OT:RR:CTF:EMAIN H341609 JRG
Center Director
Electronics Center of Excellence and Expertise
U.S. Customs and Border Protection
301 E. Ocean Blvd.
Long Beach, CA 90802
RE: Application for Further Review of Protest No. 3901-24-131277; Classification of Certain Direct Attach Copper Cable Assemblies from China
Dear Center Director:
This is our decision regarding an Application for Further Review (AFR) of Protest No. 3901-24-131277, filed on behalf of Material in Motion LLC. (Protestant). The Protest and AFR concern the classification of certain Direct Attach Copper Cable Assemblies (DACs) from China under the Harmonized Tariff Schedule of the United States (HTSUS). The AFR was forwarded to this office for consideration. This decision also considers supplemental information received via email on October 10, 2024.
FACTS:
The DACs consist of a twin-axial copper cable with two or more small form factor pluggable (SFP) transceivers terminating the cable at each end. The DACs are fitted with two to eight octal small form factor pluggable (OSFP) or quad small form factor pluggable (QSFP) transceivers, which contain an integrated EEPROM chip, “allow[ing] the module to identify itself and the type of cable attached to it in order to allow the active equipment to operate in the proper mode.” The OSFPs/QSFPs also contain both host and media interfaces. The host interface transmits and receives signals from the host, through which the transceivers inform the host of the types of interfaces the DACs support while also defining the application bitrate, the number of data lanes, signaling rate per data lane, modulation scheme, and the maximum supported media interface lane count. The media interface sends signals into the media, the copper cable, and receives the transmitted signals. While DACs’ OSPF/QSPF transceivers have their “optical-to-electrical circuit components removed,” they are designed with Tx/Rx circuitry that converts a host machine’s two-voltage binary signal to a modulated Pulse Amplitude Modulation, four level (PAM4) signal suitable to send over the copper cable media and, subsequently, converts the electrical PAM4 signal received back to the binary signal on the other end.
The DACs have 16 differential pairs (8 data lanes) that form the cable extending from an OSFP module, and 8 differential pairs (4 data lanes) that make up the cable extending from an QSFP module. The DACs have two QSFP modules on the machine end, each with 4 transmitter and 4 receiver circuits connected to 8 twin-axial wires. The DACs’ 16 twin-axial wires then meet at the other end where they are connected to the transmitter and receiver circuits of the OSFP module.
The subject DACs were entered between March 27, 2023, and May 7, 2023. The DACs were then liquidated between February 23, 2024, and March 29, 2024, under heading 8544, specifically subheading 8544.42.20, HTSUS, which provides for “Insulated (including enameled or anodized) wire, cable (including coaxial cable) and other insulated electric conductors, whether or not fitted with connectors; optical fiber cables, made up of individually sheathed fibers, whether or not assembled with electric conductors or fitted with connectors: Other electric conductors, for a voltage not exceeding 1,000 V: Fitted with connectors: Other: Of a kind used for telecommunications.” As products of China, the DACs were subject to an additional 25 percent ad valorem duty imposed by heading 9903, HTSUS, specifically subheading 9903.88.03, which provides for “Articles the product of China, as provided for in U.S. note 20(e) to this subchapter and as provided for in the subheadings enumerated in U.S. note 20(f) [to this subchapter].”
On August 16, 2024, Protestant filed the instant Protest and AFR. Protestant argues the DACs are properly classified in heading 8517, HTSUS, specifically subheading 8517.62.00, HTSUS, which provides for: “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 8443, 8525, 8527 or 8528; parts thereof: 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.”
Protestant contends the DACs are composite goods, comprised of high-speed cables and OSPF/QSPF transceivers, with the transceivers imparting the cable assemblies’ principal function under Note 3 to Section XVI, HTSUS, and essential character under GRI 3(b). Protestant states the DACs’ OSPF/QSPF transceivers interface with the network structure by “both transmitting and receiving data” and are, consequently, classified in subheading 8517.62.00, HTSUS. Given Protestant contends the DACs’ OSPF/QSPF transceivers impart their principal function and essential character, Protestant asserts the DACs are appropriately classified in subheading 8517.62.00, HTSUS. To support its assertions, Protestant cites to New York Ruling Letter (NY) N301717, dated December 4, 2018, where CBP classified a “direct attach passive SFP+ cable assembly” under subheading 8517.62.00, HTSUS.
ISSUE:
Whether the DACs are properly classified under heading 8517, HTSUS, or heading 8544, HTSUS.
LAW AND ANALYSIS:
A decision on classification and the rate and amount of duties chargeable is a protestable matter under 19 U.S.C. §1514(a)(2). The subject Protest was timely filed on August 16, 2024, within 180 days of liquidation of each entry, pursuant to 19 U.S.C. § 1514(c)(3). Further Review of Protest No. 3901-24-131277 is properly accorded pursuant to 19 CFR § 174.24(a), as the decision against which the protest was filed is alleged to be inconsistent with a CBP ruling or decision with respect to the same or substantially similar merchandise, specifically NY N301717 (December 4, 2018).
Classification under the HTSUS is in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods is determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event 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 will then be applied in order.
The HTSUS headings under consideration are as follows:
8517 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 8443, 8525, 8527 or 8528; parts thereof:
* * *
8544 Insulated (including enameled or anodized) wire, cable (including coaxial cable) and other insulated electric conductors, whether or not fitted with connectors; optical fiber cables, made up of individually sheathed fibers, whether or not assembled with electric conductors or fitted with connectors:
Note 3 to Section XVI, HTSUS, provides the following:
Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as consisting only of that component or as being that machine which performs the principal function.
The subject DACs are composite machines, consisting of twin-axial copper cables, along which data is transmitted, and OSFP/QSFP transceivers, which facilitate the transmission of data across the copper cables. As such, the threshold inquiry, pursuant to Note 3 to Section XVI, HTSUS, is which of these components performs the DACs’ principal function.
The DACs’ principal function is imparted by the OSFP/QSFP transceivers. Although the transceivers do not contain optical-to-electrical circuit components, they convert binary logic signals to PAM4 signals for transmission across the copper cable media, while also generating signals to communicate with the host network device. Therefore, OSFP/QSFP transceivers not only facilitate the transmission of data across the copper cable media but are required for any signal transmission to occur. As such, the DACs’ OSFP/QSFP transceivers impart the article’s principal function. Accordingly, under GRI 1, the DACs are classified under heading 8517, HTSUS, as “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).” Lastly, classification of the subject DACs in heading 8517 is consistent with NY N301717, dated December 4, 2018, where CBP classified similar DACs under heading 8517, HTSUS.
HOLDING:
By application of GRIs 1(Note 3 to Section XVI) and 6, the Direct Attach Copper Cable Assemblies are classified under 8517.62.00, HTSUS, which provides for, “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 8443, 8525, 8527 or 8528; parts thereof: 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.” The general, column one rate of duty is Free.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8517.62.00, HTSUS, unless specifically excluded, were subject to an additional 7.5 percent ad valorem rate of duty. At the time of importation, an importer is required to report the Chapter 99 subheading, i.e., 9903.88.15, in addition to subheading 8517.62.00, HTSUS, listed above.
You are instructed to GRANT the Protest.
You are instructed to notify the Protestant of this decision no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel and the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/, or other methods of public distribution.
Sincerely,
Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division