Classification of a Password Journal

HQ H006321 October 28, 2009 CLA-2 OT:RR:CTF:TCM H006321 IOR CATEGORY: Classification TARIFF NO: 9503.00.00 HTSUS Mr. S. Richard Shostak, Esq. Mr. Bruce Shulman, Esq Ms. Mandy Edwards, Esq. Stein Shostak Shostak Pollack & O’Hara, LLP 865 South Figueroa St, Suite 1388 Los Angeles, CA 90017 RE: Classification of a Password Journal Dear Messrs. Shostak and Shulman, and Ms. Edwards: This is in response to a submission of December 19, 2006, on behalf of Radica USA, Ltd., (subsequently acquired by Mattel, Inc.) to U.S. Customs and Border Protection (CBP) National Commodity Specialist Division (NCSD), requesting a classification ruling, for a “Password Journal”, under the Harmonized Tariff Schedule of the United States (HTSUS). Your letter was referred to this office for reply. Subsequently, we have received your submissions on behalf of Mattel, Inc., dated May 23, 2007, June 5, 2007, August 13, 2007, and October 9, 2007. A sample of the “Password Journal” has been provided for our examination, and is being returned, under separate cover, in accordance with the request in the original submission. FACTS: The “Password Journal”, Model No. 77006, is an electronic, voice command-operated, locking device. It consists of a plastic case that contains a notepad and an invisible ink pen. The plastic case incorporates two electronically-operated hinged doors. The case, when closed, is approximately 7 and ½ inches long by 7 and ½ inches wide, and 1 and ½ inches thick. The outside of the case has a built-in speaker, microphone and an activation button featuring a green, light-emitting diode (LED). The doors electronically unlock and open outward, giving access to the interior of the plastic case. The inside of the case contains an unlined 25 page notepad measuring approximately 6 inches long and 3 and ½ inches wide, a permanently attached lamp, and an invisible ink pen. The lamp contains two light sources – an ordinary light bulb and an ultraviolet LED. The ultraviolet LED is used to illuminate the invisible ink of the pen. The notepad is attached to the interior by adhesive but is easily removed. Molded into the interior is an open tray and a compartment with a snap-shut door. The open tray is approximately 1 and 1/2 inches wide, 6 inches long, and ¾ inches deep. The compartment with a lid is approximately 5 and ¾ inches long, ¾ inches deep, and 2 and 3/8 inches wide, and has a plastic tab that can be inserted into preformed slots and used to divide the compartment into two separate openings. The plastic case requires three AAA batteries to operate. The plastic case itself is purple with one pink hinged door with a “girl tech” logo and one purple hinged door printed with blue and red graphics. The plastic case uses voice commands to operate. The case is designed to unlock and open only when the user speaks a password of their choosing into the built-in microphone. As the instructions state, “[o]nce inside, you can activate the show & glow light, alarm, calendar and more simply by talking to Password Journal.” The unit’s built-in speaker gives prompts and other feedback to the user for setting or changing the password and setting the calendar and clock. The plastic case also incorporates an intruder alarm that activates when an attempt is made to open the case without the password being spoken by the user. The plastic case and its contents are packaged in a window box with an instruction manual. The packaging for the “Password Journal” indicates that it is for “ages 6 and up”, and has the printed phrases “privacy inside and out”, “double secrecy with magic pen and glow light”, “your password please”, “automatically opens with voice recognition,” and “write and reveal your thoughts and dreams.” Based on our examination of the “Password Journal” and reviews and comments on the article, submitted in Exhibits F and G to the October 9, 2007 submission, it is clear that the article does not provide any “real” security to its contents. It can be opened easily after changing the batteries or setting the reset button in the battery compartment. You assert that Radica advertises the “Password Journal” as a toy and that it is only sold in toy stores and toy departments of mass merchandisers. You have provided a DVD of a commercial which shows a young girl in hand-drawn cartoon-like settings using her “Password Journal” and fending off her younger brother from access to her “secrets”. You have also provided an internet page showing that at the time the “Password Journal” was one of the “Top 5 Most Popular Toys.” The ruling request included a copy of a bill of materials and cost information with regard to the “Password Journal.” ISSUE: Whether the “Password Journal” is classified in heading 4820, HTSUS as a notebook, diary or similar article or heading 9803, HTSUS, as a toy. LAW AND ANALYSIS: Merchandise is classifiable under the HTSUS in accordance with the General Rules of Interpretation (GRIs). The systematic detail of the HTSUS is such that most goods are classified by application of GRI 1, that is, 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 2009, HTSUS headings at issue are: Registers, account books, notebooks, order books, receipt books, letter pads, memorandum pads, diaries and similar articles, exercise books, blotting pads, binders (looseleaf or other), folders, file covers, manifold business forms, interleaved carbon sets and other articles of stationery of paper or paperboard; albums for samples or for collections and book covers (including cover boards and book jackets) of paper or paperboard: Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls, other toys; reduced scale (“scale”) models and similar recreational models, working or not; puzzles of all kinds; parts and accessories thereof………………… In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). The General EN for Chapter 95 states that the "Chapter covers toys of all kinds whether designed for the amusement of children or adults." You propose classification of the “Password Journal” as a toy of heading 9503, HTSUS, or in the alternative, under heading 4820, HTSUS, which provides for “[r]egisters, account books, notebooks, order books, receipt books, letter pads, memorandum pads, diaries and similar articles…and other articles of stationery, of paper or paperboard”.The term "toy" is not defined in the HTSUS. The U.S. Court of International Trade (CIT) construes heading 9503, HTSUS, as a "principal use" provision, insofar as it pertains to "toys." See Minnetonka Brands v. United States, 110 F. Supp. 2d 1020, 1026 (CIT 2000). Thus, to be a toy, the "character of amusement involved [is] that derived from an item which is essentially a plaything." Wilson's Customs Clearance, Inc. v. United States, 59 Cust. Ct. 36, C.D. 3061 (1967). In the tariff context, "amuse" is mainly used in contrast to some utilitarian or functional quality and the focus is not how the toys are used, but whether they are designed to amuse. It has been CBP’s position that the "amusement" requirement means that a toy should be designed and used principally for amusement and should not serve a utilitarian purpose. See HQ 963638, dated November 2, 2001. For articles governed by principal use, Additional U.S. Rule of Interpretation 1(a), HTSUS, provides that, in the absence of special language or context which otherwise requires, such use "is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use." In other words, the article's principal use at the time of importation determines whether it is classifiable within a particular class or kind. While Additional U.S. Rule of Interpretation 1(a), HTSUS, provides general criteria for discerning the principal use of an article, it does not provide specific criteria for individual tariff provisions. However, the CIT has provided factors which are indicative but not conclusive, to apply when determining whether merchandise falls within a particular class or kind. They include: general physical characteristics, 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. See United States v. Carborundum Company, 63 CCPA 98, C.A.D. 1172, 536 F. 2d 373 (1976), cert. denied, 429 U.S. 979 (hereinafter Carborundum). The plastic case has the utilitarian features of the electronic security, lighting, calendar and clock. For articles that are both amusing and functional, we look to Ideal Toy Corp. v United States, 78 Cust. Ct. 28 (1977), in which the court stated that "when amusement and utility become locked in controversy, the question becomes one of determining whether amusement is incidental to the utilitarian purpose, or whether the utility purpose is incidental to the amusement." We find these utilitarian features are incidental to amusement provided by the article to young girls. In particular, what appears to be the key feature of the item, the security, is minimally functional. The security provided by the article can be easily countermanded. Any actual reliance on the calendar and clock would be subsidiary to the amusement provided by pretending to have a secret “locked” case, and interacting with the voice commands. For purposes of determining whether the “Password Journal” falls within the class or kind of merchandise as toys, we apply the Carborundum factors as follows: The general physical characteristics of the article is a plastic case with the appearance of a toy, due to the colorful nature of the article and its packaging which refers to, for example, “double secrecy” and “magic pen”. The expectation of the ultimate purchaser is to use the article as an interactive means of maintaining perceived privacy and secrecy for writing and keeping notes and keeping other small items. The channels of trade consist of toy stores, toy departments of mass merchandisers, and the toy sections of internet websites. Information on the environment of sale (accompanying accessories, manner of advertisement and display) includes the facts that it is advertised as a toy by the fantasy like commercial, is sold in toy stores and toy departments and sections in larger retail stores and on internet websites, and is referred to as a toy on an internet shopping site. The use is for amusement, by means of the interactive voice commands with the article, and pretending to have a secret place for writing, keeping notes and other small items. The economic practicality of using the article as anything but a toy is clear. It is unlikely that use as a diary or as a secure electronic device is recognized by the trade. The foregoing application of the Carborundum criteria indicates that the “Password Journal” is a good of a kind designed for amusement, and therefore its principal use is for amusement, and it is classified in heading 9503, HTSUS. The plastic case is substantially similar to a “Spy Notebook” which was classified as a toy of heading 9503, HTSUS, by New York Ruling (NY) G81263, dated September 22, 2000. That article was described as follows: The “notebook” is a handheld, battery operated, plastic gadget that opens via a combination lock device. Once inside, the item reveals a tiny notepad of 50 sheets (1 ½” X 2”) and a miniature light incorporated within the flip up lid. A secret compartment is located on either side of the item which holds a tiny pencil and fake implements that have been hollowed out to accommodate secret messages. Included in these, are an imitation pencil sharpener, eraser, and simulated coins. The child can write a secret note, place it inside one of the “coins” or “eraser” and pass it, undetected, to a friend. The set is imported in a window box that indicates use for ages 6 and up. We note that in NY E88836, dated December 1, 1999, issued to another importer, a “Password Journal” was classified in heading 8543, HTSUS, as “electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter.” In that decision the article was described as a “secret locking journal”: It consists of a battery operated security case that contains a notebook and pencil. The security case contains a recording device and the user records a password that serves as the security feature. Access to the notebook within can only be gained by repetition of the password by the individual that originally recorded it. Although the name of the article is the same, without additional description or documentation regarding the article we have no basis to apply the decision in that ruling to the instant facts. The records with respect to NY E88836 were lost in the September 11, 2001 destruction of the World Trade Center. Therefore we are not bound to follow that ruling in this instance. We find the plastic case of the “Password Journal” to be a toy classifiable under 9503, HTSUS. As stated above, GRI 3(a) provides that “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.” GRI 3(b) provides that goods put up in sets for retail sale shall be classified as if consisting of the material or component which gives them their essential character, insofar as this criterion is applicable. EN (X) to GRI 3(b), states that for purposes of Rule 3(b) the term “goods put up in sets for retail sale” means goods which: (a) consist of at least two different articles which are, prima facie, classifiable in different headings; (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). The subject merchandise consists of an invisible ink pen, an electronic plastic container, and a notepad. The items are prima facie classifiable in more than two different headings (plastic case – 9503, HTSUS, and notepad – 4820, HTSUS). The items are packaged together, and consist of articles put up together to carry out the specific activity of amusement. The articles are put up in a manner suitable for sale directly to users without repacking. Therefore the “Password Journal” is within the term “goods put up in sets for retail sale.” GRI 3(b) states in part that goods put up in sets for retail sale, which cannot be classified by reference to 3(a), are to be classified as if they consisted of the component which gives them their essential character. The factor or factors which determine essential character will vary with the goods. EN Rule 3(b)(VIII) lists as factors the nature of the material or component, their bulk, quantity, weight or value, and the role of a constituent material in relation to the use of the goods. The set derives its essential character from the electronic plastic case as this is the dominant component by use in relation to the other constituent components. In addition, the bulk of the set constitutes the electronic plastic container, and based on the bill of materials the value of either the notepad or the pen are exceeded by the value of the components of the electronic plastic case. Accordingly, pursuant to GRI 3(b), the “Password Journal” set is properly classified under heading 9503, HTSUS, the classification for the electronic plastic case, which provides the essential character to the set. Based on the foregoing we find that the “Password Journal” is correctly classified under GRI 3(b) as a toy of heading 9503, HTSUS, specifically in subheading 9503.00.00, HTSUS. As we conclude that the “Password Journal” is classified in heading 9503, HTSUS, we do not reach your alternative argument of classification in heading 4820, HTSUS. HOLDING: By application of GRI 3(b), the “Password Journal” is classified in heading 9503, HTSUS, specifically in subheading 9503.00.0080, HTSUSA, as “[t]ricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls, other toys; reduced scale (“scale”) models and similar recreational models, working or not; puzzles of all kinds; parts and accessories thereof…Other” with a column one, general duty rate of “Free”. 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.usits.gov/tata/hts/. Sincerely, Gail A. Hamill, Chief Tariff Classification and Marking Branch