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HQ 963240





July 23, 2001

CLA-2 RR:CR:GC 963240 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 8517.50.90

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

RE: Data Service Unit/Channel Service Unit (DSU/CSU); Network Equipment; Principal Use; Chapter 84, Legal Note 5(B); Headings 8471 and 8517; EN 85.17; NY 818275, revoked

Dear Mr. Heck:

This is in reference to NY 818275, dated January 23, 1996, which was issued to you classifying the FrontRunner/MR-2 Data Service Unit/Channel Service Unit (DSU/CSU) 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 FrontRunner/MR-2 DSU/CSU 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 818275. Five comments were received in response to this notice, but only one comment specifically addresses this ruling.

FACTS:

The merchandise under consideration involve the FrontRunner/ MR-2 DSU/CSU that transmits data over digital networks at speeds ranging from 2.4 to 64 Kbps. The FrontRunner/MR2 assists in consolidating data, voice, fax and local area network (LAN) traffic over a single leased digital telephone circuit. The dimensions of this stand alone unit are 8.5 inches wide by 3.1 inches high by 11.3 inches deep, and it weighs 4 pounds.

The DSU/CSU offers an assortment of features, these include: a wide selection of data rates, including 64 Kbps Clear Channel; rate adaption for support of subrate devices over 56/54 Kbps leased lines; dial backup capability to external devices such as Basic Rate ISDN TA's; and, a compact standalone unit that frees space for data, voice, fax and LAN channels in MICOM's integration products. The DSU/CSU is typically connected in line between Marathon Network Servers or NetRunner Integration Routers.

ISSUE:

Whether the DSU/CSU is 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 . . . .

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 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.

In resolving this issue, importers must provide evidence of sole or principal use. An unsupported claim 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 DSU/CSU, we note that it is designed for transmitting data, voice and fax over leased digital telephone circuits at speeds ranging from 2.4 to 64 Kbps. It functions similarly to a modem by encoding and decoding digital signals and transmitting them. The expectation of the ultimate purchaser is to transmit data, fax, and voice over a wide area between remote offices. The DSU/CSU is typically used as a connection point between network servers or routers which provide integrated services. The trade recognizes the DSU/CSU as integrated services networking equipment. The DSU/CSU allows consolidated data, voice, and fax traffic to be transmitted over a single leased digital telephone line circuit. It also has not been demonstrated that this apparatus is used solely or principally to interconnect units within a LAN. Based on these facts and the Lenox factors, we find that the DSU/CSU is not of a kind solely or principally used in an ADP system. It therefore does not meet the definition of an ADP unit as defined in Legal Note 5(B), and is therefore 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 DSU/CSU functions 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. The commenter agrees with Customs classification of the subject merchandise under heading 8517, because it believes that the subject merchandise is similar to a modem in how it functions.

HOLDING:

Under the authority of GRI 1, the DSU/CSU is 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 818275, dated January 23, 1996, 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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