CLA-2- OT:RR:CTF:TCM H020455 TNA
Schenker of Canada Ltd.
6555 Northwest Drive
Mississauga, Ontario L4V1K2
RE: Request for Reconsideration of NY N012061; Tariff Classification of
SG19LD804-161 security system
Dear Mr. Lavrikov:
This is in response to your request dated November 2, 2007, on behalf of Schenker of Canada, Ltd., agent for the importer Lorex Technology, Inc, for reconsideration of New York Ruling Letter (NY) N012061, issued on June 19, 2007, as it pertains to the classification of the SG19LD804-161 security system under the Harmonized Tariff Schedule of the United States (HTSUS).
The subject security system, identified as model SG19LD804-161, is used for local or remote security surveillance. It consists of a 19 inch thin film transistor liquid crystal display (“TFT LCD”) video monitor with a built-in digital video recorder (“DVR”) and hard disk drive (“HDD”); four color charge-coupled device (“CCD”) cameras with cables; an Ethernet 3M cable; and a remote control.
The system allows setting multiple cameras in a surveillance system with the following features: an M-PEG 4 DVR of pictures in different places at different times; automatic recording at a scheduled time; a multiplexer feature that enables the system to record pictures from more than one camera and display them on a single screen; local and remote LAN/WAN camera viewing; digital recording of live video to the HDD; playback, archive and search (which includes calendar, event, motion and bookmark); support of four-channel audio recording; and USB 2.0 Network compatibility that supports static IP, DHCP, and DDNS. A pentaplex operation allows simultaneous live viewing, recording, playback, back-up and network controls.
The instruction manual states the following in relevant part:
The SG19LD804-161 offers a whole new level of security surveillance to the consumer market. Combining the latest word in LCD displays, Digital Video Recording and CCTV Camera design, the system does more than simply provide the sharpest video imaging (under any condition), large capacity video storage and unparalleled ease of system control – it’s also made to provide the longest trouble free service with an array of built-in diagnostics and commercial grade CCTV component design.
The system is imported packaged together for retail sale. It will not be
repackaged after importation.
In NY N012061, dated June 19 2007, U.S. Customs and Border Protection (“CBP”) classified the SG19LD804-161 security system under 8528.59.20, HTSUS, as “other color monitors.” In your request for reconsideration, dated November 2, 2007, you request classification under 8521.90.00, HTSUS, which provides for “Other video recording or reproducing apparatus.”
Whether the security surveillance system is classified in heading 8521, HTSUS, as an other video recording or reproducing apparatus or in heading 8528, HTSUS, as an other color monitor.
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRI). 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 GRI may then be applied.
The HTSUS provisions under consideration are as follows:
8521 Video recording or reproducing apparatus, whether or not incorporating a video tuner
8525 Transmission apparatus for radio-broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras, digital cameras and video camera recorders
8528 Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus
You argue that the security system is both a composite good, classifiable in accordance with Note 3 to Section XVI, HTSUS and a functional unit, classified in accordance with Note 4 to Section XVI, HTSUS. Note 3 to Section XVI, HTSUS, states the following:
Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed 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.
Note 4 to Section XVI, HTSUS, states as follows:
Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function.
This security system contains components that are classified in different headings: a DVR of heading 8521, HTSUS, fitted together with a monitor of heading 8528, HTSUS, and video cameras of heading 8525, HTSUS. To determine the classification of the security system, we must preliminarily determine the proper classification of the monitor with built-in DVR. You argue that the principal function of the video monitor with built-in DVR is video recording. In support of your position, you maintain that: (1) the product is designed and marketed as a “Combo DVR”; (2) the product is committed by design to video recording; (3) the LCD display is used to show video processed and recorded by DVR and is not intended for any other application; (4) video recording is the most important function of the unit for end-users and the primary reason consumers buy the system. The DVR allows review of previously recorded video, which is used as evidence by security personnel and enforcement agencies; (5) the DVR is the most complex and the most expensive component of the combined system. The cost of the DVR is more than double the cost of the LCD screen; and (6) other units support and enhance the product’s principal purpose of recording images received from the cameras and displayed on the screen. You also cite to decisions issued by the Canadian International Trade Tribunal which determined that the principal function of a DVR and composite multiplexer and recorder, respectively, were principally used for recording.
In examining the monitor with built-in DVR, we believe that the ability to view the cameras’ feed in the present time by use of the monitor contributes to its function as much as the ability to record these images and view them at a later time. As a result, we find that the principal function of this composite machine cannot be determined.
When the principal function of a composite machine cannot be determined, the EN to Section Note 3 for Section XVI, HTSUS, directs the application of GRI 3(c), under which the last heading of the HTSUS in numerical order is the one that prevails. Under application of GRI 3(c), the monitor with the built-in DVR, will be classified according to the monitor in heading 8528, HTSUS.
The security system consists of a video monitor with built-in DVR, 4 cameras with stands, 4 extension cables, a power adapter, a remote control, an Ethernet cable and hardware and software manuals and software CD. These components are not fitted together to form a whole. Rather, they are separately presented components which function together as a security surveillance system. As such, the security surveillance system does not meet the terms of Note 3 to Section XVI, HTSUS.
Likewise, the security 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.”
Insofar as the surveillance system consists of at least two different articles which are, prima facie, classifiable in different headings, it is classifiable in accordance with GRI 3. See GRI 2(b).
In NY N012061, we said that “the individual components [of the system] function in a cohesive, seamless manner to complete this task” of video surveillance. “It is the view of this office that no single component can be viewed as imparting the essential character of the set.” See NY N012061. This decision was in accordance with a long line of CBP’s prior rulings that examined similar security systems that all incorporated video monitors, a recording device, and security cameras. In each of these prior rulings, we found that no single component determined the system’s essential character, and, using GRI 3(c), classified the item under Heading 8528, because it was the last numerical heading. See, e.g., NYJ82325; NYH83230; NYH82259; NYA84308; HQ957992; HQ957743; HQ958082; HQ957722.
Likewise, in the present case, the security system combines multiple activities, allowing purchasers to conduct on-site or remote surveillance of their location while also recording the images that the system’s cameras capture. Neither the cameras nor the monitor can function independently of one another to achieve the surveillance function. As a result, both the cameras and the monitor contribute equally to the system’s function. Therefore, under GRI 3(c), this security system will be classified under heading 8528, HTSUS.
Under the authority of GRI 3(c), the SG19LD804-161 security system is provided for in heading 8528, HTSUS. More specifically, it is classified under subheading 8528.59.20, HTSUS, which provides for: “Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus:….”. The general, column one duty rate is 3.9%.
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 internet at www.usitc.gov/tata/hts/.
EFFECT ON OTHER RULINGS:
NY N012061, dated January 21, 2000, is AFFIRMED.
Myles B. Harmon, Director
Commercial and Trade Facilitation Division