Application for Further Review of Protest No. 2704-10-101306; Container with hanging file folders

HQ H152438 July 11, 2011 CLA-2 OT:RR:CTF:TCM H152438 CKG Category: Classification Tariff No.: 3926.10.00 Port Director U.S. Customs and Border Protection Port of Los Angeles/Long Beach 301 E. Ocean Blvd., Suite 1400Long Beach, CA 90802 Attn: Mr. Alan Aprea, Import Specialist Re:     Application for Further Review of Protest No. 2704-10-101306; Container with hanging file folders Dear Port Director: This is in reference to the Application for Further Review of Protest No. 2704-10-101306, filed on behalf of Target Stores Division (“Protestant”) on June 21, 2010, concerning the classification under the Harmonized Tariff Schedule of the United States (HTSUS) of a container with hanging file folders. FACTS: The subject merchandise is a container with hanging file folders (Style No. 1203). The container portion of the article consists of a translucent plastic box with a metal rim on top, metal rivets on its corners, and around-the-side handle openings The container comes with ten paper hanging file folders. The material breakdown by weight is 60% paper, 35% plastic, and 5% metal. The stated cost breakdown is $2.52 paper, $1.47 plastic, and $.21 metal. ISSUE: Whether the file box with hanging file folders is classified in heading 3926, HTSUS, as an article of plastic, or in heading 4820, HTSUS, as file folders of paperboard. LAW AND ANALYSIS: The matter is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification. The protest was timely filed within 180 days of liquidation of the first entry for entries made on or after December 18, 2004.  (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)). Further Review of Protest No. 2704-10-101306 was properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(b) because the decision against which the protest was filed involves specific factual and legal questions that have not been the subject of a Headquarters ruling or court decision, namely, the classification of a file box with file folders. Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification 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 otherwise require, the remaining GRIs 2 through 6 may then be applied in order. The HTSUS provisions at issue are as follows: 3926: Other articles of plastics and articles of other materials of headings 3901 to 3914: 3926.10.00: Office or school supplies… * * * * * 4820: 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: 4820.30.00: Binders (other than book covers), folders and file covers . . . * * * * * The article is prima facie classifiable under more than one heading. The box alone is classified in heading 3926, HTSUS, as an article of plastic. The file folders are classified in heading 4820, HTSUS, as file folders of paperboard. Classification of the article thus cannot be determined according to the terms of GRI 1. GRI 2(b) states that "[a]ny reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances [and] any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of rule 3." GRI 3 states, in pertinent part: When by application of [GRI] 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:(a) The 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 materials or substances contained in mixed or composite goods . . . , 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.(b) Mixtures, composite goods consisting of different materials or made up of different components . . . which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. Headings 3926 and 4820 each refer only to part of the subject article. Therefore, under GRI 3(a), these headings must be regarded as equally specific in relation to the article, and the article must be classified as if it consisted of the material or component which gives it its essential character, pursuant to GRI 3(b). EN VIII to GRI 3(b) explains that "[t]he factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of the constituent material in relation to the use of the goods." The “essential character” of an article is “that which is indispensable to the structure, core or condition of the article, i.e., what it is.” Structural Industries v. United States, 360 F. Supp. 2d 1336. Recent court decisions on the essential character for GRI 3(b) purposes have looked primarily to the role of the each material or component in relation to the use of the goods. See Structural Industries, 360 F. Supp. 2d 1330 (Ct. Int’l Trade 2005); Conair Corp. v. United States, 29 C.I.T. 888 (2005); Home Depot USA, Inc. v. United States, 427 F. Supp. 2d 1278 (Ct. Int’l Trade 2006), aff’d 491 F.3d 1334 (Fed. Cir. 2007). According to the Protestant, the file folders provide the majority of the cost and weight of the set, while the plastic box is the bulkiest component. These factors are thus not entirely conclusive. Yet, the role of each component in relation to the use of the good weighs heavily in favor of the plastic box. The plastic box imparts a greater utility to the consumer than the file folders. The box stores the file folders, which must be contained in order to be organized. Furthermore, while both the box and the file folders can be reused, the plastic and metal construction of the box is significantly more durable than the paper file folders, which are more likely to tatter, tear and wear with time than the box itself. The box is also able to store a greater variety of items than the folders, which can only be used to store documents, and which obviously have a more limited storage capacity. The number of folders included (ten) is also insufficient to store a significant number of documents. The consumer would likely need to purchase more folders or simply abandon the folders and place the documents directly in the box. Based on the foregoing, we find that the essential character of the container is imparted by the plastic box, which constitutes the bulk of the good, provides its shape, and plays a more important role in relation to the use of the good than the file folders. As such, the container with hanging file folders is classified in heading 3926, HTSUS. This finding is consistent with prior CBP rulings on similar merchandise, including Headquarters Ruling Letter (HQ) 967816, dated October 5, 2005, to which you cite in support of classification in heading 4820, HTSUS. In HQ 967816, CBP classified the “Big Mouth Folio,” a plastic folio folder imported with a memorandum pad in heading 4820, HTSUS, by application of GRI 3(a). This ruling does not control the classification of the instant merchandise, which is not a substantially similar product. Although both products are composite goods of plastic and paperboard, the box with file folders is much larger, not portable, and is used for storage rather than as an article of stationary. Although the folder in HQ 967816 was made of plastic, CBP found that the Big Mouth Folio, as a whole, exhibited the characteristics of an article of stationary, in part because heading 4820, HTSUS, covers both folders and memorandum pads. Heading 4820, however, does not include boxes, of any material. The box with file folders, as a whole, thus does not exhibit characteristics of an article of stationary, of any material. Heading 4820, HTSUS, therefore describes only part of the article. CBP reached a similar conclusion in HQ H087877, dated February 23, 2010, in which we classified a binder with index cards in heading 3926, HTSUS, pursuant to GRI 3(b), because the binder could be used with other materials and could be reused once the index cards were full. HOLDING: By application of GRI 3(b), the container with hanging file folders is classified in heading 3926, HTSUS, specifically subheading 3926.10.00, which provides for “Other articles of plastics and articles of other materials of headings 3901 to 3914: Office or school supplies.” The 2010 column one, general rate of duty is 5.3% ad valorem. You are instructed to deny the protest in full. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division