CLA-2: RR:CTF:TCM H005123 KSH
Port Director
U.S. Customs and Border Protection
605 West Fourth Avenue
Suite 230
Anchorage, AK 99501-2252
Attn: Caroline Takaki
RE: Application for Further Review of Protest 3195-06-100298
Dear Port Director:
This is in reply to your correspondence forwarding Application for Further Review of Protest (AFR) 3195-06-100298, filed by Barlow and Associates, on behalf of its client, Plexus Manufacturing.
FACTS:
The merchandise at issue is printed circuit assemblies (PCAs) which are imported to be incorporated into one or more of six models of encoders. The PCAs consist of a fiberglass board onto which electrical circuits are etched and populated with resistors, capacitors, transistors, inductors, integrated circuits and connectors. The principal function of the encoders, into which the PCAs are assembled, is digital data compression and statistical multiplexing (i.e., combining multiple digital signals into one signal for transmission over a line). The encoders accept various signals from different sources and protocols. The signals are organized and managed to maximize use of available bandwidth. Protestant states that the encoders are principally utilized by broadband integrated service providers who offer multi-services such as digital television, internet and telephony.
The literature submitted for the encoders indicates that each model offers MPEG-2 and/or MPEG-4 video compression and provides in depth information concerning its relative audio or video specifications. There is no evidence that the encoder can transmit data signals other than audio or video.
The protest is against Customs and Border Protection’s (CBP)
classification and liquidation of one entry of printed circuit assemblies under heading 8529 of the Harmonized Tariff Schedule of the United States (HTSUS).
On March 2, 2005, protestant entered the merchandise subject to this protest in subheading 8529.90.0060, HTSUS, which provides for: "TV signal transmission apparatus.” A corrected entry was subsequently filed reclassifying the merchandise in subheading 8517.90.4400, HTSUS, which provides for “Electrical apparatus for line telephony or line telegraphy, including line telephone sets with cordless handsets and telecommunication apparatus for carrier-current line systems or for digital line systems; videophones; parts thereof: Parts: Other: Printed circuit assemblies: For telegraphic apparatus.”
On June 6, 2005, a CBP Form 28, Request for Information was issued seeking information pertaining to, among other items, what the merchandise is, where and how it is used and exactly how it operates. On August 10, 2005, protestant submitted its reply to the CF 28. Protestant noted, in relevant part, that the encoder is designed for broadcast applications where optimizing bandwidth efficiency is of primary importance to video-on-demand service providers. Protestant also stated that the encoder does not receive and transmit TV programs nor do they directly transmit to a set top box. Protestant sent a follow up to its initial reply on January 20, 2006, in which it asserted that the printed circuit boards could not be classified as “parts of television apparatus” because they are not capable of receiving or processing any signal at the time of importation. In response to protestant’s reply to the CBP Form 28, a proposed Notice of Action was issued on January 3, 2006. A final Notice of Action was issued on March 6, 2006, to rate advance the entry. The merchandise was liquidated in subheading 8529.90.1300, HTSUS, which provides for printed circuit assemblies for television apparatus on March 24, 2006.
On September 14, 2006, protestant filed a protest and application for further review against the classification and liquidation of the merchandise in heading 8529, HTSUS. Protestant now claims that the merchandise should have been classified in heading 8517, HTSUS, as “apparatus for line telephony.” Protestant’s AFR request was approved.
ISSUE:
Whether the PCA’s are classified in heading 8529, HTSUS, as parts suitable for use solely or principally with the apparatus of headings 8525 to 8528, or heading 8517, HTSUS, as apparatus for line telephony.
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 of the entry made on March 2, 2005. (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 of the protest is warranted pursuant to 19 CFR §§174.24(b) and 174.25 as the protest is alleged to be inconsistent with a ruling of the Commissioner of Customs or his designee, or with a decision made at any port with respect to the same or substantially similar merchandise. Specifically, protestant cites to New York Ruling Letters (NY) M80819, dated March 8, 2006; NY R02506, dated September 8, 2005; NY R03164, dated February 10, 2006; NY R00326, dated May 11, 2004; NY R03274, dated March 15, 2006; NY R00773, dated September 29, 2004 and Headquarters Ruling Letter (HQ) 963242, dated July 23, 2001.
Classification under the HTSUS is made in accordance with the General Rules of Interpretation. 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 may then be applied.
The 2005 HTSUS headings at issue are as follows: 8517 Electrical apparatus for line telephony or line telegraphy, including
line telephone sets with cordless handsets and telecommunication apparatus for carrier-current line systems or for digital line systems; videophones; parts thereof:
* * * *
Parts suitable for use solely or principally with the apparatus of
headings 8525 to 8528:
Note 2, to Section XVI, HTSUS, governs, in part, the classification of parts
of heading 8529, HTSUS. It states that:
Subject to note 1 to this section, note 1 to chapter 84 and to note 1 to chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules: (a) Parts which are goods included in any of the headings of chapters 84 and 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8485,
8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings;
(b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517;
(c) All other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8485 or 8548.
In understanding the language of the HTSUS, the Harmonized
Commodity Description and Coding System Explanatory Notes (ENs) may be utilized. The ENs, though not dispositive or legally binding, provide commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. CBP believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The EN’s to heading 8517, HTSUS, read in relevant part:
* * * *
(II) TELEGRAPHIC APPARATUS
This is essentially designed for converting characters, graphics, images or other data 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 characters, graphics, images or other data or into the characters, graphics, images or other data themselves.
* * * *
(IV) APPARATUS FOR CARRIER-CURRENT LINE SYSTEMS OR FOR DIGITAL LINE SYSTEMS
These systems are based on the modulation of an electrical carrier-current or of a light beam by analogue or digital signals. Use is made of the carrier-current modulation technique and pulse code modulation (PCM) or some other digital system. These systems are used for the transmission of all kinds of information (characters, graphics, images, or other data, etc.).
This includes :
(A) Multiplexers of all categories and related line equipment for metal or optical-fibre cables. “Line equipment” includes transmitters and receivers or electro-optical converters.
* * * *
(C) Data compressors/decompressors (codecs) which have the capability of transmission and reception of digital information.
In accordance with the terms of Note 2(b) to Section XVI, HTSUS, it is
necessary to determine whether the PCAs are solely or principally used as a part of goods of heading 8517, HTSUS, or heading 8525, HTSUS.
Protestant argues that the encoders into which the printed circuit board
assemblies are incorporated function as multiplexers and digital data compressors/de-compressors and are principally used in the transmission of all kinds of information (characters, graphics, images, or other data, etc) over line equipment for telephone service, cable television and internet connection. Accordingly, protestant argues that the encoder fits the exemplars listed in the EN to heading 8517, HTSUS.
Protestant maintains that heading 8525, HTSUS, is too narrow in scope to capture the encoders as the encoders are principally used to transmit digital data for multiple services including telephony, television and internet. As such, protestant claims that the PCA’s which are incorporated into the encoders cannot be classified in heading 8529, HTSUS.
The encoders at issue here are used to transmit video and audio signals. Before multiplexing the audio and video signals which will be transmitted, the encoder compresses or reduces the number of bits of data that represent the original video and audio signals. Though the digital stream output by the encoder may be transmitted over a telephone line, the encoders do not prepare, transmit, or receive telephonic signals. The end user of the encoders is irrelevant inasmuch as classification must be determined by the type of signal being transmitted. As previously indicated, the encoders are used to transmit video and audio signals. There is no evidence that the encoder can transmit telephonic data signals. See footnote 1, supra.
Protestant also argues that classification in heading 8517, HTSUS, is supported by the following rulings: NY M80819, dated March 8, 2006; NY R02506, dated September 8, 2005; NY R03164, dated February 10, 2006; NY R00326, dated May 11, 2004; NY R03274, dated March 15, 2006; HQ 963242, dated July 23, 2001 and; NY R00773, dated September 29, 2004. In NY M80819, equipment utilized by cable television and telecom companies for Voice over Internet Protocol, Digital Subscriber Line and Video On Demand was classified in heading 8517, HTSUS. In NY R02506, optical transmitters designed to allow cable providers the ability to provide voice and data transmission was classified in heading 8517, HTSUS. In NY R03164, a GM Node designed to deliver video and high speed data over hybrid/coax networks was classified in heading 8517, HTSUS. In NY R00326, PCA’s with switching equipment to connect central office switches of telecommunications service providers was classified in heading 8517, HTSUS. In NY 03274, long-haul telecommuncations line systems were classified in heading 8517. In HQ 963242, statistical multiplexers used to combine multiple channels of communication to share a single phone line connection to a computer was classified in heading 8517, HTSUS. Lastly, in NY R00773, an integrated multiservice platform was classified in heading 8517, HTSUS.
The encoders are distinguishable from the merchandise at issue in the aforementioned rulings insofar as the merchandise identified in each of the rulings above was capable of transmitting a telephonic data signal. For instance, in NY M80819, the merchandise supported both short and long haul transmission and provided broadcast/narrowcast video, voice and data. None of the information submitted by the protestant supports a finding that the encoder into which the PCA is incorporated can transmit telephonic data signals.
Protestant contends that the addition of a new subheading in heading 8517 of the 2007 HTSUS, evidences an intent to clarify that new digital technology transmission apparatus handling multiservice signals belongs in heading 8517, HTSUS. The PCAs subject to the instant protest were entered prior to February 3, 2007, the effective date of the 2007 HTSUS, and as such are
governed by the HTSUS in effect at the time of entry, and the 2007 HTSUS text is not germane to this discussion. We note, however, that the 2007, HTSUS, specifically excludes apparatus for the transmission or reception of radio-broadcasting or television signals of heading 8525, HTSUS (i.e., audio and video signals).
The encoders, which transmit video and audio signals, are classifiable in heading 8525, HTSUS, as “Transmission apparatus for radiotelephony, radiotelegraphy, radiobroadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras; still image video cameras and other video camera recorders; digital cameras.” In accordance with Section XVI, Note 2(b), the PCA’s, which are parts of the encoder, are classified in heading 8529, HTSUS, as “Parts suitable for use solely or principally with the apparatus of headings 8525 to 8528.”
HOLDING: By application of GRI 1 and Section XVI Note 2(b), the PCAs are classified in heading 8529, HTSUS. They are specifically provided for in subheading 8529.90.1300, HTSUS, as "Parts suitable for use solely or principally with the apparatus of headings 8525 to 8528: Other: Printed Circuit assemblies: Of television apparatus: Other: Other.” The general, column one rate of duty in effect at the time of entry was 2.9% ad valorem.
Since the rate of duty under the classification indicated above is the same as the liquidated rate, you are instructed to deny 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