CLA-2 CO:R:C:M 089355 MBR
District Director
U.S. Customs Service
111 West Huron St.
Buffalo, New York 14202
RE: Protest No. 0901-9-850158; CLIMA Printed Circuit Boards; Pep
and Step Circuit Boards; TDI Converter; Local Area Networking;
Telegraphic Apparatus
Dear Sir:
This is in response to the request for further review of
Protest No. 0901-9-850158, dated May 9, 1989, regarding the
classification of CLIMA printed Circuit boards, Pep and Step
circuit boards, and TDI converters, under the Harmonized Tariff
Schedule of the United States (HTSUS).
FACTS:
The "CLIMA" boards are described in the submitted literature
as an intelligent card consisting of an 8088 processor with 64K of
DRAM, an 8053 timer, an 8259A interrupt controller, a 2764 EPROM
and multibus interface. The card plugs into a Multi-Bus type host
computer and is used to communicate to other remote computers. The
board performs functions such as handling low level communication
protocols, error checking and error handling.
"PEP" stands for "Personal Emulation Package." "Step" is the
same technology developed by UNISYS. These "PEP" and "Step" boards
are communications boards similar to the Network Interface Cards
("NICs") ruled upon in HQ 089596, dated September 17, 1991. NICs
are designed for physical incorporation into a personal computer
(PC) or into an automatic data processing (ADP) system. NICs 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. The NICs convert, process, and format data so that
several ADP machines or systems are able to communicate and
function as a local area network.
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The NICs 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. Once received by another
NIC, the packets are converted into a form usable by the
destination device. Thus, the NICs essentially process, translate,
convert, and transmit data for use within the LAN. The NICs 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 NICs consist of various programmed chips (including
microprocessors), resistors, transistors, and logic devices which
operate within the network transmission and protocol software.
The "TDI" (Two-wire Direct Interface) Adapter is UNISYS
connectivity hardware used to attach a single personal computer via
the RS232C connector to a poll-select two-wire direct interface
communications line for a local area network.
ISSUE:
Whether the CLIMA, PEP, and Step communications boards, and
the TDI adapter are classifiable under heading 8473, HTSUS, which
provides for parts of automatic data processing machines, or under
heading 8517, HTSUS, which provides for "[e]lectrical apparatus for
line telephony or telegraphy"?
LAW AND ANALYSIS:
The General Rules of Interpretation (GRI's) to the HTSUS
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 instant local area networking data communication 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.
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The submitted literature clearly shows that the instant
networking boards are the foundation to a local area network and
are dedicated to data communication. 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 work stations. 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.
The protestant 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
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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, HTSUS.
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 argued that the instant merchandise constitutes
integral elements of the operation of the computer or of the data
processing system by transferring data from one location to another
and, as such, is a "part" or "unit" of an ADP machine. However,
the network interface cards do not constitute "integral elements"
of the computer itself. The networking cards 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, HTSUS.
Heading 8517, HTSUS, 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 HTSUS, 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). There can
be no controversy that these boards are data communication boards
for local area networking.
Therefore, the instant data communications devices, 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).
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, these local area network data communications
devices 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.
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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 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 cards 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
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articles in question performs these particular, specialized
functions.
Based upon the design and intended applications of the instant
merchandise, it is Customs opinion that the instant boards (for
Local Area Networking) are not principally used for carrier current
line systems.
The importer repeatedly states that the TDI converters "do not
at any time connect to or through telephone lines." However, this
fact does not change the design and function of the TDI from one
of data communication, i.e., the transmission of data.
Therefore, the instant CLIMA, PEP, and Step local area network
data communication system boards and TDI converter 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 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 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 "CLIMA," "PEP," and "Step" local area network data
communication system boards and TDI converter 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 protest should be denied in full. A copy of this decision
should be attached to the Customs Form 19 and provided to the
protestant as part of the notice of action on the protest.
Sincerely,
John Durant, Director
Commercial Rulings Division