CLA-2: OT:RR:CTF:TCM H031166 KSH
Mr. Pieter Whittemore
Celestica Corporation
645 Harvey Road
Manchester, NH 03103
RE: Tariff classification of wireless cellular telephones packaged together with various accessories; Foreign Trade Zone.
Dear Mr. Whittemore:
This is in reference to your request of April 21, 2010, on behalf of
Celestica Corporation, for a prospective ruling to determine the classification of wireless cellualr telephones packaged together with various accessories under the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
Under the proposed scenario, various components of wireless cellualr telephones would be admitted into a U.S. Foreign Trade Zone (FTZ) under foreign non-privileged (NPF) status for final assembly and configuration, including downloading the carrier’s operating software. The finished cellualr telephones would then be packed into point of sale boxes, together with an instruction kit with CD, a quick starting guide, an ion-lithium battery, a plastic phone carrying case, a battery charger and a headset. Upon customer demand, the packaged kit would exit the FTZ and enter the commerce of the United States.
ISSUE:
Whether cellualr telephones packaged together with an instruction kit with CD, a quick starting guide, an ion-lithium battery, a plastic phone carrying case, a battery charger and a headset, are classified as a set pursuant to GRI 3(b).
LAW AND ANALYSIS:
FTZs are established under the authority of the Foreign Trade Zones Act of 1934, as amended, 19 U.S.C. 81a-81u. Section 81c provides for the admission of merchandise into a FTZ and its treatment and shipment to U.S. Customs Territory. Section 81c(a) explains that:
[f]oreign and domestic merchandise of every description, except such as is prohibited by law, may, without being subject to the customs laws of the United States, except as otherwise provided in this chapter, be brought into a zone and may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, or otherwise manipulated, or be manufactured except as otherwise provided in this chapter, and be exported . . .
For tariff classification purposes, goods are “admitted,” and not “entered,” into an FTZ. Only after such goods are withdrawn from the FTZ and enter U.S. Customs Territory, are they deemed entered for purposes of tariff classification. The classification of articles entered from an FTZ is, in part, dependent upon whether the articles have Privileged Foreign Status (PF) or Non-Privileged Foreign Status (NPF). As previously stated, the subject merchandise is entered under NPF status. Under Section 146.65(a)(2) of the CBP Regulations (19 CFR 146.65(a)(2)), NPF status merchandise is “[s]ubject to tariff classification in accordance with its character, condition and quantity as constructively transferred to customs territory at the time of entry or when an entry summary is filed with [CBP].”
NPF status is defined by the Foreign Trade Zone Customs Manual (FTZ Manual) as “[s]tatus of zone merchandise not previously cleared by Customs which is appraised in the condition of the merchandise at the time it enters the Customs territory upon exiting the zone …. While in the zone, NPF status merchandise can be manipulated or manufactured into another commercial item with a different tariff classification. NPF status allows zone users to pay at the rate of the finished product produced in the zone.” FTZ Manual, pg. 203, available at http://foreign-trade-zone.com/customs_manual.htm (last visited July 12, 2010). It is a residual status which applies to foreign merchandise which does not have the status of privileged foreign merchandise or zone-restricted merchandise and is not deemed as waste. See 19 C.F.R. §146.42 (a). Insofar as the subject handheld components have NPF status, they are not subject to classification upon admission into the FTZ.
Merchandise is classifiable under the Harmonized Tariff Schedule of the
United States (HTSUS) in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the remaining GRIs 2 through 6.
As previously noted, the wireless handset device is packaged and sold with an instruction kit with CD, a quick starting guide, an ion-lithium battery, a plastic phone carrying case, a battery charger and a headset . The classification of goods put up in sets for retail sale is governed by GRI 3(b). GRI 3(b) provides, in relevant part, that goods put up for retail sale shall be classified as if they consisted of the material or component which gives them their essential character.
According to the ENs for GRI 3(b), "goods put up in sets for retail sale" refers to 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…." See EN (X), GRI 3(b).
The wireless handheld device kit meets the GRI 3(b) criteria for "goods put up in sets for retail sale." First, the set consists of articles which, if imported alone, would be classifiable under different headings (i.e., the wireless handheld device is classified in heading 8517, HTSUS, the battery is classified in heading 8507, HTSUS, the carrying case is classified in heading 4202, HTSUS and the headset is classified in heading 8518, HTSUS). Second, all of the components in the set permit the user to effectively use and recharge a wireless handheld device. Third, in its imported condition, the wireless handheld device kit is packaged in a manner suitable for retail sale to the ultimate purchaser (i.e., in master pack cartons), and does not need to be repackaged.
EN VIII to GRI 3(b) explains, "[t]he factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of the constituent material in relation to the use of the goods."
There have been several court decisions on "essential character" for purposes of classification under GRI 3(b). See, Conair Corp. v. United States, 29 C.I.T. 888 (2005); Structural Industries v. United States, 360 F. Supp. 2d 1330, 1337-1338 (Ct. Int’l Trade 2005); and Home Depot USA, Inc. v. United States, 427 F. Supp. 2d 1278, 1295-1356 (Ct. Int’l Trade 2006), aff’d 491 F.3d 1334 (Fed. Cir. 2007). "[E]ssential character is that which is indispensable to the structure, core or condition of the article, i.e., what it is." Home Depot USA, Inc. v. United States, 427 F. Supp. 2d at 1293 quoting A.N. Deringer, Inc. v. United States, 66 Cust. Ct. 378, 383 (1971). In particular in Home Depot USA, Inc. v. United States, the court stated "[a]n essential character inquiry requires a fact intensive analysis." 427 F. Supp. 2d 1278, 1284 (Ct. Int’l Trade 2006).
Upon review of all of the components, we find that the wireless handheld device provides the essential character to the set. It is the primary component while the remaining components – i.e., the instruction kit with the CD, the quick starting guide, the ion-lithium battery, the plastic phone-carrying case, the battery charger, and the headset – simply aid in its functioning. Accordingly, pursuant to GRI 3(b), the wireless handheld device set is properly classified under heading 8517, HTSUS.
HOLDING:
Pursuant to GRI 3, the wireless handheld device set is classified in heading 8517, HTSUS upon being withdrawn from warehouse and entering the commerce of the United States. It is provided for in 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 general, column one 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 world wide web at www.usitc.gov.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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,
Ieva K. O’Rourke, Chief
Tariff Classification and Marking Branch