CLA-2 R:C:M 958082 LTO

Ms. Madeline B. Kuflik
Panasonic Company
One Panasonic Way
Secaucus, New Jersey 07094

RE: S-3 Security System (Video Doorphone); HQ 081783 revoked; HQ 082289 revoked; camera unit; monitor unit; HQs 087404, 088748, 957722; GRI 3; composite good; EN to GRI 3(b); EN to section XVI; section XVI, notes 3 and 4; subheading 8517.81.00

Dear Ms. Kuflik:

This is in reference to HQ 081783, issued to you on April 21, 1988, and HQ 082289, issued to you on December 8, 1989, which concerned the classification of a security system and components thereof under the Harmonized Tariff Schedule of the United States (HTSUS). After further review, we have determined that it is necessary to revoke HQ 081783 and HQ 082289. 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. No. 103-182, 107 Stat. 2057, 2186 (1993), notice of the proposed revocation of HQ 081783 and HQ 082289 was published August 2, 1995, in the Customs Bulletin, Volume 29, Number 31. FACTS:

The subject merchandise is the S-3 Security System (also referred to as the "Video Doorphone" intercom system), which is intended to provide video and audio communication between a visitor at the door of a residence and the occupant outside. The system consists primarily of two components, a camera unit and monitor unit. The - 2 -

camera unit, or "door unit" (model VA-9020), consists of a CCD camera, microphone and speaker, while the monitor unit (model VA-9010) consists of a video monitor with single-line telephone, which can also be used for outgoing and incoming calls.

ISSUE:

Whether the S-3 Security System is classifiable, according to note 3 or 4 to section XVI, HTSUS, under heading 8517, HTSUS, which provides for telephonic apparatus.

LAW AND ANALYSIS:

The General Rules of Interpretation (GRI's) to the HTSUS govern the classification of goods in the tariff schedule. GRI 1 states, in pertinent part, that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes . . . ."

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System. While not legally binding, and therefore not dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System, and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

In HQ 081783, the S-3 Security System was classified according to note 3 to section XVI, HTSUS, as other telephonic apparatus under subheading 8517.81.00, HTSUS. In HQ 082289, the System's camera unit and monitor unit, when imported separately, were also classified under subheading 8517.81.00, HTSUS.

The system's camera unit incorporates a microphone and speaker, while its monitor unit incorporates a telephone. Classification of these units, when imported separately, is based on note 3 to section XVI, HTSUS, which provides as follows:

composite machines consisting of two or more machines fitted together to form a whole and other machines adapted 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. - 3 -

The audio (telephone, speaker and microphone) and video (camera or monitor) components of the camera unit and monitor unit are equally important to the overall functioning of each unit. It is therefore our opinion that it is not possible to determine which component performs each unit's "principal function." Thus, in accordance with GRI 1, note 3 to section XVI, HTSUS, and based on the principles of GRI 3(c) (see General EN to section XVI, pg. 1133), the camera unit is classifiable under subheading 8525.30.90, HTSUS, which provides for other television cameras, while the monitor unit is classifiable under subheading 8528.20.00, HTSUS, which provides for black and white or other monochrome video monitors. See HQ 087077, dated March 27, 1991 (wherein we stated that there are no HTSUS legal notes or ENs that provide for "unfinished" functional units). See also HQ 957722, dated May 12, 1995 (although not specified, a CCD camera and monitor, imported separately, were similarly classified in accordance with note 3 to section XVI, HTSUS). HQ 082289 must therefore be revoked.

As there is no single heading that covers all of the components of this system, it is necessary to resort to GRI 3, HTSUS, which governs the classification of goods that are, prima facie, classifiable under two or more headings. GRI 3(a) requires that the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the components contained in a composite good, those headings are to be regarded as equally specific in relation to those goods. Headings 8525 and 8528, HTSUS, each refer to part only of the components of the S-3 Security System. Accordingly, no heading provides a specific description of the system.

GRI 3(b), HTSUS, provides that "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." The system consists of components which are separable but can be attached by cables. The components are "adapted one to the other and are mutually complementary," in that they form a system that is designed to provide audio and video communication. See EN to GRI 3(b), pg. 4. Moreover, as the camera unit and monitor unit have specially designed housings and/or mounting brackets, "the design and intended use of these components would prevent them from normally being sold separately." See HQ 087404, dated December 7, 1990; HQ 957722. Thus, the system is a GRI 3(b) composite good, and it is classifiable as if consisting of the component which gives the system its "essential character."

The various components of the camera unit and monitor unit work together to provide audio and video communication. The microphone and speaker of the camera unit and the telephone of the monitor unit function together to provide two-way audio communication. The camera of the camera unit and the monitor of the monitor unit - 4 -

function together to provide one-way video communication. As both units are necessary to perform either audio or video communication, it is our opinion that they play an equal role in relation to the use of the system, and that neither gives the system its essential character. Thus, it is necessary to resort to GRI 3(c), which states that "[w]hen goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration." Accordingly, the S-3 Security System is classifiable under heading 8528, HTSUS, specifically under subheading 8528.20.00, HTSUS, and HQ 081783 must be revoked.

The S-3 Security System cannot be classified according to note 3 to section XVI, HTSUS. The system consists primarily of two components, a camera unit and monitor unit, which are connected together by cables. It does not consist of machines "fitted together to form a whole." See General EN to section XVI, pg. 1133 (machines must be "incorporated one in the other or mounted one on the other, or mounted on a common base or frame or in a common housing"). Further, the system does not consist of machines adapted to perform "complementary or alternative functions." See General EN to section XVI, pg. 1132 (i.e., "machine-tools for working metal using interchangeable tools, which enable them to carry out different machining operations . . . ."). Thus, reference to note 3 to section XVI, HTSUS, in this instance is misplaced.

Finally, we note that the system cannot be classified according to note 4 to section XVI, HTSUS, as a "functional unit." While the system does consist of individual components, interconnected by electric cables or other devices, the components do not "contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85 . . . (emphasis added)." HOLDING:

The S-3 Security System is classifiable under subheading 8528.20.00, HTSUS, which provides for black or white video monitors. The corresponding rate of duty for articles of this subheading is 5% ad valorem.

If imported separately, the camera unit is classifiable under subheading 8525.30.90, HTSUS, which provides for other television cameras (3.8% ad valorem). The monitor unit is classifiable under subheading 8528.20.00, HTSUS, which provides for black and white or other monochrome video monitors.

In accordance with 19 U.S.C. 1625(c)(1), this ruling will become effective 60 days after publication in the Customs Bulletin. Publication of rulings or decisions pursuant to 19 U.S.C. 1625(c)(1) does not constitute a change of practice or position in accordance with section 177.10(c)(1), Customs Regulations (19 CFR 177.10(c)(1)). - 5 -

EFFECT ON OTHER RULINGS: HQ 081783, dated April 21, 1988, and HQ 082289, dated December 8, 1989, are revoked.

Sincerely,

John Durant,
Director

Commercial Rulings Division