Intelligent flight batteries classifiable under subheading 85076000

In re PN Trade and Services (CAAR Mumbai)

An intelligent flight battery is a lithium-ion rechargeable and removable battery to power a drone. As per HSN explanatory notes to heading 8507, these batteries. also known as electric accumulators, are characterised by the fact that the electrochemical action is reversible so that the accumulator may be recharged. They are used to store electricity and supply it when required. A direct current is passed through the accumulator producing certain chemical changes (charging); when the terminals of the accumulator are subsequently connected to an external circuit these chemical changes reverse and produce a direct current in the external circuit (discharging). This cycle of operations. charging and discharging, can be repeated for the life of the accumulator. Subheading 85076000 specifically mentions Lithium-ion based electric accumulators. Accordingly. the intelligent flight batteries are classifiable under subheading 85076000. The rate of duty i.e. basic customs duty (BCD) is 20%.

Two-way charging hub is used for charging the remote controller and three batteries in sequence. Up to 3 batteries can be inserted into the hub, which is connected to a separate USB charger. The hub automatically detects the battery with the most power and charges that one first. It can additionally act as a makeshift power bank. A USB Type-A output can draw from the battery’s power to provide up to 5V/2A to a compatible device. Heading 8537 covers boards. panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536. for electric control or the distribution of electricity. As per explanatory notes to heading 8537, these consist of an assembly of apparatus of the kind referred to in headings 8535 and 8536 (e.g., switches and fuses) on a board, panel, console. etc., or mourned in a cabinet, desk, etc. This heading also includes “programmable controllers” which are digital apparatus using a programmable memory for the storage of instructions for implementing specific functions such as logic. sequencin^g. timing. counting and arithmetic, to control, through digital or analogue input/output modules, various types of machines. Therefore, a two-way charging huh merits classification under 8537, specifically under subheading 85371000 (for a voltage not exceeding 1000 V). The rate of duty is 15%.

The impugned propellers are used to provide thrust to WI mini 3 pro drone. Subheading 88071000 specifically mentions, inter-alia, propellers to be used with drones falling under heading 8806. Therefore, these items are classifiable under subheading 88071000. The rate of duty is 2.5%.

The screws for propellers are made of stainless steel and have standard threading. The goods are classifiable under subheading 73181900 as other threaded screws of steel. The rate of duty is 15%.

The shoulder bag is used to store/carry one drone and accessories like one remote controller, three batteries, one charging hub, propellers, an ND filter set, a data cable, and an SD card. The interior has a divided compartment style. The outer surface is made up of Polyurethane (PU) sheeting of plastic, i.e., synthetic leather. The bag is designed to provide storage, protection, portability, and organization to a drone and its accessories. The applicable subheading is 42029200, which provides for “other containers or cases; with outer surface of sheeting of plastics”. The rate of duty is 15%.

The USB type-C cable is to be used for the two-way communication of information and data and/or DC voltage between the connected equipment. The cable is insulated by plastic material. There are standard connectors on both ends. The applicable sub-heading is 85444220, which provides for “Insulated wire, cable and other insulated electric conductors; Other electric conductors, for a voltage not exceeding 1,000 V; Fitted with connectors; Plastic insulated”. The rate of duty is 15%.

FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI

M/s. PN Trade and Services (having PAN  no. AACCN387 I F) filed an application on 25.07.2022 seeking advance rulings on the classification of WI Mini 3 Pro fly more kit and the rate of duty applicable to the said goods.

2. The applicant is predominantly engaged in the import of photography-related goods and their supply through the distribution system in the Indian market. The applicant intends to import a combo kit, namely DJI Mini 3 Pro Fly More Kit. They have stated that the combo kit is used specifically with DJI Mini Pro 3 drone. The said Unmanned Aerial Vehicle (UAV), incorporating a built-in camera for the purpose of aerial videography and photography, is categorised as a nano drone according to Drone Rules, 2021. The combo kit under consideration consists of the following items:

2.1 As per the applicant, the goods under consideration are specifically used with DJI Mini Pro 3 drones. Chapter 88 of the Customs Tariff Act, 1975 covers UAVs. The applicant stated that the said drone is classified under tariff entry 88069100. Heading 8807 covers parts of goods of headings 8801, 8802 or 8806. As the goods under consideration are solely used with WI Mini Pro 3, they are classifiable under headin^g 8807. specifically under tariff entry 88073000. The applicant has also stated that the imported goods are sold as a complete kit and are not intended to he sold as loose items.

2.2 In their CAAR-1 application form the applicant has stated that neither the questions raised are pendin^g in their case before any officer of customs, appellate tribunal or any court of law nor a similar matter raised in the question by the applicant has already been decided by the appellate tribunal or any court.

3. The applicant has specified that they intend to import the subject goods from Air Cargo Complex, Mumbai. Accordingly, the application was forwarded to the jurisdictional commissionerate for their comments on 26.07.2022. However, no reply has been received. though a reminder has also been sent on 30.08.22.

4. A personal hearing was fixed on 22.09.2022 at 12:00 PM. Shri Pratik Nishar appeared online for the hearing. On being asked as to why the individual items- bags, cable, batteries, under specific headings and not under CTH 88073000, he stated that the import will be made in kit form only and not as individual items. He was requested to produce a classification followed by the supplier. Further, he was also requested to explain the composition of each individual product of the kit in order to arrive at the correct classification. The time for submission of supplementary reply was given up to 29.09.2022.

4.1 The applicant made additional submission vide letter dated 28.09.2022. They have reiterated that the goods are specifically to be used with the drone. They have provided a detailed description of certain products below:

–> Shoulder hag: Separate compartment style for keeping the drone, remote and batteries and other accessories to provide safety while travelling. The material of synthetic PU leather is used.

–>  Mini 3 pro propellers are made of plastic material.

-> Screws for propellers are made of stainless steel and have standard threading.

->  Type C cable is insulated with plastic material.

The applicant has also submitted an invoice raised by the Hong Kong-based supplier M/s Happy Worth Limited. The supplier has classified the DJI mini pro fly more kit under HKHS 88079000.

5. I have considered all the materials placed before me in respect of the subject devices. I have gone through the submissions made by the applicant during the personal hearing. No reply has been received from the jurisdictional commissionerate. Therefore, I proceed to pronounce my ruling on the basis of information available on record as well as information gathered from other reliable sources. The issues before for discussion are the classification of the DJI Mini 3 Pro Fly More drone kit and the rate of duty applicable to the said products. The impugned product is a combo kit, which is sold to be used with all Mini 3 Pro drone. The subject kit consists of multiple articles classifiable under separate headings. Therefore, whether the goods are to be classified as a kit or each item is to be classified separately, needs to be decided.

5.1 As per General Rule for Interpretation (GRI) 3(b), -Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3 (a), shall he classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable”. Explanatory note X to GRI 3(b) is reproduced below:

(X) For the purposes of this Rule, the term “goods put up in sets Jr 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 a particular need or carry out a specific activity; and

(c) are put up in a manner suitable for sale directly to end users without repacking (e.g., in boxes or cases or on boards).

The impugned goods are presented as a kit consisting of separately classifiable items. These items are packed together for retail sale. Accordingly, the impugned goods satisfy conditions (a) and (c) mentioned above. However, it fails to satisfy the above-specified condition (b). These individual products do not meet a particular need. Further, they do not carry out a specific activity. For example, the shoulder bag and USB type-C data cable could be used for other purposes besides for the drone. As these products do not meet a particular need or carry out a specific activity, each product merits a separate classification.

5.2 General explanatory note HI (parts and accessories) to Section XVII is reproduced below:

It should, however, be noted that these headings apply only to those parts or accessories which compl^y with all three of the following conditions:

(a) They must not be excluded by the terms of Note 2 to this Section.

and (b) They must be suitable for use solely or principally with the alleles of Chapters 86 to 88

and (c) They must not be more specifically included elsewhere in the Nomenclature.

Elaborating further on the above-mentioned point (c), the explanatory notes state that parts and accessories, even if identifiable as for the articles of this Section, are excluded if they are covered more specifically by another heading elsewhere in the Nomenclature. From the product list, except propellers, all other products are mentioned elsewhere in the nomenclature. Therefore, the individual product merits classification as per their specific entry in the tariff.

5.3. Further, on the manufacturer’s website (https://store.dji.com/list/camera-drones?category=101%3D101.203.301&from=store-nav) these products are listed as separate items besides as a kit. When sold as a standalone item, for example, the intelligent flight battery is classified as a battery and not as part of a drone. Accordingly, the selections of products put up together and consisting of specifically mentioned items in the tariff elsewhere, would not constitute parts or accessories as a unit.

6. From the foregoing discussion, the goods will be classified as per their specific tariff entry. An intelligent flight battery is a lithium-ion rechargeable and removable battery to power a drone. As per HSN explanatory notes to heading 8507, these batteries. also known as electric accumulators, are characterised by the fact that the electrochemical action is reversible so that the accumulator may be recharged. They are used to store electricity and supply it when required. A direct current is passed through the accumulator producing certain chemical changes (charging); when the terminals of the accumulator are subsequently connected to an external circuit these chemical changes reverse and produce a direct current in the external circuit (discharging). This cycle of operations. charging and discharging, can be repeated for the life of the accumulator. Subheading 85076000 specifically mentions Lithium-ion based electric accumulators. Accordingly. the intelligent flight batteries are classifiable under subheading 85076000. The rate of duty i.e. basic customs duty (BCD) is 20%.

6.1 Two-way charging hub is used for charging the remote controller and three batteries in sequence. Up to 3 batteries can be inserted into the hub, which is connected to a separate USB charger. The hub automatically detects the battery with the most power and charges that one first. It can additionally act as a makeshift power bank. A USB Type-A output can draw from the battery’s power to provide up to 5V/2A to a compatible device. Heading 8537 covers boards. panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536. for electric control or the distribution of electricity. As per explanatory notes to heading 8537, these consist of an assembly of apparatus of the kind referred to in headings 8535 and 8536 (e.g., switches and fuses) on a board, panel, console. etc., or mourned in a cabinet, desk, etc. This heading also includes “programmable controllers” which are digital apparatus using a programmable memory for the storage of instructions for implementing specific functions such as logic. sequencin^g. timing. counting and arithmetic, to control, through digital or analogue input/output modules, various types of machines. Therefore, a two-way charging huh merits classification under 8537, specifically under subheading 85371000 (for a voltage not exceeding 1000 V). The rate of duty is 15%.

6.2 The impugned propellers are used to provide thrust to WI mini 3 pro drone. Subheading 88071000 specifically mentions, inter-alia, propellers to be used with drones falling under heading 8806. Therefore, these items are classifiable under subheading 88071000. The rate of duty is 2.5%.

6.3 The screws for propellers are made of stainless steel and have standard threading. The goods are classifiable under subheading 73181900 as other threaded screws of steel. The rate of duty is 15%.

6.4 The shoulder bag is used to store/carry one drone and accessories like one remote controller, three batteries, one char^ging hub, propellers, an ND filter set, a data cable, and an SD card. The interior has a divided compartment style. The outer surface is made up of Polyurethane (PU) sheeting of plastic, i.e., synthetic leather. The bag is designed to provide storage, protection, portability, and organization to a drone and its accessories. The applicable subheading is 42029200, which provides for “other containers or cases; with outer surface of sheeting ofplastics”. The rate of duty is 15%.

6.5 The USB type-C cable is to be used for the two-way communication of information and data and/or DC voltage between the connected equipment. The cable is insulated by plastic material. There are standard connectors on both ends. The applicable subheading is 85444220, which provides for “Insulated wire, cable and other insulated electric conductors; Other electric conductors, for a voltage not exceeding 1,000 V; Fitted with connectors; Plastic insulated”. The rate of duty is 15%.

6.6 The applicant in their CAAR-1 application inquired about the rate of duty applicable to the impugned goods. Accordingly, the rate of duty specified above for various goods is only the basic customs duty (BCD. However, the applicant is advised to refer to the ICEGATE website (https://www.icegate.gov.in/Webappl/index_imp.jsp) to know about the effective rate of duty on subject goods. which includes, besides BCD, various cesses, IGST levy, other duties, etc. .

7. In view of the aforesaid discussion, I rule that the goods under consideration are classifiable under the following subheadings of the Customs Tariff Act, 1975 having rate of duty (BCD), as specified: