CLA-2 CO:R:C:M 956970 KCC

Wesley K. Caine, Esq.
Stewart and Stewart
808 Seventeenth Street, N.W.
Washington, D.C. 20006-3910

RE: Cable-television signal-converter; remote-control device; HRL 952293; HRL 952302; HRL 952441; set; GRI 3(b); essential character; EN Rule 3(b); NAFTA; Article 509; originating good; General Note 12(b)(ii(A); change in tariff classification; non-originating materials; General Note 12(t)/85.77

Dear Mr. Caine:

This is in regards to your letter dated August 26, 1994, on behalf of Sigmatron International, Inc., concerning the tariff classification under the Harmonized Tariff Schedule of the United States (HTSUS), and preferential tariff treatment under the North American Free Trade Agreement (NAFTA) for a cable-television signal-converter and remote-control device.

FACTS:

The article under consideration is the "TV-86" cable-television signal-converter (converter) manufactured in Mexico. It is a household appliance for converting cable-television signals into signals recognizable by television sets so that users can access cable television. It enables any television set to receive cable-television channels 0 through 84 on ordinary television channel 3. Sigmatron enters the articles at issue under subheading 8525.10.2030, HTSUS, as "converters."

Currently the converter is packaged together with a hand-operated remote-control device which permits the user to change cable channels at a distance from the converter. The remote-control device is made in Korea and when entered with the converter is classified under subheading 8525.10.2030, HTSUS. You state that the converter and remote-control device's packaging identifies both goods and their country of origin. If separately imported, you state that the remote-control device is classifiable under subheading 8525.10.2040, HTSUS.

The converter is manufactured in Mexico from approximately 222 parts of U.S. (approximately 112), Mexican (approximately 5) and foreign origin (approximately 105). Your submission identified all the parts and their HTSUS tariff provisions. As given, the following is a list of the non-originating NAFTA parts, their HTSUS tariff provision and country of origin::

PART

SCREW PANHD PHIL

SPACER THREADED BRASS

XFORMER PWR FUSED

RES. OHM various

CAP various

SWITCH various

CRYSTAL

DIO HOT CAR MIX, DIO SIL SWITCH, RECT., UHF HI RATIO

DIO IR AMPEREX & LED LOW INTENSITY DSPLY

TRANS MOT., TRANS & TRANS FET N CHAN DUAL G

CONN AC CORD

CONN CHASSIS

COIL CHOKE SHLD

IC OP AMP 8 PIN, IC MOT, IC PLL & REVR AMP

POT OHM PIHER RADIAL

CAP various

IC REGULATOR & IC 12 VOLT V-REG

CONN AC RECPTACLE HTSUS

7318.15.60

7415.30.00

8504.31.40

8533.10.00

8532.23.00

8536.50.80

8541.60.00

8541.10.00

8541.40.20

8541.21.00

8544.51.80

8536.69.00

8504.50.00

8542.11.00

8533.40.80

8532.22.00

8542.19.00

8536.90.00 COUNTRY

Taiwan

Taiwan

China

Taiwan

Taiwan, South Korea

Taiwan, Hong Kong

Taiwan

Taiwan, Japan

Taiwan, South Korea

Taiwan, Germany, South Korea

Taiwan

Taiwan

Taiwan

foreign, Japan

Spain

South Korea

South Korea

South Korea ISSUE:

I. What is the tariff classification of the "TV-86" converter and remote-control device under the HTSUS?

II. Is the "TV-86" converter eligible for preferential tariff treatment under the NAFTA pursuant to General Note 12(b), HTSUS?

LAW AND ANALYSIS:

I. Tariff Classification

The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUS, states, in part, that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes...." The subheadings at issue are:

8525.10.2030 Transmission apparatus for radiotelephony, radiotelegraphy, radiobroadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras...Transmission apparatus... Television...Other...Converters, decoders, preamplifiers, line amplifiers, distribution amplifiers and other amplifiers; directional couplers and other couplers; all the foregoing designed for cable or closed-circuit television applications.

8537.10.9070 Boards, panels (including numerical control panels), consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, other than switching apparatus of heading 8517...For a voltage not exceeding 1.000 V...Other...Other.

In this case, two different components are imported together in the same package; the converter and the remote-control device. We agree that the converter is classified under subheading 8525.10.2030, HTSUS, as a "converter."

However, Customs position is that the remote-control device is classified under subheading 8537.10.9070, HTSUS, as other boards, panels, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, for a voltage not exceeding 1.000 V. See, Headquarters Ruling Letter (HRL) 952293 dated October 31, 1994, HRL 952302 dated November 2, 1992, and HRL 952441 dated November 2, 1992. With regard to the remote control, similar merchandise is the subject of an action before the U.S. Court of International Trade in Universal Electronics Inc. v. U.S. (Court No. 93-11-00740).

When, by application of GRI 2, HTSUS, goods are prima facie classifiable under two or more headings, GRI 3, HTSUS, is applicable. In this case, classification is determined by application of GRI 3(b), HTSUS, which provides:

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.

In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) may be utilized. The ENs, although not dispositive, provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the HTSUS. See, T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). EN Rule 3(b)(X) (pg. 4), provides a three-part test for "goods put up in sets for retail sale": For 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 facia, 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 repackaging (e.g., in boxes or cases or on boards).

In the present situation, the merchandise consists of two different articles, which, as stated above, are classified under two different headings. The converter and remote-control device are used together to view cable television from an ordinary television set. The remote-control device allows a user to operate the converter from a distance. The articles are put up together to meet a particular need or carry out a specific activity, i.e. viewing of cable television. Additionally, both articles are packaged together for sale directly to the consumer without repackaging. Therefore, the converter and remote-control device are a set for tariff purposes. To determine the proper classification, the essential character of the set needs to be determined.

In general, essential character has been construed to mean the attribute which strongly marks or serves to distinguish what an article is; that which is indispensable to the structure, core or condition of the article. In addition, EN Rule 3(b) (pg. 4), provides further factors which help determine the essential character of goods. Factors such as bulk, quantity, weight or value, or the role of a constituent material in relation to the use of the goods are to be utilized, though the importance of certain factors will vary between different kinds of goods.

We are of the opinion that the essential character of the set is imparted by the converter. It is the component which converts cable television signals into signals recognizable by a television set. Therefore, the set, i.e. the converter and remote-control device, are classified under subheading 8525.10.2030, HTSUS.

II. NAFTA Eligibility

To be eligible for tariff preferences under the NAFTA, goods must be "originating goods" within the rules of origin in General Note 12(b), HTSUS. Because the converter set is made from parts imported from non-NAFTA countries, to be "goods originating in the territory of a NAFTA party" the goods must be "transformed in the territory of Canada, Mexico and/or the United States" pursuant to General Note 12(b)(ii)(A), HTSUS, which states:

except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivision (r), (s) and (t) of this note or the rules set forth therein....

In this case, we must examine whether the converter set is "transformed in the territory of Canada, Mexico and/or the United States" pursuant to General Note 12(b)(ii)(A), HTSUS. The converter set is imported into the U.S. under subheading 8525.10.2030, HTSUS, as a converter.

As the converter set is classified under subheading 8525.10.2030, HTSUS, a transformation is evident when a change in tariff classification occurs that is authorized by General Note 12(t)/85.77, HTSUS. General Note 12(t)/85.77, HTSUS, states:

A change to subheadings 8525.10 through 8525.20 from any subheading outside that group, provided that, with respect to printed circuit assemblies (PCAs) of tariff items 8529.90.01, 8529.90.03, 8529.90.06, 8529.90.09, 8529.90.13, 8529.90.16, 8529.90.19 or 8529.90.23:

(A) except as provided in subparagraph (b), for each multiple of nine PCAs, or any portion thereof, that is contained in the good, only one PCA may be a non-originating PCA, and

(B) if the good contains less than three PCAs, all of the PCAs must be originating PCAs.

None of the non-originating parts are classified as PCAs under the subheadings of 8525, as listed in General Note 12(t)/85.77, HTSUS. Therefore, we can disregard that portion of the transformation rule. However, any non-originating parts of the converter must come from a subheading outside subheadings 8525.10 through 8525.20. None of the described non-originating parts listed in the FACTS section of this ruling, including the remote-control device, are classified within subheadings 8525.10 through 8525.20. A change in tariff classification does occur for the converter set. Therefore, the "TV-86" converter set is eligible for preferential tariff treatment under the NAFTA pursuant to General Note 12(b)(ii)(A), HTSUS, upon meeting all other applicable requirements.

HOLDING:

Pursuant to GRI 3(b), HTSUS, the "TV-38" converter and remote-control device are classified as a set under subheading 8525.10.2030, HTSUS, which provides for converters.

The "TV-86" converter set is considered an "originating goods" pursuant to General Note 12(b)(ii)(A), HTSUS, upon meeting all other applicable requirements.

Sincerely,

John Durant, Director
Commercial Rulings Division