HQ 089227
July, 24, 1991
CLA-2 CO:R:C:M 089227 MBR
Mr. Julian Higgins
5407 Eglinton Ave. West, #202
Toronto, Ontario
M9C 5K6 Canada
RE: "SOFTLINK" Data Communications System; Telegraphic
Apparatus; Protocol Conversion; Modem
Dear Mr. Higgins:
This is in reply to your letter of March 5, 1991, on behalf
of Smartlink Canada Limited, requesting classification of the
"SOFTLINK" data communications system, under the Harmonized
Tariff Schedule of the United States Annotated (HTSUSA).
FACTS:
Your product literature states that the main applications of
SOFTLINK involve the transfer of data between asynchronous host
systems and Value Added Networks (VANS). These include links
into the CentreFile Service, and links from universities and
polytechnics into the UCCA and PCAS networks.
The synchronous transmission rate is determined by the
external clock derived from a modem or Network Termination Unit
(NTU). Each synchronous port can operate at its own speed, or
SOFTLINK can provide a clock to one port derived from the other
port. The protocol is selected by means of the MODE switch on
the front panel. There are 8 combinations of 2780/3780, both
full and half duplex on both ports. At the end of the file
transfer process, SOFTLINK transfers a log file to the local host
giving a history of all file transfers taking place and the
number of lines in each file. Any errors in transmission will be
highlighted in the log file. The SOFTLINK requires an external
modem in order to transmit and receive data over carrier current
line systems.
The SOFTLINK unit has a metal housing and "is about the size
of a large telephone directory." It contains a power supply and
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a single circuit board. The circuit board contains a processor,
memory, devices to control the bringing in and sending out of
data, and two EPROMs (Erasable Programmable Read Only Memory).
The EPROMs are programmed by Smartlink to fulfill a customer's
particular needs.
ISSUE:
What is the classification of the SOFTLINK data
communications system, under the Harmonized Tariff Schedule of
the United States Annotated (HTSUSA)?
LAW AND ANALYSIS:
The General Rules of Interpretation (GRI's) to the HTSUSA
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...
Heading 8517, HTSUSA, provides for: "[e]lectrical apparatus
for line telephony or line telegraphy, including such apparatus
for carrier-current line systems." The Harmonized Commodity
Description and Coding System Explanatory Notes (EN) to heading
8517 of the HTSUSA, 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 electric current or of an
optical wave flowing in a metallic or dielectric
(copper, optical fibers, 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.
The term "apparatus" has been defined by the courts as a
combination of articles and materials which are intended,
adapted, and necessary for the accomplishment of some purpose.
The Deseret Co., v. United States, ___CIT___, Slip Op. 86-93
(1986). Your product literature states that the main
applications of SOFTLINK involve the transfer of data between
asynchronous host systems and Value Added Networks (VANS).
Therefore, clearly the SOFTLINK data communications system is a
combination of articles and materials intended, adapted and
necessary for the accomplishment of a specific purpose, i.e.,
that of data communication.
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The issue has been raised as to what the term "Carrier
Current" line systems encompasses. "Carrier Current" is used in
connection with both power and communications circuits, however,
the principle is basically the same for both systems. The term
refers to the use of a relatively high-frequency alternating
current superimposed on the ordinary circuit frequencies in order
to increase the usefulness of a given transmission line. Thus,
in the case of power systems, carrier currents of several kHz
frequency are coupled to the 60-Hz transmission lines. These
carrier currents may be modulated to provide telephone
communication between points on the power system or they may be
used to actuate relays on the system. The latter use is known as
carrier relaying. Carrier currents have greatly extended the
usefulness of existing line facilities of the telephone and
telegraph companies. Several carrier frequencies may be coupled
to the lines already having regular voice or telegraph signals on
them. Each of these carrier frequencies may be modulated with a
separate voice or telegraph channel and thus a given line may
carry the regular signal plus several new carrier channels, each
of which is equivalent to another circuit at regular frequencies.
At the receiving end, the various channels are separated by
filters and the signals are demodulated and then fed to
conventional phone or telegraph circuits. The number of carrier
channels which may be applied to a given line depends upon the
characteristics of the line, varying from one or two for some
lines to several hundred for a coaxial cable. See Van Nostrand's
Scientific Encyclopedia, Seventh Edition, Vol. 1, page 518
(1989).
However, heading 8517, HTSUSA, provides for: "[e]lectrical
apparatus for line telephony or line telegraphy, including such
apparatus for carrier-current line systems." Therefore, heading
8517, HTSUSA, includes apparatus for carrier-current line
systems, but is not limited to such apparatus.
The Customs Co-Operation Council Harmonized Commodity
Description and Coding System, Summary of Comments and
Observations by the Technical Team, Chapter 85, (April 25, 1979)
stated:
With regard to packet switching equipment, the Technical
Team reproduces below, for information, a text published by
the Secretariat for the attention of the Working Party on
Customs applications of computers (Doc. 21.926):
The transmission of computer system messages or parts
of messages between distant points in the form of
discrete packets which are transmitted over an
independently operated computer driven network. The
routes followed by messages are determined by the
network and not by the sending systems. Packet
switching is in many ways analogous to the conventional
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manual postal system in which an independent
carrier receives and delivers letter packets for a
community of users. Any one transmission line of
the network may carry messages from different
senders to different addresses. A message to be
transmitted across a packet switched network is
handled in the following manner: [t]he message is
split into a number of packets of fixed maximum
size each prefixed by the source and destination
addresses, length and sequence number. Each
packet is then handled by the network as a
discrete message, being passed from one switch or
node of the network to the next as soon as
possible, depending on the destination address,
the traffic density and the routes available. At
the destination, the addresses, etc., are stripped
off, the packets combined to form the original
message and an acknowledgement sent back to the
source according to whether or not the message is
free from error. By using high speed links for
the network, packets, originating from a large
number of users transmitting into the network at
moderate speeds, may be interleaved within the
network, while maintaining full integrity and
security. In this manner, network time is shared
between users in a similar manner to that of a
time sharing computer system.
Although the above text is not binding on us, such
information is helpful in that it is demonstrative of the Customs
Co-Operation Council's consideration for inclusion of this type
of apparatus in Chapter 85.
Certainly, the SOFTLINK data communication system is
apparatus designed for the transmission of data between two
points, by variation of an electric current connecting the
transmitting station to the receiving station. However, you
argue that the SOFTLINK is not a modem or a dataset. We agree,
but the SOFTLINK data communications system need not be a modem
or a dataset to be properly classifiable in heading 8517, HTSUSA.
Therefore, it is Customs position that the SOFTLINK data
communication system is properly classifiable under subheading
8517.82.00, which provides for: "[e]lectrical apparatus for line
telephony or telegraphy, including such apparatus for carrier-
current line systems: [o]ther apparatus: [t]elegraphic." For
similar holdings regarding similar data communications
merchandise, see HQ 086035, dated August 2, 1990, HQ 086478,
dated April 9, 1990, HQ 087468, dated January 8, 1991, HQ 086615,
dated April 20, 1990, HQ 085661, dated February 15, 1990, and NY
852403, dated May 31, 1990.
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HOLDING:
The SOFTLINK data communication system is properly
classifiable under subheading 8517.82.00, which provides for:
"[e]lectrical apparatus for line telephony or telegraphy,
including such apparatus for carrier-current line systems:
[o]ther apparatus: [t]elegraphic." The rate of duty is 4.7% ad
valorem. The rate of duty is Free if the applicable regulations
of the United States-Canada Free Trade Agreement are met.
Sincerely,
John Durant, Director
Commercial Rulings Division