Classification of Amazon Echo Device C2H4R9 – Customs Authority Ruling

In re Amazon Wholesale India Private Limited (CAAR Delhi)

The Customs Authority of Advance Ruling, Delhi, recently issued a ruling on the classification of the Amazon Echo Device C2H4R9 (referred to as the subject goods). This ruling addresses questions related to the classification of the device, its features, and eligibility for customs duty benefits.

Applicant and Application: The applicant, Amazon Wholesale India Private Limited, sought an advance ruling under section 28-H of the Customs Act, 1962, regarding the classification of the subject goods. The application was registered on 09.03.2023.

Nature of the Subject Goods: The subject goods, Amazon Echo Device C2H4R9, are part of the Echo family of products. These devices are voice command-enabled and perform various functions, including answering questions, playing music, providing news and information, and controlling smart devices. They respond to the wake word “Alexa” and are Wi-Fi and Bluetooth-enabled.

Technical Details: The subject goods are compact, weighing 200 grams, with 512MB of RAM and advanced Bluetooth and Wi-Fi connectivity. They come with a built-in speaker, require the Alexa App for setup, and are powered by MediaTek MT 8519 processor.

Functionality: The devices capture voice commands, transmit them over the internet to Amazon services in the cloud (Alexa Voice Service), where they are processed and interpreted. The response is then sent back to the device for presentation to the user. The subject goods also support voice interactions, music playback, setting alarms, and controlling smart appliances.

Classification Dispute: The applicant argued that the principal function of the subject goods is communication, as they rely on voice commands and internet connectivity. They suggested classification under Sub-heading 85176290 based on Section Note 3 to Section XVI.

Counterargument: The Customs Authority countered that the primary function of the goods is to reproduce sound and act as speakers. They contended that even though the devices have communication capabilities, their principal function remains as speakers, leading to classification under Sub-heading 8518.

Applicability of Notifications: The applicant sought clarification on the applicability of customs duty notifications, including Notification No. 57/2017-Cus and Notification No. 12/2022-Cus.

Ruling: The Customs Authority ruled that the subject goods should be classified under Sub-heading 85182210, consistent with their principal function as smart speakers. They determined that benefits under Notification No. 57/2017-Cus were not applicable due to the classification. Additionally, the exemption under Notification No. 12/2022-Cus was found inapplicable as the subject goods fell under the category of hearable devices.

Conclusion: The Customs Authority’s ruling clarifies the classification of the Amazon Echo Device C2H4R9 as smart speakers under Sub-heading 85182210. It also highlights the inapplicability of certain customs duty benefits due to this classification. This ruling provides valuable insights into the customs classification of similar devices and their eligibility for duty concessions.

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

M/s Amazon Wholesale India Private Limited, 14th Floor, Unit 1401 to 1421, Block E. International Trade Tower. Nehru Place, New Delhi- 110019, having IEC No. 0513081950 and PAN-AAMCA0671Q (applicant, in short) has filed an application dated 02.03.2023, received in this office on 09.03.2023 seeking advance ruling under section 28-H of the Customs Act. 1962 before the Customs Authority for Advance Rulings. New Delhi (CAAR. New Delhi, in short).The application was accordingly registered under Serial No. 06/2023 dated 09.03.2023.

2. The applicant vide the aforesaid application, has sought ruling on the question of classification of the proposed item of import, Digital Media Receiver, Model No. C2H4R9 (subject goods. in short). Ruling has also been sought on applicability of various notification on import of the subject goods.

3.1 In reply to a question in Form CAAR-I i.e as to whether a similar matter as raised in the question(s) by the applicant has already been decided by the Appellate Tribunal or any court’?. the applicant has stated that. the subject Echo device covered under the present application is ne‘‘ and different from previous Echo devices. therefore. the present application is being filed.

3.2 As per the applicant, they now propose to import Digital Media Receiver having model no. C2H4R9, which is a new Echo family product: the Echo family devices, are voice command devices with multiple functions, including answering questions. playing music, reading news/audio-books, providing traffic. weather and other real-time information and controlling smart devices: the Echo family devices are communication devices in the form of smart speaker with or without display with Alexa Technology built in it: these devices respond to the name “Alexa”, which is commonly known as the ‘wake word’: this ‘wake word’ can be changed by the user to either “Amazon”. “Computer- or “Echo”. Further, the applicant has stated that, the subject Echo deN ice is a hands-free Alexa-enabled device that comes with an inbuilt speaker: the subject goods are compatible with Fire OS, Android, and iOS devices and are accessible via web browser i.e. Alexa App: the subject goods support Wi-fi and Bluetooth connectivity: with the help of the subject goods, a user can perform various functions such as voice interaction, music playback, making to-do lists. setting alarms, streaming podcasts, playing audio books, providing weather, traffic update. other real-time information and controlling smart devices.

3.3 The applicant has also submitted technical details of the subject goods as under :-

3.4 In reference to working of the subject goods. the applicant has stated that. these are pre-programmed to catch few magic words like “Alexa” in the present case: a user may change this wake word to “Amazon” or “Echo”: once. the subject goods, through microphones. analyse these words. they become operative and start recording user’s voice: the captured voice command is then sent over the intemet to Amazon services in the cloud called Alexa Voice Service (AVS. in short): Amazon server processes the voice commands, interprets them and sends a response back to the subject goods which then processes and presents the response to the user either as a voice reply or in the form of an action i.e. performing a specific function (turn on the lights): for example, a user gives a command. “Alexa. play the previous song again”, the moment, the Echo device hear the word Alexa, it becomes operative and starts recording the command which in the present example is play the previous song again ‘; the subject Echo device then sends this recorded command to AVS which analyses this command and finds out the results from Amazon cloud to be sent back to the subject Echo device: the subject Echo device plays the same either through the internal speaker or through external speakers: the subject Echo device can control smart appliances in a similar manner. Further. the applicant has submitted that, the subject Echo devices are Bluetooth enabled. which enables it to connect with user’s phone and/or external speaker: when they are connected to the user’s phone, they can play audio stored in the user’s phone: when they are connected to an external speaker. the audio output is played through the external speaker instead of their internal speaker: the subject Echo devices do not support cellular services; they require an internet connection to perform their functions i.e. they do not have modem incorporated in them: the subject Echo devices works on Single-Input Single-Output technology and are not Multiple Input Multiple Output (MIMO)/Long Term Evolution (LTE). enabled.

3.5 As regards classification of the subject Echo devices, it is submitted by the applicant that these devices receive voice data (audio signals) from the user; the captured voice command is then sent over the intemet to Amazon service in the cloud: Amazon server processes the voice commands, interpret them and sends a response back to subject Echo device which then processes and presents the response to the user (e.g. song. news. time. etc.): the response is finally audible to the users through the speakers.

3.6 The applicant then referred to rule 1 of the General Rules for Interpretation of Import Tariff (GRI. in short) and has stated that. as per the rule 1. the goods under consideration should be classified in accordance with the terms of the heading or relevant Section or Chapter Notes; Section XVI covers all sorts of mechanical and electrical appliances/equipment etc.; Section Note 3 to Section XVI states, -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 complimentary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.-.

3.7 The applicant has further submitted that the afore-said functions can be performed only when the subject Echo devices are connected to an already enabled Wi-fi or active Bluetooth connection. by the process of communication (transmission, conversion and reception) either with the Amazon cloud or with its user’s phone: in other words. the subject Echo devices cannot pros ide voice-enabled services or function as a speaker or a control apparatus etc. without the communication function; it is pertinent to note that the communication function of the subject Echo device is a SI11 qua non for performing all the aforesaid functions and the same entails three major steps: firstly. receive voice commands from the user, secondly. convert the audio signals into wireless signals and transmit to the Amazon cloud through internet connection, where the commands are processed to obtain the results and lastly. receive the results from the cloud in the form of wireless signals. convert the same into electric signals and thus regenerate the results in the form of information/music. through audio or action oriented output; by applying Section Note 3 to Section XVI and on the basis of the functioning performed by the subject Echo device, the applicant understands that communicating with the AVS/Amazon cloud to deliver voice enabled Alexa services is the principal function of the subject Echo device; the communication here means transmission, reception and conversion of voice or other form of data and this function is covered under heading 8517; thus classification would be Sub-heading 85176290; the subject Echo device undoubtedly performs the function of speaker i.e. output of the subject echo device. however. the same is not the principal function.

3.8 The applicant has also stated that. CAAR. New Delhi vide ruling dated 20.07.2021 has classified previous models of Echo Dot devices, which are similar to the subject echo devices under heading 8518 by placing reliance on the fact that the principal function is to reproduce sound and act as speaker. All the features (such as internet connectivity. Wi-fi etc.) make the speaker as smart speaker and the same shall not change the principal function by applying rule I of GRI read with Section Note 3 to Section XVI of the Tariff Act: CAAR, New Delhi has relied upon the description and functions to arrive at classification under heading 8518. The applicant is also of the view that. the inbuilt speaker only acts as an output medium for the subject goods: for performance of some functions, the output is action oriented. and in such cases, speaker is not even required as output medium: moreover, classification of goods cannot be decided solely on the basis of name/nomenclature used for advertising/marketing. As regards applicability of Notification No. 57/2017-Cus. dated 30.06.2017. the applicant has stated inter-alia that serial number 20 of the said notification provides for a concessional rate of Basic Customs Duty for goods classifiable under Sub-heading 85176290 subject to certain exclusions however the subject goods do not fall under any of the exclusion categories given under serial number 20 of Notification No. 57/2017-Cus dated 30.06.2017. hence they are eligible to claim benefit of the notification: however. without prejudice. if the classification of the subject Echo devices is confirmed under the heading 8518. they are eligible to take benefit vide serial number 10 of Notification No. I 2/2022-Cus dated 01.02.2022 which provides concessional rate of duty to ‘All goods, other than hearable devices’: the definition of the term ‘hearable devices’ given in the notification, itself inter-alia means ‘portable bluetooth speakers comprising of an amplifier and loudspeaker(s) with maximum output power not exceeding 40 Watts. having battery as a source of power and capable of wireless connectivity through bluetooth: in the present case. the Echo Dot devices are connected through wire with the socket and do not use battery as a source of power, hence these dev ices cannot fall under the ambit of hearable devices: thereby benefit under serial number 10 of the Notification No. 12/2022-Customs dated 1.2.2022 is applicable on import of the subject Echo devices, if classified under heading 8518.

3.9 The applicant has also mentioned that the devices are not launched commercially in India and requested to ensure that confidentiality thereof is maintained and copy of ruling in the instant case. is not published on the website to maintain confidentiality in terms of proviso to rule 27 of the Customs Authority for Advance Rulings Regulations, 2021.

4. In view of the above submissions. the applicant has sought advance ruling on the following questions:

(a) Whether the subject Echo devices are rightly classifiable under Sub-heading 85176290 under Schedule Ito the Customs Tariff Act, 1975?

(b) If the answer to the above question is in the positive, whether the applicant is eligible to claim benefit of serial number 20 of Notification No. 57/2017-Cus, as amended?

(c) If the answer to question (a) is in the negative and classification is confirmed under heading 8518 relying on previous ruling no. CAAR/Amazon/17/2021 dated 20.07.2021. whether benefit of serial number 10 of Notification No. 12/2022-Customs dated 1.2.2022 is applicable on import of the subject Echo devices?

(d) If the answers to questions (a) and (c) are in the negative. then, what is the appropriate classification and effective rate of duties on import of the subject Echo de% ices?

5. Comments in the matter have been received from the concerned Commissionerate of Customs. wherein. it is stated inter-alia that, claim of the importer that communication by way of transmission. reception, conversion of voice and other form of data is the principal function. is unacceptable: it is found that the input through the inbuilt microphone and output through the inbuilt speakers are equally common for performing all the aforesaid functions; in fact, the alarm function of the device does not require the so-called principal function ‘transmission. reception, conversion of voice and other form of data but it requires the microphone-speaker combination for setting up the alarms and ringing the alarm: thus the principal function is ‘input thorough the inbuilt microphone and output through the inbuilt speakers’ and thus. it merits classification under Customs Tariff Sub-heading 85182210 of the Customs Tariff Act: even if it is considered that the device has two principal functions equally important for it to function fully. then there is need to refer to rule 3(c) of the GRI which provides that ‘when by application of rule 2(b) or for any other reason, goods are, prima-facie. classifiable under two or more headings, classification shall be affected as follows:—*(c) when goods cannot be classified by reference to rule 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.’: so. the items, merit classification under Sub-heading 85182210 of the Customs Tariff Act. Vide the said comments. attention is drawn to the Ruling No. CAAR/Del/Amazon/17/2021 dated 20.07.2021 issued by CAAR, New Delhi and also judgement of the Tribunal in the case of M/s Logic India Trading Co. Vs. CC, Cochin reported under [2016 (337) ELT 65 (Tri-Bang)] wherein it has been held that even if the Multimedia speakers have additional facilities such as USB port, FM radio etc.. it %%ill not alter the classification of the product as primary function of the imported machine systems is speaker and therefore, the same are classifiable under heading 8518 of the Customs Tariff Act. 1975: further the Hon’ble Supreme Court has also endorsed the above decision of the Tribunal. Thus. classification under CTH 851822 is concluded.

6. Personal Hearing in the matter was scheduled however the authorized representative of the applicant vide email dated 01.09.2023 stated that a personal hearing on 04.09.2023 will not be required and ruling. in the application be issued directly on the basis of written submissions made in the application, oral submissions made on 19.05.2023 in relation to previous application for advance ruling no. VIII/CAAR/Delhi/Amazon/55/2023 and additional submissions dated 01.09.2023.

7. Vide the additional submissions dated 01.09.2023. the applicant while reiterating certain submissions earlier made in their application, has stated inter-alia that, the comments of the concerned Commissionerate has been issued referring to the subject goods as Echo Dot 5th Gen (without clock) and Echo Dot 5th Gen (with clock) which is factually incorrect: the subject goods are Echo devices but are different from the aforesaid two products: the subject goods are communication devices. which are capable of performing many functions: as per brochures of the subject goods, these goods are marketed for various features, including music/sound playing features which clarifies that the subject goods are not bought and sold in the market as mere speakers. but as Alexa integrated devices: the subject devices are not comparable to multi-media speakers. which solely perform the functions of acting as ‘speaker’, albeit speakers which can reproduce sounds from various sources: therefore. the decision of the Hon’ble Tribunal in Logic India is inapplicable for determining classification of the subject goods: the subject goods are indeed interactive communication apparatus-the microphone and speakers merely act as input and output medium. respectively; the input and output are mere facilitators in performance of the subject goods as communication apparatus, and cannot by themselves, be deemed as principal function. In light of submissions in addition to those made in their application for advance ruling. it is reiterated that subject goods are classifiable under Sub-heading 851762 only.

8. Finding that the application is valid in terms of provisions of the Customs Act,1962 and the CAAR Regulations. 2021. having considered the submissions made in the application for advance ruling and also the submissions made in addition, thereafter, and recognizing the importance of timely pronouncement of rulings. I proceed to examine the question on merits. I have also gone through the oral submissions made on 19.05.2023 in relation to previous application for advance ruling no. VIII/CAAR/Delhi/Amazon/55/2023.

9.1 I note that brochure of the subject goods submitted by the applicant describe the goods as echopop (it’s smart. it’s stylish), outline features as loud sound, million of songs, hands-free. bluetooth and smart home and mention generic name as. ‘smart speakers’.

9.2 As per the Import Tariff, under the heading 8518, loudspeakers, wireless and other than wireless along NNi th other goods, are classified. The determination of classification of the aforesaid devices would involve interpretation of General Rules for Interpretation of Import Tariff.

9.3 Rule 1 of the GRI lays down that the titles of Sections, Chapters and sub-Chapters are provided for ease of reference only: for legal purposes. classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes. Rule 3 of the GRI provides. “3. When by application of rule 2(b) or for any other reason. goods are. prima-facie. classifiable under two or more headings. classification shall be effected as follows: (a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However. when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods. even if one of them gives a more complete or precise description of the goods. (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 (a). shall be classified as if they consisted of the material or component which gives them their essential character. in so far as this criterion is applicable. (c) when goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Further. Section Note 3 to Section XVI states. “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 complimentary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.”

9.4 I note that heading 8517 of the Import Tariff. suggested by the applicant for the goods in question covers Telephone sets. Smartphones and other Telephone 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. It is the contention of the applicant that goods in question are in the nature of other apparatus for the transmission or reception of voice, images or other data, whose basic function being communication.

9.5 However, on perusal of the copy of brochure of the subject goods submitted by the authorized representative of the applicant vide their letter dated 01.09.2023, which is also available on the applicant’s website. it is observed that the generic description of the subject goods is given as ‘Smart Speakers’ and the said brochure describe the subject goods by emphasizing on the features such as. best/loud sound with deeper/balanced bass. clearer/crisp vocals and Alexa which are the features related to principal function of the device i.e smart speaker. Though. other functions viz. making to do list, setting alarm, playing audio books. weather & traffic update etc. are secondary to the principal function. Moreover, in the application for advance ruling, the applicant has stated that proposed item of import is “Digital Media Receiver, Model No. C2H4R9″ however, the brochure mentions. ”Introducing Echo Pop (2023 release) Smart speaker with Alexa and Bluetooth Loud sound. balanced bass, crisp

ovals”. It is not understood as to why proposed item of import has been described as Digital Media Receiver. in the application for advance ruling when the brochure of the company mentions its generic description as ‘smart speaker’. Moreover, the applicant has described the subject goods as a hands-free Alexa-enabled device that comes with an inbuilt speaker however, it appears that description should have been speaker which is Alexa-enabled. In spite of the above, the applicant’s contention that subject goods are not bought and sold in the market as mere speakers. but as Alexa integrated devices, appears to be contradictory and requires rejection.

9.6 In view of the foregoing facts and discussion regarding the subject goods whose generic description as per the brochure is ‘smart-speaker’. though it performs other functions which are secondary in nature. it would be appropriate to discuss the coverage of goods under headings 8518. Heading 8518 covers Microphones and stands therefor: Loudspeakers. whether or not mounted in their enclosures: Headphones and Earphones. whether or not combined with a microphone. and sets consisting of a microphone and one or more Loudspeakers: Audio-Frequency Electric Amplifiers: Electric Sound Amplifier sets. Moreover, even w/o acting as communication devices for communicating with Amazon cloud/AVS. these devices can connect with smart phone and play songs taking input from the smart phone.

9.7 In light of the foregoing facts and discussions, I find that the principal function of the goods in question is to reproduce sound and act as a speaker. Admittedly, for these devices to function as speaker. they accept voice commands and with wi-fi/blue-tooth connection capability. manage to get the input sound for reproduction from various web channels. The features of the devices, make them work as “smart” speakers, retaining nonetheless the principal function as speaker. Therefore. guided by Rule 1 and Rule 3 of GRI and Note 3 of Section XVI of the Import Tariff. I find that the subject goods of generic description. ‘smart-speakers’, merit classification under heading 8518.

9.8 In continuation. it is also noted that the concerned Commissionerate has raised valid provisions for classification of the goods in question under heading 8518 and has correctly mentioned inter-alia that even if it is considered that the device has two principal functions equally important for it to function fully, then there is need to refer to rule 3(c) of the GRI which provides that \\ hen by application of rule 2(b) or for any other reason, goods are. prima-facie. classifiable under two or more headings, classification shall be affected as follows: ‘(c) when goods cannot be classified by reference to rule 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equall• merit consideration.’; so, the subject goods merit classification under Sub-heading 85182210 of the Customs Tariff Act. Further, as regard the comments of the concerned Commissionerate, the applicant has observed that comments of the concerned Commissionerate has been issued referring the subject goods as Echo Dot 5th Gen (without clock) and Echo Dot 5th Gen (with clock) which is factually incorrect. Though. the observation regarding reference to the wrong product name by the concerned Commissionerate, is correct but it appears to be typographical error.

9.9 Moreover, as per Chapter Note 5 of Chapter 85. smart phone means telephones for cellular network. Applying the same analogy, smart-speakers would also mean speaker with additional functions. The heading 8517 is meant for, ‘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)’. The wordings used in the heading does not mean that an apparatus which performs a specific function with the ability to transmit, receive voice, data etc. will get classified under heading 8517. The purpose of transceiver inbuilt in the device is to facilitate performance of the specific function for which the device is meant for i.e speaker in the instant case. The other associated functions linked with a device may not be providing character of essential nature to the goods however these functions add value to a device. By the logic applied by the applicant any machine even though capable of performing a specific function, if it is also fined with wi-fi module to connect with internet, will become a communication device under heading 8517 & all other headings meant for classification of such machines performing a specific function, will be left redundant. Lastly. I note that in the previous Ruling Nos. CAAR/Del/Amazon/17/2021 dated 20.07.2021 and CAAR/Del/Amazon/15/2023 dated 12.07.2023. the Authority while giving ruling on classification of the similar goods has reasoned out in detail, for classification of the said goods under heading 8518.

10. Keeping in view the foregoing, I am of the view that classification of the proposed items of import, “Digital Media Receiver, Model No. C2H4R9” or ‘echopop’ (description as per brochure supplied by the applicant) will be under Sub-heading 85182210 of the first schedule to the Customs Tariff Act, 1975.

11. As regards questions relating to applicability of notifications on import of the goods in question, it is ruled that exemption under serial number 20 of Notification No. 57/2017-Cus dated 30.06.2017, as amended, is not admissible as it is seen that the benefit of serial number 20 of the said notification is available only to goods falling under sub-heading 85176290 and 85176990. Since the goods in question merit classification under Sub-heading 85182210. the exemption under serial number 20 of Notification No. 57/2017-Cus. is not admissible. As regards applicability of exemption from duties. as per serial number 10 of Notification No. 12/2022-Cus. dated 01.02.2022. it is noted that under the said serial number of Notification No. 12/2022-Cus. dated 01.02.2022, concessional rate of duties is applicable on all goods other than hearable devices falling under Sub-heading 851821, 851822. 851829 or 851830 and as per the Notification hearable devices inter-alia means portable bluetooth speakers comprising of an amplifier and loudspeaker(s) with maximum output power not exceeding 40 Watts, having battery as a source of power and capable of wireless connectivity through bluetooth. From the submissions of the applicant, it is inferred that the goods in question are portable smart speaker, blue-tooth/wi-fi enabled capable of wireless connectivity. Further. based on the definition of hearable devices, goods in question are hearable devices thus exemption vide serial number 10 of Notification No. 1 2/2022-Cus. dated 01.02.2022 is not admissible.

12. As regards applicant’s question for ruling on effective rate of duty on import of the subject goods, it is ruled that the provisions laid down under Chapter VB of the Customs Act. 1962, relating to Advance Rulings. do not mandate giving ruling on effective rate of duty on specific goods.

13. Lastly. I note that the applicant has also mentioned that the devices are not launched commercially in India and requested to ensure that confidentiality thereof is maintained. I order that ruling pronounced be hosted in the public domain after one hundred eight• days (180) days of issue of the ruling, in terms of regulation 27 of the Customs Authority for Advance Rulings Regulations, 2021.

14. I rule accordingly.