CLA-2 RR:CR:GC 963242 RFA
Mr. Dennis Heck
Tower Group International, Inc.
2400 Marine Avenue
Redondo Beach, CA 90278 1103
RE: Statistical Multiplexers; Network Equipment; Principal Use; Chapter 84, Note 5(B); Headings 8471 and 8517; EN 85.17; NY A80132, revoked
Dear Mr. Heck:
This is in reference to NY A80132, dated February 13, 1996, which was issued to you on behalf of Micom Communications Corporation, classifying statistical multiplexers 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 statistical multiplexers 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 A80132. Five comments were received in response to this notice, but only one comment specifically addresses this ruling.
FACTS:
The merchandise under consideration involves two models of statistical multiplexers, described as a LCi statistical multiplexer and the Val U Mux
statistical multiplexer. The basic difference between the two multiplexers is that the LCi's are 230/250 volt units and the Val U Mux's are 110/115 volt units.
These statistical multiplexers are free standing units that provide remote access to almost any host computer with either 2 channel, 4 channel or 8 channel capability. Both of these models allow as many as eight asynchronous devices to share a single phone line to a host computer using enhanced statistical multiplexer software as its base. The units have front panel LCD's which show the diagnostic texts available, and can mix and match different hosts, terminals and printers through flexible per channel end configuration.
These multiplexers are designed, and can be used in both private and public telephone networks, such as private leased networks in one building, and in such areas as campuses and universities and manufacturing companies with distributed (private) data communications requirements.
ISSUE:
Whether the statistical multiplexers are 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.
The commenter states that the statistical multiplexers receive and combine signals from up to 8 ADP machines or unit which is then transmitted to a modem to be sent over a telephone line system. Because the statistical multiplexers do not transmit data between two points on a telephone line, the commenter claims that the subject merchandise should be classified in heading 8471.
In resolving this issue, importers must provide evidence of sole or principal use. An unsupported claim, such as the one made by the commenter, 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 statistical multiplexers, we note that it allows up to 8 asynchronous devices to share a single public or leased telephone line. The expectation of the ultimate purchaser is to save money on resources by multiplexing channels together over one line or communications link. The use of the merchandise is to combine multiple channels of information over a single transmission path. Because the statistical multiplexers are used to combine multiple signals into one signal for transmission over a public or leased telephone line, we find that they do not meet the requirements of Legal Note 5(B)(a) to Chapter 84, as it is not solely or principally used in an ADP system. Therefore, it is precluded from classification under 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 CARRIER CURRENT
LINE SYSTEMS OR FOR DIGITAL LINE SYSTEMS
These systems are based on the modulation of an electrical carrier current or of a light beam by analogue or digital signals. Use is made of the carrier current 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 optical fibre cables. “Line equipment” includes transmitters and receivers or electro optical converters. Combined modulators demodulators (modems) are also classified here.
Because the statistical multiplexers function 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.
HOLDING:
Under the authority of GRI 1, the statistical multiplexers are 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 A80132, dated February 13, 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