HQ 0952631 - Revocation of HQ 086478; "DevelNet" Local Area Network (LAN) System; Develcon Electronics; HQ 951331; HQ 952659 - United States International Trade Commision Rulings

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HQ 952631

October 13, 1992

CLA-2 CO:R:C:M 952631 MBR

CATEGORY: CLASSIFICATION

TARIFF NO.: 8471.99.15

Mr. Harry Wood
H.A. & J.L. Wood, Inc.
Pembina, North Dakota 58271

RE: Revocation of HQ 086478; "DevelNet" Local Area Network (LAN) System; Develcon Electronics; HQ 951331; HQ 952659

Dear Mr. Wood:

On April 9, 1990, we issued HQ 086478 to you regarding the classification of the "DevelNet" LAN system, under the Harmonized Tariff Schedule of the United States (HTSUS).

Subsequently, due to our ongoing research and analysis, we have reconsidered the classification of automatic data processing machine (ADP) networking equipment. See HQ 951331, dated September 18, 1992, as modified by HQ 952659, dated October 7, 1992.

FACTS:

The DevelNet system has been designed to fulfill local area network requirements by providing data processing functions similar to a centralized data PBX. The system also allows the user to create regional or national "wide area" networks by connecting various local area networks into a fully integrated data communications network. This will permit users of the various terminals, computers, or other devices, in one part of the network to communicate with other equipment (users, data bases, terminals, etc.) throughout the network which may operate with different communications protocols and speeds. In addition, DevelNet is being developed to provide access to public and private data transmission networks such as Telenet, Tymnet, Datapac and Ethernet. DevelNet is also being designed to incorporate data PBX or local area networking devices from other vendors into its wide area network. This will permit customers who have already installed local data communications equipment (i.e., Local Area Networks) to implement a wide area network without having to replace previously installed equipment. DevelNet has been designed to incorporate network management features, redundant power supplies, controller boards, and self diagnostic capabilities.

ISSUE:

What is the classification of the "DevelNet" LAN system, under the Harmonized Tariff Schedule of the United States?

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...

Legal Note 5(B) to chapter 84, HTSUS, provides guidance regarding units of automatic data processing machines. It states:

Automatic data processing machines may be in the form of systems consisting of a variable number of separately housed units. A unit is to be regarded as being a part of the complete system if it meets all of the following conditions:

(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 (it must, in particular, unless it is a power supply unit, be able to accept or deliver data in a form (code or signals) which can be used by the system).

It has been asserted that networking systems such as the "DevelNet" system are essential to the ADP systems they are connected to because they process and format the data of the computers they serve. We now agree.

It is also important to note that the ENs, page 1299-1300, describe separately presented ADP units as follows:

This heading also covers separately presented constituent units of data processing systems. Constituent units are those defined in Parts (A) and (B) above as being parts of a complete system.

Apart from central processing units and input and output units, examples of such units include:

(4) Control and adaptor units such as those to 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.

This category includes channel to channel adapters used to connect two digital systems to each other.

(5) Signal Converting units. At input, these enable an external signal to be understood by the machine, while at output, they convert the output signals that result from the processing carried out by the machine into signals which can be used externally.

The "DevelNet" LAN system does in fact effectuate interconnection of the CPU unit to other units or ADP machines, thereby serving control and adaption functions, as well as performing signal conversion. Thus, classification is appropriate in subheading 8471.99.15, HTSUS, which provides for ADP control or adapter units.

Our diligent research and analysis of this issue has been continually ongoing. Therefore, we have learned more about this merchandise, its functions, and its geometrically progressive technological developments.

Therefore, based on the new information acquired, and in an effort to expeditiously and accurately address this classification issue, we have reconsidered our position. It is now our conclusion that the data processing features of control and adaption do in fact represent the principal function of the "DevelNet" system, directing classification 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 Develcon Electronics "DevelNet" LAN system is properly classifiable under 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." The rate of duty is Free.

EFFECT ON OTHER RULINGS:

For the reasons stated above, HQ 086478, dated April 9, 1990, is revoked under authority of section 177.9(d), Customs Regulations.

Sincerely,

John Durant, Director
Commercial Rulings Division

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