2022 (8) TMI 1393 - AAR - Customs

Classification of goods proposed to be imported - handheld mobile computers - classifiable under Heading 8471 or under Heading 8517? - HELD THAT - These are portable devices used in enterprise environments to run mobile apps, capture barcodes, take photos and videos, and provide voice and data communications for workers and managers. These devices combine personal computer and scanning functions (applies to mobile computers and tablet computers) in a single device that can be outfitted with off-the-shelf or custom software applications that perform everyday tasks, such as monitoring deliveries, tracking assets, and managing inventory. And because they run on familiar operating systems such as Windows/Android, they offer the same functionality as a desktop computer or laptop. These processors are also equipped with a barcode scan engine and act as their own host, which means one can instantly update and edit information as it is captured. Note 6(D) to Chapter 84 lists certain separately presented products that are to be excluded from Heading 8471, even if they can be classified as part of an ADP system. Note 6(E) to Chapter 84 mentions that a machine incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings. As the impugned devices, as described by the applicant, appear to be akin to ADP machines performing capturing of data and its further processing, the Notes 6(D) and 6(E) do not appear to have application in this case. In the instant case, these devices combine computing and scanning functions for monitoring deliveries, tracking assets, and managing inventory. They also have communication capabilities. However, for the products under consideration, automatic data processing appears to be the main function, while other functionalities of said machines are not different from auxiliary functions that could be seen on any computer, such as desktop or laptop computers. The difference between a 'smartphone and tablet computer , is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it . Thus, as per the said circular, tablet computers are classifiable under Heading 8471 and not under Heading 8517 despite the fact that the product is having cellular connection functionality, considering its principal function as automatic data processing. Similarly, in this case, the principal function of the impugned devices is barcode scanning and data processing for monitoring deliveries, tracking assets and managing inventory. Therefore, these devices appear to merit classification under Heading 8471 and not under Heading 8517. The impugned devices have many features such as higher scanning capacity, data editing functionality, ruggedness and enterprise-level security features, which a smartphone for cellular connection lacks. These devices are used by enterprises to capture data. The products are used in inventory management, store receiving, order processing, package tracking, tracing delivering etc. These devices use Wi-Fi connectivity and Bluetooth for information sharing. Cellular connectivity is essentially used for GPS and information sharing, where wi-fi is not available. Cellular connectivity can also be used for making calls - the devices under consideration are not classifiable as smartphones. They merit classification under sub-heading 8471 30 90. The 13 devices listed in the first paragraph of this ruling are classifiable under Heading 8471 and more specifically, under sub-heading 8471 30 90 of the First Schedule to the Customs Tariff Act, 1975.

Issues Involved:

1. Classification of handheld mobile computers (mobile computers and touch computers) under the Customs Tariff Act.
2. Determination of whether these devices qualify as Automatic Data Processing (ADP) machines under Heading 84.71.
3. Examination of alternative classification under Heading 85.17.
4. Consideration of the principal function of the devices for classification purposes.

Issue-wise Detailed Analysis:

1. Classification of handheld mobile computers under the Customs Tariff Act:

M/s. Rashi Peripherals Private Limited filed two applications seeking advance rulings on the classification of various handheld mobile computers, including touch computers and mobile computers, with and without SIM card slots. The devices are equipped with Qualcomm Snapdragon processors, Android 10 operating systems, and various connectivity features such as GPS, Bluetooth, and Wi-Fi. The applicant contends that these devices should be classified under Heading 84.71 as ADP machines.

2. Determination of whether these devices qualify as ADP machines under Heading 84.71:

The applicant argues that the handheld mobile computers meet the criteria set out in Note 6(A) to Chapter 84, which defines ADP machines. The devices can store processing programs, be freely programmed, perform arithmetical computations, and execute processing programs without human intervention. The applicant also asserts that the devices are not covered by Notes 6(D) and 6(E) of Chapter 84, which exclude certain products from being classified as ADP machines. The applicant emphasizes that the principal function of these devices is data processing, and they are marketed as "mobile computers" rather than phones.

3. Examination of alternative classification under Heading 85.17:

Heading 85.17 covers telephone sets, including smartphones and other telephones for cellular networks. The applicant contends that the devices, even those with SIM card slots, are primarily ADP machines and not communication devices. The applicant highlights differences between conventional smartphones and the proposed imports, such as ruggedness, scanning capabilities, and enterprise-level security features. The devices are used in enterprise environments for tasks like inventory management and data processing, with cellular connectivity being an auxiliary function.

4. Consideration of the principal function of the devices for classification purposes:

The ruling examines whether the devices should be classified under Heading 84.71 or 85.17, considering the principal function of the devices. The ruling notes that the principal function of the devices is automatic data processing, similar to tablet computers, which are classified under Heading 84.71. The ruling references Circular No. 20/2013, which clarifies that the classification of devices like tablet computers is based on their principal features rather than the presence of a voice calling function. The ruling concludes that the handheld mobile computers are essentially ADP machines with additional connectivity capabilities and should be classified under Heading 84.71.

Conclusion:

The ruling determines that the 13 devices listed in the applications are classifiable under Heading 84.71 and more specifically under sub-heading 8471 30 90 of the First Schedule to the Customs Tariff Act, 1975, as Automatic Data Processing (ADP) machines. The devices' principal function of data processing and their marketing as mobile computers support this classification, despite their additional communication capabilities.

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