CLA-2 OT:RR:CTF:TCM H310305 EKR
Center Director, Electronics Center of Excellence and Expertise
U.S. Customs and Border Protection
Los Angeles Service Port
301 E. Ocean Blvd.
Long Beach, CA 90802
ATTN: Christopher M. Roenbeck
RE: Application for Further Review of Protest No. 5301-19-101449; Classification of surveillance kits
Dear Center Director:
This is in response to the Application for Further Review (“AFR”) of Protest 5301-19-101449, dated November 27, 2019, filed by Sandler, Travis & Rosenberg, P.A. on behalf of Dahua Technology USA, Inc. (“Dahua”), in response to your classification of three models of surveillance kits (“the surveillance kits”) under the Harmonized Tariff Schedule of the United States (“HTSUS”). The surveillance kits were entered on February 27, 2019 and liquidated on May 31, 2019. In reaching the determination below, we have considered information presented in Dahua’s November 27, 2019 protest filing.
FACTS:
Dahua’s protest concerns two “Network Video Recorder Kits” (Item Nos. N444E42 and N484E62) and one “Digital Video Recorder Kit” (Item No. C542E42). According to Dahua’s product descriptions, Item Nos. N444E42 and N484E62 are Network Security Systems consisting of a network video recorder and four or six network cameras, respectively. Each four megapixel (“MP”) eyeball camera has a 2.8 mm fixed lens, infrared light-emitting diode (“LED”) technology to capture images in low light, and an “Intelligent Video System” that allows the camera to monitor for intrusions, abandoned objects, and tampering. The network video recorder contains an embedded quad-core processor, up to 8 MP resolution for preview and playback, and “plug and play” technology allowing the user to connect multiple cameras on the same network. The network video recorder incorporates motion-detection algorithms, alarm triggers, and customizable recording functions, allowing the user to program the recorder as desired. Both the cameras and the network video recorder conform to the “Open Network Video Interface Forum” specification to ensure interoperability between network video products, regardless of manufacturer.
Dahua’s Digital Video Recorder Kit (Item No. C542E42) contains four 1080p High Definition Composite Video Interface (“HDCVI”) eyeball cameras and one 4-channel 1080p HDCVI digital video recorder. The 1080p cameras offer full HD 1080p video, but are designed to accommodate multiple video formats, to ensure compatibility with lower resolution video recorders. Like the cameras included in the network surveillance kits above, each 1080p eyeball camera has a 2.8 mm fixed lens and infrared LED technology to capture images in low light. The digital video recorder contains an embedded processor, and is likewise designed to be compatible with both HDCVI and HD/SD network cameras. Like the network video recorder, the digital video recorder incorporates motion-detection algorithms, alarm triggers, and customizable recording functions, allowing the user to program the recorder as desired.
Though the specifications of the components vary, all three surveillance kits are comprised of one video recorder and four to six cameras, with accompanying auxiliary items like cables and user guides. Dahua’s protest states that the surveillance kits are imported and sold as “’bundles’ directly to the consumer without repacking.” (Dahua’s Arguments in Support of Protest, p.3). The cameras capture images in real time, and transmit the images to their respective video recorders. None of the cameras are themselves capable of recording or storing captured images.
At entry, Dahua classified all three surveillance kits pursuant to General Rule of Interpretation ("GRI") 3(b) as goods put up in sets for retail sale with the essential character imparted by the video recorder of subheading 8521.90.0000, HTSUS, which provides for video recording or reproducing apparatus. On May 21, 2019, CBP issued a Notice of Action, reclassifying the surveillance kits in subheading 8525.80.30, HTSUS, which provides in pertinent part, for television type cameras. CBP liquidated the entries under subheading 8525.80.30, HTSUS, on May 31, 2019.
ISSUE:
Whether the surveillance kits are classified in heading 8521, HTSUS, as “[v]ideo recording or reproducing apparatus…” or in heading 8525, HTSUS, as “… television cameras, digital cameras and video camera recorders….”
LAW AND ANALYSIS:
Initially, we note that the matters protested are protestable under 19 U.S.C. §1514(a)(2) as decisions on classification. The protest was timely filed, within 180 days of liquidation of the first entry. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2) (B) (ii), (iii) (codified as amended at 19 U.S.C. § 1514(c) (3) (2006)). Further Review of Protest No. 5301-19-101449 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(c) because the decision against which the protest was filed is alleged to involve questions of law or fact not previously considered in previous rulings issued by CBP
Classification under the HTSUS is determined 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 2 through 6 may then be applied in order. The 2019 HTSUS provisions under consideration are as follows:
8521 Video recording or reproducing apparatus, whether or not incorporating a video tuner:
8521.90.00 Other.
* * * * *
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:
8525.80 Television cameras, digital cameras and video camera recorders:
Television cameras:
8525.80.30 Other.
GRI 3 provides as follows:
When, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a) 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 materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b) 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.
(c) When 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.
In addition, in interpreting the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89 80, 54 Fed. Reg. 35127 (August 23, 1989). Paragraph (VII) of the ENs to GRI 3(b) states that, “[i]n all these cases the goods are to be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.” Paragraph (VIII) of the ENs to GRI 3(b) states that “[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 a constituent material in relation to the use of the goods.” Furthermore, paragraph (X) of the ENs to GRI 3 states that:
For the purposes of this Rule, the term “goods put up in sets for retail sale” shall be taken to mean goods which:
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;
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 end users without repacking (e.g., in boxes or cases or on boards).
CBP and Dahua agree that the cameras are properly classified as television cameras of heading 8525, HTSUS, and the video recorders are properly classified as video recording apparatus of heading 8521, HTSUS. Because the surveillance kits are comprised of at least two different articles which are, prima facie, classifiable in two different headings, the kits are classified in accordance with GRI 3.
CBP and Dahua likewise agree that the surveillance kits are goods put up in sets for retail sale, as described in paragraph (X) of the ENs to GRI 3. The surveillance kits consist of at least two different articles, the cameras and the video recorders, which are, prima facie, classifiable in different headings. The surveillance kits consist of articles put up together to carry out a specific activity, namely surveillance. Lastly, the surveillance kits are put up in a manner suitable for sale directly to end users without repacking. As a result, headings 8521, HTSUS, and 8525, HTSUS each refer to part only of the set as a whole, and therefore, pursuant to GRI 3(a), we regard these headings as equally specific in relation to the surveillance kits.
Dahua contends that the surveillance kits should be classified pursuant to GRI 3(b) in heading 8521, HTSUS, because the video recorders impart the essential character of the sets. Paragraph (VII) of the ENs to GRI 3 notes that “[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 a constituent material in relation to the use of the goods.” Dahua asserts that the video recorders impart the essential character of the sets because of the enhanced “smart” features of the video recorders at issue. Dahua argues that the cameras are not operable without the video recorder, pointing out that the cameras have no internal storage capacity that would allow a user to review images without the intermediary video recorder. By contrast, Dahua notes that the video recorder captures the images from the cameras, and can be connected to a monitor or other platform for viewing. Dahua further argues that the features of the video recorders, including motion detection algorithms and customized recording modes, make the video recorders the “brains” of the system, and would drive consumer purchasing decisions when considering surveillance systems. Lastly, Dahua argues that the video recorders carry a higher unit price than the cameras, and that this indicates the primary importance of the video recorders in the instant surveillance kits. Taken together, Dahua concludes that the features of the video recorders establish that the video recorders impart the essential character of the surveillance kits at issue.
Furthermore, Dahua asserts that prior CBP rulings on surveillance kits are not instructive in the instant case, because those rulings did not consider video recorders with the “smart” features of Dahua’s video recorders. CBP has issued numerous rulings classifying surveillance systems imported as sets, dating back to 1995. Many of these rulings classify systems incorporating both cameras and recorders, including both the ruling referenced by Dahua in their protest and the ruling cited by the CEE in their denial of the protest. See, e.g. NY N183597 (dated October 4, 2011); NY N121877 (dated September 22, 2010); NY N096239 (dated March 11, 2010); HQ H020455 (dated March 2, 2010); NY N078845 (dated November 3, 2009); NY N012061 (dated June 19, 2007); NY H88556 (dated February 20, 2002); and NY H83230 (dated July 17, 2001). In all of these rulings, CBP has classified the merchandise as a set. In all but one of these rulings, CBP has determined that no one component of the set imparts essential character, and has ultimately applied GRI 3(c) to classify the merchandise in the heading appearing last in numerical order amongst those meriting consideration.
Despite Dahua claim that the instant video recorder is more technologically advanced than the video recorders at issue in the aforementioned rulings, we find the past CBP rulings to be instructive in this case. That the instant video recorders include some “smart” features does not make them any less reliant on the cameras to accomplish their inherent recording function for the purposes of operating within the surveillance system. In other words, the cameras and video recorders in Dahua’s surveillance kits are equally important to the function of the kit, which is surveillance. Without the cameras, the video recorders would have no video on which to run a motion detection algorithm and no images to record. Without the video recorders, the user would be unable to review the images captured by the cameras. Both the cameras and the video recorders are needed to achieve the surveillance function of the kit as a whole. As a result, neither the cameras nor the video recorder, taken alone, can impart the essential character of the kit. Therefore, the subject surveillance kits are classified pursuant to GRI 3(c), in the heading which occurs last in numerical order among those under consideration. In this instance, that is the heading applicable to the cameras, heading 8525, HTSUS.
HOLDING:
By application of GRIs 1, 3(c), and 6, the subject kits are classified under heading 8525, HTSUS, specifically in subheading 8525.80.30, which provides for: "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: Television cameras, digital cameras and video camera recorders: Television cameras: Other.” The 2019, column one, general rate of duty for subheading 8525.80.30, HTSUS is 0.5 percent ad valorem.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8525.80.30, HTSUS, unless specifically excluded, are subject to an additional 10 percent ad valorem rate of duty. At the time of importation, the importer must report the Chapter 99 subheading, i.e., 9903.88.03, in addition to subheading 8525.80.30, HTSUS, listed above.
The HTSUS is subject to periodic amendment so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading. For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/trade/remedies/301-certain-products-china respectively.
You are instructed to DENY the protest.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Sixty days from the date of the decision, the Office International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP Home Page at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
for Craig T. Clark, Director
Commercial and Trade Facilitation Division