Mr. Steven B. Zisser
Zisser Customs Law Group
2297 Niels Bohr Court, Ste. 114
San Diego, CA 92154
RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA) of a screened television receiver from Mexico; Article 509.
Dear Mr. Zisser:
In your letter dated June 18, 2008, on behalf of Hitachi Home Electronics America, Inc., you requested a ruling on the status of an LCD monitor with a set top box from Mexico under the NAFTA.
The subject merchandise, based on the submitted information, is an ultra-thin LCD monitor, which is stated to be configured with a 32-inch, 37-inch, 42-inch, or 47-inch screen diagonal, that will be packaged with a set top box functioning as a non-screened television receiver.
This multimedia monitor does not contain a tuner and does not incorporate any video recording or reproducing apparatus. It is assembled in Mexico from both originating and non-originating components, which are noted to be from China, Mexico, Japan, United States and Taiwan.
The set top box, which does not have a communication function for tariff classification purposes, is equipped with a digital television tuner, but does not incorporate any video recording or reproducing apparatus. This set top box, having the ability to be connected to all external devices, such as antennas, cable, VCR, DVD, et cetera, can be connected to any type of LCD monitor by a single HDMI cable connection in noting that this combination then serves to function as a screened television receiver.
The set top box, which is fully produced and manufactured in Korea, will be shipped to Mexico, where it will be packaged with the LCD monitor, including the following: an HDMI cable, a power cord, an adapter, a remote control, batteries, an instruction manual, and a warranty card. When packaged together this merchandise, at the time of importation, will be considered suitable for sale directly to the user without repacking.
When packaged and imported together, the issue is whether each device will be classified separately for preferential treatment under the North American Free Trade Agreement. In this regard, legal note 4 to section XVI reads: “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 85, then the whole falls to be classified in the heading appropriate to that function.” Pursuant to this legal note, we are directed to make a determination as to whether these machines can operate as a functional unit.
It is stated that the subject LCD monitor and set top box can function separately and independently from each other as well as operating with other independent devices. Therefore, when packaged together, it is further stated that there is no single-defined function covered by an appropriate heading in either chapter 84 or 85 for determining that this merchandise is a functional unit.
Although each machine can operate separately from each other, it is the opinion of this office that the LCD monitor and set top box, when packaged together, do contribute to the clearly defined function of operating as a screened television receiver, which is covered under heading 8528, Harmonized Tariff Schedule of the United States (HTSUS), in chapter 85; and therefore this office considers these machines to operate together as a functional unit.
The applicable subheading for the LCD monitor with set top box will be 8528.72.7250, Harmonized Tariff Schedule of the United States (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: Reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus: Other, color: With a flat panel screen: Other: Other: LCD-type (direct view)." The general duty rate will be 5 percent ad valorem.
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 World Wide Web at http://www.usitc.gov/tata/hts/.
In regard to the NAFTA, the rules of origin provisions for United States free trade agreements, other than those for the United States-Australia Free Trade Agreement, the United States-Singapore Free Trade Agreement and the United States-Chile Free Trade Agreement, have not been updated to reflect changes to the tariff schedule resulting from Presidential Proclamation 8097, which modified the HTS to reflect World Customs Organization changes to the Harmonized Commodity Description and Coding System. You will therefore see tariff heading/subheading numbers in the pertinent general notes which do not correspond to numbers in chapters 1 through 97 or to other portions of the same general notes.
Accordingly, because the NAFTA rules of origin have not been updated to reflect the 2007 changes to the Harmonized System, the pre-2007 classifications for the goods at issue must be used in order to ascertain their correct rule of origin under NAFTA.
General Note 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the NAFTA. General Note 12(b), HTSUS, (19 U.S.C. § 1202) states, in pertinent part, that
For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if--
(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that--
(A) 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 subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials.
Since this merchandise has been neither wholly obtained or produced entirely in the territory of a NAFTA country nor produced entirely in the territory of a NAFTA country exclusively from originating materials, the change in tariff classification rules must be reviewed.
In reference to this matter, chapter rule 6 to chapter 85 of General Note 12(t) reads: “The origin of a television combination unit shall be determined in accordance with the rule that would be applicable to such unit if it were solely a television receiver.” Pursuant to the above chapter rule, this merchandise, which is considered to be a functional unit with the clearly defined function of being a screened television receiver, is classifiable under subheading 8528.72, HTSUS, which correlates with subheading 8528.12, HTSUS (pre-2007).
Further, the applicable tariff shift rule, General Note 12(t) 85.92 reads: “A change to subheading 8528.12 from tariff items 8528.12.04 or 8528.12.08 or any other heading.” By application of this NAFTA note, there is no change in tariff classification. The non-originating set top box produced in Korea, operating together with the LCD monitor as a screened television receiver and classified in subheading 8528.12 (pre-2007), never underwent the change in tariff classification required under this rule, i.e., from incomplete or unfinished receivers (tariff items 8528.12.04 and 8528.12.08) or from materials classified in a heading other than 8528.12. The processing of the non-originating set top box does not meet the applicable NAFTA rule of origin, and therefore, the screened television receiver will not benefit from preferential tariff treatment under the NAFTA.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Lisa Cariello at 646-733-3014.
Robert B. Swierupski