HQ 956943 - Protest 1703-94-100095; Screen telephone; line telegraphy; heading 8471; Section XVI, note 3; Chapter 84, note 5; EN 85.17; HQs 086253, 952100, 952862 - United States International Trade Commision Rulings

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HQ 956943

December 20, 1994

CLA-2 CO:R:C:M 956943 LTO

CATEGORY: CLASSIFICATION

TARIFF NO.: 8517.82.00

District Director
U.S. Customs Service
1 E. Bay Street
Room 104
Savannah, Georgia 31401

RE: Protest 1703-94-100095; Screen telephone; line telegraphy; heading 8471; Section XVI, note 3; Chapter 84, note 5; EN 85.17; HQs 086253, 952100, 952862

Dear District Director:

The following is our decision regarding Protest 1703-94- 100095, which concerns the classification of the P100 Screen Telephone under the Harmonized Tariff Schedule of the United States (HTSUS). The subject merchandise was entered on August 2, 1993, and the entry was liquidated on May 6, 1994. The protest was timely filed on August 4, 1994.

FACTS:

The article in question is the P100 Screen Telephone, which consists of a modular telephone handset, keyboard, dial pad, smart card slot, memory card slot, LED screen and two microprocessors (an NEC V24 and 8051 I/O processor). The P100 is used by service-oriented businesses, such as, health providers, banks, etc., as a standard telephone and data retrieval device.

The P100 communicates with the service provider's host computer, and permits data entry and processing of off-line and on-line transactions. The P100 allows supervisory access for maintenance of store data, such as patient history and provider information. It also provides screen-based forms, and allows the user to access information on enrollments, benefits, claim status, etc.

The P100 Screen Telephone was entered under subheading 8471.91.00, HTSUS, which provides for digital processing units. The P100 was classified upon liquidation under subheading 8517.10.00, HTSUS, which provides for telephone sets. Alternatively, the protestant now contends that the P100 is classifiable under subheading 8517.82.00 (now, subheading 8517.82.80), HTSUS, which provides for other electrical apparatus for line telegraphy.

ISSUE:

Whether the P100 Screen Telephone is classifiable as a digital processing unit under heading 8471, HTSUS, a telephone set under heading 8517, HTSUS, or electrical apparatus for line telegraphy under heading 8517, HTSUS.

LAW AND ANALYSIS:

The General Rules of Interpretation (GRI's) to the HTSUS govern the classification of goods in the tariff schedule. GRI 1 states in pertinent part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes . . . ."

The Harmonized Commodity Description and Coding System Explanatory Notes (EN) constitute the Customs Co-operation Council's official interpretation of the Harmonized System. While not legally binding, the ENs provide a commentary on the scope of each heading of the Harmonized System, and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).

The headings at issue are as follows:

8471 Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included

8517 Electrical apparatus for line telephony or telegraphy, including such apparatus for carrier-current line systems; parts thereof

Both headings 8471 and 8517, HTSUS, are within section XVI, HTSUS. Note 3 to section XVI, provides as follows:

Unless the context otherwise requires, composite machines consisting of two or more machines fitted
together to form a whole and other machines adapted 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.

The P100 is a device which performs two sets of functions-- it functions as a standard telephone and performs various data retrieval functions. These functions can be described as "complementary or alternative," and therefore, the P100 is a composite machine within the meaning of section XVI, note 3.

Customs has previously considered the classification of similar enhanced telephones, the Citibank Enhanced Telephone (ET) and the ONLINE 120 Transaction and Communication Terminal. In HQ 086253, dated May 15, 1990, Customs addressed the classification of the Citibank ET. The Citibank ET allowed the user to access Citibank financial services, and enabled the user to view account information, transfer funds, pay bills, buy and sell securities, communicate via electronic mail with customer service, etc. We found that the Citibank ET, a section XVI, note 3 composite good, was principally used for transmitting data between two points. Consequently, we held that the device was classifiable under subheading 8517.82.00, HTSUS, which provides for other telegraphic apparatus.

In HQ 952100, dated September 15, 1992, Customs addressed the classification of the ONLINE 120 Transaction and Communication Terminal. The ONLINE 120 allowed the user to pay bills and perform other debit applications, such as, banking, home shopping, off-track betting, catalog purchasing, health claims, and other transaction-based services. Citing HQ 086253, we held that the ONLINE 120 was a section XVI, note 3 composite good, and that it was classifiable under subheading 8517.82.00, HTSUS.

EN 85.17, pg. 1362, provides that the telegraphic apparatus of heading 8517, HTSUS, "is essentially designed for converting texts or images into appropriate electrical impulses for transmitting those impulses, and at the receiving end, receiving these impulses and converting them either into conventional symbols or indications representing the text, or into the text or image itself." The P100 converts text or images into electrical impulses and transmits these impulses to the receiver, where the impulses are translated. The device relays information between the user and the service's host computer. It is therefore prima facie classifiable under heading 8517, HTSUS, specifically subheading 8517.82.00, HTSUS, which provides for other telegraphic apparatus.

The protestant contends that the principal function of the device is that of an automatic data processing machine. However, the P100 does not meet the definition of an automatic data processing machine found in note 5 to chapter 84, HTSUS, as it cannot be "freely programmed in accordance with the requirements of the user." See HQ 952862, dated November 1, 1994. Further, while the device may qualify as an input/output unit of subheading 8471.92.10, HTSUS, it is our opinion that, in accordance with HQ 086253 and HQ 952100, the principal function of the P100 is the transmission of data between two points, and that this function is described by heading 8517, HTSUS.

HOLDING:

The P100 Screen Telephone is classifiable under subheading 8517.82.00, HTSUS. The corresponding rate of duty for articles of this subheading is 4.7% ad valorem.

The protest should be GRANTED, as the merchandise was ultimately found to be classifiable under the protestant's alternative claim. In accordance with section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to the mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director

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