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HQ 959853




April 8, 1997

CLA-2 RR:TC:MM 959853 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 8518.30.20, 8524.39.00

Mr. Joseph Paul Forget
Compliance Coordinator
Recoton
2950 Lake Emma Road
Lake Mary, FL 32746

RE: Internet "Phone"; Internet Explorer and Net Meeting CD-ROM Software for Automatic Data Processing (ADP) Machines; "Goods Put Up In Sets For Retail Sale"; HQ 956490

Dear Mr. Forget:

In a letter dated September 16, 1996, to the Customs National Commodity Specialists Division in New York, you requested the tariff classification of an Internet "phone" with CD-ROM software for a computer under the Harmonized Tariff Schedule of the United States (HTSUS). Your letter and an Internet "Phone" sample were referred to this office for a response.

FACTS:

The merchandise consists of a gift box packaged ready for retail sale, containing an Internet "Phone" SV-2030 and a Microsoft Internet Explorer and Net Meeting CD-ROM software, which are used with a computer. While the Internet "Phone" resembles a telephone, it is not designed to connect directly to the telephone network. It does not have a dialing selector, bell or buzzer. The handset contains a microphone and a speaker. The base contains a microphone, speaker, volume control, battery case, switch for handset, switch for "speaker phone" setting, and cable with two-pronged male jack connectors for use with a computer equipped with voice/sound capabilities. This equipment operates like other microphone and speaker equipment designed for multimedia computer applications. The Internet "Phone" enables the user to hold a microphone/speaker set to their ear and mouth to hold comfortable, audible conversations over the Internet. The actual Internet connection is made by means of the computer's modem. The Microsoft Internet Explorer and Net Meeting CD-ROM software allows the user to search for information on the Internet.

ISSUE:

Whether the Internet "Phone" and Internet Explorer CD-ROM software sold in a retail box are classified separately or as "goods put up in sets for retail sale" under the HTSUS?

LAW AND ANALYSIS:

Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRI's). GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes.

The subject merchandise consists of: an Internet "Phone" which is prima facie classifiable under heading 8518, HTSUS, as a combined microphone/speaker set; and, the Microsoft Internet CD-ROM software which is prima facie classifiable under heading 8524, HTSUS, as records tapes and other recorded media for sound or other similarly recorded phenomena. Because the merchandise is prima facie classifiable in more than one heading, we must apply the other GRI's.

GRI 3(a) provides in pertinent part: "[t]he 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 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."

Because the software and the phone fall under separate headings in the tariff schedule which describe only a portion of the subject merchandise, the headings are to be regarded as equally specific under GRI 3(a). Therefore, GRI 3(a) fails in establishing classification, and GRI 3(b) becomes applicable. GRI 3(b) provides that goods put up in sets for retail sale, shall be classified as if they consisted of the material or component which gives them their essential character.

The Harmonized Commodity Description and Coding System Explanatory Notes (EN) constitute the official interpretation of the HTSUS. While not legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 FR 35127, 35128 (August 23, 1989). EN X to GRI 3(b), page 4, provides as follows:

[f]or the purposes of this Rule, the term "goods put up in sets for retail sale" shall be taken to mean goods which:

(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).

According to EN X to GRI 3(b), a set must consist of at least two different articles. The subject merchandise meets the first criteria because it consists of software, and a combined microphone/speaker set which are prima facie classifiable in different headings. The subject merchandise also meets the third criteria of being put up in a manner suitable for sale directly to users, because it is packaged in a box ready for retail sale.

The only issue remaining is whether the articles meet the second criteria of being put up together to meet a particular need or carry out a specific activity. In HQ 956490, dated August 19, 1994, Customs determined the classification of a Microsoft "Mouse & Windows" retail set entered in a sealed plastic wrap retail box, containing Microsoft "Windows 3.1" operating system computer software on 3.5 inch disks, a digitizer unit (commonly known as a computer "Mouse"), port adapters, instruction software, instruction manuals, advertising material, and warranty manuals. Because the Mouse is needed to use "Windows 3.1", Customs held that these articles are put up together to carry out the specific activity of utilizing the software operating system. The "Mouse & Windows" was found to be a retail set because it meets all three criteria as set forth above. Customs further determined that the essential character of the subject retail set was imparted by the software program because the reason the end-user purchases the set was for the ability to utilize the Microsoft "Windows 3.1" operating software program.

Based upon the limited information provided, we find that the Internet "Phone" and the Internet Explorer software are not put up together to meet a particular need or carry out a specific activity. The user can search the Internet for information using the software without using the Internet "Phone". According to our information, the Internet "Phone" operates like any other microphone and speaker equipment designed for multimedia computer applications. These multimedia applications do not require access to the Internet. Without further evidence to prove the contrary, we conclude that each article can be used independently of the other and therefore the subject merchandise cannot be classified as "goods put up in sets for retail sale". Unless evidence can be presented at the time of entry that supports a claim of "put up together to meet a particular need or carry out a specific activity", each article must be classified separately.

The Internet "Phone" is classifiable under subheading 8518.30.20, HTSUS, which provides for: "[m]icrophones and stands therefor; . . . ; headphones, earphones and combined microphone/speaker sets . . . : [h]eadphones, earphones and combined microphone/speaker sets: [o]ther. . . ." According to the information provided, the subject merchandise is a CD-ROM disc for a computer laser reading system which creates sound and image phenomena on the user's computer screen and speakers. Based upon these facts, we find that the CD-ROM software is classifiable under subheading 8524.39.00, HTSUS, which provides for: "[r]ecords, tapes and other recorded media for sound or other similarly recorded phenomena. . . : [d]iscs for laser reading systems: [o]ther. . . ."

HOLDING:

The Internet "Phone" is classifiable under subheading 8518.30.20, HTSUS, which provides for: "[m]icrophones and stands therefor; . . . ; headphones, earphones and combined microphone/speaker sets . . . : [h]eadphones, earphones and combined microphone/speaker sets: [o]ther. . . ." The general, column one rate of duty is 4.9 percent ad valorem.

The Internet Explorer software, is classifiable under subheading 8524.39.00, HTSUS, which provides for: "[r]ecords, tapes and other recorded media for sound or other similarly recorded phenomena. . . : [d]iscs for laser reading systems: [o]ther. . . ." The general, column one rate of duty is 3.7 percent ad valorem.

Sincerely,

John Durant, Director
Tariff Classification Appeals Division

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