Tariff Classification of Imported Magnets

DEPARTMENT OF THE TREASURY

Customs Service

[T.D. 94-97]

Tariff Classification of Imported Magnets

AGENCY: U.S. Customs Service, Department of the Treasury.

ACTION: Final change of position.

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SUMMARY: This document gives notice of a change of position regarding

the classification of imported articles consisting of small metal or

barium ferrite magnets placed in a plastic, textile or ceramic housing

(sometimes referred to as refrigerator or household magnets), under the

Harmonized Tariff Schedule of the United States (HTSUS).

Customs has ruled in the past that based on the composition of the

magnet, it was classified either as an article of metal under heading

7323, HTSUS, or as an article of ceramic (barium ferrite) under heading

6912, HTSUS.

Customs now believes that because composite goods consisting of

magnets and a textile, plastic or ceramic housing or shell, have the

essential character of magnets, they are properly classifiable as such

under heading 8505, HTSUS. The result of this change of position is a

small decrease in the rate of duty on the subject merchandise.

DATES: The change in tariff classification resulting from this decision

will be effective on or after December 5, 1994 for all entries not

finally liquidated as well as to merchandise entered for consumption or

withdrawn from warehouse on or after this date.

FOR FURTHER INFORMATION CONTACT:

Robert F. Altneu, Office of Regulations and Rulings (202) 482-7030.

SUPPLEMENTARY INFORMATION:

Background

Classification of merchandise under the Harmonized Tariff Schedule

of the United States (HTSUS) is in accordance with the General Rules of

Interpretation (GRIs). GRI 1 provides that classification shall be

determined according to the terms of the headings and any relative

section or chapter notes.

Magnets are specifically provided for in heading 8505, HTSUS. In

several rulings, we have held that articles consisting of a magnet

placed within a decorative housing or shell made of plastic, ceramic,

or textile (sometimes referred to as refrigerator or household

magnets), were composite goods. Classification was considered under the

following subheadings and duty rates:

6912.00.50: Ceramic tableware, kitchenware, other household articles .

. .: [o]ther

The general, column one rate of duty is 7 percent ad valorem.

7323.99.90: Table, kitchen or other household articles and parts

thereof, of iron or steel . . . : [o]ther: [o]ther: [n]ot coated or

plated with precious metal: [o]ther: [o]ther. . . .

The general, column one rate of duty is 3.4 percent ad valorem.

8505.19.00: Electromagnets; permanent magnets and articles intended to

become permanent magnets after magnetization. . . : [p]ermanent magnets

and articles intended to become permanent magnets after magnetization:

[o]ther. . . .

The general, column one rate of duty is 4.9 percent ad valorem.

Because the article was a composite good consisting of metal,

ceramic, textile, and/or plastic, it was prima facie classifiable under

two or more headings. Customs would then apply GRI 3(b) to determine

the essential character of the article.

The Harmonized Commodity Description and Coding System Explanatory

Notes (EN) constitute the Customs Cooperation Council's official

interpretation of the HTSUS. While not legally binding, 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 VIII to GRI

3(b) states as follows:

[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 a constituent material in

relation to the use of the goods.

In the rulings issued, Customs concluded that the magnet imparts

the essential character to the article. The plastic, textile or ceramic

portion of the article merely embellished the article and acted as a

decorative selling feature.

However, Customs precluded classification of the article under

heading 8505, HTSUS, which specifically provides for permanent magnets

based upon a portion of EN 85.05. EN 85.05, page 1341, states in

pertinent part as follows:

[t]his heading does not cover: [e]lectro-magnets, permanent magnets

or magnetic devices of this heading, when presented with machines,

apparatus, toys, games, etc., of which they are designed to form

part (classified with those machines, apparatus, etc.)

Based upon this portion of EN 85.05, we held that the magnets were

designed to form part of the article. It was concluded that because the

magnets are presented with and incorporated into a textile, ceramic or

plastic article (i.e., a hook, fruit caricature or advertising slogan),

they are precluded from classification in heading 8505, HTSUS. Because

the essential character of the article is the magnet, the article would

then be classified based upon the composition of the magnet as an

article of metal under heading 7323, HTSUS, or as an article of ceramic

(barium ferrite) under heading 6912, HTSUS.

Several rulings were issued following this rationale. See HQs

082500, 083130, 083133, 083134, 089332, 089333, 089760; NYs 860370,

862523. This list may not be exhaustive. There may be others issued by

Customs in New York or in the various Customs districts under the pre-

entry classification procedures.

In a notice published in the Federal Register on June 28, 1994 (59

FR 33320), Customs furnished notice that the classification of the

subject merchandise was under review and requested comments from

interested parties.

Only two submissions were received in response to the notice. While

both agreed to the proposed change of position, they each provided a

substantive discussion of the legal issues involved.

Discussion of Comments

Comment: Articles consisting of small metal or barium ferrite

magnets placed in a plastic, textile or ceramic housing (sometimes

referred to as refrigerator or household magnets) are eo nomine

provided for under heading 8505 as magnets, based upon GRI 1. See

O.C.O.D. 89-1, 23 Cust. Bull. 36, dated September 6, 1989.

Response: Customs disagrees that the subject merchandise is

classifiable under GRI 1. Magnets entered unattached to any other

object are eo nomine classifiable under heading 8505, HTSUS. Magnets

placed in a plastic, textile or ceramic housing are prima facie

classifiable under headings 8505, 3926, 6307, or 6912, HTSUS,

respectively. Because the subject merchandise is comprised of two or

more articles classified under separate headings, classification cannot

be determined by use of GRI 1. Therefore, GRI 3 must be used.

Furthermore, O.C.O.D. 89-1 was issued as guidelines on the proper

interpretation and application of GRI 1 to classify merchandise to the

importing community. Since the enactment of the HTSUS, Customs has

consistently issued binding rulings which set forth the proper

interpretation of articles which are prima facie classifiable in two or

more headings under the HTSUS according to GRI 3.

Comment: The proposed change in the method of classification of the

subject merchandise should apply to all relevant protested and

unliquidated entries, as well as to future entries.

Response: Because Customs believes that our previous interpretation

was incorrect and this change in position results in a slight reduction

in duties, we believe that the benefit should be available to importers

immediately for all entries not finally liquidated.

Conclusion

It is now our position that EN 85.05 has been misinterpreted. The

exclusion in EN 85.05 is designed to cover only those articles in which

the magnet is merely an insignificant part of a larger article (i.e.,

kitchen cabinets with a magnet to keep the doors closed). In such

cases, the magnet portion is ignored for classification purposes, and

the article (i.e., kitchen cabinet) is classified as if the magnet were

not present.

In regards to articles consisting of a metal or barium ferrite

magnet and a plastic, textile or ceramic shell or housing (i.e., a

hook, fruit caricature or an advertisement slogan), Customs believes

that they are composite goods. Customs will continue to apply an

essential character analysis pursuant to GRI 3(b) to find the essential

character of the merchandise. If the shell or housing portion of the

article merely embellishes the product and acts as a decorative selling

feature, and the essential character is imparted by the magnet, then

the article is properly classifiable in heading 8505, HTSUS, as a

permanent magnet. This change in position only relates to how Customs

interprets the exclusion stated in EN 85.05.

The change in tariff classification resulting from this decision

will be effective immediately for all entries not finally liquidated as

well as to merchandise entered for consumption or withdrawn from

warehouse on or after this date. By this action, those rulings which

are inconsistent with our current position are revoked.

Approved: November 22, 1994.

Michael H. Lane,

Acting Commissioner of Customs.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 94-29831 Filed 12-2-94; 8:45 am]

BILLING CODE 4820-02-P