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HQ 965524




August 29, 2002

CLA-2 RR:CR:GC 965524 AML

CATEGORY: CLASSIFICATION

TARIFF NO.: 8541.40.20

Damon V. Pike, National Director
Customs Services
Deloitte & Touche, LLP
Suite 1500
191 Peachtree Street NE
Atlanta, GA 30303-1924

RE: Reconsideration of NY 814750; Laser Diodes and Laser Diode Modules

Dear Mr. Pike:

This is in response to your letter, dated February 14, 2002, on behalf of Optical Communications Products, Inc. (hereinafter “OCP”), to the National Commodity Specialist Division, New York, requesting the tariff classification of laser diodes and laser diode modules under the Harmonized Tariff Schedule of the United States (HTSUS). Your request for classification includes a request for reconsideration and modification of New York Ruling Letter (“NY”) 814750, issued to OCP on October 10, 1995, which classified certain laser diode modules under subheading 9013.80.60, HTSUS, which provides for other optical appliances and instruments, not specified or included elsewhere in this chapter, other. As you are aware, your request was forwarded to this office for reply. A sample, schematic drawings and an affidavit were provided for our consideration.

We have reconsidered NY 814750 as it pertains to the classification of laser diode modules and have determined that in that regard it is incorrect. This ruling sets forth the correct classification of the laser diode modules.

FACTS:

The articles at issue (OCP model #s FOL1371LC/OH3, FOL1371MF/OL3-F, FOL1371MC/OL3-F and FOL1371RC/OH3) are laser diodes and laser diode modules. You state that all of the laser diodes and laser diode modules are used in communications and telecommunications systems to convert electrical energy into light energy so that other devices can transmit data on optic fibers.

You state, with regard to your request that NY 814750 be modified, the following:

In NY Ruling 814750 . . . Customs held that laser diodes imported without the optical lenses (model numbers FOL1371 Y3 AND Y4) were properly classifiable under HTSUS number 8541.40.20 as “light-emitting diodes.” OCP agrees with this classification for those model numbers and their current counterparts and is not challenging NY 814750 with respect to those items.

However, NY Ruling 814750 also ruled on the tariff classification for laser diode modules which comprise the bulk of OCP’s imports, i.e., model numbers FOL1402Pax, FOL1371MB, MF, RA and Yx. The FOL1402Pax, FOL1371MB, FOL1371MF, FOL1371RA and FOL 1371 Y3 and Y4 (with optical lenses attached) models were classified under HTSUS number 9013.80.60 as “other optical appliances and instruments, not specified or included elsewhere in this chapter.” The apparent reason for the distinction between the classification for laser diode modules under this tariff item (versus the laser diodes themselves, which were classified under 8541.40.20) centered on the inclusion of glass selfloc lenses in the modules. Because the laser diode modules contained “lenses which are essential to the operation of these products,” Customs determined that the laser diode modules should be classified as optical appliances under heading 9013.

By reference to the schematic drawings provided, the laser diode modules consist of the following components (which perform the functions described):

TO Can – operates as the housing for the laser and the detector.

Lens holder – holds the lens in place.

Lens – focuses light emitted from the laser to the fiber stub.

Lens sleeve – provides protection for the lens and creates mechanical stability.

Shell pipe – allows for mechanical stability and integrity. Laser diode – converts electrical currents into light, contains p-n junction and mirrors.

Detector – contains a photodiode which detects light from the laser diode, and is used to control the operation of the laser diode.

Fiber stub (ferrule stub) or fiber – receives light produced by the laser diode which is focused by the lens, and transmits the data to an optic fiber to which the fiber is attached.

Pins – receive electrical currents from the power source.

Flange – piece of metal with holes which allows for attachment to electronics which transmit to the laser diode.

Rubber boot – functions to maintain the mechanical integrity of the module and protects the fiber from damage during handling. The rubber boot is found in laser diode modules that have pigtails attached.

You summarize the function of the articles as follows:

All of these models and their components operate in the same manner and for the same purpose in each type of laser diode module, i.e., the laser diode which is essential to the functionality of the laser diode module converts electrical energy into light energy to transmit data within telecommunication and data communication systems. The primary differences among the models relate to the power and packaging of the laser diode module.

In an affidavit provided with your request, an engineer employed by OCP for ten years (with fifteen years experience in the industry) states that “the laser diode modules described in NEC (see NEC Electronics, Inc. v. U.S., 21 C.I.T. 327 (1997), affirmed, 144 F. 3d 788 (CAFC 1998) are virtually identical to the laser diode modules that OCP produces.” The statement continues as follows:

OCP’s laser diode modules are used in data communications and telecommunications. OCP’s laser diode modules contain a p-n junction that produces photons to emit infrared or visible light, which operate by positioning a compound with an excess of electrons side-by-side with a compound that has a deficiency of electrons to form a single crystal. The laser diode module’s p-n junction spontaneously emits photons when an electrical current is passed through the junction, causing electrons from the n side of the junction to recombine with positively charged particles, known as “holes,” from the p side of the junction. The photons emitted from this process produce the infrared or visible light of the laser diode module. This process is known as the “recombination of carriers.” Also, as in NEC, OCP’s laser diode modules require additional components in order to stimulate the emission of photons, to strengthen the intensity of the photon emission, and to guide the photons into a more focused or coherent emission. In general, a laser requires a feedback mechanism comprised of a set of mirrors set in a cavity that redirects photons emitted from the p-n junction back into the junction.

With regard to the collimating lenses that are components of the articles, the affiant states the following:

All of the laser diode modules in question contain a single [glass] lens. The collimating lens focuses the light onto the fiber or fiber stub.

In NEC Electronics, Inc. v. U.S., 21 C.I.T. 327 (1997), affirmed, 144 F. 3d 788 (CAFC 1998), the Court of Appeals for the Federal Circuit (repeating almost verbatim the factual predicates enumerated by the Court of International Trade), described the articles at issue as follows:

There is a broad range of diodes in commercial production that are subject to various classifications under the HTSUS. Photosensitive diodes, such as solar cells and photodetectors, absorb light and generate an electrical current by means of "carrier transportation." Light-emitting diodes are commonly used as small lamps to indicate whether a device, such as a computer, is on or off. Unlike photosensitive diodes, light-emitting diodes discharge light when an electrical current is passed through a p-n junction. The electrical current causes the recombination of electrons and holes across the light-emitting diode's p-n junction thereby resulting in the emission of photons. This technique is known as the "recombination of carriers," as opposed to the technique of "carrier transport" used in photosensitive diodes. Although laser diodes use a p-n junction to produce light, laser diodes require additional elements to those contained in a typical light-emitting diode in order to stimulate the emission of photons, to strengthen the intensity of the photon emission, and to guide the photons into a more focused or coherent emission. These additional elements include a set of mirrors to redirect stray photons back into the p-n junction as well as a lens to focus the photons. However, like typical light-emitting diodes, laser diodes operate by means of recombination of carriers rather than carrier transport.

ISSUE:

Whether the laser diodes and the laser diode modules are properly classified under subheading 8541.40.20, HTSUS, which provides for light emitting diodes, or under subheading 9013.80.90, HTSUS, which provides for other optical appliances or instruments?

LAW AND ANALYSIS:

Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context that requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.

GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in order. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and mutatis mutandis, to the GRIs. Further, only those subheadings at the same level of indentation are comparable.

The HTSUS provisions under consideration are as follows:

8541 Diodes, transistors and similar semiconductor devices; photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels; light-emitting diodes; mounted piezoelectric crystals; parts thereof: 8541.40 Photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels; light-emitting diodes: 8541.40.20 Light-emitting diodes (LED's). Liquid crystal devices not constituting articles provided for more specifically in other headings; lasers, other than laser diodes; other optical appliances and instruments, not specified or included elsewhere in this chapter; parts and accessories thereof: Other devices, appliances and instruments Other.

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the 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 thus useful in ascertaining the classification of merchandise under the System. Customs believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).

An article is to be classified according to its condition as imported. See XTC Products, Inc. v. United States, 771 F.Supp. 401, 405 (1991). See also United States v. Citroen, 223 U.S. 407 (1911). In their condition as imported, the laser diode modules consist of several components (reference is made to the components including their housings and connectors) that are prima facie classifiable under separate headings of the HTSUS: the laser diode (heading 8451, HTSUS); the collimating lens (heading 9013, HTSUS), the plastic coated optic fiber (heading 8544, HTSUS; see HQ 964632, dated April 3, 2001). Therefore, under GRI 3(b), classification of the composite article is determined on the basis of the component that gives it its essential character. EN Rule 3(b)(VIII) lists as factors to help determine the essential character of such goods the nature of the materials or components, their bulk, quantity, weight or value, and the role of a constituent material in relation to the use of the goods.

Recently, there have been several Court decisions on "essential character" for purposes of GRI 3(b). Better Home Plastics Corp. v. United States, 916 F. Supp. 1265 (CIT 1996), affirmed 119 F.3d 969 (Fed. Cir. 1997), involved the classification of shower curtain sets, consisting of an outer textile curtain, inner plastic magnetic liner, and plastic hooks. Customs had classified the sets on the basis of the textile curtain under the "default rule of GRI 3(c)", after determining that neither the relative specificity test nor the essential character test was applicable (119 F.3d at 971). The CIT found that the plastic liner performed the indispensable function of keeping water inside the shower and therefore held that the plastic liner imparted the essential character upon the set.

Other decisions in which the Court looked primarily to the role of the constituent material in relation to the use of the goods to determine essential character include Mita Copystar America, Inc. v. United States, 966 F. Supp. 1245 (CIT 1997), motion for rehearing and reconsideration denied, 994 F. Supp. 393 (CIT 1998), and Vista International Packaging Co., v. United States, 19 CIT 868, 890 F. Supp. 1095 (1995). See also Pillowtex Corp. v. United States, 983 F. Supp. 188 (CIT 1997), in which the Court found that, although GRI 3(b) could not be applied, if a GRI 3(b) analysis were performed, the essential character would be based upon the composite good’s function.

In NY 814750, the basis for the distinction and separate classification of the laser diodes and the laser diode modules was because the laser diode modules contained the collimating lens, the lens was deemed to impart the essential character of the modules and thus the articles were classified under heading 9013, HTSUS. Hence, we consider whether the laser diode or the collimating lens imparts the essential character of the laser diode modules in question.

Legal Note 1(m) to section XVI, HTSUS, states that: "[t]his section does not cover . . . [a]rticles of chapter 90." Legal Note 4 to section XVI provides that:

Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function.

Note 4 to section XVI is relevant to this analysis as it is incorporated by reference into legal note 3 to Chapter 90. Thus, if the laser diodes and laser diode modules are classifiable under one of the headings of chapter 90, HTSUS, then they cannot be classifiable under heading 8541, HTSUS.

Heading 9013, HTSUS, provides for ”liquid crystal devices not constituting articles provided for more specifically in other headings; lasers, other than laser diodes; other optical appliances and instruments, not specified or included elsewhere in this chapter [bold emphasis added].” By its terms, heading 9013 does not cover laser diodes, and by implication, laser diode modules. The ENs to the heading provide, in pertinent part, at page 1793, that ”this heading does not include . . . laser diodes (heading 85.41)[.]” Thus, we find, by application of GRI 1, that the subject laser diodes and laser diode modules are not provided for under heading 9013, HTSUS, and therefore cannot be therein classified.

Note 5 to chapter 85, provides, in pertinent part, as follows:

For the purposes of headings 8541 and 8542:

(a) "Diodes, transistors and similar semiconductor devices" are semiconductor devices the operation of which depends on variations in resistivity on the application of an electric field; For the classification of the articles defined in this Note, headings 8541 and 8542 shall take precedence over any other heading in the Nomenclature (tariff schedule) which might cover them by reference to, in particular, their function.

Heading 8541, HTSUS, provides for diodes, transistors and similar semiconductor devices; photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels; light emitting diodes; mounted piezo-electric crystals. The ENs to heading 8541 at page 1695 provide, in pertinent part, that:

These are defined in Note 5 (A) to this Chapter.

The operation of the devices of this group is based on the electronic properties of certain “ semiconductor ” materials.

The semiconductor devices of this group generally comprise one or more “junctions”, between p-type and n-type semiconductor materials.

They include:

(C) LIGHT EMITTING DIODES

Light emitting diodes, or electroluminescent diodes, (based, inter alia, on gallium arsenide or gallium phosphide) are devices which convert electric energy into visible, infrared or ultra-violet rays. They are used, e.g., for displaying or transmitting data in control systems.

Laser diodes emit a coherent light beam and are used, e.g., in detecting nuclear particles, in altimetering or in telemetering equipment, in communication systems using fibre optics.

Laser diodes have been consistently classified by Customs under subheading 8541.40, HTSUS. See HQ 088628, dated August 20, 1991; HQ 088754, dated June 2, 1992; and HQ 960815, dated July 1, 1998.

We find that the essential character of the laser diode modules is imparted by the laser diode, which, through its p-n junction, converts electrical energy into optical energy. While the collimating lens focuses (or makes coherent) the converted light energy onto the fiber stub for transmission, the essence of the fiber optic communication system is its use of light energy. The laser diode module accomplishes this indispensable function by converting the form of the energy. Further, we find that the articles at issue are substantially similar to those at issue in NEC, supra and infra.

Accordingly, the laser diode modules are to be classified under heading 8541, HTSUS, as light emitting diodes.

This conclusion comports with those reached in NEC Electronics, Inc. v. U.S., 21 C.I.T. 327 (1997), affirmed, 144 F. 3d 788 (CAFC 1998). In NEC, the court in upholding the Customs Service decision, found that laser diodes modules were classifiable under subheading 8541.40.20, HTSUS. In NEC the court found that pursuant to GRI 3(b), goods comprised of different components must be classified as though they were wholly made of the material or component which gives them their essential character. The court found that the laser diode component gave the laser diode module its essential character. Customs has since followed this finding for similar products. See also HQ 960815 (July 1, 1998).

The NEC decision revokes, by operation of law, any rulings concerning the classification of laser diode modules substantially similar to those therein considered (see Section 152.16(e), Customs Regulations, 19 CFR 152.16(e)) that classify such articles in a heading other than 8541, HTSUS. New rulings may be requested where necessary pursuant to the provisions of part 177 of the Customs Regulations (see 19 CFR § 177 et seq.).

Insofar as NY 814750 is inconsistent with the NEC decision, supra, it has been modified by operation of law. See Section 152.16(e), Customs Regulations, 19 CFR 152.16(e). This ruling is issued based on the change in the applicable law.

HOLDING:

For the reasons set forth above, the laser diodes and laser diode modules (OCP model #s FOL1371LC/OH3, FOL1371MF/OL3-F, FOL1371MC/OL3-F and FOL1371RC/OH3) are classified under subheading 8541.40.20, HTSUS, which provides for light emitting diodes.

Sincerely,

Myles B. Harmon, Acting Director

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