CLA-2 CO:R:C:G 086253 JMH
Ms. Jane B. O'Dell
Peat Marwick Main & Co.
2001 M Street, N.W.
Washington, D.C. 20036
RE: Enhanced telephone
Dear Ms. O'Dell:
Your November 14, 1989, request for a classification ruling
for the Citibank Enhanced Telephone (ET) has been referred to
this office for a reply.
FACTS:
The merchandise in question, the Citibank ET, is to be
initially produced and imported from Austria. The ET's
components are housed in a shell which resembles a regular
telephone.
The ET acts as a normal telephone with number memory,
autodial, display of number dialed, and on-hook dialing
functions. The "enhanced" portion of this article allows the
user to access Citibank financial services. The ET enables a
Citibank customer to view accounts, transfer funds between
accounts, pay bills electronically, buy and sell securities, and
have electronic mail communication with customer service. Other
capabilities include access to a "Credit Advisor" which provides
a basis for a formal loan application, access to an electronic
telephone directory, and access to an interactive product selling
for investment services.
To provide these "enhanced" functions the ET performs the
following data processing functions: storage, retrieval and
selection of data; data entry, formatting and display; display of
error messages; recovery for local functions; and the ability to
hold the main menu. The ET does not perform arithmetical
calculations by itself. Its program is established by Citibank
and can only be modified by Citibank. You state that the
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banking functions are not dependent upon the telephone for
operation, but that incorporation within a telephone merely makes
the banking services more "user friendly."
ISSUE:
Whether the ET is an "[a]utomatic data processing machine
(ADP) and units thereof" within heading 8471, Harmonized Tariff
Schedule of the United States Annotated (HTSUSA), or an
"[e]lectrical apparatus for line telephony or telegraphy..."
within heading 8517, HTSUSA.
LAW AND ANALYSIS:
The classification of merchandise under the HTSUSA is
governed by the General Rules of Interpretation (GRI's). GRI 1,
HTSUSA, states in part that "for legal purposes, classification
shall be determined according to the terms of the headings and
any relative section or chapter notes...
You believe that the ET is classified within Chapter 84,
heading 8471, HTSUSA or alternatively, within Chapter 85, heading
8517, HTSUSA. These headings describe:
8471 Automatic data processing machines and units
thereof; magnetic or optical readers,
machines for transcribing data onto data
media in coded form and machines for
processing such data, not elsewhere specified
or included...
* * * * * * * * * * * * *
8517 Electrical apparatus for line telephony or
telegraphy, including such apparatus for
carrier-current line systems; parts
thereof...
Both headings 8471 and 8517 are within Section XVI, HTSUSA.
According to GRI 1, any applicable section and chapter notes must
also be utilized when determining the appropriate heading.
Section XVI, Notes 3 and 5, HTSUSA, are relevant to these
headings. Section XVI, Note 3 states:
Unless the context otherwise requires, composite
machines consisting of two or more machines fitted
together to form a whole and other machines adapted for
the purpose of performing two or more complementary or
alternative functions are to be classified as if
consisting only of that component or as being that
machine which performs the principal function.
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Section XVI, Note 5 defines "machine" as any "machine,
machinery, plant, equipment, apparatus or appliance cited in the
headings of chapter 84 or 85."
The ET is a "machine" which performs two sets of functions.
The first set of functions are those of a typical telephone. The
second set of functions are those of a banking device. These two
sets of functions, operating within one machine, are
complementary since they are housed together and use the same
energy source. The telephone and banking functions are
alternatives since one need not be in operation to utilize the
other. Therefore, the ET is a composite machine within the
meaning of Section XVI, Note 3. It must be classified according
to its principal function.
The principal function of the ET is as a banking device.
The ET is a telephone which has been enhanced to provide access
to banking operations. The "enhanced" portion of the ET
constitutes the greatest percentage of the ET's cost. It is
marketed by a bank. The reason for obtaining the ET is to have
home access to financial information and banking services. The
only persons to whom this device will be of any use are Citibank
customers. The resulting question, however, is whether this
banking device function is a data processing function within
heading 8471 or a telegraphic function within heading 8517.
In order to determine which heading best describes the ET,
the Explanatory Notes to the HTSUSA must be examined. The
Explanatory Notes are to be looked to for guidance in the proper
interpretation of the HTSUSA. See 54 Fed. Reg. 35127, 35128
(August 23, 1989).
Explanatory Note 84.71, Harmonized Commodity Description and
Coding System (HCDCS), Vol. 3. pp. 1296-1302, provides
information regarding the coverage of heading 8471. Data
processing is defined as the "handling of information of all
kinds, in pre-established logical sequences and for a specific
purpose or purposes." Explanatory Note 84.71, HCDCS, Vol. 3, p.
1297.
The definition of line telegraphy is found within
Explanatory Note 85.17, HCDCS, Vol. 4, pp. 1360-1363.
Telegraphic apparatus are:
essentially designed for converting texts or images
into appropriate electrical impulses for transmitting
those impulses, and at the receiving end, receiving
these impulses and converting them either into
conventional symbols or indications representing the
text, or into the text or image itself. Explanatory
Note 85.17, HCDCS, Vol. 4, p. 1362.
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As a banking device, the ET acts to relay requests for
financial information or the performance of banking services from
the customer to Citibank. The computers at the Citibank offices
process the request and respond to the customer. The "handling"
of data denotes an active undertaking. The ET does not process
or calculate, so to "handle" the data. Thus, it does not meet
the terms of heading 8471.
The ET converts the text or images into electrical impulses
and transmits these impulses to the receiver, where the impulses
are translated. It passively relays information between the user
and Citibank. That the ET has high technology components does
not change the telegraphic nature of the device. Therefore, the
ET's principal function as a banking device is described by the
terms of heading 8517 as a telegraphic function.
It is the opinion of this office that the ET is a
telegraphic apparatus within heading 8517. The appropriate
subheading and classification for the ET is within subheading
8517.82.00, HTSUSA, as "Electrical apparatus for line telephony
or telegraphy...Other apparatus...telegraphic..."
The multiple features of and numerous possibilities for
machines of this type require that classification rulings be
issued on a case-by-case basis.
HOLDING:
The Citibank Enhanced Telephone is a composite machine,
consisting of a telephone and a banking device, in accordance
with GRI 1, HTSUSA, and Section XVI, Note 3, HTSUSA. The banking
functions of the ET provide the device's principal function.
This principal function is most accurately described as a
telegraphic function. Therefore, the proper classification of
the ET is within subheading 8517.82.00, HTSUSA, as "Electrical
apparatus for line telephony or telegraphy...Other
apparatus...Telegraphic..."
The multiple features of and numerous possibilities for
machines of this type require that classification rulings be
issued on a case-by-case basis.
Sincerely,
John Durant, Director
Commercial Rulings Division