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HQ 089596


September 17, 1991

CLA-2 CO:R:C:M 089596 MBR

CATEGORY: CLASSIFICATION

TARIFF NO.: 8517.82.00

Ms. Stella C. Hall
Porter International Incorporated
P.O. Box 81488
San Diego, CA 92138

RE: The "Aster, Tamarix and Cypress" Networking Cards; Local Area Networking; Telegraphic Apparatus

Dear Ms. Hall:

This is in reply to your letter of November 7, 1990, on behalf of Lantana Technology, Inc., requesting classification of data communication local area "networking cards" (LAN), under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

FACTS:

The submitted literature states that the specific trademarks of the Lanatana Technology, Inc., data communication local area networking cards are "Aster, Tamarix and Cypress."

The "Tamarix Series" is described in your literature as Lanatana's line of products for Ethernet local-area networks. Tamarix products include adapters for PC/XT, AT and Micro Channel-based systems, as well as complementary transceivers, bridges, and repeaters - "everything necessary to build a complete Ethernet LAN."

The "Aster Series" includes a full line of ARCnet LAN adapters for PC/XT, AT and Micro Channel-based systems, as well as active and passive hubs, and other accessories. "This comprehensive line of products offers everything you need to construct or expand a cost-effective ARCnet network."

The "Cypress Series" are described as Token Ring Controllers for PC/XT, AT and Micro Channel." These controllers are available in 16/4 Mbps (Mega bytes per second transmission rate) and 4 Mbps configurations for PC/XT, AT and Micro Channel architectures. "Utilizing advanced bus master and ASIC design, Cypress adapters deliver the highest possible throughput in both server and workstation environments."

ISSUE:

Whether the Lanatana Technology, Inc., "Aster, Tamarix and Cypress" data communication local area networking boards are classifiable under heading 8471, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for "[a]utomatic data processing machines," or under heading 8517, HTSUSA, which provides for "[e]lectrical apparatus for line telephony or telegraphy"?

LAW AND ANALYSIS:

The General Rules of Interpretation (GRI's) to the HTSUSA govern the classification of goods in the tariff schedule. GRI 1 states, in pertinent part:

...classification shall be determined according to the terms of the headings and any relative section or chapter notes...

The "Aster, Tamarix and Cypress" data communication local area networking boards are not classifiable as automatic data processing machines, as defined by Legal Note 5(A)(a) to Chapter 84, HTSUSA. Legal Note 5(A)(a)(2) requires that digital machines must be capable of: "(2) being freely programmed in accordance with the requirements of the user." Although they do perform some forms of data processing (such as service data which defines protocol, packet size, etc.) it is Customs position that they are not freely programmed, and therefore are not classifiable under heading 8471.

The importer freely admits that the instant "networking cards" are the foundation to a "Local Area Network." The Computer Glossary, Fourth Edition, Alan Freedman (1989), defines a "Local Area Network" as follows:

A local area network is a communications network that serves several users within a confined geographical area. Although the term may refer to any communications network within a building or plant, it typically refers to the interconnection of personal computers.

Personal computer local area networks function as distributed processing systems in which each computer, or node, in the network does its own processing and manages some of its data. Shared data is stored in a high- performance pc in the network, called a file server or network server, which acts as a remote disk drive to all the users in the network.

The printers that are attached to the network can function on a first-come, first-served basis, or they can be connected to a computer, called a print server, which collects the print output and feeds it to the printer one job at a time.

A local area network is the backbone of office automation and allows electronic mail and other information to be communicated between all users of the system. Local area networks are becoming essential for small work groups that enter, share and exchange the same information.

With the use of a gateway, local area network can connect to minicomputer and mainframe networks.

BASEBAND NETWORKS
Baseband networks are all digital networks that require information in digital form. Examples are ARCNET, Token Ring, Ethernet and Starlan. All of these networks are driven by network management software that resides in the file servers and the workstations. Examples of network software are Microsoft's NetBIOS and LAN Manager, Apple Talk, TPC/IP and Novell's NetWare.

BROADBAND NETWORKS
Broadband networks use carrier frequencies and can handle voice and video transmission as well, for example, Wang Computer's WangNET. (Emphasis added).

The importer argues that the networking boards are "parts" of automatic data processing machines. However, the fact that each board at issue requires the attachment of another article (the PC) in order to be capable of performing its function (data communication) does not render each board a "part," since there is no requirement that a machine must be "self-activating." Nord Light, Inc. v. United States, 49 CCPA 12, C.A.D. 786 (1961). Although, when imported, the boards are incapable of functioning unless placed in a configuration with certain other boards and devices, in their final use they nevertheless are in and of themselves, network data communication (electrical telegraphic) apparatus specifically provided for in heading 8517, HTSUSA. Westinghouse Electric International Co. v. United States, 28 Cust. Ct. 209, C.D. 1411 (1952), cited with approval by Fairchild Camera & Instrument Corp., Inter-Maritime Forwarding Co., Inc. v. United States, 53 CCPA 122, 126, C.A.D. 887 (1966). Similarly, the fact that they need to be incorporated within a system housing or chassis does not mandate their classification as a part. General Electric Company v. United States, 2 CIT 84, (1981).

It has been asserted that the instant merchandise constitutes integral elements of the operation of the computer or of the data processing CPU when transferring data from one location to another and, as such, is a part or unit of a computer or a data processing machine." However, the networking boards do not constitute "integral elements" of the computer itself. As stated by the importer's literature, the networking boards are integral to the establishment of a local area network, i.e., the operation of transferring data from one location to another. This specific function is encompassed by heading 8517, HTSUSA.

Heading 8517, HTSUSA, provides for: "[e]lectrical apparatus for line telephony or line telegraphy, including such apparatus for carrier-current line systems." The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) to heading 8517 of the HTSUSA, page 1360, state:

The term "electrical apparatus for line telephony or line telegraphy" means apparatus for the transmission between two points of speech or other sounds (or of symbols representing written messages, images or other data), by variation of an electric current or of an optical wave flowing in a metallic or dielectric (copper, optical fibers, combination cable, etc.) circuit connecting the transmitting station to the receiving station. The heading covers all such electrical apparatus designed for this purpose, including the special apparatus used for carrier- current line systems.

The term "apparatus" has been defined by the courts as a combination of articles and materials which are intended, adapted, and necessary for the accomplishment of some purpose. The Deseret Co., v. United States, ___CIT___, Slip Op. 86-93 (1986). Your literature states that the "Tamarix Series" is Lanatana's line of products for Ethernet local-area networks, that the "Aster Series" is a comprehensive line of products that offers everything you need to construct or expand a cost- effective ARCnet network, and that the "Cypress Series" are Token Ring LAN controllers.

Therefore, all three of these networking data communications systems are a combination of articles and materials intended, adapted and necessary for the accomplishment of a specific purpose, i.e., that of local area network data communication

Heading 8517, HTSUSA, provides for: "[e]lectrical apparatus for line telephony or line telegraphy, including such apparatus for carrier-current line systems." The issue has been raised as to what the term "Carrier Current" line systems encompasses. "Carrier Current" is used in connection with both power and communications circuits, however, the principle is basically the same for both systems. The term refers to the use of a relatively high-frequency alternating current superimposed on the ordinary circuit frequencies in order to increase the usefulness of a given transmission line. Thus, in the case of power systems, carrier currents of several kHz frequency are coupled to the 60-Hz transmission lines. These carrier currents may be modulated to provide telephone communication between points on the power system or they may be used to actuate relays on the system. The latter use is known as carrier relaying. Carrier currents have greatly extended the usefulness of existing line facilities of the telephone and telegraph companies. Several carrier frequencies may be coupled to the lines already having regular voice or telegraph signals on them. Each of these carrier frequencies may be modulated with a separate voice or telegraph channel and thus a given line may carry the regular signal plus several new carrier channels, each of which is equivalent to another circuit at regular frequencies. At the receiving end, the various channels are separated by filters and the signals are demodulated and then fed to conventional phone or telegraph circuits. The number of carrier channels which may be applied to a given line depends upon the characteristics of the line, varying from one or two for some lines to several hundred for a coaxial cable. See Van Nostrand's Scientific Encyclopedia, Seventh Edition, Vol. 1, page 518 (1989).

Heading 8517, HTSUSA, provides for: "[e]lectrical apparatus for line telephony or line telegraphy, including such apparatus for carrier-current line systems." Therefore, heading 8517, HTSUSA, includes apparatus for carrier-current line systems, but is not limited to such apparatus.

The Customs Co-Operation Council Harmonized Commodity Description and Coding System, Summary of Comments and Observations by the Technical Team, Chapter 85, (April 25, 1979) stated:

With regard to packet switching equipment, the Technical Team reproduces below, for information, a text published by the Secretariat for the attention of the Working Party on Customs applications of computers, a definition of data communication packet switching (Doc. 21.926):

The transmission of computer system messages or parts of messages between distant points in the form of discrete packets which are transmitted over an independently operated computer driven network. The routes followed by messages are determined by the network and not by the sending systems. Packet switching is in many ways analogous to the conventional manual postal system in which an independent carrier receives and delivers letter packets for a community of users. Any one transmission line of the network may carry messages from different senders to different addresses. A message to be transmitted across a packet switched network is handled in the following manner: [t]he message is split into a number of packets of fixed maximum size each prefixed by the source and destination addresses, length and sequence number. Each packet is then handled by the network as a discrete message, being passed from one switch or node of the network to the next as soon as possible, depending on the destination address, the traffic density and the routes available. At the destination, the addresses, etc., are stripped off, the packets combined to form the original message and an acknowledgement sent back to the source according to whether or not the message is free from error. By using high speed links for the network, packets, originating from a large number of users transmitting into the network at moderate speeds, may be interleaved within the network, while maintaining full integrity and security. In this manner, network time is shared between users in a similar manner to that of a time sharing computer system.

Although the above text is not binding on us, such information is helpful in that it is demonstrative of the Customs Co-Operation Council's consideration for inclusion of this type of apparatus in Chapter 85.

Certainly, all three of these local area network data communications systems are apparatus designed for the transmission of data between two points, by variation of an electric current connecting the transmitting station to the receiving station, as described above.

Heading 8517, HTSUSA, specifically includes line telegraphy for the transmission of symbols representing written messages, images or other data. The definition of "telegraphic apparatus" is found within the Harmonized Commodity Description and Coding System Explanatory Note (EN) to 85.17, p. 1363, which states:

This 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. (Emphasis added).

The issue has been raised whether or not these three local area network data communication boards should be considered "modems" for tariff purposes. The Computer Glossary, Fourth Edition, by Alan Freedman (1989), defines "Modem" as follows:

(MOdulator-DEModulator) A modem is a device that adapts a terminal or computer to a communications network. Modems turn digital pulses from the computer into frequencies (modulate) within the audio range of the telephone system and convert the frequencies back into digital pulses (demodulate) on the receiving side. Specialized modems are used to connect personal computers to a broadband local area network, which, similar to the telephone system, use electromagnetic waves for transmission signals, but at different frequencies. The telephone industry also refers to a modem as a dataset.

The modem handles the dialing and answering of the call and also generates the speed of the transmission, which is measured in bits per second. Modems used on telephone lines transmit at speeds of 300, 1200, 2400, 4800, 9600 and 19200 bits per second. The effective data rate is 10% of the bit rate; thus, 300 bits per second (bps) is equivalent to 30 characters per second (cps). It would take a full minute to fill up a video screen at that rate; 15 seconds at 1,200 bps and about seven seconds at 2,400 bps. Due to noisy lines in the dial-up telephone system, the higher speeds can be problematic, and private lines may be required.

In order to have a personal computer dial up and communicate with another computer or public information service, more than a modem is required. The computer must have a serial port available into which the modem is connected. In addition, a communications program must be used in order to direct the computer to do the transmitting and receiving.

As this definition delineates, "[m]odems turn digital pulses from the computer into frequencies (modulate) within the audio range of the telephone system and convert the frequencies back into digital pulses (demodulate) on the receiving side." None of the articles in question performs these particular, specialized functions. In fact, the instant merchandise requires the addition of a modem in order to function over twisted pair cable.

Based upon the design and intended applications of the instant merchandise, it is Customs opinion that the "Aster, Tamarix and Cypress" networking boards (for Local Area Networks) are not principally used for carrier current line systems.

Therefore, the "Aster, Tamarix and Cypress" local area network data communication system cards are classifiable under subheading 8517.82.00, which provides for: "[e]lectrical apparatus for line telephony or telegraphy, including such apparatus for carrier-current line systems: [o]ther apparatus: [t]elegraphic."

For similar holdings regarding similar data communications merchandise, see HQ 089597, dated September 5, 1991 (regarding an Ethernet Controller), HQ 089277, dated August 14, 1991, HQ 089227, dated July 24, 1991, HQ 086035, dated August 2, 1990, HQ 086478, dated April 9, 1990, HQ 087468, dated January 8, 1991, HQ 086615, dated April 20, 1990, HQ 085661, dated February 15, 1990, and NY 852403, dated May 31, 1990.

HOLDING:

The "Aster, Tamarix and Cypress" local area network data communication system cards are classifiable under subheading 8517.82.00, which provides for: "[e]lectrical apparatus for line telephony or telegraphy, including such apparatus for carrier- current line systems: [o]ther apparatus: [t]elegraphic." The rate of duty is 4.7% ad valorem.

Sincerely,

John Durant, Director

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