CLA-2 RR: CR: GC 966675 DBS
Ms. Lucy Richardson
Sony Electronics Inc.
123 Tice Boulevard
Woodcliff Lake, NJ 07675
RE: Revocation of NY I84878; Sony XM Satellite Radio
Dear Ms. Richardson:
This is in response to your letter dated July 23, 2003, to the CBP National Commodity Specialist Division (NCSD), requesting reconsideration of New York ruling letter (NY) I84878, which was issued to you on behalf of Sony Electronics Inc. (Sony) on August 28, 2002. NY I84878 classified three XM satellite radio kits in subheading 8527.29.80, Harmonized Tariff Schedule of the United States (HTSUS). Your request was forwarded to this office for reply. We have reviewed NY I84878 and have found it to be incorrect. In addition, we have considered the new information which you submitted that was unavailable to CBP at the time of the ruling. The following sets forth the correct classification.
Pursuant to section 625(c), Tariff Act of 1930 (19 U.S.C. 1625(c)), 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, 2186 (1993), notice of the proposed revocation of the above identified ruling was published on March 24, 2004, in the Customs Bulletin, Volume 38, Number 13. No comments were received in response to the notice.
The merchandise at issue is three XM satellite radio kits. Satellite radio is broadcast radio transmitted via a satellite, directly to the receiver, on the XM frequency band. It is intended to provide 100 channels of subscriber radio to the user. The kits are configured in three model types. In NY I84878, the models were listed as DNR-XM01C, DNR-XM01R and DNR-XM01H. You have informed us that two of the letters were transposed, and that the model numbers are actually DRN-XM01C, DRN-XM01R and DRN-XM01H.
NY I84878 stated that model DRN-XM01C ("C" model) is composed of the satellite receiver, antenna, remote control, a cassette adapter/car battery cord and a cradle. Model DRN-XM01R ("R" model) is composed of the satellite receiver, RF modulator, antenna, remote control and cradle. Model DRN-XM01H ("H" model) is composed of a satellite receiver, antenna, remote control, cradle and an AC power adapter. Each kit is packaged for retail sale. Samples of the actual packaging in which the kits will be imported and sold were furnished to the NCSD at the time of the original ruling request. Each configured kit is designed to provide satellite radio to a listener while using a motor vehicle.
Though NY I84878 stated that all three models were for use in a motor vehicle, your request for reconsideration stated that the "C" and "R" models are advertised as predominantly for use in a motor vehicle, and that the "H" model is primarily intended for the home. The "R" model is designed for custom installation while the "C" model is designed for self-installation. They are imported and sold with car docking stations that stabilize the unit in a motor vehicle. The antennae have magnetic bases for rooftop mounting. The "H" model, on the other hand, has an XM-compatible antenna that does not have a magnetic base. It is imported with an audio cable that connects to a home stereo system or boom box. The "C" and "H" models may be adapted to home or car, respectively, but require add-on kits to do so.
You submitted that all three receivers at issue provide signal selection, amplification and detection capabilities for the XM satellite radio frequency. You explained that "R" model operates by the the RF modulator supplying power to the cradle, which in turn powers the tuner. The tuner sends audio signals back through the cradle to the RF modulator box which modulates and converts the signal to FM frequency. The RF output is connected to a car stereo head unit. The "C" model operates in a similar fashion, but instead of a RF modulator, the signal is sent through the cassette adapter. The signal for the "H" model is sent through the audio cable.
Unknown to Sony at the time of the original ruling request, the satellite radio receivers in these kits incorporate Synchronous Dynamic Random Access Memory (SDRAM) for sound recording. The XM receivers record XM audio and then retrieve from the SDRAM. The receivers' digital process circuitry repairs any discrepancies in the audio signal output by the SDRAM, removes any textual data associated with the audio signal and converts the signal from digital to analog. In addition, CBP subsequently issued rulings on other models of XM's receivers (NY J83641, dated April 30, 2003 and NY J84658, dated May 14, 2003) and classified them in subheading 8527.31.60, HTSUS, which provides for other radiobroadcasting receivers combined with sound recording or reproducing apparatus. You claim that the receivers classified in those rulings are substantially similar to the instant models for tariff purposes, but for the fact that the "C" and "R" are of a kind used in a motor vehicle.
In light of the foregoing, you claim models DRN-XM01C and DRN-XM01R are classified in subheading 8527.21.40, HTSUS, and that model DRN-XM01H is classified in subheading 8527.31.60, HTSUS.
What is the tariff classification of Sony's XM Satellite Receiver kits that incorporate sound recording or reproducing apparatus?
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 may then be applied.
In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) may be utilized. ENs, though not dispositive or legally binding, provide commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. Customs believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The HTSUS provisions under consideration are as follows:
8527 Reception apparatus for radiotelephony, radiotelegraphy or radiobroadcasting, whether or not combined, in the same housing, with sound recording or reproducing apparatus or a clock:
Radiobroadcast receivers not capable of operating without an external source of power, of a kind used in motor vehicles, including apparatus capable of receiving also radiotelephony or radiotelegraphy:
8527.21 Combined with sound recording or reproducing apparatus:
* * *
* * *
Other radiobroadcast receivers, including apparatus capable of receiving also radiotelephony or radiotelegraphy:
8527.31 Combined with sound recording or reproducing apparatus:
When imported as a set, classification of merchandise under a single heading cannot be determined by applying GRI 1; we must apply the other GRIs. GRI 3 provides for goods that are, prima facie, classifiable in two or more headings. GRI 3(b) instructs that mixtures, composite goods, and goods put up in sets for retail sale shall be classified by the component which gives them their essential character. The components constitute “goods put up in sets for retail sale,” if they satisfy the following criteria set forth in EN (X) to GRI 3(b). If they do not meet the criteria, the components are classified individually. Goods are classified as sets put up for retail sale if they:
(a) 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;
(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 (e.g., in boxes or cases or on boards).
EN (X), GRI 3(b). Each of the satellite radio kits is comprised of goods that are prima facie classifiable in different headings. The sets consists of articles put up together to meet the particular need of receiving and listening to XM radio broadcasting in either the home or motor vehicle. They are packaged together for retail sale. Therefore, the three models meet the criteria to be classified as a set; and are thus classified by that article which imparts the essential character.
The EN VIII to GRI 3(b), states, “The 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 a constituent material in relation to the use of the goods.” As the receiver is the article without which there would be no reception of the XM broadcast, it imparts the essential character of the set.
To classify the satellite radio receiver, we turn back to GRI 1. Heading 8527, HTSUS, provides, in relevant part, for reception apparatus for radiobroadcasting. EN 85.27(B) states in part that sound radio-broadcasting apparatus are for the reception of signals by means of electro-magnetic waves transmitted through the ether without any line connection. In Channel Master v. United States, 648 F. Supp. 10, 12 (CIT 1986), aff’d 856 F. 2d 177 (Fed. Cir. 1988), the Court of International Trade stated that a radio receiver, as the term was used in the predecessor tariff schedule to the HTSUS, is an eo nomine designation for an article which has been lexicographically and judicially defined as capable of performing three basic functions: selectivity, amplification, and detection. See also NEC America, Inc. v. United States, 596 F. Supp. 466, 470 (CIT 1984), aff’d 760 F.2d 1295 (CAFC 1985); General Electric Co. v. United States, 525 F. Supp. 1244, 1248 (CIT 1981), aff’d 69 CCPA 166 (1982). We are still guided by this today. See Headquarters ruling letter (HQ) 964419, dated January 2, 2001. As the instant receivers obtain a radio signal via satellite, they use electro-magnetic waves transmitted through the ether without any line connection to receive the signals. See id. Moreover, according to Sony, they select, amplify and detect (demodulate) the signals. Therefore, at GRI 1, they are reception apparatus for radio broadcasting of heading 8527, HTSUS.
In order to determine in which subheading(s) they fall, we turn to GRI 6, which permits the comparison of same-level subheadings within a heading, by the terms of the subheading and any subheading notes, as well as the application of Rules 1 through 5, applied by the appropriate substitution of terms, unless the context otherwise requires. Applying GRI 1 through GRI 6, the terms of the first subheading level at issue require us to determine whether any of the Sony models are of a kind used in motor vehicles.
To determine the class or kind to which a good belongs, the courts have provided factors, which are indicative but not conclusive. These factors are set forth in United States v. Carborundum Co., 63 CCPA 98, C.A.D. 1172, 536 F. 2d 373 (1976), cert. denied, 429 U.S. 979 (hereinafter Carborundum). They include the general physical characteristics of the article, the expectation of the ultimate purchaser, channels of trade, environment of sale (accompanying accessories, manner of advertisement and display), use in the same manner as merchandise which defines the class, economic practicality of so using the import, and recognition in the trade of this use.
All three Sony models at issue are transportable satellite radio receivers. However, the antennae for the "C" and "R" model receivers have magnetic bases for attaching to a vehicle rooftop. They are advertised for installation in a motor vehicle. They are sold as a set for retail sale with accessories such as the car docking station for use in a motor vehicle or the cassette adapter or RF modulator to connect the receiver to an existing car stereo. Given these factors for the environment of sale, we may assume that the expectation of the ultimate purchaser is to use the receiver in a motor vehicle. Other XM satellite radio receivers similarly equipped for motor vehicles, though, like the "C" model, may be adapted for use in the home. Taking into account, however, that unlike certain other models, such as those subject to NY J83641 and NY J84658, the "R" and "C" models are imported primarily for use in a motor vehicle, we find that they may be considered to be "of a kind used in motor vehicles," classified under either subheading 8527.21 or 8527.29, HTSUS.
Based on the information available at the time of the original ruling request, these two receivers were properly classified under subheading 8527.29, HTSUS. However, Sony has since submitted that all three of the receivers incorporate SDRAM, which is sound recording apparatus. Accordingly, the "R" and "C" models are classified under subheading 8527.21, HTSUS, specifically in subheading 8527.21.40, HTSUS.
The "H" model is imported with an audio cable and XM-compatible antenna. It is advertised and sold with a home accessory kit. However, the user may separately purchase a car accessory kit, which includes the items specialized for use in a motor vehicle, most of which are currently presented with the "C" model. We note that NY J83641 and NY J84658 classified satellite radio receivers with internal digital sound recording capability from XM radio broadcasts in subheading 8527.31.6080, HTSUS, which provides, in relevant part, for other reception apparatus for radio broadcasting combined with sound recording or reproducing apparatus. The receiver classified in NY J83641 is designed for use with a personal computer. The receiver classified in NY J84658 is sold with home adapter, vehicle adapter or audio system kits, which are advertised equally. Applying the Carborundum factors to the foregoing, we find the "H" model is not of a kind used in motor vehicles. Therefore, it should not have been classified in NY I84878 under subheading 8527.29, HTSUS. However, it is a radiobroadcast receiver, classifiable under subheading 8527.31. As with the receivers in NY J83641 and NY J84658, it incorporates SDRAM, and is therefore classified under subheading 8527.31.6080, HTSUS.
For the foregoing reasons, we find NY I84878 to be incorrect.
At GRI 3(b), Sony's XM satellite radio receiver kit models DRN-
XM01C and DRN-XM01R are classified in subheading 8527.21.4080, HTSUS, which provides for "Reception apparatus for radiotelephony, radiotelegraphy or radiobroadcasting, whether or not combined, in the same housing, with sound recording or reproducing apparatus or a clock: Radiobroadcast receivers not capable of operating without an external source of power, of a kind used in motor vehicles, including apparatus capable of receiving also radiotelephony or radiotelegraphy: Combined with sound recording or reproducing apparatus: Other: Other." The rate of duty according to the 2004 HTSUS is 1% ad valorem..
At GRI 3(b), Sony's XM satellite radio receiver kit model DRN-XM01H is classified in subheading 8527.31.6080, HTSUS, which provides for "Reception apparatus for radiotelephony, radiotelegraphy or radiobroadcasting, whether or not combined, in the same housing, with sound recording or reproducing apparatus or a clock: Other radiobroadcast receivers, including apparatus capable of receiving also radio telephony or radiotelegraphy: Combined with sound recording or reproducing apparatus: Other: Other: Other." The rate of duty according to the 2004 HTSUS is free.
EFFECT ON OTHER RULINGS:
NY I84878, dated August 28, 2002, is hereby REVOKED. In accordance with 19 U.S.C 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Myles B. Harmon, Director
Commercial Rulings Division