Radio-frequency identification (RFID) is the use of an object (typically referred to as an RFID tag) applied to or incorporated into a product, animal, or person for the purpose of identification and tracking using radio waves. Radio-frequency identification is comprised of interrogators (also known as readers), and tags (also known as labels or transponders).
Classification of readers/interrogators
CBP tends to treat readers/interrogators as ADP units. Relatively recent CBP ruling, NY M84377 (2006), classified RFID reader in the residual category of output units. The RFID reader was a “complete, self contained, freestanding unit that is connectable to other systems by a cable.” Therefore, CBP concluded “the card reader is classified as a separated unit that uses contactless technology provided for under heading 8471.”
The problem with NY M84377 lies with the fact that the reader in question fails to meet ADP unit criteria under legal note 5(C)(i) – The unit is to be regarded as being part of ADP if it is of a kind solely or principally used in ADP processing system. The reader in question was for point-of-sale system, which are specifically provided under 8470.50.0020 (HTSUS 2010). The point-of-sale system is usually pre-programmed technology, and therefore, fails ADP requirement of legal note 5(A)(ii) – ADP machine must be capable of being freely programmed in accordance with the requirements by the user. Without even questioning whether point-of-sale system is indeed an ADP of heading 8771, CBP prematurely concluded that the reader is classified as the unit thereof. It is important to note that “freely programmed” requirement existed in 2006 HTSUS version.
The premature conclusion creates a problem with quasi-precedent binding ruling system of CBP. The ruling has not been overruled and remains a good authority. As the society moves closer to informational paradigm shift, more and more technology would come in “pre-programmed” packages designed for use by low-skilled or low-trained personnel. Such technology would fail legal note 5(A)(ii) requirement.
Classification of tags / transponders / labels
HQ H086456 (2010) sets forth a good contemporary analysis for RFID tags classification methodology. In sum, it is a semiconductor device of heading 8523, subject to caveat to Chapter 85 legal note 4(b). One good question to ask, when determining classification of the tag, is whether it comes with a capacitor (or similar passive or active circuit element). If capacitor or similar device is present, the RFID tag is precluded from classification as “smart card” under 8523.52.00 (2010 HTSUS).
