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HQ 963253




July 23, 2001

CLA-2 RR:CR:GC 963253 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 8517.50.90

Mr. Terry Gartman
Lodestar Technology Inc.
3101 Maguire Blvd., Suite 251
Orlando, FL 32803

RE: ISDN Personal Computer Adapter; Routers; Network Equipment; Principal Use; Chapter 84, Note 5(B); Headings 8471 and 8517; EN 85.17; HQ 952812, modified

Dear Mr. Gartman:

This is in reference to HQ 952812, dated December 30, 1992, which was issued to you, classifying the ISDN (Integrated Services Digital Network) PC Adapter 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 ISDN PC Adapter set forth in that ruling is incorrect. This modification will not affect the classification of the other apparatus.

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 modify HQ 952812. Five comments were received in response to this notice, but only one comment specifically addresses this ruling.

FACTS:

The "ISDN PC Adapter" is a basic rate interface card which is designed to be incorporated into a personal computer. It is capable of connecting two devices, usually one telephone and one personal computer, to a basic rate ISDN
line from the telephone company. It performs packet switching of data using X.25 protocol and circuit switching of data using either X.25 or V.120 protocols. It is also possible to attach an analogue telephone to the BChannel using the RJ11 connector jack on the adapter's back bracket.

ISSUE:

Whether the ISDN PC Adapter 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 ISDN PC Adapter, we note that it is a card or board designed for use in a personal computer. The subject merchandise can support up to 8 devices (telephones, fax machines, personal computers, etc.) to have dialed digital connection. The expectation of the ultimate purchaser is to transmit data, fax, and voice over PSTN from a home office or small office. The use (class of merchandise) is ISDN, which is a circuit switched offering of Public Telephone Carriers designed to support integrated services. Recognition in the trade is that ISDN is based on CCITT/ITU-TSS [Consultive Committee for International Telephone and Telegraph/ International Telecommunications Union-Telecommunications Sector] standards.

Based upon these factors, we find that the ISDN PC Adapter is not of a kind solely or principally used in an ADP system as it allows connection of computers, fax machines, and analog telephones on one line for the transmission of voice, fax and data over a telephone line system. It therefore does not meet the definition of an ADP unit as defined in Legal Note 5(B), and is precluded from classification in heading 8471, HTSUS.

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 ISDN PC Adapter 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. In its response, the commenter states that because these devices directly connect a personal computer to a telephone line, similar to the functions of a modem, it does not object to the classification under heading 8517.

HOLDING:

Under the authority of GRI 1, the ISDN PC Adapter 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:

HQ 952812, dated December 30, 1992, is modified. 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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