Revocation of NY R04381, R04507, R04505; JVC Everio multifunction digital cameras

HQ H046643 May 10, 2010 CLA-2 OT:RR:CTF:TCM H046643 HkP CATEGORY: Classification TARIFF NO.: 8525.80.50 Mr. Dennis Forhart, Director Price Waterhouse Coopers 1420 Fifth Avenue, Suite 1900 Seattle, WA 98101 RE: Revocation of NY R04381, R04507, R04505; JVC Everio multifunction digital cameras Dear Mr. Forhart: This is in reference to New York Ruling Letters (NY) R04381 (July 21, 2006), R04507 (Aug. 15, 2006), and R04505 (Aug. 15, 2006) issued to you on behalf of your client, JVC Corporation. At issue in those rulings was the tariff classification of JVC Everio cameras, model GZ-MC500US, GZ-MG30US, and GZ-MG20US, respectively, under the Harmonized Tariff Schedule of the United States (HTSUS). The National Commodity Specialist Division, U.S. Customs and Border Protection (“CBP”), classified the cameras in subheading 8525.40.40, HTSUS (2006), as digital still image video cameras. For the reasons set forth in this ruling, we are of the view that the correct classification is under subheading 8525.80.50, HTSUS (2009), as “other” than digital still image cameras or television cameras and hereby revoke NY R04381, NY R04507, and NY R04505. Pursuant to section 625(c), Tariff Act of 1930 (19 U.S.C. §1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), notice of the proposed revocations was published on February 10, 2010, in the Customs Bulletin, Vol. 44, No. 7. One comment was received from JVC in response to this notice opposing the proposed action. FACTS: In NY R04381, the JVC Everio camera (model GZ-MC500US) was described as follows: The item in question is a digital camera denoted as the Everio Camera model number GZMC500US. The camera capture and store [sic] up to 9,999 digital still images and up to sixty minutes of video. It employs 3 CCDs combined with advanced 5-mega-pixel shift technology. The camera can be connected to a PC and or [sic] television/monitor for viewing of images. The thousands of still images are stored as JPEG files and can also be directly connected to a printer for image reproduction. In addition, this camera has the following features: 200x digital zoom, MPEG-2 digital video format; minimum shutter speed of ½ sec.; maximum shutter speed of 1/4000 sec.; custom, preset and automatic white balance, program, automatic, shutter-priority and aperture-priority exposure modes; pop-up flash; several flash modes; removable 4GB microdrive; storage for 2650 x 1920, 2048 x 1536, 1600 x 1200, 1280 x 960, and 640 x 480 JPEG images; a microphone; USB, composite video/audio output, S-video output connectors, and headphone and DC power input connectors. See http://cnet.com, JVC Everio GZ-MC500, Specifications. In NY R04507, the JVC Everio camera (model GZ-MG30US) was described as follows: The subject merchandise is a digital camera … It is stated that this camera can capture and store nearly 10,000 digital still images to an internal 30GB hard disk drive with the capability for recording seven hours of DVD-quality video. This camera, which has a 2 ½ inch LCD screen for easy viewing of still images, allows for five different modes (from sport to portrait settings) to capture optimal quality still photos; there is also a choice of four recording modes that allows the user to choose between more shooting time or higher quality. This camera can be connected to a television for viewing, a VCR/DVD recorder for recording onto a video tape or DVD, a printer to print still image photos, a computer for data transfer, or JVC’s Everio Share Station which allows the user to burn images directly onto a DVD. It is also stated that all of the digital camera’s capabilities are advertised equally on the good’s packaging. In addition this camera has the following features: 800x digital zoom; 8.0 megapixels; progressive scan; CCD optical sensor; NTSC and PAL analog video format and MPEG-2 digital video format; minimum/maximum shutter speeds of ½ sec/ 1/4000 sec; ½ sec camcorder slow shutter modes; storage for 640 x 480 JPEG images; 25 x optical zoom; 2.2 – 55 mm focal length equivalent to a 35 mm camera; built-in microphone; USB, composite video/audio output, S-video output connectors, and headphone and DC power input connectors. See http://cnet.com, JVC Everio GZ-MG30U, Specifications. In NY R04505, Everio model GZ-MG20US was described as having the same features as the GZ-MG30US, except that the GZ-MG20US had an internal 20 GB hard disk drive with the capacity for recording nearly 4 ½ hours of DVD movie-quality video, and 6.8 megapixels. See also http://cnet.com, JVC Everio GZ-MG20U, Specifications. ISSUE: Do the JVC multifunction digital cameras, models GZ-MC500US, GZ-MG30US and GZ-MG20US, principally function as digital still image video cameras of subheading 8525.80.40, HTSUS? LAW AND ANALYSIS: Classification under the HTSUS is made in accordance with the General Rules of Interpretation. 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 require otherwise, the remaining GRIs may then be applied. The 2009 HTSUS provisions under consideration are as follows: 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: 8525.80.4000 Digital still image video cameras …. 8525.80.50 Other …. Note 3 to Section XVI, HTSUS, in which heading 8525 is located, provides as follows: 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. There is no dispute that the multifunction cameras are correctly classified in heading 8525 (8525.80), HTSUS, (2009) because that heading provides for both digital cameras and video camera recorders and the cameras at issue function as both. At issue is the proper eight digit national tariff rate. Accordingly, GRI 6 is implicated. GRI 6 provides that the classification of goods in the subheading of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to GRI 1 through 5, on the understanding that only subheadings at the same level are comparable. Relative section, chapter and subchapter notes also apply, unless the context otherwise requires. You contend that “Digital cameras … are commonly defined as, ‘a camera that stores images digitally rather than recording them onto film.’” You also state that “cameras that have been historically referred to as camcorders” are not digital machines and that, consequently, digital machines that can record video and capture still images cannot be classified outside of subheading 8525.80.40, HTSUS. In the comment submitted on behalf of JVC, counsel states that CBP’s interpretation of the phrase “digital still image video camera” is not supported by the plain meaning of the text. Specifically, counsel argues that the Everio product line is provided for by name as “digital still image video cameras” in subheading 8525.80.40, HTSUS. Counsel states that each word in this provision directly addresses the product line. As such, counsel argues that a reasonable person would conclude that the wording itself could and should be taken at its face value and applied as such. Subheading 8525.80.40, HTSUS (2009) provides for “Digital still image video cameras”. This phrase is not defined in the HTSUS or in the Explanatory Notes to heading 8525, HTSUS. When a tariff term is not defined in the HTSUS, we may look to its legislative history or, failing that, to its common and commercial meaning. See, for e.g., Rocknel Fastener, Inc. v. United States, 267 F.3d 1354, 1356 (Fed. Cir. 2001). In this instance, because this provision is directly derived from text that was incorporated into the Harmonized System (HS) and, consequently, into the HTSUS in 1996, we seek guidance from its international legislative history. Our research has revealed that the phrase “still image video camera” is a term of art, of which the term “digital” is a qualifier. When the phrase “still image video camera” was first introduced into the Harmonized System in 1996 in heading 8525 (8525.40), the Explanatory Note (EN) to heading 8525 explained that “[t]hese apparatus record images taken by the camera.… The images thus recorded can be reproduced by means of an external television receiver.” EN 85.25(D) (1996). According to the WCO file on the creation of subheading 8525.40, still image video cameras worked by converting images into electric signals and recording them onto a magnetic medium (floppy disk). The camera then had to be connected to a video monitor in order to view the pictures. The products on which the description of a “still image video camera” was based were the Canon Still Video System, comprised of SV Camera R-470 and the SV Player RV-301, as well as the Canon XAPSHOT RC-250 High-Band Still Video Camera. EN 85.25(D) (1996) and the WCO discussions regarding still image video cameras indicate that (1) these cameras record still images by electronic means (CCD) and, (2) the electronic images are viewed on a video display. Therefore, because the phrase “digital still image video camera” is a term of art, its meaning is not the same as the plain meaning of its component words. Since 1996 when the Harmonized System first provided for still image video cameras, the WCO has attempted to reflect the technological advancements made to these cameras by updating their description in the Explanatory Notes. In 2002 the text of EN 85.25 was updated to reflect that: (1) “data may be stored in analogue or digital form”; (2) “the cameras of the heading capture an image by focusing the image onto a light-sensitive device, such as a complementary metal oxide semiconductor (CMOS) or charge-coupled device (CCD)”; and, (3) “Generally, these cameras are equipped with an optical viewfinder or a liquid crystal display (LCD), or both. Many cameras equipped with an LCD can employ the display both as a viewfinder when taking pictures and as a screen when reproducing images already recorded; in some cases the camera is capable of displaying images received from other sources on the LCD screen.” EN 85.25(D) (2002). Also, the phrase “digital cameras” was added to the text of heading 8525 and subheading 8525.40, HTSUS (2002). When the 2007 changes were made to the HS, text was added to EN 85.25 which further clarified that the group including digital cameras and video camera recorders “covers cameras that capture images and convert them into an electronic signal that is … recorded in the camera as a still image or as a motion picture (i.e., digital cameras and video camera recorders).” EN 85.25(B) (2007). Based on this legislative history, we agree, with counsel’s comment that the text of subheading 8525.80.40, HTSUS, (digital still image video camera) is derived from a description of a digital still camera fitted with a CCD and based on video recorder technology. However, as discussed supra, digital still image video cameras can also be based on CMOS technology. Consistent with this legislative history, CBP has previously classified cameras that solely or principally record still images in a digital format and that reproduce the still images on a video display as digital still image cameras in subheading 8525.80.40, HTSUS. See, e.g., NY 817941, dated January 14, 1996 (concerning the Ricoh DC-1 digital camera “that can capture stills and … motion scenes without the use of film”); HQ 960384, dated April 1, 1999 (concerning the Casio QV-10 “hand-held digital still (‘point and shoot’) camera … based on camcorder technology…”); HQ 960664, dated April 20, 1999 (concerning the Olympus Digital Still Camera model # D-200L); NY F86533, dated May 17, 2000 (concerning a “digital camera that only takes still images utilizing an image sensor and storing images on computer chips”); and NY G86928, dated February 9, 2001 (concerning digital still image cameras with storage capability). Subheading 8525.80.50, HTSUS, covers cameras “Other” than digital still image video cameras. It is CBP’s position that cameras that solely or principally record moving images, such as camcorders/video cameras, and cameras that do not principally record still images are classified in this subheading, unless such cameras are more specifically provided for elsewhere in the HTSUS. Counsel for JVC agrees with the agency’s position in her comment (“’camcorders’ which perform sequential image capture are classified in subheading 8525.80.40, HTSUS.”). Next, we address your view that digital machines that can record video and capture still images cannot be classified outside of subheading 8525.80.40, HTSUS. Counsel comments that it is not necessary to utilize a principal function analysis in classifying such cameras because they meet the plain meaning of subheading 8525.80.40, HTSUS. In this regard, counsel argues that GRI 1 is controlling and that an analysis of whether the products at issue are true composite machines is not necessary. GRI 1 provides in relevant part that, “classification shall be determined according to the terms of the headings and any relative section or chapter notes.” Our reliance on Chapter Note 3 to Section XVI, HTSUS, is therefore in accord with GRI 1. For reasons already addressed, we find that the context does not require anything other than a principal function analysis because no one subheading describes all the functions of the cameras. See Gen. EN (VI), Sec. XVI (“Note 3 to Section XVI need not be invoked when the composite machine is covered as such by a particular heading ...”). In particular, we refer to our finding that the phrase “still image video camera” is a term of art, qualified by the term “digital”, that describes cameras that capture still images only and display them on a screen, and that the phrase should not be parsed for meaning. Further, subheading 8525.80, HTSUS, the text superior to subheadings 8525.80.40 and 8525.80.50, and which governs the scope of those two subheadings, provides eo nomine for “video camera recorders”, as does heading 8525. At the domestic level, subheading 8525.80.50, HTSUS, merely provides for cameras “other” than digital still image video cameras and television cameras. There is nothing in its text to exclude digital camcorders from classification in subheading 8525.80.50. Moreover, the Explanatory Notes to heading 8525, HTSUS, explain that: [T]he cameras of this heading convert … images into analogue or digital data. The cameras of this heading capture an image by focusing the image onto a light-sensitive device, such as a complementary metal oxide semiconductor (CMOS) or charge-coupled device (CCD). The light-sensitive device sends an electrical representation of the images to be further processed into an analogue or digital record of the images.” …. In digital cameras and video camera recorders, images are recorded into an internal storage device or onto media (e.g., magnetic tape, optical media, semiconductor media or other storage media of heading 85.23)…. EN 85.25(B) (2009). See also EN 85.25(D) (2002). The Explanatory Notes clearly state that video camera recorders of heading 8525 may record images digitally (on semiconductor media). Therefore, the cameras at issue have the functionality of digital still image video cameras of subheading 8525.80.40, HSTUS, and of other cameras of subheading 8525.80.50. As a result, they meet the description of composite machines provided in Note 3 to Section XVI and must be classified according to their principal function. CBP has found the analysis developed and utilized by the courts in relation to “principal use” (the “Carborundum factors”) to be a useful aid in determining principal function. Generally, the courts have provided several factors, which are indicative but not conclusive, to apply when determining whether merchandise falls within a particular class or kind. They include: (1) general physical characteristics, (2) expectation of the ultimate purchaser, (3) channels of trade, environment of sale (accompanying accessories, manner of advertisement and display), (4) use in the same manner as merchandise which defines the class, (5) economic practicality of so using the import, and (6) recognition in the trade of this use. See United States v. Carborundum Co., 63 CCPA 98, 102, 536 F.2d 373, 377 (1976), cert denied, 429 U.S. 979 (1976); Lennox Collections v. United States, 20 Ct. Int’l Trade 194, 196 (1996); Kraft, Inc. v. United States, 16 Ct. Int’l Trade 483, 489 (1992); and G. Heileman Brewing Co. v. United States, 14 Ct. Int’l Trade 614, 620 (1990). See also Headquarters Ruling Letter (“HQ”) W968223, dated January 12, 2007, and HQ 966270, dated June 3, 2003. In your ruling requests submitted on July 13, and 28, 2006, you did not provide us with information on each of the factors noted above, but you did state the following: The Everio media cameras are multifunctional cameras designed for the purpose of performing two or more complementary yet alternative functions, still image and video recording. The media cameras in question contain no feature that predominates over any other feature to suggest that one capability constitutes the principal function. In fact, all of the digital camera’s capabilities are advertised equally on the good’s packaging. As such, unlike previous generations of still image OR video cameras, we have concluded that JVC, in the digital Everio camera line has evolved digital technology to such a point that the cameras do not have a single principal function (still image or video). By your own admission, the cameras at issue are precluded from being classified as digital still image cameras. Counsel comments that CBP did not address information submitted by JVC in support of a Carborundum analysis. Accordingly, we will address the information under the relevant subheadings below. General Physical Characteristics and Recognition in the Trade of Use Based on the features of each of the cameras, which is detailed in the FACTS section above, the cameras are able to function as both digital “point and shoot” cameras and as camcorders. These functions have been extensively reviewed by the electronics industry. For example, a review on pcmag.com states, in relevant part: The Everio GZ-MG30 – one of four new hard-drive models (the other three are the GZ-MG20, GZ-MG40 and GZ-MG50) is a one CCD chip camcorder with 25X optical zoom (a 35-mm equivalent of about 42 to 1,050 mm) that allows for more than seven hours of shooting time on the highest qualify setting. The hard drive also lets you avoid the continual need to buy additional disc media, which may soften the blow of the hefty $900 price tag. (The GZ-MG20, GZ-MG40 andGZ-MG50 list for $800, $900, and $1000, respectively. The latter two give you 1.3-megapixel still-image quality photos.) …. Lastly, we found the digital still-camera capabilities to be inadequate for anything other than Web use. For this camcorder, the stills were only 640-by-480, with an average of only 350 lines of resolution – below our acceptable 1MP range. There’s no flash included on the camera ei