HQ 0952623 - Modification of HQ 950410; Ethernet Adapter; Units Suitable for Physical Incorporation Into Automatic Data Processing machines or Units Thereof; HQ 951331; HQ 952659 - United States International Trade Commision Rulings

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HQ 952623

October 13, 1992

CLA-2 CO:R:C:M 952623

CATEGORY: CLASSIFICATION

TARIFF NO.: 8471.99.15

Mr. S. Richard Shostak
Stein Shostak Shostak & O'Hara
3580 Wilshire Boulevard, Suite 1240
Los Angeles, CA 90010-2597

RE: Modification of HQ 950410; Ethernet Adapter; Units Suitable for Physical Incorporation Into Automatic Data Processing machines or Units Thereof; HQ 951331; HQ 952659

Dear Mr. Shostak:

On March 23, 1992, we issued HQ 950410 to you regarding the classification of the Teradata Corporation Relational Database Processors and the Ethernet Adapters, under the Harmonized Tariff Schedule of the United States (HTSUS).

However, in HQ 951331, dated September 18, 1992, as modified by HQ 952659, dated October 7, 1992, we reconsidered the classification of Local Area Network (LAN) interfaces and adapters. Therefore, it is necessary to modify your case accordingly.

FACTS:

The Teradata DBC/1012 is a high performance, fault-tolerant computer system optimized for relational database management. This microprocessor-based system is expandable in small modules of processing and storage capacity. The minimum configuration includes a processor subsystem and a storage subsystem, providing up to 24 MIPS (millions of instructions per second) of processing capacity and up to 19 gigabytes of storage capacity, depending on options. The system can be expanded to more than 3 BIPS (billions of instructions per second) and nearly 5 terabytes of data storage, all operating as a single system with a single image.

The submitted literature states that the DBC/1012 integrates three types of processors: Interface Processors (IFPs), Access Module Processors (AMPs), and Communications Processors (COPs). The IFP provides connection to mainframe hosts; the AMP manipulates the database, accesses Disk Storage Units (DSUs) and prepares the
data results; the COP provides connection to a local area network, enabling user access from minicomputers, workstations and personal computers.

Technical personnel at Teradata have stated that the Ethernet Adapter is assembled onto the communications processor board and incorporated into that ADP unit.

ISSUE:

Whether the DBC/1012 relational database processors and Ethernet adapters are classified within heading 8517, HTSUS, as "Electrical apparatus for line telephony or telegraphy, including such apparatus for carrier-current line systems; parts thereof...", or within heading 8471, HTSUS, as "Automatic data processing machines and units thereof...."

LAW AND ANALYSIS:

The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (GRI's). GRI 1 states in part:
for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes...

The competing headings in the instant case are headings 8517 and 8471, HTSUS. These headings describe:

8517 Electrical apparatus for line telephony or telegraphy, including such apparatus for carrier-current line systems; parts thereof...

8517.40.70 Other apparatus, for carrier-current line systems: Other: Telegraphic

8471 Automatic data processing machines and units thereof...Other

8471.99.15 Other: Control or adapter units

Our analysis of the classification of the IFPs, COPs, and AMPs remains the same.

Chapter 84, Legal Note 5, HTSUS, defines the term "automatic data processing machines" for the purposes of heading 8471, HTSUS. Chapter 84, Note 5(A)(a) states that "automatic data processing machines" includes:

Digital machines, capable of (1) storing the processing program or programs and at least the data immediately necessary for execution of the program; (2) being freely programmed in accordance with the requirements of the user; (3) performing arithmetical computations specified by the user; and, (4) executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run..."

Legal Note 5(b) further provides that ADP machines may be in the form of systems consisting of a variable number of separately housed units. A unit must meet the following requirements to be regarded as part of a complete system:

(a) It is connectable to the central processing unit either directly or through one or more other units; and

(b) It is specifically designed as part of such a system.

HQ 089828, dated December 3, 1991, and HQ 085666, dated November 8, 1989, held that certain communications controllers imported by IBM and Fujitsu America, respectively, were classifiable under subheading 8471.99.15, HTSUSA, which provides for automatic data processing machines and units thereof, other control or adapter units. You argue that the instant IFPs, AMPs, and COPs, are similar, and therefore, should be similarly classifiable. We agree. The Teradata DBC/1012 Data Base Computer System is essentially a high capacity, highly diverse, front end processor. This system has taken over certain processing functions originally performed by the CPU of an ADP system. The result is that the main frame host computer spends less time servicing the database and the network and CPU resources are available for more application processing.

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) to heading 8471, HTSUS, defines "control or adapter units" as follows:

[Units which] effect interconnection of the central processing unit to other digital data processing machines, or to groups of input or output units which may comprise visual display units, remote terminals, etc.

The DBC/1012 provides interconnection of the CPU (host computer) to other ADP units (storage units and remote terminals). Therefore, it is properly classifiable within subheading 8471.99.15, HTSUS, which provides for: "[a]utomatic data processing machines and units thereof...: [o]ther: [o]ther: [c]ontrol or adapter units."

Customs has consistently held that the most important factor to be considered when classifying merchandise such as this, is whether the merchandise is principally used for the processing of data (heading 8471, HTSUS), or for the transmission of data between two points (heading 8517, HTSUS). The DBC/1012 Data Base Computer is designed specifically for applications involving complex queries utilizing a large data base. Thus, the instant merchandise is found to be principally designed and used for the processing of data.

Pursuant to GRI 2(a) regarding incomplete or unfinished articles, we find that a substantially complete importation has the essential character of the complete or finished article and is classifiable as such. When separately imported, each of the COPs, AMPs, and IFPs, have the essential character of a control or adapter unit, and would all remain classifiable in subheading 8471.99.15, HTSUS.

In HQ 950410, we held that any separately imported Ethernet Adapters would be classifiable in subheading 8517.40.70, HTSUS. However, pursuant to our analysis in HQ 951331, as modified by HQ 952659, it is now Customs position that the principal function of Ethernet Adapters is that which is encompassed by data processing. Therefore they are properly classifiable in subheading 8471.99.15, HTSUS, which provides for: "[a]utomatic data processing machines and units thereof: [o]ther: [o]ther: [c]ontrol or adapter units."

HOLDING:

The Teradata Data Base Computer System model DBC/1012, which integrates Interface Processors (IFPs), Access Module Processors (AMPs), and Communications Processors (COPs), is classifiable in subheading 8471.99.15, HTSUS, which provides for: "[a]utomatic data processing machines and units thereof...: [o]ther: [o]ther: [c]ontrol or adapter units," when imported together as a system.

When separately imported, the IFPs, AMPs, and COPs remain classifiable in 8471.99.15, HTSUS.

The Ethernet Adapters, separately imported, would be classifiable in subheading 8471.99.15, HTSUS, which provides for: "[a]utomatic data processing machines and units thereof...: [o]ther: [o]ther: [c]ontrol or adapter units."

EFFECT ON OTHER RULINGS:

For the reasons stated above, HQ 950410, dated March 23, 1992, is modified to the extent of the classification of the Ethernet

Adapters, which are now classifiable in subheading 8471.99.15, HTSUS. HQ 950410 is modified under authority of Section 177.9(d), Customs Regulations.

Sincerely,

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