CLA-2: OT:RR:CTF:TCM H052564 KSH
Port Director
Port of Alaska
U.S. Customs and Border Protection
605 W. 4th Avenue, Suite 230
Anchorage, AK 99501
RE: Application for Further Review of Protest No. 3195-08-100355; Security Transponder
Dear Port Director: This is in reply to your correspondence forwarding an Application for Further Review (AFR) of Protest No. 3195-08-100355, filed on behalf of NXP Semiconductor USA, Inc (Protestant). The protest is against U.S. Customs and Border Protection’s (CBP) classification and liquidation of five entries of security transponders under heading 8543 of the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The merchandise at issue is a wireless security transponder identified as the “PCF 7936AS.” The PCF 7936AS is used in vehicle immobilization applications. The transponder is mounted within an automobile ignition key. An antenna is mounted around the perimeter of the automobile ignition lock and connects to a base station located in the automobile. When in use, the base station energizes the antenna which creates an electromagnetic induction to power the transponder and is the sole source of power for the
transponder. The transponder sends data to the base station via this electromagnetic field. If the information transmitted to the base station from the transponder is authenticated, the automobile will start. Once connected to the electromagnetic field, the transponder also transmits data to and receives data from the automobile’s controller area network including odometer information, seat position and service information.
The transponder is composed of four components: (1) a contact-less interface; (2) control logic; (3) a calculation unit and; (4) a 256-bit EEPROM to record and store data received from the base station. The contact-less interface includes a rectifier, power-on reset, clock recovery, a modulator and demodulator. The control logic includes data acquisition and EEPROM access control.
Between October 6 and 13, 2007, protestant entered the merchandise subject to this protest in heading 8548, HTSUS, which provides for: “Waste and scrap of primary cells, primary batteries and electric storage batteries; spent primary cells, spent primary batteries and spent electric storage batteries; electrical parts of machinery or apparatus, not specified or included elsewhere in this chapter.” On March 22, 2007, a Request for Information was issued requesting a description of the function of the transponder, its components and the apparatus of which it is a part. On January 11, 2008, a Notice of Action was issued advising the protestant that the merchandise had been reclassified in heading 8543, HTSUS, which provides for “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof.” The merchandise was liquidated on August 15 and 22, 2008, in heading 8543, HTSUS.
On October 14, 2008, protestant filed a Protest and AFR against the classification and liquidation of the merchandise in heading 8543, HTSUS. Protestant now asserts that the security transponder is classified in heading 8523, HTSUS, which provides for: “Discs, tapes, solid-state non-volatile storage devices, 'smart cards' and other media for the recording of sound or of other phenomena, whether or not recorded, including matrices and masters for the production of discs, but excluding products of Chapter 37.” In the alternative, protestant argues for classification in heading 8517, HTSUS, which provides for: “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 8443, 8525, 8527 or 8528; parts thereof.” The protest was timely filed pursuant to 19 U.S.C. §1514 (c)(3).
ISSUE: Whether the security transponder is classified in heading 8517, HTSUS, as other apparatus for the transmission or reception of voice, images or other data, in heading 8523, HTSUS, as a solid-state non-volatile storage device or in heading 8543, HTSUS, as electrical machines and apparatus, having individual functions, not specified or included elsewhere in Chapter 85.
LAW AND ANALYSIS: Initially, we note that the matter protested is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification. The protest was timely filed within 180 days of liquidation. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, §2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)).
Further review is warranted pursuant to 19 C.F.R. §§174.24(a) and 174.25 because the protest is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts. Specifically, protestant alleges that this “matter and class of merchandise [has not been] previously reviewed by CBP.”
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRIs). GRI 1 provides that classification shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied.
The 2007 HTSUS headings under consideration are as follows:
8517 Telephone sets, including 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 8443, 8525, 8527 or 8528; parts thereof:
8523 Discs, tapes, solid-state non-volatile storage devices, 'smart cards' and other media for the recording of sound or of other phenomena, whether or not recorded, including matrices and masters for the production of discs, but excluding products of Chapter 37:
8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof:
* * *
Note 4 to Chapter 85, HTSUS, states, in relevant part:
For the purposes of heading 8523:
(a) "Solid-state non-volatile storage devices" (for example, "flash memory cards" or "flash electronic storage cards") are storage devices with a connecting socket, comprising in the same housing one or more flash memories (for example, "FLASH E²PROM") in the form of integrated circuits mounted on a printed circuit board. They may include a controller in the form of an integrated circuit and discrete passive components, such as capacitors and resistors;
The Harmonized Commodity Description and Coding System Explanatory Notes (EN), constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the headings. It is CBP’s practice to follow, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The Explanatory Notes to heading 8517, HTSUS, state, in pertinent part, that heading 8517, HTSUS:
[C]overs apparatus for the transmission or reception of speech or other sounds, images or other data between two points by variation of an electric current or optical wave flowing in a wired network or by electromagnetic waves in a wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include telephony, telegraphy, radio-telephony, radio-telegraphy, local and wide area networks.
* * *
The EN to heading 8523, HTSUS, provides, in relevant part:
Products of this group contain one or more electronic integrated circuits.
Thus, this group includes:
(1) Solid-state, non-volatile data storage devices for recording data from an external source (See Note 4 (a) to this chapter). These devices (also known as "flash memory cards" or "flash electronic storage cards") are used for recording data from an external source, or providing data to, devices such as navigation and global positioning systems, data collection terminals, portable scanners, medical monitoring appliances, audio recording apparatus, personal communicators, mobile phones, digital cameras and automatic data processing machines. Generally, the data are stored onto, and read from, the device once it has been connected to that particular appliance, but can also be uploaded onto or downloaded from an automatic data processing machine.
The media use only power supplied from the appliances to which they are connected, and require no battery.
These non-volatile data storage devices are comprised of, in the same housing, one or more flash memories ("FLASH E2PROM/EEPROM") in the form of integrated circuits mounted on a printed circuit board, and incorporate a connecting socket to a host appliance. They may include capacitors, resistors and a microcontroller in the form of an integrated circuit. Example of solid state non-volatile storage devices are USB flash drives.
The EN to heading 8543, HTSUS, provides, in relevant part:
This heading covers all electrical appliances and apparatus, not falling in any other heading of this Chapter, nor covered more specifically by a heading of any other Chapter of the Nomenclature, nor excluded by the operation of a Legal Note to Section XVI or to this Chapter.
* * *
This heading excludes :
* * *
(c) "Smart cards" (including proximity cards or tags) as defined in Note 4 (b) to this Chapter (heading 85.23).
* * *
The security transponder meets the terms of Note 4(a) to Chapter 85, HTSUS. Specifically, the security transponder transmits data using its contact-less interface and records non-volatile data (in its EEPROM chip). The security transponder does not require a battery and includes a capacitor. While it does not have a socket, it is electrically connected via an antenna and the electromagnetic field to the base station via a wireless connection, which performs the same function as a socket. Moreover, the wireless connectivity does not affect the function of the transponder. As such, it is classified in heading 8523, HTSUS.
Inasmuch as the security transponder is specifically provided for in heading 8523, HTSUS, in accordance with Note 4(a) to Chapter 85, HTSUS, it cannot be classified in heading 8543, HTSUS, by the terms of that heading. See EN 85.43. In addition, we note that the security transponder is not described by heading 8517, HTSUS, because it performs functions that are not described therein (i.e., recordation, storage and evaluation analysis). Further, it is distinguishable from New York Ruling Letter (NY) L80675, dated November 29, 2004, inasmuch as the transponder at issue therein only executed the functions of reception, conversion and transmission of signals but did not record, store or evaluate those signals.
HOLDING:
By application of GRI 1 and Note 4(a) to Chapter 85, HTSUS, the security transponder is classified in heading 8523, HTSUS. It is specifically provided for in subheading 8523.51.00 which provides for: “Discs, tapes, solid-state non-volatile storage devices, 'smart cards' and other media for the recording of sound or of other phenomena, whether or not recorded, including matrices and masters for the production of discs, but excluding products of Chapter 37: Semiconductor media: Solid-state non-volatile storage devices.” The general column one rate of duty at the time of entry was Free.
Since reclassification of the merchandise as indicated will result in a lower rate of duty as claimed you are instructed to allow the protest in full. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. No later than 60 days from the date of this letter, the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP homepage on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division