CLA-2 CO:R:C:M 952659 MBR
Mr. John C. Dibble
Venable, Baetjer, Howard & Civiletti
Suite 1000
1201 New York Ave., N.W.
Washington, D.C.20005-3917
RE: Modification of HQ 951331; Local Area Network Interface
Boards; LAN; Automatic Data Processing Machine; Control or
Adapter Units
Dear Mr. Dibble:
On September 18, 1992, we issued HQ 951331 to you regarding
the classification of "Network Interface Boards," on behalf of the
Western Digital Corporation, IBM Corporation, NCR Corporation, and
Madge Networks, under the Harmonized Tariff Schedule of the United
States (HTSUS).
FACTS:
The merchandise in question is Local Area Network ("LAN")
Interface Boards. These stuffed printed circuit boards are
designed for physical incorporation into a personal computer (PC)
or into an automatic data processing (ADP) system. LAN boards are
connectable to other PCs and units (e.g., input units, output
units, storage units, and gateway equipment) over a variety of
local area network (LAN) media including coaxial cables and twisted
pair wire. These LAN network interface boards (NIBs) convert,
process, and format data so that several ADP machines or systems
are able to communicate and function as a local area network.
The LAN boards perform two major functions. They receive
binary information from a PC and convert this to digital data so
that it can be used at other locations within the LAN. Examples
of this conversion are character format conversion and file
conversion. Once converted, this data is either formatted
separately or grouped into units of data known as packets. This
data is then transmitted to different locations within the LAN.
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Once received by another NIB, the packets are converted into a form
usable by the destination device. Thus, essentially, LAN boards
process, translate, convert, and transmit data for use within the
LAN. The NIBs also perform such additional functions as encoding,
decoding, LAN protocol implementation, temporary memory storage,
control logic for access to the host computer, and LAN processor
local memory.
The LAN boards consist of various programmed chips (including
microprocessors), resistors, transistors, and logic devices which
operate within the network transmission and protocol software.
ISSUE:
Are local area network interface boards classifiable under
subheading 8517.99.15, HTSUS, which provides for "control or
adapter units" or are they classifiable under subheading
8471.99.60, HTSUS, which provides for "other" ADP units?
LAW AND ANALYSIS:
Since the HTSUS came into effect there has been a great deal
of controversy regarding the classification of LAN boards.
However, there is no clear classification guidance from either the
HTSUS or the Harmonized Commodity Description and Coding System
Explanatory Notes (ENs), primarily due to the technological
advancements in this area.
In HQ 951331 we cited Legal Note 5(B) to chapter 84, HTSUS,
which provides guidance regarding units of automatic data
processing machines. It states:
Automatic data processing machines may be in the form of
systems consisting of a variable number of separately housed
units. A unit is to be regarded as being a part of the
complete system if it meets all of the following conditions:
(a) It is connectable to the central processing unit either
directly or through one or more other units; and
(b) It is specifically designed as part of such a system (it
must, in particular, unless it is a power supply unit,
be able to accept or deliver data in a form (code or
signals) which can be used by the system).
We agreed that the NIBs are essential to the ADP systems with
which they are integrated because they process and format the data
of the computers they serve.
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In HQ 951331 we also cited the Harmonized Commodity
Description and Coding System Explanatory Notes (ENs), pages 1299-
1300, which describe separately presented ADP units as follows:
This heading also covers separately presented constituent
units of data processing systems. Constituent units are those
defined in Parts (A) and (B) above as being parts of a
complete system.
Apart from central processing units and input and output
units, examples of such units include:
(4) Control and adaptor units such as those to effect
interconnection of the central processing unit to other
digital data processing machines, or to groups of input
or output units which may comprise visual display units,
remote terminals, etc.
It is now our opinion that rather than "processing" being the
principal function of the network interface board, their principal
function is, in fact, to effectuate interconnection of the CPU unit
to other units or ADP machines, thereby serving "control" and
"adaption" functions. In HQ 951331 it was our opinion that the
NIBs did not have the essential character of control or adapter
units because of their processing capabilities. However, it has
come to our attention that the NIBs processing capabilities are
designed principally to perform the control and adaption functions,
as described by the ENs.
However, the NIBs are prima facie classifiable under both
subheadings. Subheading 8471.99.15, HTSUS, provides for "Control
or adapter units" whereas, subheading 8471.99.60, HTSUS, provides
for "Other." General Rule of Interpretation (GRI) 3(a) states in
pertinent part: "The heading which provides the most specific
description shall be preferred to headings providing a more general
description. Thus, since the NIBs are more specifically described
in subheading 8471.99.15, HTSUS, they are more appropriately
classifiable in that subheading.
This modification has no other effect than to change the
subheading classification of local area network interface boards
from subheading 8471.99.60, HTSUS, to subheading 8471.99.15, HTSUS.
HQ 951331 remains in effect to revoke the following rulings: HQ
089596, dated September 17, 1991, HQ 089597, dated September 5,
1991, 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 086615, dated April 20, 1990, NY 843415, dated August 8,
1989, and NY 852403, dated May 31, 1990.
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HOLDING:
The instant local area network interface boards are
classifiable under subheading 8471.99.15, HTSUS, which provides
for: "[a]utomatic data processing machines and units thereof:
[o]ther: [o]ther: [c]ontrol or adapter units." The rate of duty
is Free.
EFFECT ON OTHER RULINGS:
For the reasons stated above, HQ 951331 is modified under
authority of Section 177.9(d), Customs Regulations. The following
rulings remain revoked in accordance with HQ 951331, and this
ruling: HQ 089596, dated September 17, 1991, HQ 089597, dated
September 5, 1991, 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 086615, dated April 20, 1990, NY 843415,
dated August 8, 1989, and NY 852403, dated May 31, 1990.
Sincerely,
John Durant, Director