Business information recorded on magnetic computer discs; ENs85.24 (8); H. Conf. Rep. No. 576; General Note 4(c); HQ 079847;HQ 220988.

HQ 951044 February 1, 1993 CLA-2 CO:R:C:M 951044 AJS CATEGORY: Classification TARIFF NO.: 8524.90.40 Judith K. Matta William F. Joffroy, Inc. Customs Broker P.O. Box 21041 Phoenix, AZ 85036 RE: Business information recorded on magnetic computer discs; ENs 85.24 (8); H. Conf. Rep. No. 576; General Note 4(c); HQ 079847; HQ 220988. Dear Ms. Matta: This is in response to your letter of December 16, 1991, on behalf of International Computing Systems, Inc., to the Regional Commissioner of Customs in New York, requesting the tariff classification of magnetic computer discs from El Salvador under the Harmonized Tariff Schedule of the United States (HTSUS). Your letter has been referred to this office for reply. We regret the delay in responding. FACTS: The subject merchandise consists of business information recorded on magnetic computer discs. Your client intends to contract with U.S. companies to export their written or hard copy business records to El Salvador where these records will be transcribed onto magnetic computer discs. The discs will be of U.S. origin and shipped to El Salvador blank. The magnetic discs with the transcribed information will then be returned to the U.S. The written or hard copy business records will either be returned to the U.S. or destroyed after transcription in El Salvador. ISSUE: Whether the subject discs are entitled to a duty exemption as "[r]ecords, diagrams and other data with regard to any business, engineering or exploration operation whether -2- on paper, cards, photographs, blueprints, tapes or other media." pursuant to General Note 4(c), HTSUS; or classifiable within subheading 8524.90.40, HTSUS, which provides for "other" recorded media. LAW AND ANALYSIS: Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRIs), taken in order. GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes. Heading 8524, HTSUS, provides for records, tapes and other recorded media for sound or other similarly recorded phenomena. The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) state that this heading covers media on which phenomena other than sound or image have been recorded (e.g., magnetic tapes, disc packs, diskettes and cassettes for machines of headings 84.69 to 84.72). ENs 85.24 (8), p. 1373. The subject discs satisfy this description. They are magnetic discs (i.e., recorded media) for computers (i.e., a machine of heading 8471) with information transcribed upon them. While the ENs are not dispositive, they provide a commentary on the scope of each heading, and offer guidance for interpretation of the HTSUS. H. Conf. Rep. No. 576, 100th Cong., 2d Sess. p. 549, reprinted in 1988 U.S. CODE CONG. & ADMIN. NEWS p. 1582. Accordingly, we consider the above ENs instructive for determining that the subject discs satisfy the terms of heading 8524, HTSUS. More specifically, they are described within subheading 8524.90.40, HTSUS, which provides for "other" recorded media. The HTSUS does, however, contain a duty exemption for certain business records contained on magnetic discs. General Note 4(c), HTSUS, provides that "[r]ecords, diagrams and other data with regard to any business, engineering or exploration operation whether on paper, cards, photographs, blueprints, tapes or other media." are exempt from duty and entry. The subject discs will contain business records. Accordingly, they satisfy the terms of General Note 4(c) in that they will be records with regard to a business operation contained on media. Therefore, the subject discs are exempt from duty pursuant to General Note 4(c). The question has also arisen concerning instances in which discs will contain information that does not concern a business operation, but rather commercial information which is intended for sale to third parties. In these instances -3- the discs cannot be considered business records because they are a commercial product intended for sale to third parties and not information related to business operations. Therefore, these types of discs are not business records exempt from entry and duty pursuant to General Note 4(c), HTSUS, but instead media subject to duty within subheading 8524.90.40, HTSUS. This conclusion regarding discs containing commercial information intended for sale to third parties is supported by previous Customs decisions. In HQ 079847 (10/28/87), we addressed the scope of the predecessor provision of General Note 4(c), HTSUS, (i.e., General Headnote 5(e), Tariff Schedules of the United States (TSUS)). This ruling involved the classification of magnetic tapes which contained information acquired by the U.S. Government Landsat satellite system outside the U.S. In some instances, these tapes were sold to private industry, private individuals or foreign governments (i.e., third parties). We ruled that these tapes did not qualify for treatment as business records because they were not for inter- corporate use. Instead, the tapes were classified as recorded media. This situation is very similar to one in which discs containing commercial information are intended for sale to third parties. In HQ 079847, we also reviewed the legislative history of Headnote 5(e), TSUS, and its predecessor (i.e., item 870.10, TSUS). We concluded that these provisions were not intended to exempt from duty information sold to a third party because they are not business records for inter-corporate use. Discs containing commercial information intended for sale to third parties are also not information for inter-corporate use, but rather a commercial product intended for sale to other businesses. Based on this decision, discs containing commercial information intended for sale to third parties would also not qualify as business records exempt from duty and entry pursuant to General Note 4(c), HTSUS. Congress has indicated that earlier tariff rulings must not be disregarded in applying the HTSUS. The conference report to the 1988 Omnibus Trade Bill states that "on a case-by-case basis prior decisions should be considered instructive in interpreting the HTS[US], particularly where the nomenclature previously interpreted in those decisions remains unchanged and no dissimilar interpretation is required by the text of the HTS[US]. H. Conf. Rep. No. 576, 100th Cong., 2D Sess. 548, 550 (1988). HQ 079847 is an earlier tariff ruling which satisfies this description. General Note 4(c), HTSUS, is identical to Headnote 5(e), -4- TSUS, and no dissimilar interpretation is required by the text of the HTSUS. Accordingly, we find this decision instructive for determining that discs containing commercial information intended for sale to third parties are not business records exempt from duty pursuant to General Note 4(c), HTSUS. In HQ 220988 (8/29/89), Customs once again discussed the applicability of General Note 4(c), HTSUS. This case involved used airline tickets and credit card forms which were exported from the U.S. for processing onto magnetic tape, microfiche or microfilm (i.e., recorded media). We ruled that the used airline tickets and credit card forms which were returned to the U.S. are business records within the meaning of General Note 4(c), HTSUS. However, we did not specifically address the issue of whether the recorded media itself was also included within the meaning of General Note 4(c), HTSUS. Accordingly, we do not view the decision rendered in HQ 220988 dispositive for the resolution of this case. HOLDING: The subject magnetic computer discs containing business records are exempt from entry and the payment of duty as records with regard to a business operation contained on media pursuant to General Note 4(c), HTSUS. However, if the discs contain commercial information intended for sale to third parties they are not business records exempt from duty. They are recorded media classifiable within subheading 8524.90.40, HTSUS, which provides for "other" recorded media. Sincerely, John Durant, Director Commercial Rulings Division