Electronic integrated circuits classification prevails where imported IC-Codecs are not communication apparatus at the time of import.

IC-Codecs imported as un-diced wafers or rolls were classifiable under CTI 8542 39 00 as electronic integrated circuits, because they were not capable of stand-alone transmission or reception and did not answer the description of communication apparatus under CTI 8517 62 90 at the time of import. The tariff scheme required classification by the heading terms read with the section and chapter notes, and the HSN notes supported treatment under Chapter 85, including monolithic integrated circuits. As the goods fell under Heading 8542, the exemption attached to that heading applied and the demand based on reclassification under Heading 8517 could not be sustained.

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Issues: Whether the imported IC-Codecs were classifiable under CTI 8542 39 00 as electronic integrated circuits or under CTI 8517 62 90 as communication apparatus, and whether the consequential duty demand and exemption benefit followed from that classification.

Analysis: The applicable tariff scheme required classification according to the terms of the headings read with the relevant section and chapter notes. Heading 8517 covers apparatus or machines for transmission or reception of voice, images or other data, whereas Heading 8542 specifically covers electronic integrated circuits. The imported goods were found to be IC-Codecs in the form of un-diced wafers or rolls, incapable of stand-alone communication or transmission/reception at the time of import, and therefore not describable as apparatus or machines under Heading 8517. The goods answered the description of electronic integrated circuits under Chapter 85, including monolithic integrated circuits under Chapter Note 9(b), and the HSN notes supported that treatment. Since the goods fell under Heading 8542, the benefit of the exemption applicable to that heading followed, and the demand founded on classification under Heading 8517 could not be sustained.

Conclusion: The goods were correctly classifiable under CTI 8542 39 00 and not under CTI 8517 62 90, with the result that the demand based on the impugned reclassification failed.

Final Conclusion: The assessee succeeded on the classification dispute, and the adverse demand order did not survive.

Ratio Decidendi: For tariff classification, a product that is specifically covered by the heading for electronic integrated circuits cannot be shifted to a broader communication-apparatus heading unless it answers that latter description at the time of import.

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