “goods put up in sets for retail sale” shall be taken to mean goods which :
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
consist of products or articles put up together to meet a particular need or carry out a specific activity; and
are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards).
* * * * *
In NY N049055, CBP classified various mobile phone components (including mobile phone handsets, mobile phone batteries, mobile phone battery covers, mobile phone chargers, and mobile phone instruction manuals), imported together in bulk but packaged separately, in heading 8517, HTSUS. The ruling applied GRI 2(a) to classify all of the components together as unassembled “kits”. For the reasons set forth below, this analysis is incorrect.
GRI 2(a) provides, in pertinent part, that “Any reference in a heading to an article shall be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.”
GRI 3(b) provides that “[m]ixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.” In addition, the Explanatory Note to GRI 3(b) holds that: “[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.
(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.”
The instant mobile phone kit components imported by LG are not classifiable under a single heading pursuant to either GRI 2 or GRI 3. The components do not constitute an unassembled mobile phone pursuant to GRI 2(a), because the charger and the instruction manual are not parts of a fully assembled phone. Furthermore, the imported mobile phone kit components are not “goods put up in sets for retail sale” because they are not put up in a manner suitable for sale directly to users without repacking. Instead, the various components are all packaged separately and in bulk at the time of importation. Only after importation are the components repacked for sale directly to consumers. Despite these facts, NY N049055 nonetheless concluded that the LG phone kit components are “unassembled mobile phone kits” to be classified together in a single heading pursuant to GRI 2(a). This conclusion is incorrect.
First, we note that GRI 2(a) refers specifically to individual articles, not sets or “kits”, which are governed by GRI 3(b). A composite good can be an article, but a set is by definition, several articles. GRI 2(a) and GRI 3 can therefore be read together, and frequently have been with respect to composite goods, but the language of GRI 2(a) does not support extending this rule to GRI 3(b) sets. Second, it is an established rule of tariff classification, set forth in the EN to GRI 3(b) and CBP rulings, that “goods put up in sets for retail sale” “must be put up in a manner suitable for sale directly to users without repacking”. Such goods must meet all three of the criteria listed in the EN to GRI 3(b) in order to be classified as a GRI 3(b) set. See e.g., HQ H236637, dated June 28, 2013; HQ H179957, dated September 20, 2012; HQ H081686, dated August 15, 2012; HQ 950667, dated January 17, 1992; HQ 088681, dated May 14, 1991; NY E87868 October 15, 1999; and NY J85398; June 26, 2003. Thus, if at the time of importation a kit lacks any of the essential elements of a set, it cannot be classified as such under either GRI 2 or GRI 3. For example, in HQ 088681, CBP considered a similar scenario, in which various components of a portfolio were imported in separate cartons in the same container. These components were not, at the time of importation, "put up in a manner suitable for sale directly to users without repacking." Thus, CBP concluded that the portfolio components did not constitute a set under GRI 3(b), and that GRI 3 should not have been considered in the classification of the merchandise. Similarly, in HQ 950667, CBP concluded that medicine cabinets with built-in mirrors and over the cabinet lights packaged separately were not GRI 3(b) sets because “that the goods may be sold as "sets" after importation is of no importance where those same goods are not "packaged as sets" upon importation.”
NY N049055 cites to HQ 951511, dated June 1, 1992, for the proposition that goods do not have to be in "kit" form, nor do they have to be shipped in the same packing container, to be unassembled for the purposes of GRI 2(a). HQ 951511 classified unassembled motor vehicle wiring harnesses and lamps used for lighting in subheading 8512.20.20, HTSUS, which provides for [e]lectrical lighting or signaling equipment of a kind used for motor vehicles, by GRI 2(a). However, we note that HQ 951511 only describes unassembled motor vehicle wiring harnesses and lamps, and does not address the classification of a GRI 3(b) set. HQ 951511 merely states that the unassembled components of an article of heading 8512, HTSUS, do not have to be in kit form to satisfy GRI 2(a). It does not provide any support for concluding that GRI 2(a) can be used to circumvent the requirements of GRI 3(b). GRI 3(b) requires that the components of a set be put up for sale directly to users without repacking. The instant kits are not put up in a manner suitable for sale directly to users without repacking, because they are packaged separately at importation and are repackaged after importation. Thus, the instant LG kits do not meet the essential elements of a GRI 3(b) set, and the imported articles are not classifiable under the same heading pursuant to either GRI 2 or 3.
The comment received in response to this notice agrees that the subject kits are not classified as sets under GRI 3(b), but argues that the mobile phone handset, battery and battery cover constitute an unassembled phone pursuant to GRI 2(a). The commenter points to HQ H245902, dated January 28, 2015, in support of classification of the mobile phone handset, battery and battery cover in heading 8517, HTSUS, as an unassembled phone. HQ H245902 classified shipments of equal numbers of mobile phone handsets, batteries, and Bluetooth wireless earphones, imported in the same shipping container but in separate shipping boxes, in heading 8517, HTSUS. HQ H245902 concluded that the mobile phone handsets and batteries constituted un unassembled phone of heading 8517 pursuant to GRI 2(a). Because the wireless earphones were not a component of a completed phone, and because the merchandise was not packaged together for retail sale pursuant to GRI 3(b), the wireless earphones were classified separately. We agree that in this case, the LG mobile phone handset, battery and battery cover constitute an unassembled cellular telephone pursuant to GRI 2(a). Because the manual and charger are not parts of a cellular telephone, and are not put up together with the phone handsets and batteries for retail sale pursuant to GRI 3(b), they will be classified separately.
The LG mobile phone handset, battery and battery cover are classified in heading 8517, HTSUS, by application of GRI 2(a), as a telephone for a cellular or other wireless network.
The mobile phone battery charger will be classified in heading 8504, HTUS, which provides for ““Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof.”
The instruction manual will be classified in heading 4901, HTSUS, which provides for “Printed books, brochures, leaflets and similar printed matter, whether or not in single sheets.”
HOLDING:
By application of GRIs 1, 2(a) and 6, the LG mobile phone handsets, battery and battery covers are classified in heading 8517, HTSUS, specifically subheading 8517.12.00, HTSUS, which provides for "Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the
transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network),
other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof: Telephone sets, including telephones for cellular networks or for other wireless networks : Telephones for cellular networks or for other wireless networks." The 2015 column one, general rate of duty is Free.
The battery charger is classified in heading 8504, HTSUS, specifically subheading 8504.40.85, HTSUS, which provides for “Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: Static converters: For telecommunication apparatus.” The 2015, column one, general rate of duty is Free.
The instruction manual is classified in heading 4901, HTSUS, specifically subheading 4901.99.00, HTSUS, which provides for “Printed books, brochures, leaflets and similar printed matter, whether or not in single sheets: Other: Other.” The 2015 column one, general rate of duty is Free.
EFFECT ON OTHER RULINGS:
NY N049055, dated February 4, 2009, is hereby revoked.
In accordance with 19 U.S.C. 1625(c), this ruling will become effective 60 days after publication in the CUSTOMS BULLETIN.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division