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AUTHORITY FOR ADVANCE RULINGS
(CENTRAL EXCISE, CUSTOMS & SERVICE TAX)
Hon'ble Mr.Justice Syed Shah Mohammad Quadri (Chairman)
Mr.Somnath Pal (Member)
Tuesday, the Twenty Eighth of February Two Thousand Six
Ruling Nos. AAR/14-27(Cus)/2006
Applicant in all the applications M/s Alcatel India Ltd.
Plot No. 25, Sector 18
Commissioner designated Commissioner of Customs,
Air Cargo Complex
New Custom House
Present : for the applicant Mr. Charles A. Barber
Director (Customs & Supply Chain)
Alcatel, London, UK
Mr. Steve Gaikwad
Client Partner, Vantis Custom House
for the Commissioner Mr. A.K. Roy, Joint CDR
designated CESTAT, New Delhi
R U L I N G
( By Mr. Somnath Pal, Member )
The question posed by the applicant in these applications, namely, whether the telecommunication cables of the types proposed to be imported by them are classifiable under Tariff Item 8544 70 90 of the First Schedule to the Customs Tariff Act, 1975 (in short the Act), being common, they are being disposed of together.
2. As per the applicant, telecommunication cables of the following description are involved in these applications :-
From the above, it is clear that three different types of telecommunication cables are proposed to be imported by them. They are - (a) OALC; (b) URC & (c) Terrestrial (Land). The first two models are 'submarine' while the third is 'terrestrial (land)'.
As per the generic description of goods given for the category OALC in the corresponding applications, these submarine telecommunication cables are a hybrid of optical and mechanical operations that form part of a submarine telecommunication system for use in transmission of aggregate data. The ASN OALC cable design can accommodate up to 48 fibre pairs. The fibres are housed in a jelly-filled (non-hygroscopic filling compound) steel tube surrounded by further layers of steel wires that provide tensile strength. This steel tube is insulated with a layer of polyethylene to form the telecommunication cable. Such cables are designed to protect and facilitate the optical fibre transmission path during operation (carry the signal), during installation (laying and burial at sea), and recovery operations.
For the URC category
the same general description of goods as for OALC has been given, the
variations being in finer physical characteristics and functional parameters.
The last one, namely, the Terrestrial (Land) category, covers goods described as communication cable for submarine telecommunication systems. It is comprised of optical fibres (glass fibre reinforced with plastic material). It is set in a thermoplastic tube containing up to 12 fibres (except for Sl. No. 12 in the Table above, where it contains upto 8 fibres) and filled with a non-hygroscopic compound. The inner and the outer sheaths are made of a non-flammable, black high density polyethylene/copolymer with a nominal thickness of 1.5 mm. For items in Sl. Nos. 9, 10 & 11, it has been further added that tubes and fillers are stranded around the central strength member.
3. On the classification issue, the applicant has referred to the Rules 1 and 6 of the General Rules for Interpretation of the First Schedule to the Act, and submitted that all these telecommunication cables are classifiable under tariff item 8544 70 90. A copy each of the rulings issued by the Customs authorities in UK, USA and Australia (for OALC and URC categories of telecommunication cables) and by the UK & Australian Customs (for terrestrial telecommunication cable), has also been submitted alongwith the respective applications to show that they have classified these products under tariff sub-heading 8544 70.
4. The Commissioner in his initial comments in respect of all these applications stated that on the basis of description of goods given in Annexure-II to the application, and general characteristics given in the Technical Documents, the classification under tariff item 8544 70 90 as proposed by the applicant may be accepted.
5. At this juncture, it would be useful to refer to the tariff heading 8544 which reads as under :-
8544 "Insulated (including enameled or anodised) wire, cable (including co-axial cable) and other insulated electric conductors, whether or not fitted with connectors; optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors"
Had it not been noticed at the first hearing itself before the Authority that for any optical fibre cable to be classified under the heading 8544, it is essential to establish that it is made up of individually sheathed fibres, we would have proceeded on the comments of the Commissioner. Since neither the technical information furnished by the applicant nor the comments given by the Commissioner, apparently touched upon the requisite "made up of individually sheathed fibres", the Authority gave the parties opportunity to submit their further response, if any, in this regard. The Authority directed the applicant to clarify whether the optical fibre cables are made up of individually sheathed fibres and also to produce before the Authority the samples of the goods which are the subject matter of classification.
6. It appears from the record that at this stage, the Commissioner suo motu sought the opinion of the Department of Information Technology, Ministry of Communications and Information Technology, Government of India, New Delhi (in short, DIT) as to whether the optical fibre cables in question are made up of individually sheathed fibre. The relevant part of the reply of DIT Ref. no. 5(10)/2005- IPHW dated 06.10.2005 reads as follows :-
"The matter has been examined in the Department of Information Technology. In this connection, it is clarified that the 14 Nos. Optical Fibre Cables under reference are not made up of individually sheathed fibre"
7. In their response to DIT's opinion, the applicant, reiterating their own stand taken earlier, referred to the technical information for the cable description that is OALC; URC and Terrestrial (Land), which includes the individual nature of the fibres. They also forwarded ten samples of cables with proper identification which are the subject matter of these applications. However, having noticed that the aforementioned opinion was given without looking into samples of the cables in question, the Authority decided to send the samples to the DIT for verifying the same and reporting whether in the light of the explanation given by the applicant, they could be treated as made up of individually sheathed fibres within the meaning of tariff heading 8544 of the Act.
8. In reply, the DIT in their letter Ref. no. 5(10)/2005- IPHW dated 05.01.2006 gave the point-wise comments as under :-
"a) Whether the samples furnished vouch for the claim of the applicant that the optical fibre cables have been manufactured by a process in which "the fibres are coated with different colours and are housed in jelly material which would amount to individually sheathing the fibre as per the modern technology".
The samples furnished by the party are optical fibre cables of various types. The optical fibres consist of the core and cladding (glass) and the UV curable resin, which for identification of the individual fibre is coloured, in different colors. Several fibres are then housed in a single plastic tubing filled with jelly material. This does not amount to individually sheathing of the fibre.
b) In particular, whether the optical cables (in each of the samples) are made of optical fibres which have "individual protective sheath made of a UV-curable resin (also described as coating)", as claimed by the party in their letter dated 13.12.2005.
The optical fibres itself (sic) consist of the core, cladding and UV coating. Thus, it is not correct to try to call the UV coating as a sheath in the context of the tariff heading. In fact, in the input-output norms for import of raw materials for production of optical fibres, the UV curable coating is listed under the list of raw materials for optical fibres. It is not listed under the raw materials for cabling the fibre into cables. The tariff heading refers to a further individual sheath, which is placed over the UV curable resin coated optical fibre.
c) Whether as per the description given and on examination/testing of the samples in question, these optical fibre cables can be taken to have been made up of individually sheathed fibres. In this context, what is regarded in the modern technology as individually sheathing of optical fibres may also please be elaborated.
In our technical opinion and on physical examination of the samples in question, these optical fibre cables are not made up of individually sheathed fibres."
9. The letter containing the above comments was forwarded by the Authority to the applicant as well as to the Commissioner and the Joint CDR for their further response, if any. While giving detailed comments, the applicant relied upon certain rulings issued by the USA Customs classifying such cables under heading 8544, the technical information on the manufacturing process of fibre optic telecommunication cable, the HSN Explanatory Note and the relevance of the Information Technology Agreement (ITA) in dealing with the classification of telecommunication cables. The Ld. Joint CDR, on the other hand, urged that in view of the clear opinion given by DIT the proper classification would be under tariff item 9001 10 00.
It will be useful to refer to heading 9001 which reads as follows :-
9001 "Optical fibres and optical fibre bundles; optical fibre cables other than those of heading 8544; sheets and plates of polarising material; lenses (including contact lenses), prisms, mirrors and other optical elements, of any material, unmounted, other than such elements of glass not optically worked"
The description of the heading shows that all optical fibre cables which are not covered by the heading 8544 would fall under the heading 9001.
10. The thrust of the submissions of the applicant, at one stage of the proceedings has been that the fibres are coated with different colours and are housed in jelly material which would amount to individually sheathing the fibre as per the modern technology. However, subsequently, the Ld. Representatives of the applicant would argue that the old manufacturing method of plastic sheathing of the fibre has been developed in modern manufacturing processes in telecommunications to individual sheathing through a coating process, which provides a substantial coat, which sheathes the narrow fibre; it is a substitute provided by the modern technology of the erstwhile plastic sheath. The DIT, on the other hand opined that the optical fibre itself consists of a core, cladding and UV curable resin coating. According to the DIT, it is not correct to try to call this coating as a sheath in the context of the tariff heading which refers to a further individual sheath which is placed over the UV curable resin coated optical fibre. In support of this view, the DIT referred to the input-output norms for import of raw materials, for production of optical fibres, in which the UV curable coating is listed under the list of raw materials for cabling the fibre into cables. While disagreeing with this opinion, the applicant has contended that the answers given by the DIT to the points raised by the Authority, in the technical opinion of the applicant, did not reflect the depth of protection provided by coating which sheaths each fibre. It was further pointed out by the applicant that the DIT did not address the question raised by the Authority, namely "what is regarded in the modern technology as individually sheathing of optical fibres" . According to the applicant, their cables do reflect this aspect.
In its report the DIT has put emphasis on the fact that the UV curable resin coating is an essential part of optical fibre itself and without it the product cannot even qualify as an optical fibre; such a coating cannot be called a 'sheath' which has necessarily to be something to be placed over the optical fibre as an additional cover to make it an "individually sheathed fibre" - the expression which appears in the heading 8544. The DIT has not elaborated "what is regarded in the modern technology as individually sheathing of optical fibre," though it has been categorical in giving the technical opinion on all the other queries of the Authority. Since this is the issue which forms the basis of the applicant's contention before us, we consider it necessary and appropriate to examine this aspect.
11. We begin our task of examining the core issue which crystalises from the above factual details on record. The basic question, which needs to be addressed is - Can the optical fibre cables as per the technical details given by the applicant in the respective application and whose samples have been submitted by them before the Authority and which they propose to import, be taken to be made up of individually sheathed fibres?
12. Before examining the applicant's contention on the modern technology aspect, we would first focus our attention on the relevant entries in the Tariff. Though the description of the goods given in the tariff heading 8544 both in the HSN and in the Act, inter alia, refers to the expression "made up of individually sheathed fibres", no explanation/definition of the words "sheath" or "sheathing" appears either in the HSN Explanatory Notes or in the Section/Chapter Notes to Chapter 85 of the Act. In the HSN Explanatory Note for the tariff heading 85.44 it has however been mentioned inter alia that "the heading also covers optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors. The sheaths are usually of different colours to permit identification of the fibres at both ends of the cable......." The word "sheathed" has been used in the text, but it is not explained or defined what actually constitutes a 'sheath' or individually "sheathing" fibre. All that the Note says is that the sheaths are usually of different colours which facilitates identification of the fibres at both ends of the cable. The buffer coating put on the individual fibre also has a colour coating for the same purpose but this fact, per se, does not make the coating a sheathing. The HSN Explanatory Note to the heading 90.01 also refers to the word "sheath" while explaining that "optical fibre cables of this heading (which may be fitted with connectors) consist of a sheath containing one or more optical fibre bundles, the fibres of which are not individually sheathed". Though in this Note also, no definition or explanation of the word 'sheath' has been given, nevertheless some clue is available to discern as to what a 'sheath' is meant to be. In the first part of the sentence in this Explanatory Note, it has referred to 'sheath' as containing one or more optical fibre bundles. This, in turn, implies that 'sheath' has to be something in the form of a jacket or container. The same meaning should logically be attached to it when interpreting the expression "individually sheathed" appearing in the latter part of the same sentence. The distinction in the description of the goods in question, namely, optical fibre cables in headings 85.44 and 90.01 lies in the fact that the former refers to "individually sheathed fibres", whereas the latter (as the HSN Explanatory Note clarifies), refers to 'a sheath containing one or more optical fibre bundles, the fibres of which are not individually sheathed'. In so far as the Section/Chapter Notes to Chapters 85 & 90 of the Act are concerned, terms 'sheath' or 'sheathing' have also not been defined or explained.
13. Since the terms 'sheath' and 'coating' are not defined or explained in the HSN or the Act, we have to understand them in the sense in which they are understood by English speaking people ordinarily as well as in scientific/technical context. Therefore, necessarily, we have to look for the meaning of these words in the dictionary which, in our view, would give a reasonably clear perception of what a 'sheath' and 'coating' ordinarily stand for and how they are commonly understood. This is what we found.
The New Shorter Oxford English Dictionary -1993 Edition
Sheath 1 A close-fitting case or covering for the blade esp. of a sword, dagger, etc. when not in use........ b A case or covering with a similar function or purpose; ...... 4a A thin-walled, hollow part of a device or mechanism which surrounds another part.
Coating --- 3. A layer of any substance, as paint, tin etc, spread over or covering a surface;
Chambers Dictionary of Science and Technology
Sheath (ElecEng) The covering of a cable.
Coating (ElecEng) - The metallic sheets or films forming the plates of a capacitor;
The New Oxford American Dictionary
Sheath A close-fitting cover for something, esp. something that is elongated in shape, in particular :
A cover for the blade of a knife or sword.
A protective covering around an electric cable.
Coating - a thin layer or covering of something : a coating of paint.
McGraw-Hill - Dictionary of Scientific and Technical Terms - Fifth Edition
Sheath [ELEC] A protective outside covering on a cable. [............ELECTROMAG] The metal wall of a waveguide. [SCI TECH] A protective case or cover
Coating - 1. Any material that will form a continuous film over a surface. 2. The film formed by the material.
From the above, it is clear that as is understood and perceived not only in common parlance but also in scientific/technical sense, a "sheath" is something different from a "coating". Nowhere have these two words been shown as synonym. No material has also been placed before us to show that they are treated as synonymous. In 'Fiber Optics' by Robert J. Hoss & Edward A. Lacy*, the expression 'Optical-Fiber Coating" has been explained as "a protective material bonded to an optical fiber, over the cladding if any, to preserve fiber strength and inhibit cabling losses, by providing protection against mechanical damage, protection against moisture and debilitating environments, compatibility with fiber and cable manufacture, and compatibility with the jacketing process. Coatings include fluorpolymers, Teflon, Kynar, polyurethane, and many others....". In the website Answers.Com, fiber optics glossary, the word 'coating' has been taken to mean "a protective layer applied over the fiber cladding during the drawing process to protect it from the environment". We think there is no need to multiply the references to drive home the point that 'coating' is not treated as 'sheathing' either in ordinary sense or in the scientific/technical field.
In support of their contention that the products in question should be classifiable under tariff heading 8544, the applicant referred to the HSN Explanatory Note for heading 8544 in which the issue of insulation of conductors has been dealt with. In our view, it is of no help to them. That Explanatory Note
merely states that for insulation purpose, one or more coverings of insulating materials are generally used and in certain cases the insulation is obtained by anodizing or by a similar process (e.g, the production of a surface coating). In fact, in the same Explanatory Note, the word 'sheath' has been used in contradistinction to coating when it clarifies that in certain cases a metal sheath (e.g., lead, brass, aluminium or steel) serves as a protective covering for the insulation of a conductor. It is, therefore, clear that the coating and sheathing are two different entities, though both of them may have the same function, namely, insulation of conductors. We are, therefore, unable to appreciate as to how the expression "individually sheathed fibres" employed in the heading 8544, would justify the view that a 'coating' given on the cladding of an optical fibre, becomes a 'sheath', notwithstanding their common protective purpose.
________________________________________________________________ * [Published by PTR Prentice - Hall, Inc, New Jersey, USA] at page 279
14. Having examined the relevant tariff entries, let us now turn to the description of the goods and the submissions made in regard to Alcatel's products under consideration.
On the nature of coating applied by the applicant during manufacturing process of optical fibre followed by them, this is what they have to say :-
"Alcatel applies a dual acrylate coating called 'AFC3', and a colour coating called 'Color Lock', during its optical fibre manufacturing process or uses uncoloured fibres that are further identified via the application of an additional coloured layer. The thickness of Alcatel's UV curable dual acrylate coatings and colouring is 60 to 62.5 microns thick in keeping with industry standards. The dual acrylate coating provides important fibre protection and structural integrity to the bare glass fibres, responsible for each fibre's tensile strength, to the extent that the bare glass fibres could not be used without it. The application of dual acrylate coatings/sheathing provides significant protection against abrasion of the optic fibres, enhances tensile strength and reduces the effects of long-term stress, in particular exposure to humid environments which can lead to failure due to a phenomenon called 'static fatigue'. After the individual fibres are manufactured (with their coatings) they are placed inside buffer tubes. Each cable also has a varied number of individual optical fibres grouped in a number of buffered tubes or similar coverings, including different types of insulation, which are all contained within a particular cable's outermost layer or jacket. The finished optical fibre cable is then imported. Each of the subject optical fibres is manufactured individually; with its dual-layer acrylate coating and colouring processes either integrated into a single-step of production, or separated in two steps, clad and coated. The industry standard specifications for coated, coloured optic fibres are 250+/-15microns, and it's AFC3/Colour-Lock or additional coloured layer process exceeds this standards.
The amount of coating applied to its optical fibre is 60 to 62.5 microns thick and reflects 'an industry standard'. The incorporation of AFC3 coating and Colour-Lock process as well as uncoloured coating further coloured during an additional manufacturing step protects the individual optical fibres from abrasions on the glass core and cladding that could cause short or long term failures. The AFC3 dual acrylate coating and 'Colour-Lock' are clearly visible to the naked eye, and are not proportionately 'very thin' with respect to the diameter of the optical fibre core and cladding."
It has been further stated by the applicant in their letter dated 13.12.2005, that "early cable designs produced by Alcatel were based on an individual additional protection of the fibres, either in the form of buffer sheath tightly applied around the fibre or of a soft material, coating the fibre individually and housed in a protective sheath or slot.
The evolution of the telecommunications market requiring telecommunications cable designs to be smaller; or to accommodate a greater number of fibres in the same space; and the rapid evolution of transmission technologies requiring the use of optical fibres of more and more complex design and with a higher sensitivity to bending effects (i.e. when the fibre bends it does not show unacceptable attenuation increases), have resulted in changes in cable design technology to a 'loose design package' as the cable core, i.e. several individually sheathed fibres, the sheath being a UV curable resin with additional protective gel, housed in a stainless steel or plastic tube depending upon whether the cable is for submerged or terrestrial applications respectively.
Alcatel current cable design follows this technology where the individual sheathing of the fibres is provided using today's technology i.e. UV curable resin to provide protective sheath."
To support their contention the applicant also gave reference to the following website links alongwith a brief introduction to each one of them with regard to the optical fibre cable technology :
"1. http://www.corning.com/opticalfiber/guidelinesmagazine/eguidelines/vol6/ view.aspx?article=2&page=1®ion=na&language=e : Corning are the biggest manufacturer worldwide of optical fibres. This is an article on coating in optical fibres. The article explains that the technology has changed from a one layer coating into a 2 layered coating and this has become an industry norm. The main reason being that the former was only for protection from scratches and scuff while current technology provides protection to the light carrying ability and preserves its strength. The article also explains that there are two types of these cables i.e. those used for laser applications and those used for telecoms e.g. submarine fibre. The article also finally states that coating has changed over the years from infinitely stiff (tubing) to an infinitely elastic material.
2. http://www.howstuffworks.com/fiber-optical . The article provides basic information on optical fibre cables and provides a diagram of its construction i.e. core, cladding and buffer coating which is the same as the Alcatel products.
3. htpp://www.ciscopress.com/articles/article.asp?p=170740&seqNum=4&rl=1 : This is an article from Cisco who are a multi-national telecommunication supplier and the article describes in detail the construction of optical fibre cables.
4. http://www.itu.int/itudoc/gs/promo/tsb/85003.pdf . : The ITU (International Telecommunication Union) is an organization for developments on standards world-wide in the telecommunication sector. The diagram on page 2 of this article shows the optical fibre and its configuration.
5. http://www.mrfiber.com/fiber-history . : This website gives you a brief history of fibre optic technology and also the development of this technology."
15. An optical fibre consists of three main regions - (a) a central cylinder or 'core'; (b) a surrounding layer of material called 'cladding'; and (c) an outer coating over the cladding. The 'core' transmits the lightwaves; the 'cladding' keeps the lightwaves within the 'core' and provides some strength to the core. The cladding has a lower refractive index (faster speed) than that of the core in order to keep the light in the core. The outer coating which is also called a buffer coating or a primary coating, is a protective layer applied over the fibre cladding to provide physical and environmental protection for the fibre.
Optical fibres are made of extremely pure optical glass. The first step in the manufacture of optical fibre is making a 'preform' glass cylinder which is usually done by a process called 'modified chemical vapour deposition (MCVD)'. The process of making preform blank is highly automated and takes several hours. After the preform blank cools, it is tested for quality control (index of refraction). The second step is to get this blank loaded into a fibre drawing tower in which it gets lowered into a high-temperature graphite furnace and the tip gets melted until a molten glob falls down by gravity. As it drops, it cools and forms a thread. In the third step which is virtually an extension of the second step itself, the operator threads the strand through a series of coating cups (buffer coatings) and ultraviolet light curing ovens onto a tractor-controlled spool on which the finished product is wound. The finished optical fibre is then tested for various parameters like tensile strength, refractive index profile, information carrying capacity, operating temperature/humidity range, ability to conduct light underwater (important for undersea cables) etc. (Source - How Fibre Optics Work - an article by Craig C. Freudennich, Ph.D - in www.howstuffworks.com).
The coating is typically an ultraviolet (UV) light-cured acrylate applied during the manufacturing process of the fibre. The "buffer coating" could also be constructed out of one or more layers of polymer, non-porous hard elastomers or high performance PVC materials. During the installation process, this coating is stripped away from the cladding to allow proper termination to an optical transmission system. The coating size can vary, but the standard sizes are 250 micrometer (one micrometer means one millionth of a meter, also called a micron) and 900 micrometer. The 250 micrometer coating takes less space in larger outdoor cables. The 900 micrometer is larger and more suitable for smaller indoor cables. (Source - chapter from the book Optical Network Design & Implementation by Vivek Alwayn, courtesy of Cisco Press - www.ciscopress.com)
A few more technical terms relevant to the issue before us, need to be explained at this juncture. Optical fibres are broadly of two types :-
(a) Multimode fibre - It has a bigger core (almost always 62.5 micrometer, but sometimes 50 micrometer) and is used with LED (Light Emitting Diode) sources at wavelengths of 850 and 1300 nm for short distance, lower speed networks like LANs (Local Area Network)
[Mode' means a single electromagnetic field pattern that travels in a fibre]
(b) Single mode fibre - It has a much smaller core, only about 9 micrometer and is used for telephony and CATV with laser sources at 1300 and 1550 nm. It can go very long distances at very high speeds.
(Source:-Tech Optics-Fibre Optic Jargon-www.techoptics.com)
First level of Fibre Protection
The optical fibre is a very small waveguide. In an environment free from stress or external forces, this waveguide will transmit the light launched into it with minimal loss, or attenuation. However, an unsupported fibre is subject to a loss of optical power caused by the microbending (microbends are minute fibre deviation caused by lateral forces which cause optical power loss from the core). To handle this problem two first level protections of fibre have been developed namely, loose buffer and tight buffer.
(i) Loose Tube :- In the loose buffer construction, the fibre is contained in a plastic tube that has an inner diameter considerably larger than the fibre itself. The loose tube isolates the fibre from the exterior mechanical forces acting on the cable. For multifibre cables, a number of these tubes, each containing single or multiple fibres, are combined with strength members to keep the fibres free of stress, and to minimize elongation and contraction. By varying the amount of fibre inside the tube during the cabling process, the degree of shrinkage due to temperature variation can be controlled, and therefore the degree of attenuation over a temperature range is minimized. For use in a more strenuous environment, a much more robust cable construction (than in indoor applications) is required. The loose-tube construction is suitable for this purpose. This is therefore usually found in cables used for outdoor installations. Under continuous mechanical stress, the loose tube permits more stable transmission characteristics.
(ii) Tight Buffer : - The other fibre packaging technique, tight buffer, uses a direct extrusion of plastic over the basic fibre coating. Typical plastic used for this extrusion are Nylon, Hytrel, or other thermoplastic elastomers. Tight buffer construction serves to protect the fibre from crushing and impact loads, and to a certain degree, from the microbending induced during cabling operations. It permits smaller, lighter-weight designs for similar fibre configuration, and generally yields a more flexible, crush-resistant cable.
(Source :- Article - Fibre Optic Communications - by Patrik Boshell - www.electricity-today.com )
16. In effect, what the applicant is claiming, is that the cable design technology followed by them is "loose buffer construction" to which we have already made a reference earlier. They also assert that their products in question are having a core, cladding and a buffer coating. As explained by them, several fibres each of which has UV curable dual acrylate coating and a colour coating on it, with additional protective gel, are housed in a stainless steel tube for submerged applications or in a plastic tube for terrestrial applications. According to them, coating of thickness 60 to 62.5 microns will provide individual sheathing of the fibres. We have checked up the textual contents of the websites referred to by the applicant but are unable to find any support therefrom to their claim that the improved technique of coating including the UV curable dual acrylate coating is recognized in the modern cable design technology as sheathing of individual fibre. In fact, the applicant has not produced any technical literature to show that primary or buffer coating of thickness 60-62.5 microns is accepted and acted upon in the industry as individually sheathing of the fibre.
17. While the Corning website informs us that the optical fibre coating has come a long way in the past three decades and the quest for the 'holy grail' of coating - the ideal coating - has changed over the years, from a coating that is infinitely stiff to one that is infinitely elastic, or one that is entirely resistant to temperature, it does not however, treat coating as identical to a 'sheath'. Therefore, it follows that a coating does not don the identity of a 'sheath' within the meaning of the expression used in the heading 8544 with which we are ultimately concerned. As the definitions given in the dictionaries would go to show, sheath is a separate cover or shell and each fibre is enclosed in its own protective sheath to add further protection. Subsequently, these individually sheathed optical fibres are fitted with a common sheath and/or armour and other protective mechanisms to form a telecommunication cable. The individual sheathing on each fibre provides protection from damage should such fibres rub against each other. That technologically improved quality of coating on each fibre ensures as good a protection as a 'sheath' can possibly provide to the fibre, is of no relevance in so far as the coverage of the expression "made up of individually sheathed fibres" in the tariff heading 8544 is concerned.
18. On a careful consideration of the material submitted by the applicant and those gathered by us from various technical literature/websites, it has become evident that, optical fibres being highly sensitive and delicate products by themselves, need protection from physical and environmental stress of various kinds, right from the stage of their manufacturing till they are cabled to form optical fibre cables ready to be sold and purchased in the market. The degree of protection depends on the ultimate use which the resultant cables would be put to. It is also seen that the fibres and the cables made therefrom have to go through various rigorous tests before they become marketable. Applying dual acrylate coating on individual fibre at the manufacturing stage is undoubtedly aimed at giving the fibre more protection than what a single layer of coating could provide. As the text in Corning website www.corning.com records - "optical fiber coatings are designed to serve two primary roles : to protect the light-carrying ability of the glass fiber and to preserve its strength. While some of the first coatings in the history of optical fiber were a single layer of protective material, dual-layer coatings are the industry norm today, as researchers discovered early on that they offered improved performance for the fibre". Thus, it is clear that what is reported to be the industry norm today is an improved version of coating only and not treating such coating as a 'sheath' on individual fibre. That individual sheathing of the fibre is provided using present day technology ie, UV curable resin of thickness 60-62.5 microns to provide a protective sheath is merely a claim or statement made by the applicant without any support from technical literature/documents. We are therefore not in a position to agree with this point of view.
19. While on this subject, we cannot but notice another point of considerable significance concerning the interpretation of the expression "individually sheathed fibres". From the manufacturing process of an optical fibre, which we have briefly narrated in the earlier part of this ruling, it is indisputably established that the primary or buffer coating is an integral part of the manufacturing of an optical fibre. In otherwords, a fibre is not a fibre unless it is complete with the coating. That being the factual position, if coating is to be treated as sheathing as the contention of the applicant is, then the 'fibre' should be taken to be already 'individually sheathed' once it gets born as a 'fibre' on completion of its manufacturing process. In that event, the expression "individually sheathed" before the word "fibres" as employed in the tariff heading 8544 would become completely redundant and superfluous. Obviously, such an interpretation cannot merit any support or acceptance. From this angle as well, it sounds logical to assume that the framers of the expression in the HSN and in the Act would not have used the word "sheathed" to mean "coated" in the context of optical fibre cables covered by the heading 8544.
20. We have gone through the various rulings given by the USA Customs, copies of which have been furnished to us by the applicant. All these rulings excepting one have been issued by the Commercial Rulings Division of USA Customs, New York while the Customs ruling HQ964632 detailing the process of coating and why this is considered as sheathing was issued by the USA Customs Headquarters in Washington. We have, studied them carefully with keen interest as they have dealt with the same issue which is before us. Much emphasis has been placed in the ruling on Alcatel's assertion that the amount of coating applied to its optical fibre is 60 microns thick and reflects "an industry standard" and that its incorporation of AFC3 coating and Colourlock process protects the individual optical fibres from abrasions on the glass core and cladding that could cause short or long-term failures. The officials giving the ruling observed, "insofar as the subject optical fiber is individually coated with 60 microns of protective dual acrylate, it is our opinion that optical fiber cable composed of this optical fiber and coated with this combination of 60 microns of dual acrylate coatings and "ColourLock" would be classifiable as "individually sheathed" under heading 8544 HTSUS...... Alcatel's 60 microns of dual acrylate coatings do substantially add to the overall protection, security, and reliability of each individual optical fiber and should be considered sheathing." Moreover, while making it clear that it is not their view that every coating, buffering, jacket, covering or sheathing (merely because it is called "sheathing") affords an optical fibre sufficient protection for it to be classifiable under heading 8544, the said ruling nevertheless noted, "in this case, Alcatel has adequately demonstrated that its combination of 60 microns of dual acrylate coating and colouring does provide substantial sheathing protection to the individual optical fibres in its optical fibre cable". We however, noted that neither any authentic, independent and supportive technical information/literature/document/norms or standards nor any evidence showing any such practice being in vogue in the concerned industry, had been cited or analyzed in the rulings to show (a) that combination of 60 micron thick UV curable double acrylate coating with ColourLcok process is acknowledged and accepted as individually sheathing the fibre; (b) any norm or measure to judge what constitutes 'substantial sheathing protection' and (c) that any 'coating' which gives an optical fibre 'substantial sheathing protection' is regarded as a 'sheath'. It is worthwhile to mention that the heading 8544 does not employ the expression 'made up of fibres individually having substantial sheathing protection'. The words used are 'made up of individually sheathed fibres'. The entire focus is on each fibre being individually sheathed and not on any mechanism which gives equal protection as what a sheath would normally give.
Another reason given in these rulings relates to the exclusion of the optical fibre cables under consideration from the coverage of the heading 9001. The particular portion of the HSN Explanatory Note to heading 90.01 to which reference has been made in this context reads as follows - "Optical fibres consist of concentric layers of glass or plastics of different refractive indices. Those drawn from glass have a very thin coating of plastics, invisible to the naked eye, which renders the fibres less prone to fracture. Optical fibres are usually presented on reels and may be several kilometers in length. They are used to make optical fibre bundles and optical fibre cables". This, only gives the general description of an optical fibre and does not in any way exclude from the purview of heading 90.01 optical fibres having thicker coatings or a coating which is visible to naked eye. What is actually excluded from the coverage of this heading is clearly stipulated in the same Explanatory Note where it states that "the heading, however, excludes optical fibre cables made up of individually sheathed fibres (heading 85.44)". It has further been clarified in another part of this Explanatory Note that "Optical fibre cables of this heading (which may be fitted with connectors) consist of a sheath containing one or more optical fibre bundles, the fibrers of which are not individually sheathed." So, the only thing that matters in deciding whether optical fibre cables would fall within or go out of the ambit of tariff heading 9001 is whether they are made up of individually sheathed fibres or not. Based on various information, technical and otherwise, gathered by us and highlighted in foregoing paras, we are of the view that the nature and depth of coating or the degree of protection it seeks to provide, would not take it out of the realm of 'coating' and give it an identity of a different entity known as 'sheath'. With due respect, we are therefore, not persuaded to agree with the opinion expressed in the rulings given by USA Customs.
21. The other point which remains to be considered is the relevance of the Information Technology Agreement (ITA) on the classification of the products in question. The applicant has highlighted this aspect and stressed the point that if these telecommunication products are classified under heading 9001, India would be going against the principles of ITA and it would also create a great disadvantage for importers into India, as they would have to pay duty on products clearly intended to be duty free when the Indian Government signed the ITA.
We have carefully perused the authenticated copy of the ITA and India's schedule as amended upto 31.10.2005, made available to us by the Government of India, Ministry of Commerce & Industry, Department of Commerce, New Delhi through the Commissioner of Customs, Air Cargo Exports, New Delhi. We observe that the ITA came into force on 13th December, 1996 in the World Trade Organisation (WTO) Ministerial Conference at Singapore. India joined the ITA on 25th March, 1997. The parties to the said Agreement declared as follows:-
"1. Each party's trade regime should evolve in a manner that enhances market access opportunities for information technology products.
2. Pursuant to the modalities set forth in the Annex to this Declaration, each party shall bind and eliminate customs duties and other duties and charges of any kind, within the meaning of Article II:1(b) of the General Agreement on Tariffs and Trade 1994, with respect to the following :
(a) all products classified (or classifiable) with Harmonized System (1996) ("HS") headings listed in Attachment A to the Annex to this Declaration; and
(b) all products specified in Attachment B to the Annex to this Declaration, whether or not they are included in Attachment A;
through equal rate reductions of customs duties beginning in 1997 and concluding in 2000, recognizing that extended staging of reductions and, before implementation, expansion of product coverage may be necessary in limited circumstances."
As can be seen from the above Declaration, each party shall bind and eliminate customs duties and other duties and charges of any kind with respect to (i) all products classified (or classifiable) with HS (1996) headings listed in Attachment A to the Annex to this Declaration and (ii) all products specified in Attachment B to the Annex to this Declaration, whether or not they are included in Attachment A. On perusal of Attachment A, section 1, we find that an entry 'Optical fibre cables' is included therein with corresponding HS 96 heading 8544 70 shown against it. This means that only those optical fibre cables which are classified or classifiable under heading 8544 70 (that is, those which are made up of individually sheathed fibres) are to get the benefit of the ITA. There is no entry in this Attachment for the HS 96 heading 9001. Attachment A, section 2, enlists the semi-conductor manufacturing and testing equipment and parts thereof with corresponding HS code, which is not relevant to the products under consideration before us. In any event, neither the HS 96 heading 8544 nor heading 9001 figures in this list. Attachment B is the positive list of specific products to be covered by the ITA wherever they are classified in the HS. The description 'Optical fibre cables' does not appear in this Attachment either.
In so far as the India's schedule to the ITA is concerned, the list starts with the following preamble :-
"With respect to any product described in or for Attachment B to the Annex to the Ministerial Declaration on Trade in Information Technology products (WT/MIN(96)/16) to the extent not specifically provided for in this schedule, the customs duties on such product, as well any other duties and charges of any kind (within the meaning of Article II:1(b) of the General Agreement on Tariffs and Trade 1994), shall be bound and eliminated, as set forth in paragraph 2(a) of the Annex to the Declaration, wherever the product is classified".
The schedule gives the description of the products and the corresponding HS heading. The description 'Optical fibre cables' shown against the heading 8544 70 finds a place in this list while such cables falling under the heading 9001 are not included in the said schedule. So, Government of India's obligation under ITA is restricted to the optical fibre cables classifiable under the HS heading 8544 70 (same as in our tariff as well) and not in respect of optical fibre cables classifiable under the heading 9001. In fact, Government of India, in fulfilment of its obligation under the ITA, has been periodically reducing the rate of duty on the products covered by the India's schedule to the ITA over the last few years since 1997. The exemption notifications No. 24/2005-Cus dated 01.03.2005 as corrected by Corrigenda M.F. (D.R.) F. No. 334/1/2005 dated 02.03.2005 and No. 25/2005-Cus dated 01.03.2005, issued as part of that process, now exempt goods falling under the specified Heading, sub-heading or Tariff item mentioned in the two notifications, from the whole of duty of customs leviable thereon. In so far as optical fibre cables are concerned, the exemption is only for those which are classifiable under 8544 70 and not for those classifiable under 9001 as is apparent from the Notification No. 24/2005. The other Notification does not cover optical fibre cables at all. This being the factual and legal position as at present, we are unable to appreciate the contention of the applicant that India would be going against the principles of ITA if their products are classified under the heading 9001.
22. Having carefully examined the question posed by the applicant, both from the technical as well as legal angles, we are inevitably led to the conclusion that the products involved in these applications, namely, optical fibre cables are not "made up of individually sheathed fibres" which is the basic criterion to be fulfilled by any optical fibre cable to merit classification under tariff heading 8544 of the First Schedule to the Act. That being the case, they can not be classified under the heading 8544. Since the tariff heading 9001 specifically covers "optical fibre cables other than those of heading 8544", the products in question would accordingly fall squarely under the heading 9001. Note 1(h) of Chapter 90, states that "optical fibre cables of heading 8544" are not covered in Chapter 90. In other words, optical fibre cables made up of fibres that are not "individually sheathed" would be classifiable under the heading 9001. Having regard to the tariff lay-out of the heading 9001, we find that the products in question would more precisely be classifiable under the tariff item 9001 10 00. The question posed by the applicant is therefore, to be answered in the negative.
23. To complete the analysis, we have to refer to one more relevant fact. As we have recorded earlier, ten samples in all, covering the fourteen products under consideration have been produced before us by the applicant. Out of these, eight samples which are of the two categories, namely, OALC & URC, are purely optical fibre cables as can be made out by visual examination, whereas the remaining two which are samples of the category 'Terrestrial (Land)' cables, are found to be having electric conductors apart from optical fibre cable(s) in the same assembly. In otherwords, they are composite goods. Unlike the heading 8544, there is no qualifying remark "whether or not assembled with electric conductors or fitted with connectors" for the entry "optical fibre cables" in the heading 9001. Section/Chapter Note to Chapter 90 is silent on this aspect. The HSN Explanatory Note to heading 9001 clarifies only to the extent that optical fibre cables of this heading may be fitted with connectors, but does not talk of assembly with conductors. So, we have to fall back upon the General Rules for the Interpretation of the First Schedule to the Act, for deciding the classification of such composite goods. Rule 3(b) which is the relevant rule for this purpose reads 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 (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." Since, undoubtedly, the optical fibre cable component in the composite goods under consideration gives them their essential character, they would have to be classified as if they consisted of optical fibre cable(s) only. This would mean that even these composite goods would be classifiable under the heading 9001 and more precisely, under the tariff item 9001 10 00.
24. Thus, in view of the foregoing, we rule on the question posed by the applicant that each of the fourteen products proposed to be imported by them whose identifying descriptions have been enlisted in the Table in para 2 above and whose technical details and representative samples have been produced by them before the Authority, is not covered by the tariff heading 8544 and would accordingly be appropriately classifiable under the tariff item 9001 10 00 of the First Schedule to the Act.
Pronounced in the open Court of the Authority on this 28th day of February, 2006.
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(B.A.Agrawal) (Justice S.S.M.Quadri) (Somnath Pal)
Member Chairman Member