HQ 0952876 - Revocation of NY 871080; ETRADEAL; Digital Telephone Network; Data Network; Local Area Network; LAN; Functional Unit; ADP Machine - United States International Trade Commision Rulings

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HQ 952876

February 19, 1993

CLA-2 CO:R:C:M 952876 MBR

CATEGORY: CLASSIFICATION

TARIFF NO.: 8517.81.00

Mr. Daniel F. Callahan
Director of Operations
ETRALI Advanced Turret Systems
747 Third Avenue
New York, NY 10017

RE: Revocation of NY 871080; ETRADEAL; Digital Telephone Network; Data Network; Local Area Network; LAN; Functional Unit; ADP Machine

Dear Mr. Callahan:

This is in reply to your letter of September 29, 1992, to the Area Director of Customs in New York, regarding NY 871080 of February 28, 1992, concerning the tariff classification of the ETRADEAL digital telephone network, under the Harmonized Tariff Schedule of the United States (HTSUS). Your letter was referred to this office for response.

FACTS:

The "ETRADEAL" digital telephone and data network is designed for installation at financial trading market locations, brokerage offices, command and control centers, utilities, airlines, etc. It is designed principally for telephonic communication, however, it also provides access to data.

The hardware consists of LCD touch screens and a local area network (LAN) for systems administration. ETRADEAL's architecture is based on a dual 80 megabit (MB) bus connecting workstations to Input/Output (I/O) ports. The bus structure is delivered in redundant form via twinax, twisted pair, or fiber optic cable, utilizing Motorola 68000 32-bit processors. The bus is supported by a VME type backplane. The bus is interfaced to the distribution ring via AMD 7968/7969 Taxi chips to convert parallel data to serial data. The peripheral control utilizes another Motorola processor, the MC68HC11, to allow workstations access to all ports delivered by the bus. Voice is encoded into data at 64 kbits/sec and data is delivered at 9600 bits/sec.

ISSUE:

Is the "ETRADEAL" digital telephone and data network classifiable as units of ADP machines, or is it classifiable as telephonic apparatus, under the Harmonized Tariff Schedule of the United States (HTSUS)?

LAW AND ANALYSIS:

The General Rules of Interpretation (GRI's) to the HTSUS 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...

Based upon the prior information submitted and the belief that the "ETRADEAL" digital system did not carry voice transmissions, NY 871080, dated February 20, 1992, held that the "ETRADEAL" system was classifiable in subheading 8517.82.00, HTSUS, which provides for other telegraphic apparatus.

However, new information provided delineates the fact that the "ETRADEAL" system is a functional unit with the principal function of telephonic communication. Therefore, the ETRADEAL digital telephone and data communication system is prima facie classifiable in the following headings:

8471 Automatic data processing machines and units thereof:

8517 Electrical apparatus for line telephony or telegraphy, including such apparatus for carrier current line systems

The ETRADEAL system includes a number of ADP machines, and units thereof. Chapter 84, legal note 5(B), defines "units" of automatic data processing (ADP) systems. Legal Note 5(B) 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...

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

The Harmonized Commodity Description and Coding System Explanatory Notes (EN), for heading 8471, page 1299, state:

(D) SEPARATELY PRESENTED UNITS

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. (emphasis added).

The ENs which provide for "Separately Presented Units" of ADP machines, page 1300, include:

(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.

However, HQ 086851, dated April 9, 1990, held that a Chromatograph and a Computer, imported together, were a "functional unit" intended to contribute to the clearly defined function of Chromatography.

Section XVI, Note 4, requires the classification of "functional units" to be within the heading appropriate to the function of the unit. Section XVI, Note 4, states:

Where a machine...consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function.

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs), page 1133, state that a "functional unit" covers only those "machines and combination of machines essential to the performance of the function specific to the functional unit as a whole..." The principal function specific to the importations in question is digital telephonic communication. The importer has stated that each importation is configured pursuant to a customer
order and is complete and ready for installation.

Furthermore, chapter 84, legal note 5 goes on to state that: "[h]eading 8471 does not cover machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function. Such machines are classified in headings appropriate to their respective functions or, failing that, in residual headings."

Additional U.S. Rule of Interpretation 1(a) states: "[i]n the absence of special language or context which otherwise requires-

(a) a tariff classification controlled by use (other than actual use) is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind which the imported goods belong, and the controlling use is the principal use.

The importer has stated that the principal use of the ETRADEAL digital telephonic and data network is for telephonic communication. The Harmonized Commodity Description and Coding System Explanatory Notes (ENs), regarding electrical apparatus for line telephony or line telegraphy, 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 electrical current or of an optical wave flowing in a metallic or dielectric (copper, optical fibres, combination cable, etc.) circuit connecting the transmitting station to the receiving station.

The ETRADEAL digital telephonic and data network meets this definition. Therefore, it is classifiable pursuant to its principal function in subheading 8517.81.00, HTSUS, which provides for: "[e]lectrical apparatus for line telephony or telegraphy, including such apparatus for carrier current line systems: [o]ther apparatus: [t]elephonic."

HOLDING:

The ETRADEAL digital telephonic and data network functional unit is classifiable pursuant to its principal function in subheading 8517.81.00, HTSUS, which provides for: "[e]lectrical apparatus for line telephony or telegraphy, including such apparatus for carrier current line systems: [o]ther apparatus: [t]elephonic." The rate of duty is 8.5% ad valorem.

When the ADP machine(s) are imported separately, they are classifiable under heading 8471, HTSUS. The other constituent units, imported separately, would be separately classifiable. You should seek another ruling for that merchandise if you intend to import it separately in the future.

Pursuant to chapter 85, legal note 6, recorded software of heading 8524.90.40, HTSUS, remains classifiable in that heading, even if it is imported with the apparatus with which it is intended. The general rate of duty is 9.7 cents per square meter of recording surface.

As provided in 19 CFR 177.9, generally, a ruling letter is effective on the date it is issued and may be applied to all entries which are unliquidated, or other transactions with respect to which the Customs Service has not taken final action on that date. Further, a ruling letter modifying or revoking an earlier ruling letter is generally effective on the date it is issued.

However, the Customs Service may, upon application or on its own initiative, delay the effective date of such a ruling for a period of 90 days from the date of issuance. Such a delay may be granted with respect to the party to whom the ruling letter was issued or to any other party, provided such party can demonstrate to the satisfaction of the Customs Service that they reasonably relied on the earlier ruling to their detriment.

The documentation required to show detrimental reliance consists of contracts, purchase orders, invoices, buying agent instructions and other materials which tend to establish that the future transactions (the pending transactions you referenced) were, in fact, based on the asserted reliance. Also required is information regarding the quantity of merchandise that was actually imported during the requested delayed effective date, and the dates of importation.

Therefore, if you wish to request detrimental reliance you should submit the above documentation to this office, which demonstrates that you actually relied on NY 871080, to your detriment.

EFFECT ON OTHER RULINGS:

Based upon new information that the "ETRADEAL" digital network is a functional unit with the principal function of telephonic
communication, NY 871080, dated February 20, 1992, is revoked under authority of section 177.9(d), Customs Regulations.

Sincerely,

John Durant, Director

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