CLA-2 OT:RR:CTF:EMAIN HQ H302181 TPB
Ashish Sharma
Chief Marketing Officer, EVP IoT & Mobile Solutions
Inseego Corp.
300 Scranton Road, Suite 300
San Diego, CA 92121
Re: Binding ruling request on the tariff classification of certain cellular mobile hotspots
Dear Mr. Sharma:
The following is our decision to your November 14, 2018 request for a binding ruling on the classification of five models of “MiFi™” wireless hotspot devices under the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
According to your submission, the products are portable devices that provide broadband connectivity to users by receiving a signal from cell towers, broadcasting a wireless (Wi-Fi) signal providing a means for connecting a user device such as a laptop, tablet, or mobile phone and enabling the reception, transmission or regeneration of voice, image and other data from or to the user device via the internet. The five products at issue here communicate with the cell towers through a connection to a telecom carrier.
ISSUE:
What is the classification of the “cellular hotspot” device under the HTSUS?
LAW AND ANALYSIS:
Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.
General Rule of Interpretation 1 provides that the classification of goods 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 2 through 6 may then be applied in order.
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) 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 these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
You note that the MiFi Hotspot device functions very similarly to a “modern card” or “modem stick” that operates by being plugged in to a PCl slot or USB port of a computer to enable the computer to connect to a cellular network. The key difference is that the MiFi Hotspot does not “plug in” to the port of a computer, but rather emits a password-protected Wi-Fi signal (“Mi-Fi”) to which one or more devices - not limited to a computer - can connect at the same time. Thus, the primary function of a MiFi Hotspot is that of a modem.
Providing several online definitions of the word “modem” you note that the word is short for Modulator / Demodulator, a modem is a hardware component that allows a computer or other device, such as a router or switch, to connect to the internet. It converts or “modulates” an analog signal from a telephone or cable wire to a digital signal that a computer can recognize. Similarly, it converts outgoing digital data from a computer or other device to an analog signal.
You acknowledge that the MiFi can also be said to function as an “edge gateway,” also known as a “virtual router,” although you claim that this is not its primary function. You note that a gateway is defined as a device that provides communication to a remote network or autonomous system that is out of bounds for the host network nodes. In other words, “[a]ny network has a boundary or limit, so all communication placed within that network is conducted using the devices attached to it, including switches and routers. If a network node wants to communicate with a node/network that resides outsides [sic] of that network or autonomous system, the network wiII require the services of a gateway, which is familiar with the routing path of other remote networks.”
You note that a router is defined as a piece of hardware or software having a specific IP address and connected to network nodes for the transfer of data between computers. The difference between a gateway and a router is explained as follows: gateways regulate traffic between two dissimilar networks, while routers regulate traffic between similar networks. To be clear, modems connect devices to the internet through encoding and decoding data through networks like telephone carriers, and gateways and routers connect devices to devices, or networks to networks.
In your view, these products are effectively modems and are required to be connected to another phone in order to function. As such, they should not be considered within any of the subheadings provided for under 8517 within the
description: “Telephone sets, including telephones for cellular networks or for other wireless networks,” which consist of subheadings 8517.11; 8517.12; and 8517.18. Rather, you believe that the products are more accurately provided for as “Other apparatus for 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)” and specifically within subheading 8517.62 as “Machines for the reception, conversion and transmission or regeneration of voice, images or other data,
including switching and routing apparatus.”
We agree that the product in question meets the terms of heading 85.17, HTSUS. With regard to the subheading, we also agree that it would not be classified within any of the subheadings provided for under heading 85.17 within the description: “Telephone sets, including telephones for cellular networks or for other wireless networks,'' which consist of subheadings 8517.11; 8517.12; and 8517.18.”
Subheading 8517.62 provides for “Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus.” This provides an apt description of the products at issue.
With regard to the statistical subheading, we note that subheading 8517.62.0010 provides for “Modems, of a kind used with data processing machines of heading 84.71.” However, the product at issue is not of a kind used with data processing machines of heading 84.71. These are standalone, portable devices that enable multiple types and numbers of devices to connect to the internet. Therefore, they are not classified under that provision.
Subheading 8517.62.0020 provides for “Switching and routing apparatus.” As mentioned above, these devices do function as routers and could be classified under this subheading. However, they also function as cellular modems, which would be classified under subheading 8517.62.0090.
Considering the two subheadings at issue, it is our opinion that the principal function of this device is to provide a connection to the internet. That function is provided for by the cellular modem. The devices at issue do not connect together multiple devices on the same network without first connecting to the internet. They only enable one or more devices to access the internet and transmit and receive data over that network. These products simply provide internet connectivity via LTE or other cellular network for internet enabled devices. They are primarily used to provide internet
connections remotely when a traditional internet connection is not available or suitable. As such, it is our opinion that the modem provides the principal function.
Taking the foregoing into consideration, we agree that the products in question are classified under subheading 8517.62.0090, HTSUS, which provides for “…Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: Other.”
HOLDING:
Based on the forgoing, by application of GIRs 1, 3(b) and 6, the “MiFi™ hotspots” are classified under heading 85.17, more specifically under subheading 8517.62.0090, HTSUS, which provides for “Telephone sets…; other apparatus for the transmission or reception of voice, images or other data…: Other apparatus for 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): Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: Other”. The 2019 column one, general rate of duty for merchandise of this subheading is free.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov/tata/hts/.
Sincerely,
Gregory Connor, Chief
Electronics, Machinery, Automotive, and International Nomenclature Branch