2022 (6) TMI 1408 - AAR - Customs

Classification of goods intended to be imported - vehicle-mounted computers - tablet computers - mobile computer - classifiable under heading 84.71 to be classified as ADP machines or not - 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 (except vehicle-mounted computer which do not have the capability of scanning). And because they run on familiar operating systems such as Windows/Android, they offer the same functionality of a desktop computer or laptop. In respect of possible alternate heading 8517, there is a need to examine the features of these devices in the context of note 3 to section XVI of the tariff. Heading 8517 covers telephone sets, including smartphones and other 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 84.43, 85.25, 85.27 or 85.28 - the 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. Cellular connectivity is essentially used for GPS and information sharing, where wi-fi is not available. Cellular connectivity is also used for making calls. However, as mentioned earlier, 18 out of 32 models do not have cellular connectivity. On a similar device, the TC77 series touch computer, which is a handheld mobile computer used for asset inventory management purposes, Singapore Customs ruled (ref. No. CRL21 1217-0036) that the product is classifiable under subheading 84713090. Therefore, notwithstanding the WCO classification advice to the contrary, it is my considered opinion that the devices under consideration are not classifiable as smartphones. They merit classification under subheading 84713090. Thus, the 32 devices are classifiable under heading 8471 and more specifically, under subheading 84713090 of the first schedule to the Customs Tariff Act, 1975.

Summary

Issues Involved:
1. Classification of portable computers (vehicle-mounted computers, tablet computers, and mobile computers).
2. Compliance with the criteria for classification as Automatic Data Processing (ADP) machines under heading 8471.
3. Examination of potential alternate classifications under heading 8517.
4. Consideration of the World Customs Organization (WCO) classification opinions.
5. Applicability of specific subheadings and exemptions under the Customs Tariff Act.

Detailed Analysis:

1. Classification of Portable Computers:
The applicant sought advance rulings on the classification of Honeywell International Inc portable computers, including vehicle-mounted computers, tablet computers, and mobile computers. The models listed include THOR VM1A, RT10A, CK65, and others, with variations in SIM capability.

2. Compliance with Criteria for ADP Machines:
The applicant argued that the portable computers should be classified under heading 8471 as ADP machines because they meet the criteria set out in Note 5(A) to Chapter 84. These criteria include storing processing programs, being freely programmable, performing arithmetical computations, and executing processing programs without human intervention. The applicant provided detailed explanations and evidence to demonstrate that the devices meet these conditions and are not covered by exclusions in Notes 5(D) and 5(E).

3. Examination of Potential Alternate Classifications under Heading 8517:
The applicant contended that the devices should not be classified under heading 8517, which covers telephones for cellular networks and other communication apparatus. The principal function of the devices is automatic data processing, with communication capabilities being supplementary. The applicant highlighted differences between conventional cell phones and the portable computers, such as higher scanning capacity, ruggedness, data editing functionality, and enterprise-level security features.

4. Consideration of WCO Classification Opinions:
The applicant contested the WCO classification opinions that categorized similar devices under heading 8517. They argued that the WCO rulings did not consider heading 8471 and that the devices in question are more appropriately classified as ADP machines. The applicant also noted that many models do not have cellular connectivity, further supporting their classification under heading 8471.

5. Applicability of Specific Subheadings and Exemptions:
The applicant asserted that if the devices were to be classified under heading 8517, they should fall under subheading 85171400 as "Other telephones for cellular networks or for other wireless networks" and not as smartphones under subheading 85171300. They also mentioned the potential applicability of exemption under Notification No. 57/2021 -Cus dated 30.06.2017. However, they maintained that the correct classification is under heading 8471.

Ruling:
The Authority for Advance Rulings examined the features and specifications of the devices, considering the relevant chapter notes and General Rules for Interpretation (GRI) of Import Tariff. It was determined that the devices meet the criteria for ADP machines under heading 8471, as they perform data processing as their principal function. The communication capabilities were deemed supplementary, similar to those found in desktop or laptop computers.

The Authority also considered the WCO classification opinions but found that the devices in question are not primarily telephones for cellular networks. The principal function is data processing, and the devices are marketed as mobile computers, tablet computers, and vehicle-mounted computers, not as smartphones.

Therefore, the Authority ruled that the 32 devices listed are classifiable under heading 8471 and more specifically, under subheading 84713090 of the first schedule to the Customs Tariff Act, 1975.