CLA-2 CO:R:C:M 089596 MBR
Ms. Stella C. Hall
Porter International Incorporated
P.O. Box 81488
San Diego, CA 92138
RE: The "Aster, Tamarix and Cypress" Networking Cards; Local
Area Networking; Telegraphic Apparatus
Dear Ms. Hall:
This is in reply to your letter of November 7, 1990, on
behalf of Lantana Technology, Inc., requesting classification of
data communication local area "networking cards" (LAN), under the
Harmonized Tariff Schedule of the United States Annotated
(HTSUSA).
FACTS:
The submitted literature states that the specific trademarks
of the Lanatana Technology, Inc., data communication local area
networking cards are "Aster, Tamarix and Cypress."
The "Tamarix Series" is described in your literature as
Lanatana's line of products for Ethernet local-area networks.
Tamarix products include adapters for PC/XT, AT and Micro
Channel-based systems, as well as complementary transceivers,
bridges, and repeaters - "everything necessary to build a
complete Ethernet LAN."
The "Aster Series" includes a full line of ARCnet LAN
adapters for PC/XT, AT and Micro Channel-based systems, as well
as active and passive hubs, and other accessories. "This
comprehensive line of products offers everything you need to
construct or expand a cost-effective ARCnet network."
The "Cypress Series" are described as Token Ring
Controllers for PC/XT, AT and Micro Channel." These controllers
are available in 16/4 Mbps (Mega bytes per second transmission
rate) and 4 Mbps configurations for PC/XT, AT and Micro Channel
architectures. "Utilizing advanced bus master and ASIC design,
Cypress adapters deliver the highest possible throughput in both
server and workstation environments."
ISSUE:
Whether the Lanatana Technology, Inc., "Aster, Tamarix and
Cypress" data communication local area networking boards are
classifiable under heading 8471, Harmonized Tariff Schedule of
the United States Annotated (HTSUSA), which provides for
"[a]utomatic data processing machines," or under heading 8517,
HTSUSA, which provides for "[e]lectrical apparatus for line
telephony or telegraphy"?
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...
The "Aster, Tamarix and Cypress" data communication local
area networking boards are not classifiable as automatic data
processing machines, as defined by Legal Note 5(A)(a) to Chapter
84, HTSUSA. Legal Note 5(A)(a)(2) requires that digital machines
must be capable of: "(2) being freely programmed in accordance
with the requirements of the user." Although they do perform
some forms of data processing (such as service data which defines
protocol, packet size, etc.) it is Customs position that they are
not freely programmed, and therefore are not classifiable under
heading 8471.
The importer freely admits that the instant "networking
cards" are the foundation to a "Local Area Network." The
Computer Glossary, Fourth Edition, Alan Freedman (1989), defines
a "Local Area Network" as follows:
A local area network is a communications network that serves
several users within a confined geographical area. Although
the term may refer to any communications network within a
building or plant, it typically refers to the
interconnection of personal computers.
Personal computer local area networks function as
distributed processing systems in which each computer, or
node, in the network does its own processing and manages
some of its data. Shared data is stored in a high-
performance pc in the network, called a file server or
network server, which acts as a remote disk drive to all the
users in the network.
The printers that are attached to the network can function
on a first-come, first-served basis, or they can be
connected to a computer, called a print server, which
collects the print output and feeds it to the printer one
job at a time.
A local area network is the backbone of office automation
and allows electronic mail and other information to be
communicated between all users of the system. Local area
networks are becoming essential for small work groups that
enter, share and exchange the same information.
With the use of a gateway, local area network can connect to
minicomputer and mainframe networks.
BASEBAND NETWORKS
Baseband networks are all digital networks that require
information in digital form. Examples are ARCNET, Token
Ring, Ethernet and Starlan. All of these networks are
driven by network management software that resides in the
file servers and the workstations. Examples of network
software are Microsoft's NetBIOS and LAN Manager, Apple
Talk, TPC/IP and Novell's NetWare.
BROADBAND NETWORKS
Broadband networks use carrier frequencies and can handle
voice and video transmission as well, for example, Wang
Computer's WangNET. (Emphasis added).
The importer argues that the networking boards are "parts"
of automatic data processing machines. However, the fact that
each board at issue requires the attachment of another article
(the PC) in order to be capable of performing its function (data
communication) does not render each board a "part," since there
is no requirement that a machine must be "self-activating." Nord
Light, Inc. v. United States, 49 CCPA 12, C.A.D. 786 (1961).
Although, when imported, the boards are incapable of functioning
unless placed in a configuration with certain other boards and
devices, in their final use they nevertheless are in and of
themselves, network data communication (electrical telegraphic)
apparatus specifically provided for in heading 8517, HTSUSA.
Westinghouse Electric International Co. v. United States, 28
Cust. Ct. 209, C.D. 1411 (1952), cited with approval by Fairchild
Camera & Instrument Corp., Inter-Maritime Forwarding Co., Inc. v.
United States, 53 CCPA 122, 126, C.A.D. 887 (1966). Similarly,
the fact that they need to be incorporated within a system
housing or chassis does not mandate their classification as a
part. General Electric Company v. United States, 2 CIT 84,
(1981).
It has been asserted that the instant merchandise
constitutes integral elements of the operation of the computer
or of the data processing CPU when transferring data from one
location to another and, as such, is a part or unit of a computer
or a data processing machine." However, the networking boards do
not constitute "integral elements" of the computer itself. As
stated by the importer's literature, the networking boards are
integral to the establishment of a local area network, i.e., the
operation of transferring data from one location to another.
This specific function is encompassed by heading 8517, HTSUSA.
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 (ENs) 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 literature states that the "Tamarix Series" is
Lanatana's line of products for Ethernet local-area networks,
that the "Aster Series" is a comprehensive line of products that
offers everything you need to construct or expand a cost-
effective ARCnet network, and that the "Cypress Series" are Token
Ring LAN controllers.
Therefore, all three of these networking data communications
systems are a combination of articles and materials intended,
adapted and necessary for the accomplishment of a specific
purpose, i.e., that of local area network data communication
(LAN).
Heading 8517, HTSUSA, provides for: "[e]lectrical apparatus
for line telephony or line telegraphy, including such apparatus
for carrier-current line systems." 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).
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, a definition of data
communication packet switching (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
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, all three of these local area network data
communications systems are apparatus designed for the
transmission of data between two points, by variation of an
electric current connecting the transmitting station to the
receiving station, as described above.
Heading 8517, HTSUSA, specifically includes line telegraphy
for the transmission of symbols representing written messages,
images or other data. The definition of "telegraphic apparatus"
is found within the Harmonized Commodity Description and Coding
System Explanatory Note (EN) to 85.17, p. 1363, which states:
This is essentially designed for converting texts or images
into appropriate electrical impulses, for transmitting those
impulses, and at the receiving end, receiving these impulses
and converting them either into conventional symbols or
indications representing the text, or into the text or image
itself. (Emphasis added).
The issue has been raised whether or not these three local
area network data communication boards should be considered
"modems" for tariff purposes. The Computer Glossary, Fourth
Edition, by Alan Freedman (1989), defines "Modem" as follows:
(MOdulator-DEModulator) A modem is a device that adapts a
terminal or computer to a communications network. Modems
turn digital pulses from the computer into frequencies
(modulate) within the audio range of the telephone system
and convert the frequencies back into digital pulses
(demodulate) on the receiving side. Specialized modems are
used to connect personal computers to a broadband local area
network, which, similar to the telephone system, use
electromagnetic waves for transmission signals, but at
different frequencies. The telephone industry also refers
to a modem as a dataset.
The modem handles the dialing and answering of the call
and also generates the speed of the transmission, which is
measured in bits per second. Modems used on telephone lines
transmit at speeds of 300, 1200, 2400, 4800, 9600 and 19200
bits per second. The effective data rate is 10% of the bit
rate; thus, 300 bits per second (bps) is equivalent to 30
characters per second (cps). It would take a full minute to
fill up a video screen at that rate; 15 seconds at 1,200 bps
and about seven seconds at 2,400 bps. Due to noisy lines in
the dial-up telephone system, the higher speeds can be
problematic, and private lines may be required.
In order to have a personal computer dial up and
communicate with another computer or public information
service, more than a modem is required. The computer must
have a serial port available into which the modem is
connected. In addition, a communications program must be
used in order to direct the computer to do the transmitting
and receiving.
As this definition delineates, "[m]odems turn digital pulses
from the computer into frequencies (modulate) within the audio
range of the telephone system and convert the frequencies back
into digital pulses (demodulate) on the receiving side." None of
the articles in question performs these particular, specialized
functions. In fact, the instant merchandise requires the
addition of a modem in order to function over twisted pair cable.
Based upon the design and intended applications of the
instant merchandise, it is Customs opinion that the "Aster,
Tamarix and Cypress" networking boards (for Local Area Networks)
are not principally used for carrier current line systems.
Therefore, the "Aster, Tamarix and Cypress" local area
network data communication system cards are 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 089597, dated September 5, 1991 (regarding an
Ethernet Controller), HQ 089277, dated August 14, 1991, HQ
089227, dated July 24, 1991, 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.
HOLDING:
The "Aster, Tamarix and Cypress" local area network data
communication system cards are 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.
Sincerely,
John Durant, Director
Commercial Rulings Division