Classification of touch computer & mobile computers

In re Rashi Peripherals Private Limited (CAAR Mumbai)

M/s. Rashi Peripherals Private Limited filed 2 applications, specifically, application nos. 39 and application no. 40, on 23.05.2022 seeking advance rulings on the classification of handheld mobile computers, viz., touch computers and mobile computers, having the following model numbers: –

Both the applications contain similar devices, except for the additional feature of SIM card slots in devices mentioned under application no. 40

2. The applicant is a distributor of IT & mobility solutions in India and is engaged in the distribution of different types of electronic parts and products utilised for items such cameras, CPUs, gaming graphic cards, monitors, motherboards, printers etc. The applicant intends to import the above-mentioned handheld mobile computers. These devices are powered by Qualcomm Snapdragon processor and possess the Android 10 operating system. They are equipped with front and rear cameras, battery and gorilla glass. They support GPS, Bluetooth and wireless radio. They also incorporate micro USB 2.0. Out of 13 devices specified in Table 1, 5 devices of application no. 40 are SIM cards enabled. As per the applicant, these devices are used for scanning barcodes and processing data in order to increase the efficiency of functions such as inventory management etc. The products carry a processing ability of a laptop and the functionality of a scanner in a single wireless device. They essentially perform 1D 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 many models of handheld mobile computers do not have the feature of connecting to a cellular network and 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 wifi connectivity is not available. Even on the SIM-enabled devices, the cellular network is used rarely in cases such as during last-mile delivery, when wi-fi is not readily available etc. In fact, the calling function provided in products with SIM is purely a supplementary function since the same has been provided as an additional mode of connectivity apart from Bluetooth, Wi-Fi and GPS. The applicant has highlighted the following features: –

a. Rugged design;

b. Fall proof;

c. Water-resistant;

d. Dust resistant;

e. Can withstand harsh working environments up to -20 °C to + 50 °C;

f. The screen can be read even in sunlight;

g. Extended battery life;

h. Barcode scanner for reading 1D and 2D barcodes, apart from reading QR codes. The barcode scanner is equipped with an enterprise-class scan engine. The advantage is the reduction in scanning time. This device can decode 60 barcodes per second, enabling scans of over 5000-10000 barcodes per hour in continuous mode;

i. The laser can read short, mid and long-range scanning capability;

j. No separate audio jack; for voice communication, it is generally advised to have earphones;

k. It is primarily designed for scanning applications and processing scanned data and not for voice communication;

l. Specialized applications are developed to run on mobile computers, which are not / cannot run on android based mobile phones;

m. The physical keyboard is akin to what is found on a conventional computer;

n. Extra keys are provided for scanning and for performing other data processing functions.

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 As per the applicant, to qualify as an ADP machine, goods have to satisfy all the conditions mentioned in Note 6(A) to Chapter 84 and should not be covered by Note 6(D) and 6(E) ibid. 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: –

As per the applicant, chapter notes 6(C), 6(D) and 6(E) are not applicable to the impugned devices as the products are in themselves ADP machines. Thus, the proposed imports satisfy all the conditions to be fulfilled by ADP machines.

2.3 The applicant further stated that without prejudice, even if it is assumed that these devices are capable of performing more than one function, i.e., capable of functioning other than as an ADP machine, the function of the ADP machine is the principal function and therefore, shall be treated as an ADP machine in terms of note 3 to Section XVI. The proposed imports are marketed to businesses for ease of logistics and not as a substitute for a communication device. That, the handheld mobile computers are used to transmit other data, apart from the inventory-related data, is only an incidental function and the classification is to be based as if the principal function were the sole purpose. Commercially too, the products are known as “mobile computers” and not as “phones”. As per the trade parlance, the proposed imports are known in the market as “mobile computers/ touch computers” and not as smartphones or telephones. In view of the above, the applicant submitted that the handheld mobile computer models are classifiable under subheading 84713090.

2.4 The applicant has contended that the product is an automatic data processing machine that cannot be classified under the heading 8517. The proposed imports are not primarily meant for communication purposes. Communication ability like that of a traditional telephone/mobile telephone is only as auxiliary functions that these portable computers perform. The applicant highlighted the following differences between conventional cellular phones/communication devices and impugned portable computers: –

The applicant contends that the products in question are not classifiable as smartphones under subheading 85171300 as the proposed imports are essentially ADP machines which have an additional feature of cellular connectivity. It is also to be noted that 8 models of handheld mobile computers of application no. 39 (para. 1) do not have the cellular calling function and thus do not have the capability to accommodate a cellular network system. In the SIM card-enabled models, the SIM facility is provided to have a data network when WiFi is not working. Such connection or facility is only an additional/supplemental feature. Therefore, as per the applicant, they cannot be classified under subheading 85171300.

2.5 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 85176990.

2.6 In support of their contention, the applicant submitted Circular No. 20/2013 dated 14.05.13 wherein it was held 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.

2.7 Contesting the decision of the 64th and 68th Session of the World Customs Organization in respect of the classification of RFID readers/ bar scanners having inter-alia SIM capability as classifiable under heading 8517, the applicant stated that the opinions of WCO are not applicable to the products proposed to be imported for the following reasons:

a. The WCO rulings did not consider the classification of heading 8471 in the aforesaid opinions.

b. Unlike the ruling on tablet computers, which has been expressly accepted by CBIC, no similar circular has been passed accepting and adopting the above ruling.

c. The proposed imports are handheld mobile computers and not merely RFID readers.

d. The WCO ruling on tablet computers is more appropriately applied to the proposed imports.

e. Unlike the products considered in the WCO Ruling, 8 devices of application no. 39 do not have sim capability.

2.8 In relation to the above-mentioned devices, the questions on which advance rulings have been sought are as follows: –

.. 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?

3. 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, Nhava Sheva-I. ACC, Mumbai; Chennai customs-III and IGI airport. Their applications, therefore, were forwarded to the jurisdictional commissioners of customs for comments. However, no reply has been received, though reminders have also been sent.

4. Personal hearing was held on 29.06..2022 at 1230 hrs. Shri T Vishwanathan and others represented the applicant. No one appeared on behalf of the commissioners of customs. Sh. Viswanathan explained that the difference between the two applications is that one application contains a mobile computer/ touch computer with SIM card slots and the other one contains similar products withotit SIM card slots. Sh. Vishwanathan requested an amendment in application no. 40 to include another product, namely, TC15 (with SIM) which is otherwise similar to the product listed in the application. Samples of all products (except PS 20) were produced for inspection and their working was explained. The working of Zebra PS 20 was shown on the manufacturer’s website. Sh. Vishwanathan has submitted a compilation of all products involved in the application along with their essential features in a tabular format. It is explained that these products are essentially ADP machines and even those with SIM cards are not actually intended for use as a calling/ receiving device, i.e., a mobile phone. It was categorically asked whether a user can download or delete applications of his choice freely on these devices and the answer to that is in affirmation.

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. No reply has been received from the jurisdictional commissioners. Therefore, I proceed to pronounce my rulings on the basis of information available on record. The issue before me is the 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. GRI 1 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 purposes 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 for 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 modibi 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 capturing of data and its further processing, the notes 6(D) and 6(E) do not appear to have application in this case.

5.1. 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 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 84.43, 85.25, 85.27 or 85.28. As the devices also have communication capabilities, including cellular connectivity in 5 devices of application no. 40, 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 form a whole and other machines designed for the purpose ofperforming 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 given by the Board regarding the classification of “tablet computers” under heading 8471 stating that, “… The mobile phone calling function 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, hut, according to its main technical features is designed as a substitute for laptops. 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”. 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.

5.2. In regards 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, devices in application no. 39 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 do not appear to be convenient for the purpose of telephony. As per circular no. 20/2013- Cus, 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 handheld computers. On their website (https://www.zebra.com/ap/en/products/mobile-computers/handheld.html), the manufacturer mentions that “With a Zebra enterprise mobile computer in hand, workers can access the information, applications and people they need to get the job done. The result? Productivity is up and your customers experience the best service possible. When you choose Zebra, you’re in good company. The world’s largest retailers, manufacturers, transportation and logistics companies, field sales and service organisations, and healthcare providers rely on Zebra mobile computers every day to turbocharge their business”. Therefore, these devices are essentially ADP machines with additional connectivity capabilities, including cellular connectivity in 5 devices of application no 40, as discussed in para. 5.1. and the devices under consideration is already explained in para 2.4. 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. On one of the devices, the TC77 series touch computer, which is a handheld mobile computer used for asset inventory management purposes, Singapore Customs ruled (ref. No. CRL-211217-0036) that the product is classifiable under subheading 84713090. Therefore, notwithstanding the WCO classification advice to the contrary, it is my considered opinion that the devices under consideration are not classifiable as smartphones. They merit classification under subheading 84713090.

6. In view of the foregoing discussions, I rule that the 13 devices listed in the first paragraph of this ruling are classifiable under heading 8471 and more specifically, under subheading 84713090 of the first schedule to the Customs Tariff Act, 1975.