HQ H269117
CLA-2 OT:RR:CTF:FTM H269117 TSM
Mr. Philip Yale Simons
Simons & Wiskin
102 South Broadway
South Amboy, NJ 08879
RE: Revocation of HQ H217623; Modification of HQ 562821; Tariff Classification of name badge components.
Dear Mr. Simons:
This is in reference to Headquarters Ruling Letter (HQ) H217623, issued to Imprint Plus on July 25, 2012, concerning the tariff classification of different components which are put together for creating name badges. In that ruling, CBP found that the components used for creating professional name badges were retail sets classified under subheading 8505.11.00, HTSUS, which provides for “Electromagnets; permanent magnets and articles intended to become permanent magnets after magnetization … : Permanent magnets and articles intended to become permanent magnets after magnetization: Of metal.” Upon additional review, we have found this to be incorrect. For the reasons set forth below we hereby revoke HQ H217623.
This is also in reference to HQ 562821, dated October 30, 2003. In that ruling, CBP classified the components used for creating professional name badges, imported in bulk, as follows: the steel plates in heading 7326 as other articles of iron or steel; the brass plates in heading 7419 as other articles of copper; the aluminum plates in heading 7616 as other articles of aluminum; the plastic covers in heading 3926 as other articles of plastics; the magnets in heading 8505 (and specifically in subheading 8505.19.00) as magnets of materials other than metal; and the safety pins in heading 7319 as safety pins. Upon additional review, we have found this ruling to be incorrect with respect to the tariff classification of the magnets. For the reasons set forth below we hereby modify HQ 562821.
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 (Customs Modernization) of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057), a notice was published in the Customs Bulletin, Volume 51, No. 23, on June 7, 2017, proposing to revoke HQ H217623, modify HQ 562821, and revoke any treatment accorded to substantially identical transactions. No comments were received in response to this notice.
FACTS:
HQ H217623, dated July 25, 2012, describes the subject merchandise as follows:
The instant merchandise consists of different materials which are put together for creating professional name badges. The name-badge kits are sold and packaged in a sealed retail cardboard box, which states that the kits allow a person to design and print a professional name badge, with graphics and logo, quickly and easily. Each kit contains a test sheet, non-adhesive peel-off transparent and paper label sheets, name plates of aluminum or steel, plastic protective lens covers, and rectangular rare earth magnets made of metal. The kits also contain paper instructions and a CD-ROM containing software for designing templates and printing the name badges on a laser jet or ink jet printer.
Once the individual name tags are printed on the inserts, the user places the individual label on the enclosed metal plate and slides the clear plastic lens cover onto the metal plate. The rare earth magnets secure the name tags to one’s clothing. We note that the magnets have a relatively high magnetic strength.
The name badge and labels for the YouWho kit are 3” x 1” in dimensions. The Mighty Badge Kits badges are 3” x 1.5” in dimensions. The kits are sold in various configuration colors (e.g. gold or silver), sizes, and shapes (e.g. oval or square). You indicate that the metal plates in the YouWho kits are composed of steel, while the metal plates in the Mighty Badge Kit are composed of aluminum.
The kits contain materials to make a limited number of badges, but the retail packaging box notes that the name tags may be reused. For example, the instant YouWho Professional Name Badge System (“YouWho”) kit contains two metal badges, two lens covers and two magnets, but there are sixteen labels on the insert sheets.
HQ 562821, dated October 30, 2003, describes the subject merchandise as follows:
The facts as presented in the ruling request are as follows: Parts for use in making metal nametags are exported in bulk form from Canada to the United States. The parts consist of metal plates manufactured in Canada by stamping and cutting coiled or plate steel, brass or aluminum; plastic covers manufactured in Canada; and magnets and safety pins manufactured in China. No information was submitted with respect to whether the materials used to manufacture the parts in Canada are originating or non-originating.
The parts used to make the nametags are shipped together in the same carton but in separate packages. The individual parts are normally shipped in quantities sufficient to assemble a pre-determined number of nametags.
ISSUE:
What is the tariff classification of the components used for creating professional name badges?
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.
GRI 2 provides in pertinent part as follows:
Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of rule 3.
GRI 3 states that, when by application of GRI 2(b) goods are prima facie classifiable under two or more headings, classification shall be effected as follows:
...when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods… 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.
Mixtures, composite goods consisting of different materials or made up of different components,...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 understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
The ENs to GRI 2(b) state the following:
(X) Rule 2 (b) concerns mixtures and combinations of materials or substances, and goods consisting of two or more materials or substances. The headings to which it refers are headings in which there is a reference to a material or substance (e.g., heading 05.07 ivory), and headings in which there is a reference to goods of a given material or substance (e.g., heading 45.03 articles of natural cork). It will be noted that the Rule applies only if the headings or the Section or Chapter Notes do not otherwise require (e.g., heading 15.03 lard oil, not ... mixed).
Mixtures being preparations described as such in a Section or Chapter Note or in a heading text are to be classified under the provisions of Rule 1.
(XI) The effect of the Rule is to extend any heading referring to a material or substance to include mixtures or combinations of that material or substance with other materials or substances. The effect of the Rule is also to extend any heading referring to goods of a given material or substance to include goods consisting partly of that material or substance.
(XII) It does not, however, widen the heading so as to cover goods which cannot be regarded, as required under Rule 1, as answering the description in the heading; this occurs where the addition of another material or substance deprives the goods of the character of goods of the kind mentioned in the heading.
(XIII) As a consequence of this Rule, mixtures and combinations of materials or substances, and goods consisting of more than one material or substance, if prima facie classifiable under two or more headings, must therefore be classified according to the principles of Rule 3.
The ENs to GRI 3(b) provide, in pertinent part, the following:
(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...;
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).
The HTSUS provisions under consideration are as follows:
8505 Electromagnets; permanent magnets and articles intended to become permanent magnets after magnetization; electromagnetic or permanent magnet chucks, clamps and similar holding devices; electromagnetic couplings, clutches and brakes; electromagnetic lifting heads; parts thereof:
Permanent magnets and articles intended to become permanent magnets after magnetization:
8505.11.00 Of metal
* * *
8505.19 Other:
* * *
8505.19.30 Other
* * *
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:
Optical media:
* * *
8523.49 Other:
* * *
Other:
8523.49.40 For reproducing representations of instructions, data, sound, and image, recorded in a machine readable binary form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine; proprietary format recorded discs
* * *
In HQ H217623, CBP found that the components used for creating professional name badges met the definition of “goods put up as sets for retail sale” provided in EN (X) to GRI 3(b), and were classified as such under subheading 8505.11.00, HTSUS. As referenced above, EN (X) to GRI 3(b) provides that "goods put up in sets for retail sale" are those that:
consist of at least two different articles which are, prima facie, classifiable in different headings...;
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).
While it is clear that the name badge components at issue meet the first two requirements, since they are different articles prima facie classifiable in different headings, which are designed to be put together into complete name badges, upon further review we find that they do not meet the third requirement of the test. The language in the ENs “in a manner suitable for sale directly to users” clarifies the term “retail” in the GRI. The term “put up” is defined as “a. to construct; erect. …d. to display; show….” Random House College Dictionary, p. 1075 (1973 ed.). Both the GRI and the EN use the term “for sale,” which term is defined as “offered to be sold; made available to purchasers.” Id., at p. 1162. The term “sale,” alone, is the complete transaction of property for money or credit. Id. Therefore, the language “put up for sale” refers to constructing or showing goods offered to be sold.
Taken as a whole, criterion (c) requires that goods be constructed or shown in a manner suitable to be offered for sale directly to users without repacking. In this case, the name badge components are sold before they are “put up in a manner suitable for sale directly to users without repacking.” The components are purchased, and then they are assembled into individual kits, in accordance with the retail purchaser’s specific order. Therefore, we find that the name badge components at issue are not suitable for sale directly to users without repacking. Accordingly, we conclude that the name badge components are not “goods put up in sets for retail sale” and that each component must be classified individually. See HQ 967364, dated December 23, 2004 (made to order laptop and accessories kits are not classified as sets).
As referenced above, in HQ 562821, dated October 30, 2003, CBP classified the component parts used for creating professional name badges, imported in bulk, as follows: the steel plates in heading 7326 as other articles of iron or steel (and specifically in subheading 7326.90.85, HTSUS); the brass plates in heading 7419 as other articles of copper (and specifically in subheading 7419.99.50, HTSUS); the aluminum plates in heading 7616 as other articles of aluminum (and specifically in subheading 7616.99.50, HTSUS); the plastic covers in heading 3926 as other articles of plastics and articles of other materials of heading 3901 to 3914 (and specifically in subheading 3926.90.98, HTSUS); the magnets in heading 8505 as permanent magnets (and specifically in subheading 8505.19.00, HTSUS); and the safety pins in heading 7319 as safety pins (and specifically in subheading 7319.20.20, HTSUS). Upon additional review, we affirm HQ 562821 with regard to the classification of the steel, brass and aluminum plates, the plastic covers, and the safety pins.
In HQ 562821, the metal magnets encased in plastic, were classified in subheading 8505.19.00, HTSUS, which provided for magnets of materials other than metal. Upon additional review, we found that classification to be incorrect. The magnets at issue consist of the following components: (1) two metal inflexible magnets and (2) plastic holders, holding the magnets. The function of the magnets encased in plastic is to hold the name badges in place, which is accomplished by the two metal magnets. The plastic holders function as mere casing for the magnets. Applying GRI 2(b), we find that the fact that the magnets are encased in plastic does not deprive the good of having the character of a magnet of metal. See EN XII to GRI 2(b). Accordingly, it follows that the subject magnets encased in plastic are classified in subheading 8505.11.00, HTSUS, which provides for magnets of metal.
We next consider the tariff classification of the software designed to be used with the name badges at issue. The software is contained on a CD-ROM and allows the consumer to design name badge templates. Specifically, the software allows the consumer to store, change or edit all information so that producing badges is easy. Heading 8523, HTSUS, provides for discs for the recording of sound and other phenomena. Since the CD-ROM discs at issue contain software designed for use with the name badges under consideration, they are classified in subheading 8523.49.40, 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, including matrices and masters for the production of discs, but excluding products of Chapter 37: Optical media: Other: Other: For reproducing representations of instructions, data, sound, and image, recorded in a machine readable binary form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine; proprietary format recorded discs.”
HOLDING:
By application of GRIs 1, 2(b) and 6, we find that the name badge components must be classified individually. Specifically, we find that the rare earth magnets and specifically designed software are classified as follows:
The rectangular rare earth magnets are classified in heading 8505, HTSUS, and specifically in subheading 8505.11.00, HTSUS, which provides for “Electromagnets; permanent magnets and articles intended to become permanent magnets after magnetization; electromagnetic or permanent magnet chucks, clamps and similar holding devices; electromagnetic couplings, clutches and brakes; electromagnetic lifting heads; parts thereof: Permanent magnets and articles intended to become permanent magnets after magnetization: Of metal.” The 2017 column one, general rate of duty is 2.1% ad valorem.
The specifically designed software which enables the consumer to design templates, store information and print the names to be placed on badges is classified in heading 8523, HTSUS, and specifically in subheading 8523.49.40, 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, including matrices and masters for the production of discs, but excluding products of Chapter 37: Optical media: Other: Other: For reproducing representations of instructions, data, sound, and image, recorded in a machine readable binary form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine; proprietary format recorded discs.” The 2017 column one, general rate of duty is free.
EFFECT ON OTHER RULINGS:
HQ H217623, dated July 25, 2012, is hereby REVOKED; HQ 562821, dated October 30, 2003, is hereby MODIFIED with regard to the rare earth magnets and the software.
In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division