CLA-2 OT:RR:CTF:TCM H014068 HkP
Ms. Melissa Hoffman
Compliance Import Specialist
Ericsson, Inc.
6300 Legacy Drive
Mailstop EVW 1-B-5
Plano, TX 75024
RE: Classification and Country of Origin of the “TEMS™ Pocket” device
Dear Ms. Hoffman:
This is in response to your request submitted on May 31, 2007, to the National Commodity Specialist Division of U.S. Customs and Border Protection (“CBP “) requesting a binding ruling on behalf of Ericsson, Inc. At issue is the proper classification and country of origin of the “TEMS™ Pocket” device under the Harmonized Tariff Schedule of the United States (“HTSUS “). Your request was forwarded to this office for a response. In reaching our decision we have taken into consideration additional information and the sample provided by you to this office in August 2007, as well as information provided during a teleconference on September 19, 2007.
FACTS:
TEMS™ is an Ericsson company which develops, markets, and sells testing equipment for wireless networks. TEMS is not an acronym.
The TEMS Pocket is a commercially available fully functional cellular phone onto which TEMS network testing software has been loaded. According to the information submitted, TEMS software allows a cellular phone to function as a testing tool for telecommunication networks. The TEMS Pocket is used by network engineers to verify, maintain and troubleshoot mobile networks as well as for basic cell planning tasks. Collected data can be stored in the handset for later transfer to a computer. The product literature lists some of the key features of the TEMS Pocket as:
Includes a Sony Ericsson K790i, K790a, K800i or Nokia N80 mobile phone
Measures WCDMA 2100 MHz and GSM/GPRS/EDGE 850/900/1800/19000 MHz
Records logfiles for later post-processing analysis
Generates network event notifications
Clearly presents essential network information on the mobile standby display. Also displays channel information and performance measurements during WAP browsing
Measures EGPRS and WCDMA data performance
Provides cell control options including locking on RAT, locking on cell, channel and band, and modifying cell barred behavior
Supports FTP for networking troubleshooting and logfile transfer
Automates call handling, logfile recording, and transfer to server via FTP
Allows data collection in places that are hard to reach with traditional drive-test tools and methods
The cellular phone handset is designed in Sweden and is typically assembled in China or Malaysia. The phone incorporates a camera, music and video player, and an FM radio, and can connect to the Internet. After assembly, the handset is shipped to Sweden where the TEMS software is loaded on to it and tested. According to Ericsson, the TEMS software adds approximately $2500 worth of value to the phone. A sample of the TEMS Pocket has been provided for our review.
During our teleconference, Ericsson informed CBP that the TEMS Pocket connects to a cellular network as an ordinary phone and that this is the only way in which it can connect to the network to be tested. When the phone is turned on, technical information concerning the network is immediately displayed. CBP was also informed that some of the displayed information is calculated aggregated data. For example, information concerning signal strength for a particular channel is shown as a ratio of signal strength to interference. In order to use the TEMS Pocket as a cellular phone, the TEMS software has to be manually disabled.
According to the product literature, the TEMS Pocket has several data presentation views. Combined views display information valid for all radio access technology. For example, the PDP context view displays PDP addresses and PDP context settings for each address, including the NSAPI and APN. The WCDMA views display cell and network identity along with Universal Terrestrial Radio Access (UTRA) carrier RSSI (Received Signal Strength Indication). For example, the WDCMA Cells view displays UARFCN, cell status, scrambling code, RSCP, Ec/No and path loss for each cell in active set and serving/monitored cells. The GSM/GPRS views contain serving cell ARFCN, BSIC and RxLev, and cell and network identity in addition to other information listed in the literature.
In addition, the TEMS Pocket has several functions that allow the user to control the operation of the phone. According to the literature, these functions are essential for troubleshooting and verification in the field. From the Cell Control menu the user can select multiple actions such as:
- Lock to RAT (Off/WCDMA/GSM)
- Lock Cell WCDMA (Off/Set UARFCN/SC)
- Lock ARFCN GSM (Off/Set ARFCN)
- Lock to Band GSM (Off/850/900/1800/1900)
- Ignore cell barred (Off/On)
- Reset control settings to default off state
The TEMS Pocket is imported packaged together with a memory stick, battery and charger, USB cable, lanyard, hands free headset and software user guides.
Ericsson contends that the correct classification of the TEMS Pocket is subheading 9030.40.0000, HTSUSA, which provides for telecommunication testing equipment.
ISSUE:
What is the correct classification of the TEMS Pocket device under the HTSUS?
What is the country of origin of the TEMS Pocket device?
LAW AND ANALYSIS:
Classification
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 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 HTSUS provisions 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 the 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:
Telephone sets, including telephones for cellular networks or for other wireless networks:
* * *
8517.12.00 Telephone sets for cellular networks or for other wireless networks …..
9030 Oscilloscopes, spectrum analyzers and other instruments and apparatus for measuring or checking electrical quantities, excluding meters of heading 9028; … :
* * *
9030.40.0000 Other instruments and apparatus, specially designed for telecommunications (for example, cross-talk meters, gain measuring instruments, distortion factor meters, psophometers) …..
Legal Note 3 to Chapter 90 provides that note 3 to Section XVI also apply to Chapter 90. Note 3 to Section XVI provides:
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 if consisting only of that component or as being that machine which performs the principal function.
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the HTSUS at the international level. While not 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.
EN 90.30(B) explains, in relevant part, that heading 9030 “includes a wide range of electrical or electronic instruments used in radio-communications or telecommunications.” Included in this range are instruments and apparatus such as transmission level indicators, instruments for measuring interference, and cross-talk meters, which are used on telephone circuits for measuring various quantities.
It is your contention that principal function of this device is to test mobile networks. As such, you believe that it is properly classified in subheading 9030.40.0000, HTSUSA, as instruments and apparatus for measuring or checking electrical quantities, specially designed for telecommunications, and not as a cellular phone.
We agree. The TEMS Pocket measures the performance of data and signal transmissions (EGPRS and WCDMA) and displays system data for cell access, selection and location, serving cell, ARFCN of traffic channel, used timeslots and coding schemes, along with uplink and downlink (logic link control) LLC and RLC (radio link control) performance, among other functions. In addition, through the operation of the TEMS software, certain functions of the phone can be turned off in order to assist in the testing process. For example, the TEMS Pocket can be instructed to “Lock to RAT”, that is, turn off or select WCDMA or GSM (data and signal transmissions) or to “Lock to Band GSM”, that is, turn off or select a certain GSM frequency band. Finally, although the TEMS Pocket is also a fully functional cellular phone, the phone’s principal function in this device is to enable the TEMS software to connect with the cellular network to be tested.
Based on the foregoing, we find that the TEMS Pocket meets the terms of heading 9030, HTSUS, as explained by EN 90.30(B), because it is a device used for measuring or checking electrical quantities, specifically in telecommunication networks. It is classified in subheading 9030.40.0000, HTSUSA, as other instruments and apparatus specially designed for telecommunications.
The TEMS Pocket is imported packaged together with a memory stick, battery and charger, USB cable, lanyard, hands free headset and software user guides. GRI 3(b) provides that goods put up in sets for retail sale shall be classified as if they consisted of the material or component which gives them their essential character. EN (X) to GIR 3(b) explains:
For the purposes of this Rule, the term “goods put up in sets for retail sale” shall be taken to mean goods which:
(a) Consist of at least two different articles which are, prima facie, classifiable in different headings. Therefore, for example, six fondue forks cannot be regarded as a set within the meaning of this Rule;
(b) Consist of products or articles put up together to meet particular need or carry out a specific activity; and
(c) Are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards).
EN (VIII) to GIR 3(b) explains that “the factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.”
All the items under consideration here are classifiable in different headings, are “put up together” to enable a user to conduct testing of telecommunication networks, and are offered for sale directly to users without repacking. Consequently, the items may not be classified separately under their respective classifications. Furthermore, CBP finds that the item which imparts the essential character of this set is the TEMS Pocket. It is the dominant component, by use and cost in relation to the other constituent components of the set. It is also the reason why a consumer would purchase the set.
Country of Origin
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. §1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender & Co., 27 CCPA 297, 302, C.A.D. 104 (1940). Part 134, U.S. Customs and Border Protection Regulations (19 C.F.R. §134) implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304.
Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines "country of origin" as “the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the ‘country of origin’ within the meaning of [the marking laws and regulations].” For country of origin marking purposes, a substantial transformation of an article occurs when it is used in manufacture, which results in an article having a name, character, or use differing from that of the article before the processing. However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983).
CBP has long held that the installation (downloading) of software onto a computer diskette amounted to substantial transformation of the diskette because the character of the diskette had changed from one of a blank storage medium to one with a predetermined electronic pattern encoded onto it. The use of the diskette had changed from a meaningless article of software to that of an encoded instruction guide that enabled a computer to perform various commands. See HQ 732087, February 7, 1990. See also, HQ 735027 (September 7, 1993) concerning the country of origin marking requirements for “MemoPlugs”, the hardware of which was imported into the U.S. and then programmed with anti-piracy software. See generally HQ 968000 (February 14, 2006) regarding substantial transformation of components of foreign origin used in the assembly of various electronic components.
As was stated in HQ 968000, in order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, or use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process will be considered when determining whether a substantial transformation has occurred; however, no one factor is determinative.
After considering all the circumstances, we find that the installation in Sweden of the TEMS software into the pre-existing cellular phones assembled in China or Malaysia substantially transformed the use and function of these phones. Once the TEMS software was installed into the phones in Sweden the phones, although still operational as such, became devices that are substantially used to measure and check telecommunication networks. We note that the concept of substantial transformation does not mandate “absolute” transformation, but only that an article gain a new name, character and use as a result of processing. This was accomplished once the TEMS software was loaded onto the phones in Sweden. As a result, we find that the country of origin of the TEMS Pocket is Sweden.
HOLDING:
By application of GRI 3(b), Legal Note 3 to Chapter 90, we find that the TEMS Pocket is classified in heading 9030, HTSUS. It is specifically provided for in subheading 9030.40.0000, HTSUSA, which provides for: Oscilloscopes, spectrum analyzers and other instruments and apparatus for measuring or checking electrical quantities, excluding meters of heading 9028 …: Other instruments and apparatus, specially designed for telecommunications (for example, cross-talk meters, gain measuring instruments, distortion factor meters, psophometers). The 2007 column one, general rate of duty is free.
Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov.
Based on the facts of this case, we find that the country of origin of the TEMS Pocket for marking purposes is Sweden.
A copy of this ruling letter should be attached to entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Gail A. Hamill, Chief
Tariff Classification and Marking Branch