Internal Advice; Tariff Classification of Optical Fiber Cable Assemblies

HQ H273383 February 27, 2018 CLA-2 OT:RR:CTF:TCM H273383 ALS CATEGORY: Classification TARIFF NO.: 8517.62.00 Port Director U.S. Customs and Border Protection P.O. Box 3130 Laredo, Texas 78044-3130 RE: Internal Advice; Tariff Classification of Optical Fiber Cable Assemblies Dear Port Director: This letter is in reply to your request for internal advice of January 8, 2016, at the behest of legal counsel on behalf of Communication Supply Corporation (also referred to herein as “CSC”) regarding the tariff classification of Optical Fiber Cable Assemblies. Our decision is set forth below. FACTS: CSC describes the Optical Fiber Cable Assemblies (hereinafter also referred as “OFCAs”) as follows: The optical fiber cable assemblies at issue are optical fiber cables fitted with transceivers or with transceivers and connectors. Optical fiber cables allow digital data to be transmitted by rapid pulses of light through glass or plastic filament (fiber optics) and, therefore, at the speed of light. The light pulses translate into binary values that are read by a computer. Optical fiber cables used primarily in telecommunications and computer network applications. A transceiver is a transmitter and receiver combined in a single package… Examples of optical fiber cable assemblies imported by CSC include Molex’s “QSFP and PSM4 Active Optical Cable” products: Product Series 106414 – an active optical cable (AOC) with a QSFP+ transceiver on one end and a MPO connector on the other; and Product Series 1016411 and 106410 – active optical cables with SFP transceivers at both ends. They are used in structured cabling systems to transport aggregated data (from 40 to 56 Gbps) up to 4 kilometers, and are electrically compliant with the QSFP+ interface InfiniBand™ FDR/DDR/QDR, Ethernet (10 and 40 Gbps), Fibre Channel (8 and 10 Gbps), SAS 3.0 and 2.1 (12 and 6 Gbps) and other protocol applications. CSC states that, in this context, “MPO” stands for “multi-fiber push-on” or “multi-path push-on.” ISSUE: Are the Optical Fiber Cable Assemblies, as described above, properly classified under heading 8517, HTSUS, which provides for “Telephone sets, including 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 8443, 8525, 8527 or 8528; parts thereof”, or under heading 8544, HTSUS, which provides for “Insulated (including enameled or anodized) wire, cable (including coaxial cable) and other insulated electric conductors, whether or not fitted with connectors; optical fiber cables, made up of individually sheathed fibers, whether or not assembled with electric conductors or fitted with connectors”? LAW AND ANALYSIS: Classification under the HTSUS is determined in accordance with the General Rules of Interpretation (“GRI”) and, in the absence of special language or context which otherwise requires, by the Additional U.S. Rules of Interpretation (“ARI”). 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. The following headings and subheadings of the HTSUS are under consideration in this case: 8517 Telephone sets, including 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 8443, 8525, 8527 or 8528; parts thereof: 8517.62.00 Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus... * * * 8544 Insulated (including enameled or anodized) wire, cable (including coaxial cable) and other insulated electric conductors, whether or not fitted with connectors; optical fiber cables, made up of individually sheathed fibers, whether or not assembled with electric conductors or fitted with connectors: 8544.70.00 Optical fiber cables… * * * * * * * * * * * * Note 3 to Section XVI, HTSUS, in which Chapter 85 is provided, provides the following: 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 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. General Rule of Interpretation (GRI) 3(b) and (c) provide the following: 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: (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 be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. The Explanatory Notes (EN) to the Harmonized Commodity Description and Coding System represent the official interpretation of the tariff at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). CSC contends that the subject OFCAs are classifiable under heading 8544 because they are composite machines for which the principal function cannot be ascertained and therefore GRI 3(c) applies, as noted in the ENs to Section XVI, HTSUS. In doing so, CSC argues that CBP has published conflicting rulings involving similar merchandise. In CBP Ruling HQ 964781 (September 26, 2002), CBP held that fiber optic/repeater assemblies that consisted of fiber optic cables fitted with optic repeaters on both ends are to be classified under subheading 8544.70.00. In doing so, CBP determined that the fiber optic/repeater assemblies were composite machines whose principal function could not be determined, invoking note 3 to section XVI. In CBP Ruling NY N238122 (February 22, 2013), CBP held that fiber optic/transceiver assemblies that consisted of fiber optic cables fitted with transceivers on both ends are to be classified under subheading 8517.62.00. CBP also held in another case that fiber optic/transceiver assemblies that consisted of fiber optic cables fitted with transceivers on both ends are to be classified under subheading 8517.62.00. See CBP Ruling NY N254738 (July 15, 2014). CSC maintains that HQ 964781 is in conflict with NY N238122 and NY N254738 and that the latter two rulings are incorrect. In HQ 964781, the merchandise at issue consisted of fiber optic cables fitted with optic repeaters on both ends, as noted above. “Repeater” is not defined in the HTSUS and, though it is referenced in several ENs, including the EN to heading 8517, it is not defined in the ENs. When a tariff term is not defined by the HTSUS or the legislative history, its correct meaning is its common, or commercial, meaning. See Rocknel Fastener, Inc. v. United States, 267 F.3d 1354, 1356 (Fed. Cir. 2001). "To ascertain the common meaning of a term, a court may consult 'dictionaries, scientific authorities, and other reliable information sources' and lexicographic and other materials.'" Id. (quoting C.J. Tower & Sons of Buffalo, Inc. v. United States, 673 F.2d 1268, 1271, 69 Cust. Ct. 128 (Cust. Ct. 1982); Simod Am. Corp. v. United States, 872 F.2d 1572, 1576 (Fed. Cir. 1989)). A “repeater” is defined as a device that transmits or “repeats” the signals it receives “much in the same way the relay repeats the signals from the main into the local circuit.” A. E. Loring, A Hand-book of the Electromagnetic Telegraph (1878). The repeater is used “when the length of a… circuit renders it of too great resistance to be worked satisfactorily…” Id. A more recent definition is consistent with the definition above: Network repeaters regenerate incoming electrical, wireless or optical signals. With physical media like Ethernet or Wi-Fi, data transmissions can only span a limited distance before the quality of the signal degrades. Repeaters attempt to preserve signal integrity and extend the distance over which data can safely travel. https://www.lifewire.com/definition-of-repeater-816359 (2016). Another source defines repeater as such: A repeater is a network device that retransmits a received signal with more power and to an extended geographical or topological network boundary than what would be capable with the original signal. A repeater is implemented in computer networks to expand the coverage area of the network, repropagate a weak or broken signal and or service remote nodes. Repeaters amplify the received/input signal to a higher frequency domain so that it is reusable, scalable and available. Repeaters were introduced in wired data communication networks due to the limitation of a signal in propagating over a longer distance and now are a common installation in wireless networks for expanding cell size. Repeaters are also known as signal boosters. https://www.techopedia.com/definition/3176/repeater (2017). Thus, it is clear that a repeater is meant to transmit a signal within a network by relaying it, thereby extending the length of the transmission of the signal. In NY N238122 and NY N254738, the merchandise at issue consisted of fiber optic cables fitted with transceivers on both ends, as noted above. Additional U.S. Note 3, HTSUS, provides the following: For the purposes of headings 8517 and 8525 the term "transceivers" refers to combinations of radio transmitting and receiving equipment in a common housing, employing common circuit components for both transmitting and receiving, and which are not capable of simultaneously receiving and transmitting. Thus, a transceiver is distinguished from a repeater in that the transceiver transmits and receives signals, while the repeater only transmits a signal to relay it along a network. To that extent, the repeaters in HQ 964781 perform a function similar to the fiber optic cables to which they are attached, in that they are transmitting signals. We noted the following in HQ 964781: Whether the fiber optic cable carrying the signal or the optical repeater, which boosts the signal performs the principal function cannot be determined. Both are equally essential functions. Because principal function cannot be determined, through application of GRI 3(c), we classify the whole under heading 8544, which occurs last in numerical order among those headings which equally merit consideration. We contrast the relationship between the fiber optic cable and repeaters in HQ 964781 with the relationship between the fiber optic cable and transceivers in NY N238122 and NY N254738. While the fiber optic cable in all three cases is carrying a signal, the transceivers are transmitting and receiving signals. As composite articles, the fiber optic cable/transceivers assemblies are doing both transmitting and receiver, and it is clear that only the transceivers are performing those principal functions. Thus, as we found with the fiber optic cable/transceiver assemblies in N238122 and NY N254738, we so find in this case with the subject OFCAs. As CSC states in describing the OFCAs, “a transceiver is a transmitter and receiver combined in a single package...” The transmission and reception of data are the principal functions of the OFCAs and since the transceivers are the only components of the OFCAs that perform those functions, we determine that the transceivers, whether fitted only on one end as with product series 106414 or fitted on both ends as with product series 1016411 and 106410, perform the principal functions of the assemblies in accordance with Note 3 to Section XVI, HTSUS. As we have determined that the transceivers perform the principal functions of the OFCAs, GRI 3(c) is not applicable in this case. Therefore, we conclude that the Optical Fiber Cable Assemblies, as described above, are properly classified under heading 8517, HTSUS. Specifically, they are to be classified under subheading 8517.62.00, HTSUS, which provides for “Telephone sets, including 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 8443, 8525, 8527 or 8528; parts thereof: Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus...” HOLDING: The Optical Fiber Cable Assemblies are properly classified, by application of GRI 1 and Note 3 to Section XVI, under heading 8517, HTSUS. Specifically, they are to be classified under subheading 8517.62.00, HTSUS, which provides for “Telephone sets, including 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 8443, 8525, 8527 or 8528; parts thereof: Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus...” The general column one rate of duty, for merchandise classified under this subheading is Free. Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division