Handheld enterprise mobile computers classifiable under subheading 84713090

In re RET-Tech Private Limited (CAAR Mumbai)

M/s. RET-Tech Private Limited (the applicant, in short) filed an application before the Customs Authority for Advance Ruling, Mumbai (CAAR, in short) seeking advance rulings on the classification of the devices namely handheld enterprise mobile computers, having the following models: –

Table-1

2. The Applicant is engaged in the business of trading, designing, manufacturing, marketing and sale of Automated Identification and Data Capture (AIDC) products such as barcode scanners, barcode printers, mobile computers, POS printers and other information technology products utilised for primarily business and enterprise computing and IT solutions. The applicant intends to import the above-mentioned handheld mobile computers. These devices have Hard Keys (Volume up/down key, left/right scan, power, reset), Soft Keys (Three touch keys: Back, Home. Menu). are powered by Qualcomm or Mediatek Octa-core processor and possess the Android (7/8/9/10/11 or 1 2) operating system. They are equipped with front and rear cameras, battery and gorilla glass. They support GPS, Bluetooth and wi-fi system. They have multi touch capacitive screen, motion sensor equipped and have micro-SD card extension capability. As per the applicant, these devices are computers used for scanning barcode and processing data in order to increase efficiency of functions in supply chain management such as inventory management, asset tracking, stock taking etc. The product carries a processing ability of a laptop and the functionality of a scanner in a single wireless device. They essentially perform ID and 2D barcode scanning and additionally, have features like Wi-Fi/Bluetooth connectivity, data transfer etc. The predominant use of these handheld mobile computers is in warehousing/logistics/inventory operations for data capturing/storage and its transmission for allied functions. The applicant further submits that although many models of handheld mobile computers do not have the feature of connecting to a cellular network. they operate on wireless LAN connectivity to fulfil their functions. though the handheld mobile computers can perform their function even in areas where cellular network or Wi-Fi connectivity is not available. Some models may have such cellular network connectivity feature in addition to wireless LAN connectivity. Out of 13 devices specified in Table-1 above. devices at sl. nos. 1-5 do not have features to connect to cellular network whereas those at si. nos. 6-13 have feature to connect to cellular network.

2.1 The applicant has submitted that the handheld mobile computers proposed to be imported by them are classifiable under heading 84.71 as automatic data processing (ADP) machines, for the following reasons:

a. These devices satisfy the criteria set out in heading 84.71 to be classified as ADP machines:

b. The principal function performed by these devices is that of processing data, and thus, they merit classification as ADP.

c. The proposed imports are commercially known as “mobile computers/ touch computers” and not as phones.

 2.2 It is submitted that the classification of the goods under the Customs Tariff is governed by the principles as enumerated in the General Rules of Interpretation (`GRI’) set out in the Tariff. As per Rule 1 of the GRI, classification of the products shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require. according to the remaining Rules of the GRI. The product in question is an Automatic Data Processing Machine (ADP) and is specifically covered under the Heading 84.71.

Heading 84.71, inter alia, covers automatic data processing machines and units thereof. The Heading also includes portable ADP machines that do not require an external electrical output for functioning. The relevant entries of Heading 84.71 of are extracted in the table below:

Table-2

To qualify as an ADP Machine, the goods have to satisfy all the conditions mentioned in Note 5(A) to Chapter 84 and should not be covered by Note 5(D) and 5(E). Note 5A is extracted below:

5(A) For the purposes of heading 84.71, the expression “automatic data processing machines” means machines capable of:

i. Storing the processing program or programs and at least the data immediately necessary for the execution of the program;

ii. Being freely programmed in accordance with the requirements of the user;

iii. Performing arithmetical computations specified by the user; and

iv. Executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run.

The applicant has submitted that the handheld mobile computers in question comply with the above requirements, and therefore, are classifiable as ADP machines under CTH 84.71 as tabulated below: –

Table-3

Applicant has stated that the proposed imports satisfy all the conditions to be fulfilled by an ADP Machine. Thus, the proposed imports are ADP Machines.

2.3 The applicant contends that the HSN Explanatory notes for Heading 84.71 state that a complete automatic data processing unit must comprise of at least the following three units, namely, Central processing Unit, Input Unit and an Output Unit. The Handheld Enterprise mobile computers proposed to be imported contain all three of the above units. i.e.. input units in the form of a scanner, a central processing unit (inbuilt) in the form of processor and an output unit (the screen). Therefore, all the requirements to be an ADP machine is satisfied in the instant case. Thus, in terms of Rule I of the GIR, the mobile computer models in question are correctly classifiable under Heading 84.71 only. More specifically the products ought to be classified under Customs Tariff Item 8471 30 90 since they qualify the description given under sub-head 8471 30 i.e., they are portable automatic data processing machines, weighing not more than 10 kg, consisting of at least a central processing unit, a keyboard and a display and are not personal computers. Further, the products have specific professional grade barcode scanners in built into the device which feature emphasise how the scanning and processing function for the device is the primary function. This is what sets the device apart from the conventional phone/communication devices available in the market.

2.4 It is submitted that without prejudice to the foregoing submissions, Chapter Note 5D and 5(E) read with Note 5(C) are not applicable to the classification of Mobile Computers in question. Note 5(C) of Chapter 84 states that a unit can be treated as part of ADP system if the conditions mentioned therein are satisfied. However, this is subject to the Chapter Notes 5(D) and 5(E) ibid. The relevant portion of the Chapter Notes 5(C) are extracted below:

“Chapter Note 5

(C) Subject to paragraphs (D) and (E) below, a unit is to be regarded as being part of an automatic data processing system if it meets all of the following conditions:

(i) It is of a kind solely or principally used in an automatic data processing system;

(ii) It is connectable to the central processing unit either directly or through one or more other units; and it is able to accept or deliver data in dform (codes or signals) which can be used by the system.

Separately presented units of an automatic data processing machine are to be classified in heading 84.71.

Thus, it can be seen that the above Note is applicable only for units of ADP Machine. In the present case, the Handheld mobile computers in question are ADP Machines themselves. Therefore, the above Note is not applicable to the Handheld mobile computers in question.

2.5 Similarly, it is submitted that Chapter Note 5D is not applicable to ADP Machines, but
is instead only applicable to Units of ADP Machine.

(D) Heading 84.71 does not cover the following when presented separately, even if they meet all of the conditions set forth in Note 5 (C) above:

(i) Printers, copying machines, facsimile machines, whether or not combined;

(ii) 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);

(iii) Loudspeakers and microphones;

(iv) Television cameras, digital cameras and video camera recorders; (v) Monitors and projectors, not incorporating television reception apparatus.

Therefore, even this Chapter Note is not applicable to the Handheld mobile computers in question.

2.6. Applicant further submitted that Chapter Note 5(E) states that:

(g) Afachine.s incorporating or working in conjunction with an automatic data processing machine and performing a specific fimction other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings.

It is contended that aforesaid Note also will not apply in case of the handheld mobile computers proposed to be imported as they are ADP Machines themselves and not machines incorporating or working in conjunction with an ADP Machine. Therefore, in view of the above, it is submitted that the handheld mobile computers proposed to be imported are classifiable under Heading 84.71and more specifically, classifiable under Customs Tariff Item 8471 30 90.

2.7 The applicant submits that the product being an AUTOMATIC DATA PROCESSING MACHINE cannot be classified under the Heading 85.17 of the Customs Tariff. The Heading 8517 covers “Telephone sets, including telephones for cellular networks or for other wireless networks; 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) other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528”. The relevant extract of Heading 85.17. w.e.f. 01.01.2022, is reproduced below:

Table-4

Definition of smartphone as Note 5 to Chapter 85 is as below:

“For the purposes of heading 85.17, the term “sniartphones” means telephones for cellular networks, equipped with a mobile operating system designed to perform the functions of an automatic data processing machine such as downloading and running multiple applications simultaneously, including third-party applications, and whether or not integrating other features such as digital cameras and navigational aid systems”. HSN Explanatory notes for Heading 8517 on Page no. XVI-8517-1 states that:

“This heading covers 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 electro-magnetic waves in a wireless network.”

Further, the HSN Explanatory notes for Heading 8517 on Page XVI-8517-3 covers “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)”, wherein various types of devices that are covered under this entry are provided. In respect of subheadings 85176290 and 85176990, the applicant states that these are residuary entries and will only apply if products are not classified elsewhere. As explained above in detail, the imported handheld mobile computers are classifiable under heading 8471, and if not under 8471, then alternatively under subheading 851713 or 851714. Thus, these products cannot be classified under the residuary entry of 85176290 or 85 176990.

2.8 The applicant contends that the proposed imports are not classifiable under Heading 85.17 for the reasons that the proposed imports are not primarily meant for communication purposes. Communication abilities like that of a traditional telephone/mobile telephone is only an ancillary function that these mobile computers perform. And the fact that Handheld mobile computer is different from conventional cellular phones, as evident from below: ‑

Table-5

Therefore, the Handheld mobile computers proposed to be imported are not classifiable under CTH 8517.

2.9 The products in question are not classifiable as “smartphones”. It is further submitted that vide Finance Act, 2021, a new Custom Tariff Item has been introduced w.e.f. 1.1.2022: 8517 13 00 which will cover “Smartphones”. As per the definition given. the way it is worded. it is understood that the product (smartphone) is a telephone for cellular network, having additional features of ADP Machine and some more features. It is submitted that the above amendment shall not be applicable to proposed imports for the following reasons –

a. The definition itself shows that smartphones are telephones with few additional features of ADP machine. Unlike smartphones’ the proposed imports are essentially ADP Machine which have an additional feature of cellular connectivity. Thus, the principal and ancillary functions in proposed imports and smartphones, are diametrically opposite.

b. The way the proposed imports are built, it is evident that it is meant for rugged use and is not sleek like smartphones in similar price range. The proposed imports also don’t have most of the features there in smartphones of similar price range.

c. Furthermore, smartphones of the same price range as the impugned product, are marketed as luxury items for the personal use whereas the impugned products are purely used industrially. Their designs are not sleek or sophisticated like that of smartphones and are rather designed to be used in arduous environment and are made to withstand hardy environment.

d. As per the trade parlance, the products in question are known in the market as ADP Machines and not as smartphones or telephones.

e. Conventionally also, the products considered as smartphones are different from the proposed imports.

In view of the above, the handheld mobile computer models proposed to be imported are not smartphones as defined under Note 5 to Chapter 85 supra.

2.10 In support of their contention, the applicant submitted Circular No. 20/2013 dated 14.05.13 wherein a clarification regarding classification of “Tablet Computer” was issued which states that the difference between a “smartphone” and a “tablet computer”, is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it. Accordingly, the tablet computers are more appropriately classifiable in heading 8471. subheading 847130, by application of General Rules for Interpretation (GRI) of Import Tariff, 1 [Note 3 to Section XVI and Note 5(A) to Chapter 84] and 6″. The Circular also reaffirms the ruling of the World Customs Organisation, regarding tablet computers. As per the applicant, handheld mobile computers are similar to tablet computers based on the following characteristics:

a. Both devices are marketed with a focus on their data processing function:

b. Both devices are available for sale with SIM slots or without SIM slots.

c. Neither of the products is marketed as a replacement for conventional devices like cellular phones or mobile phones.

d. Both devices are portable alternatives to laptops and computers.

2.11 In relation to the afore-mentioned devices, the questions on which advance rulings have
been sought are as follows: ‑

1. Whether handheld mobile computers to be imported by the applicant are classifiable under the subheading 84713090?

2. If the answer to the above question is negative, then what would be the correct classification of mobile computers under the tariff of India?

The applicant in their CAAR-I form declared that they intend to import the impugned devices under the jurisdiction of Principal Commissioner/ Commissioner of Customs, Air Cargo

Complex, Sahar, Andheri (East); Import Commissionerate-II Chennai customs and Chennai VII-Air Cargo Commissionerate. New Custom House. Air Cargo complex, Chennai. Copies of applications, therefore, were forwarded to the jurisdictional commissioners of customs for comments.

3. The Air Cargo commissionerate, Chennai, one of the jurisdictional commissionerate through which the proposed imports are to take place, have forwarded the comments with regards to the application for advance ruling. The question no. I of the application has been replied to in affirmative. It has been opined that the principal function performed by the proposed imports is that of processing data akin to that of an ADP Machine. Scanning and processing of scanned data is the primary function of the said goods. As per submitted details Handheld Enterprise Mobile Computer satisfy the Conditions laid in Para 5(A) of Chapter note of HSN 84. As per submitted technical specifications, some of the models of Handheld Enterprise Mobile Computer have calling function like mobile phone but the goods have main function of Scanning and processing of scanned data. Hence as per Rule 3(b) of the GI Rules, the said goods are classifiable under CTI 84713090.

4. Personal hearing was held on 21.09.2022 at 1300 hrs. Shri D. Senthil Nathan represented the applicant. Sh. Senthilnathan explained that the difference in CTH 84713090 and CTH 85171300, produced two CAAR rulings in respect of similar products. Shri. Y. Shreenivas Murthy, Assistant Commissioner, representative of Chennai Air Cargo represented the Chennai Customs online. He stated his agreement with feedback received from ADC (Advance Ruling), New Customs House, Chennai. He requested to issue a ruling by upholding classification under CTH 84713050.

5. I have considered all the materials placed before me in respect of the subject devices. I have also gone through the submissions made by the applicant during the personal hearing. I have also gone through and taken on record the comments received from jurisdictional commissionerate of Air Cargo commissionerate, Chennai. Now, I proceed to pronounce my rulings on the basis of the above submissions, comments of jurisdictional authority and all the information available on record. The issue before me to decide is the correct classification of handheld mobile computers. These are portable devices used in enterprise environments to run mobile apps. capture barcodes. take photos and videos, and provide voice and data communications for workers and managers. These devices combine personal computer and scanning functions (applies to mobile computers and tablet computers) in a single device that can be outfitted with off-the-shelf or custom software applications that perform everyday tasks. such as monitoring deliveries, tracking assets, and managing inventory. And because they run on familiar operating systems such as Windows/Android, they offer the same functionality as a desktop computer or laptop. These processors are also equipped with a barcode scan engine and act as their own host, which means one can instantly update and edit information as it is captured. The applicant has-suggested heading 8471 as an appropriate classification for these devices. Due to insertion of following – “For the purposes of heading 84.62, a “slitting line” for flat products is a processing line composed of an uncoiler, a coil flattener, a slitter and a recoiler. A ‘cut-to-length line’ for flat products is a processing line composed of an uncoiler, a coil flattener, and a shear” as chapter note 5 to Chapter 84, the earlier Chapter notes 5 (A), (B), (C) & (D) are being referred to as Chapter notes 6 (A), (B), (C) & (D) in the following paras.

5.1 GRI I provides that the classification of goods shall be “determined according to the terms of the headings 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, GRIs 2 through 6 may be applied in order. In order to merit classification under heading 8471, it is clear, that these devices need to satisfy the requirements of note 6(A) to chapter 84, the said chapter note is reproduced below: ‑

For the p,urposes of heading 8471, the expression “automatic data processing machines, means machine capable of

(i) storing the processing programme or programmes and at least the data immediately necessary* the execution of the programme;

(ii) being freely programmed in accordance with the requirements of the user;

(iii) performing arithmetical computations specified by the user; and

(iv) executing, without human intervention, a processing programme which requires them to modify their execution, by logical decision during the processing run.

Therefore, there is a need to examine whether the features and specifications of the devices under consideration meet the criteria as laid down in the relevant chapter note reproduced above. The impugned devices, as seen in parA 2.2. appear to be able to satisfy the requirements of an ADP machine. Note 6(C) to chapter 84 specifies the conditions for a unit to be classified as being part of an automatic data processing system. However, from the working and features of the impugned devices, it appears that these are not units of ADP machines, but ADP machines themselves. Note 6(D) to chapter 84 lists certain separately presented products that are to be excluded from heading 8471, even if they can be classified as part of an ADP system. Note 6(E) to chapter 84 mentions that a machine incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings. As the impugned devices, as described by the applicant appear to be akin to ADP machines performing the tasks of data capture and its further processing, the notes 6(D) and 6(E) do not appear to have application in this case.

5.2. In respect of possible alternate heading 8517, there is a need to examine the features of these devices in the context of note 3 to section XVI of the tariff. Heading 8517 covers telephone sets, including smartphones and other telephones for cellular networks or/or 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 84.43, 85.25, 85.27 or 85.28. As the devices also have communication capabilities, including cellular connectivity in devices 6-13 of the table-1, classification under heading 8517 needs to be examined. Note 3 to section XVI of the tariff stipulates that, “Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to firm a whole and other machine 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”. From the note, it is clear that a composite machine performing various functions is to be classified according to the principal function performed by such a device. In the instant case, these devices combine computing and scanning functions for monitoring, deliveries, tracking assets. and managing inventory. They also have communication capabilities. However, for the products under consideration, automatic data processing appears to be the main function, while other functionalities of said machines are not different from auxiliary functions that could be seen on any computer, such as desktop or laptop computers. In circular no. 20/2013- Cus, dated 14.05.2013, clarification has been provided by the Board regarding the classification of “tablet computers” under heading 8471 stating that. “… The mobile phone calling ‘Unction could be provided by the products only as a supplementary function because it could not be activated without running an operating system of the devices…. These devices are not intended to be a substitute for a mobile phone to make voice calls, but, according to its main technical features is designed as a substitute for laptops. The difference between a “sinartphone” and “tablet computer”, is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it”. Thus, as per the said circular. tablet computers are classifiable under heading 8471 and not under heading 8517 despite the fact that the product is having cellular connection functionality, considering its principal function as automatic data processing. Similarly, in this case, the principal function of the impugned devices is barcode scanning and data processing for monitoring deliveries, tracking assets and managing inventory. Therefore, these devices appear to merit classification under heading 8471 and not under heading 8517.

5.3. With regard to the classification opinion of the 68th session of the Harmonized System Committee, it is observed that the committee has classified RFID/barcode readers with a mobile operating system capable of scanning and cellular connectivity under subheading 851713. This subheading covers smartphones. Note 5 to chapter 85 states that “For the purposes of heading 85.17, the term ‘smartphones” means telephones for cellular networks, equipped with a mobile operating system designed to perform the functions of an automatic data processing machine such as downloading and running multiple applications simultaneously, including third-party applications, and whether or not integrating other features such as digital cameras and navigational aid systems”. The note clearly states that these devices are telephones for cellular networks designed to perform the functions of ADP machines. However, the devices under consideration are principally not telephones for cellular networks. In fact, the devices at sl. nos. 1-5 in table-1 do not have the functionality of cellular connectivity. which shows that the SIM is not an integral part of these devices, as these devices are able to perform their primary function with or without the SIM card. These devices appear to have, wherever SIM is provided, telephony as an added function. As per circular no. 20/2013- Gus., dated 14.05.2013. “the difference between a “smartphone” and “tablet computer”, is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it”. The manufacturer is advertising these products as mobile computers. These devices are essentially ADP machines with additional connectivity capabilities, including cellular connectivity in 8 devices, as discussed in para. 5.1. The impugned devices have many features such as higher scanning capacity, data editing functionality. ruggedness and enterprise-level security features, which a smartphone for cellular connection lacks. These devices are used by enterprises to capture data. The products are used in inventory management, store receiving, order processing, package tracking, tracing delivering etc. These devices use Wi-Fi connectivity and Bluetooth for information sharing. Cellular connectivity is essentially used for GPS and information sharing. where wi-fi is not available. Cellular connectivity can also be used for making calls. Therefore, it is my considered opinion that the devices under consideration are not classifiable as smartphones.

6. In view of the foregoing discussions, I rule that the 13 devices listed in the table-I in the first paragraph of this ruling are classifiable under heading 8471 and more specifically, under subheading 8471 3090 of the first schedule to the Customs Tariff Act, 1975.