Tariff Classification of a Controller for an Internet-based Digital Music Network

HQ H107375 August 16, 2010 CLA-2 OT:RR:CTF:TCM H107375 RM CATEGORY: Classification TARIFF NO.: 8526.90.00 John M. Peterson, Esq. Neville Peterson LLP 17 State St., 19th Floor New York, NY 10004 RE: Tariff Classification of a Controller for an Internet-based Digital Music Network Dear Mr. Peterson: This is in response to your letter, dated November 2, 2009, to U.S. Customs and Border Protection (“CBP”), on behalf of Sonos, Inc., in which you request a binding ruling on the classification of the “Sonos Controller CR200” (hereinafter “controller” or “CR200”) under the Harmonized Tariff Schedule of the United States (“HTSUS”). In reaching our decision, we also considered supplemental information you submitted by letter, on January 18 and June 11, 2010, and the arguments you raised during a telephone conference on May 26, 2010, with a member of my staff. FACTS: Sonos’ CR200 is a hand-held graphical interface used to wirelessly control the Sonos Multi-Room Music System – a multi-component system that streams digital music files from several sources (e.g., internet radio, network storage areas (NAS), or a music library on a computer) across a peer-to-peer wireless mesh network (“SonosNet”), to stand-alone music players (“ZonePlayers”) deployed in up to thirty-two rooms (“Zones”) of one location.  The System can play the same song in every zone or choose different songs for different zones. The CR200 features a 3.5-inch LCD touch screen with a full-color VGA display and 3 function buttons (volume (-/+), mute, and “Zones”). It communicates with the ZonePlayers in the network, and ultimately the server, by way of radio frequency (“RF”) waves that correspond to binary commands (i.e., ones and zeroes). Through it, the user can access his digital music collection, choose which song(s) to play, and set the desired volume for each of the ZonePlayers in the network, from anywhere in the house. You described the process as follows: … the [controller] will send a command across SonosNet to the nearest ZonePlayer, such as, “Access this Radiohead song on my PC and play it to the ZonePlayer in the master bedroom.” The software will relay this command to the appropriate network citizen (i.e., the PC), which will then be directed to stream the file to the closest ZonePlayer in the network. [That] ZonePlayer will then determine the most efficient way to route the file across the network – it may go directly to the ZonePlayer in the master bedroom, or, it may stream the file to the bedroom through other ZonePlayers in the house. … The actual regeneration of audio, or volume control, is executed by the ZonePlayer. […] When the streamed file reaches the ZonePlayer designated to play it, that ZonePlayer will convert the data file to audio, using a sound card, and play the file using incorporated or attached speakers. When a particular track is selected, the controller’s “Now Playing” screen displays information about that song, complete with full-color album art, the elapsed time, and more. By pressing the “Zones” button, the user can see an overview of what is playing in each room. A movement sensor automatically turns on the controller when it is picked up.
Sonos’ CR200 Controller ISSUE: Whether Sonos’ CR200 controller is classified under heading 8517, HTSUS, as an apparatus for communication in a wireless network, or under heading 8526, HTSUS, as a radio remote control apparatus? LAW AND ANALYSIS: The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation ("GRIs"). GRI 1 provides, in part, that "for legal purposes, classification shall be determined according to terms of the headings 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 may then be applied in order. U.S. Additional Rule of Interpretation 1(a), HTSUS, provides, in relevant part, that: In the absence of special language or context which otherwise requires: … a tariff classification controlled by use (other than actual 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. The 2010 HTSUS provisions under consideration are the following: 8517 Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network),other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof: Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network): 8517.62.00 Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus … * * * 8526 Radar apparatus, radio navigational aid apparatus and radio remote control apparatus: Other: 8526.92.00 Radio remote control apparatus … The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System at the international level. While neither 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 Fed. Reg. 35127, 35128 (August 23, 1989). EN 85.17 provides, in relevant part: This heading covers apparatus for the transmission or reception of speech or other sounds, images or other data between two points by variation of an electric current or optical wave flowing in a wired network or by electro-magnetic waves in a wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include … local and wide area networks. … Other communication apparatus. This group includes apparatus which allows for the connection to a wired or wireless communication network or the transmission or reception of speech or other sounds, images or other data within such network. Communication networks include … Local Area Networks (LAN) … whether proprietary of open architecture. You aver that the controller is properly classified under heading 8517 (8517.62), HTSUS, because it is an “internet modem/router unit” used principally to “direct and switch digital files … stored or processed by a computer or network storage device across a peer-to-peer wireless network.” In support, you submit that in New York Ruling Letter (“NY”) N038686, dated September 30, 2008, and NY 084419, dated January 16, 2009, CBP classified similar handheld controllers for network systems in subheading 8517.62, HTSUS. Heading 8517, HTSUS, provides in pertinent part for “[O]ther apparatus for transmission or reception of … other data, including apparatus for communication in a … wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528.” The heading is a “use” provision, i.e., it describes articles in the manner in which they are used as opposed to by name. See Warner-Lambert Co. v. United States, 425 F.3d 1381 (Fed. Cir. 2005). Specifically, it is a “principal use” provision governed by U.S. Additional Rule of Interpretation 1(a), HTSUS. See Warner Lambert Co, 425 F.3d 1385 (principal use governed when the tariff referred to “Medicaments … consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses …or in forms or packings for retail sale”). Here, the “other apparatus” are described by their use “for transmission or reception of …other data.” To determine a good’s principal use, CBP considers a variety of factors, including: (1) the general physical characteristics of the merchandise; (2) the channels, class or kind of trade in which the merchandise moves; (3) the expectation of the ultimate purchasers; (4) the environment of the sale (i.e., accompanying accessories and the manner in which the merchandise is advertised and displayed); (5) usage, if any, in the same manner as merchandise which defines the class. See United States v. Carborundum Co., 536 F.2d 373, 377 (Cust. Ct. 1976). Applying the Carborundum factors listed above, we find that the controller is a good of a kind principally used for the transmission and reception of data in a wireless network; specifically, a network-based digital music network. Indeed, like the other controllers of its kind, the CR200 is equipped with multiple antennas and a touch screen with playback control buttons with which it can command the system to play a particular song, or adjust the volume, in any given room within the network. It also moves in the same channels of trade,  is advertised in a similar fashion,  and is purchased by consumers for the same reason as other network-based digital music network controllers (i.e., to wirelessly transmit and receive binary commands – a form of data – to and from the various components of the digital music system over a network). Therefore, as the controller is not otherwise provided for under HTSUS headings 8443, 8525, 8527 or 8528, we find that it is described by heading 8517, HTSUS. The controller is also described, eo nominee, in heading 8526, HTSUS, as a “Radio remote control apparatus.” The Oxford English Dictionary defines the term “radio” as “[t]he transmission and reception of radio-frequency electromagnetic waves, esp. waves carrying sound signals,” and “remote control” as “a device for controlling a piece of equipment at a distance, typically by means of radio or infrared signals that it transmits.” The CR200 is a “radio remote control apparatus,” based on the common meaning of that term, because it controls the various components of a network-based music system from a distance by way of the RF signals. You argue that the controller is not classified in heading 8526, HTSUS, because “radio remote control device are one-way devices which transmit data” whereas, by contrast, “the [CR200] both send and receives data.” In addition, you submit that, unlike other RF controllers, the one at issue “does not necessarily operate directly on a device,” but rather, “it sends signals to the SonosNet network, which in turn routes the signals to the device to be operated, controlled or informed.” We note, however, that those conclusions are not supported by the text of heading 8526, HTSUS, or by the common meaning of the term “radio remote control,” included above. To the contrary, “an eo nominee designation, with no terms of limitation, will ordinarily include all forms of the named article,” irrespective of how they are used. See Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1380-81 (Fed. Cir. 1999). Inasmuch as the controller is, prima facie, classifiable under two HTSUS headings, it cannot be classified by GRI 1. Therefore, as GRI 2 does not apply, we turn to GRI 3(a), the rule of relative specificity, which provides that: When, by application of rule 2(b) [not applicable in this case] or any other reason, goods are, prima facie, classifiable under two or more heading, classification shall be effected as follows: The heading which provides the most specific description shall be preferred to headings providing a more general description […]. Courts undertaking the GRI 3(a) comparison “look to the provision with the requirements that are more difficult to satisfy and describe the article with the greatest degree of accuracy and certainty.” See Orlando Food Corp. v. United States, 140 F.3d 1437, 1439-40 (Fed. Cir. 1998). When the GRI 3(a) comparison results in competing HTSUS provisions being equal, the general rule of customs jurisprudence is that, “in the absence of legislative intent to the contrary, a product described by both a use provision and an eo nominee provision is generally more specifically provided under the use provision.” Id. at 1441. However, that principle is not an ironclad rule of law, but merely “a convenient rule of thumb for resolving issues where the competing provisions are in balance.” See., 195 F.3d at 1315. The rule does not apply if the competing eo nominee provision is “obviously more specific than the ‘use’ provision.” See United States v. Simon Saw & Steel Co., 51 CCPA 33, 40-32 (Cust. Ct. 1964). For instance, in Carl Zeiss, Inc, 195 F.3d 1375 (Fed. Cir. 1999), the Court of Appeals for the Federal Circuit (“CAFC”) held that the provision for “compound optical microscopes” in heading 9011, HTSUS, is more specific than the provision for “instruments used in medical or surgical sciences” in heading 9018, HTSUS. In that case, the court reasoned that “the term ‘compound optical microscopes,’ even while encompassing microscopes with different specifications and uses, suggests specific structural requirements, viz, that it be ‘compound’ and ‘optical.’” As such, the CAFC held that said provision “is narrower than ‘instruments and appliances used in medical or surgical sciences,’ which encompasses a wide variety of non-microscopic merchandise, and does not suggest any structural features at all.” Id. Similarly, in this case, the tariff term “Radio remote control apparatus,” even while encompassing devices of different specifications and uses, requires that the apparatus perform a control function from a distance (a function that necessarily involves the transmission of data), and that it do so via radio signals (i.e., using an antenna). That provision is narrower, and thus more specific, than “Other apparatus for the transmission or reception of … other data … other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528,” which encompasses a wide variety of devices used to transmit and/or receive data, and does not suggest any structural requirements. We conclude, therefore, that the controller is classified under heading 8526, HTSUS. Our conclusion in accord with New York Ruling Letter (“NY”) N066817, dated July 2, 2009, and NY N049847, dated February 6, 2009, wherein CBP classified a wireless radio remote control used to control a digital media receiver through a network in subheading 8526.92.00, HTSUS. See also NY N057476, dated April 28, 2009 (wireless RF remote control for a network-based digital music system classified in subheading 8526.92.00, HTSUS). We note, finally, that the CR200 is distinguishable from the hand-held remote control classified in NY N038686 dated September 30, 2008 (the Nutone ICA-331 WH), because its communicates with the several stations of the system that it is a part of by way of radio signals (as required by the text of heading 8526, HTSUS), whereas the Nutone control does so by cable. It is also distinguishable from the SecureAlert M900 Central System of NY 084419, dated January 16, 2009, a server-based monitoring system used to display alert signals though a message display, because that device is not a radio remote controller. HOLDING: By application of GRI 3(a), Sonos’ CR200 controller is classified under heading 8526, HTSUS, specifically in subheading 8526.92.00, which provides in relevant part for: “[R]adio remote control apparatus: Other: Radio remote control apparatus.” The 2010 column one, general rate of duty is: 4.9 % ad valorem. Duty rates are provided for convenience only and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov/tata/hts/. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction. Sincerely, Ieva K. O’Rourke, Chief Tariff Classification and Marking Branch