2023 (10) TMI 74 - AAR - Customs

Classification of Portable Computers under Customs Tariff Heading 8471

The Authority ruled that the portable computers, including Barcode Mobile Computers, RFID Mobile Computers, and Tablet Mobile Computers, are classifiable ... Classification of goods proposed to be imported - Portable Computers viz. Barcode Mobile Computers, RFID Mobile Computer and Tablet Mobile Computer - classifiable under Heading 8471 as Automatic Data Processing (ADP) machines or under Heading 8517? - HELD THAT:- From the working and features of the impugned devices, it appears that these are not the units of ADP machines, but ADP machines themselves. 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(f) 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, Notes 6(D) and 6(E) do not appear to have application in this case. 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” - As the devices also have communication capabilities, including cellular connectivity in 18 out of 36 devices, the classification under Heading 8517 needs to be examined. In the instant case, these devices combine computing and scanning functions for monitoring deliveries, tracking assets, and managing inventory. 18 out of 36 devices 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. In regards to the classification opinion of the 68th session of the Harmonized System Committee, it is observed that the committee has classified RFID/barcode readers with a mobile operating system capable of scanning and cellular connectivity under sub-heading 8517 13. This sub-heading covers smartphones. Note 5 to Chapter 85 states that “For the purposes of Heading 85.17, the term “smartphones” means “telephones for cellular networks, equipped with a mobile operating system designed to perform the functions of an automatic data processing machine such as downloading and running multiple applications simultaneously, including third-party applications, and whether or not integrating other features such as digital cameras and navigational aid systems”. The note clearly states that these devices are telephones for cellular networks designed to perform the functions of ADP machines. However, the devices under consideration are principally not telephones for cellular networks. The impugned devices have many features such as higher scanning capacity, ruggedness and enterprise-level security features, which a smartphone for cellular device connection lacks. These devices are used by enterprises to capture data. As already stated 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 is also used for making calls. However, 18 out of 36 models do not have cellular connectivity. In view of forgoing discussion and facts on record, it is opined that the devices under consideration are not classifiable as smartphones. They merit classification under sub-heading 8471 30 90. The 36 devices listed in the first paragraph of the ruling are classifiable under Customs Tariff 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 Portable Computers (Barcode Mobile Computers, RFID Mobile Computer, and Tablet Mobile Computer).Summary:Issue 1: Classification of Portable ComputersThe applicant, M/s. Senate Solutions Private Limited, sought advance rulings on the classification of various portable computers, including Barcode Mobile Computers, RFID Mobile Computers, and Tablet Mobile Computers, under the Customs Tariff Act, 1975. The devices in question are used for scanning barcodes, processing data in real-time, and performing functions such as inventory management and last-mile delivery. They come with options for SIM card and Wi-Fi connectivity or Wi-Fi only.Applicant's Contention:The applicant argued that the portable computers should be classified under Heading 8471 as Automatic Data Processing (ADP) machines because:- They satisfy the criteria set out in Heading 8471.- The principal function is data processing.- They are commercially known as 'Barcode Mobile Computers, RFID Mobile Computer, and Tablet Mobile Computer,' not as phones or communication devices.The applicant further stated that even if these devices perform multiple functions, the principal function is ADP, and thus they should be classified under Heading 8471 as per Note 3 to Section XVI. They also referenced Circular No. 20/2013, which states that the principal function of tablet computers is data processing, making them classifiable under Heading 8471.Authority's Analysis:The Authority examined whether the devices meet the criteria for ADP machines under Chapter Note 6(A) to Chapter 84, which includes storing processing programs, being freely programmable, performing arithmetical computations, and executing programs without human intervention. The devices were found to satisfy these conditions.Alternate Classification Under Heading 8517:The Authority also considered Heading 8517, which covers telephones for cellular networks and other communication apparatus. However, it was determined that the principal function of these devices is data processing, not communication. Circular No. 20/2013-Cus. clarified that the classification should be based on the principal function, not the presence of a voice calling feature.Conclusion:The Authority ruled that the 36 devices listed are classifiable under Customs Tariff Heading 8471, specifically under sub-heading 8471 30 90. The devices are primarily ADP machines with additional connectivity capabilities, including cellular connectivity for some models, but their principal function remains data processing.