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HQ 963239




July 23, 2001

CLA-2 RR:CR:GC 963239 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 8517.50.90

Mr. Dennis Heck
Tower Group International, Inc.
2400 Marine Avenue
Redondo Beach, CA 902781103

RE: NetRunner Integration Routers; Network Equipment; Chapter 84, Note 5(B); Headings 8471 and 8517; EN 85.17; NY 815902, revoked

Dear Mr. Heck:

This is in reference to NY 815902, dated October 20, 1995, which was issued to you on behalf of Micom Communications Corporation, classifying four models of NetRunner Integration Routers as automatic data processing (ADP) control and adapter units under heading 8471 of the Harmonized Tariff Schedule of the United States (HTSUS). In the course of examining similar merchandise, we now believe that the classification of the NetRunner Integration Routers set forth in that ruling is incorrect.

Pursuant to section 625(c), Tariff Act of 1930 (19 U.S.C. 1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), notice was published on December 8, 1999, in the Customs Bulletin, Volume 33, Number 49, proposing to revoke NY 815902. Five comments were received in response to this notice, but only one comment specifically addresses this ruling.

FACTS:

The merchandise under consideration involve four models of the NetRunner Integration Routers, which are basically free standing units that allow for multiprotocol transmissions to be sent across public or private telephone lines to create a wide area network (WAN). The four models include the following: Netrunner 50E data/voice internetwork feeder/router; Netrunner 100E Data/voice Internetwork Node; Netrunner 200E Integration Router, and Netrunner 500ET Integration Router.

These Netrunner units are high performance IP/IPX (Internet Protocol/Internet Packet EXchange) routers, with hardware data compression and central point of control. Voice digitization and compression is performed by using 20 MIPS (million instructions per second) digital signal processors in order to reduce WAN bandwidth requirements. The Netrunner series is Novell certified and integrates Ethernet local area network (LAN) traffic with free legacy data traffic and tollfree voice and fax. This is done by compression of all information on one end (data, voice, LAN), overlaying it on the existing network, and decompressing it on the other end. The mainboards of these various models of Netrunner units contains various configurations of the Z80Zilog microprocessor, and all units contain various ROM's of program memory from 0.5MB to 765KB EPROM and 32KB of nonvolatile RAM. All four models possess I/O capability.

ISSUE:

Whether the NetRunner Integration Routers are classifiable under subheading 8471.80.10, HTSUS, as an ADP control or adapter unit, or under subheading 8517.50.90, HTSUS, as other telegraphic apparatus for digital line systems?

LAW AND ANALYSIS:

Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that classification is determined according to the terms of the headings and any relative section or chapter notes.

The HTSUS provisions under consideration are as follows:

8471 Automatic data processing machines and units thereof; . . . : 8471.80 Other units of automatic data processing machines: 8471.80.10 Control or adapter units . . . .

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 system; . . . :

8517.50 Other apparatus, for carrier-current line systems or for digital line systems: Other:
Telegraphic:
8517.50.90 Other. . . .

To be classified in heading 8471, as an ADP unit, the merchandise must meet all 3 requirements of Legal Note 5(B) to Chapter 84, HTSUS, which provides that:

Automatic data processing machines may be in the form of systems consisting of a variable number of separate units. Subject to paragraph (E) below, a unit is to be regarded as being a part of a complete system if it meets all the following conditions:

(a) It is of a kind solely or principally used in an automatic data processing system;

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

(c) It is able to accept or deliver data in a form (codes or signals) which can be used by the system.

Often, networked equipment can meet the requirements of Legal Note 5(B)(b) and 5(B)(c) to chapter 84, for the following reasons: they are connectable to the central processing unit either directly or through one or more other units; and, they are able to accept or deliver data in a form (codes or signals) which can be used by the system. Classification determinations often turn on whether networked equipment meet the terms of Legal Note 5(B)(a) to chapter 84, HTSUS. That is, Customs must determine whether the networked equipment is of a kind solely or principally used in an ADP system.

The commenter states that routers reside in and are specifically designed for use within a LAN. Furthermore, the commenter states that routers near the periphery of a LAN perform the same functions, and in particular, the same data processing functions, as those routers located at the core of the LAN. Therefore, the commenter claims that the subject router should be classified in heading 8471.

In resolving this issue, importers must provide evidence of sole or principal use. An unsupported claim, such as the one made by the commenter, that these goods are solely or principally used in an ADP system is not evidence. The courts have provided the following factors to apply, which are indicative but not conclusive, when determining the principal use of merchandise: general physical characteristics; expectation of the
ultimate purchaser; channels of trade; environment of sale (accompanying accessories, manner of advertisement and display); use in the same manner as merchandise which defines the class; economic practicality of so using the import; and recognition in the trade of this use. See Lenox Collections v. United States, 19 Ct. Int’l Trade 345, 347 (1995); Kraft, Inc. v. United States, 16 Ct. Int’l Trade 483 (1992); G. Heileman Brewing Co. v. United States, 14 CIT 614 (1990). See also United States v. Carborundum Company, 63 CCPA 98, C.A.D. 1172, 536 F.2d 373 (1976), cert. denied, 429 U.S. 979 (1976). Even if an importer is able to meet the terms of Legal Note 5(B)(a), classification under Legal Note 5(E) to chapter 84 may still be applicable.

In applying the Lenox factors to the NetRunner Integration Routers, we note that they all have at least the following general physical characteristics: 1 WAN link; 2 data channels; 4 voice/fax channels; voice digitization and compression. The expectations of the ultimate purchaser are to transmit data, fax and voice over the wide area between the corporate and remote branch offices. It allows for the connection of personal computers, telephones, fax machines, etc. The use (class of merchandise) is as an integrated services wide area router. Recognition in the trade is that the subject merchandise are integrated services networking equipment as they allow connection of computers, fax machines, and telephones on one line for the transmission of voice, fax and data over a public or private telephone line system. It also has not been demonstrated that this apparatus is used solely or principally to interconnect units within a LAN. Based upon these facts and the Lenox factors, we find that the NetRunner Integration Routers are not of a kind solely or principally used in an ADP system. They therefore do not meet the definition of an ADP unit as defined in Legal Note 5(B)) to Chapter 84, and are precluded from classification in heading 8471.

Heading 8517, HTSUS, provides for electrical apparatus for line telephony or telegraphy, including telecommunication apparatus for digital line systems. The Harmonized Commodity Description and Coding System Explanatory Notes (EN) constitute the official interpretation of the HTSUS. While not legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 FR 35127, 35128 (August 23, 1989). EN 85.17, page 1472, states, in pertinent part, as follows:

[t]he 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 fibres, 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.

(III) APPARATUS FOR CARRIERCURRENT
LINE SYSTEMS OR FOR DIGITAL LINE SYSTEMS

These systems are based on the modulation of an electrical carriercurrent or of a light beam by analogue or digital signals. Use is made of the carriercurrent 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 opticalfibre cables. “Line equipment” includes transmitters and receivers or electrooptical converters. Combined modulatorsdemodulators (modems) are also classified here.

Because the NetRunner Integration Routers function as apparatus for the transmission between two points of speech or other sounds or symbols over a public or private telephone line, it is classifiable at GRI 1 in heading 8517, HTSUS, specifically under subheading 8517.50.90, HTSUS.

HOLDING:

Under the authority of GRI 1, the NetRunner Integration Routers are classifiable under subheading 8517.50.90, HTSUS, which provides for: “[e]lectrical 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 system. . . : [o]ther apparatus, for carrier-current line systems or for digital line systems: [o]ther: [t]elegraphic: [o]ther. . . .”

EFFECT ON OTHER RULINGS:

NY 815902, dated October 20, 1995, is revoked. In accordance with 19 U.S.C. 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.

Sincerely,

John Durant, Director
Commercial Rulings Division

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