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HQ 962968




October 26, 2000

CLA-2 RR:CR:GC 962968 KBR

CATEGORY: CLASSIFICATION

TARIFF NO.: 8517.50.90; 8517.80.20.

Mr. Philip Ardire, President
Western DataCom Co. Inc.
P.O. Box 45113
Cleveland, OH 44145

RE: Asynchronous Transfer Mode Data Network Encryption Hardware

Dear Mr. Ardire:

This is in regard to your undated letter to the Director, National Commodity Specialist Division New York, requesting a ruling as to the classification, under the Harmonized Tariff Schedule of the United States (HTSUS), of encryption hardware used in securing Asynchronous Transfer Mode (ATM) data networks. Your request was forwarded to this office for reply. We are in receipt of your letter of July 12, 2000.

FACTS:

You plan to import Model HC-7910 data encryption hardware used in securing ATM data networks which are manufactured by Crypto AG in Switzerland. ATM is the technology used for implementing Broadband-Integrated Services Digital Network (B-ISDN). The HC-7910 is a high-speed data encryptor containing a 128K bit encryption algorithm. This article is used to secure data or video transmissions and telephone links against interception or manipulation over both public and private networks. The system uses a principle called “Private Virtual Network” © encryption and allows for both Switched Virtual Circuit (SVC) and well as Permanent Virtual Circuit (PVC) configurations. The HC-7910 protects all data or information in the secure area and can transmit both encrypted and plain connections through one link. The unit is comprised of tamper-proof electronic printed circuit boards contained in a metal housing weighing approximately ten pounds. ISSUE:

What is the correct classification for Model HC-7910 encryption hardware used in securing ATM data networks?

LAW AND ANALYSIS:

Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that classification is determined according to the terms of the headings and any relative section or chapter notes. Merchandise that cannot be classified in accordance with GRI 1 is to be classified in accordance with subsequent GRI.

In interpreting the headings and subheadings, Customs looks to the Harmonized Commodity Description and Coding System Explanatory Notes (ENs). Although not legally binding, they provide a commentary on the scope of each heading of the HTSUS. It is Customs practice to follow, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89-90, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

The HTSUS provisions under consideration are as follows:

8517 Electrical apparatus for line telephony or line telegraphy, including line telephone sets with cordless handsets and telecommunication apparatus for carrier-current line systems or for digital line systems; videophones; parts thereof:

8517.50 Other apparatus, for carrier-current line systems or for digital line systems:

8517.50.90 Other:

Other apparatus

Telegraphic

EN (III) for heading 8517, HTSUS, describes apparatus for carrier-current line systems or for digital line systems:

These systems are based on the modulation of an electrical carrier-current or of a light beam by analogue or digital signals. Use is made of the carrier-current modulation technique and pulse code modulation (PCM) or some other digital system. These systems are used for the transmission of all kinds of information (words, data, images, etc.).

These systems include all categories of multiplexers and related line equipment for metal or optical-fibre cables. “Line equipment” includes transmitters and receivers or electro-optical converters. Combined modulators-demodulators (modems) are also classified here.

Encryption is defined by Newton's Telecom Dictionary, 16th Edition as:

The transformation of data into a form unreadable by anyone without a secret decryption key. Its purpose is to ensure privacy by keeping the information hidden from anyone for whom it is not intended. In security, encryption is the ciphering of data by applying an algorithm to plain text to convert it to ciphertext.

At the six digit level, by application of GRI 6, two subheadings appear to describe the merchandise, subheading 8517.50, other apparatus, for carrier-current line systems or for digital line systems, and subheading 8517.80, other apparatus. The encryption device is in the information transmission path and encrypts ATM transmissions which is necessitated by the realities of transmitting over the unsecured wide area network (WAN). However, the encryption device only secures the information, it does not appear to include any actual transmission or reception apparatus, but is auxiliary to the actual transmission. EN (III) for heading 8517 which refers to apparatus for carrier-current line systems or for digital line systems as used in subheading 8517.50.90, HTSUS, provides for transmission of all kinds of information (word, data, images, etc.). This encryption device does not transmit, but rather codes and decodes the word, data, images, etc. being transmitted during the transmission. We interpret the subheading not to cover the instant encryption device because it does not actively transmit or receive information, as is typical of line system apparatus. This view comports with an earlier decision on similar goods. See HQ 086196 dated April 2, 1990.

Therefore, subheading 8517.80.20, HTSUS, more specifically describes the merchandise.

HOLDING:

By application of GRI 6, Model HC-7910 encryption hardware used in securing ATM data networks is classifiable in subheading 8517.80.20, HTSUS, which provides for Electrical apparatus for line telephony or line telegraphy, including line telephone sets with cordless handsets and telecommunication apparatus for carrier-current line systems or for digital line systems; videophones; parts thereof: Other apparatus: Telegraphic.

Sincerely,

John Durant, Director
Commercial Rulings Division

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