United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 2002 HQ Rulings > HQ 963250 - HQ 963596 > HQ 963250

Previous Ruling Next Ruling
HQ 963250




July 23, 2001

CLA-2 RR:CR:GC 963250 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 8517.50.60

Ms. Joan McLeod
Nortel Networks, Inc.
55 Pineview Drive
Amherst, NY 14228

RE: Data Switching Device; Network Equipment; Principal Use; Chapter 84, Note 5(B); Headings 8471 and 8517; EN 85.17; HQ 956406, revoked

Dear Ms. McLeod:

This is in reference to HQ 956406, dated September 26, 1994, which classified your data switching device 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 data switching device 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 HQ 956406. Five comments were received in response to this notice, but only one comment specifically addresses this ruling.

FACTS:

The merchandise under consideration consists of a data switching device (model no. DPN100), imported from Canada. It is designed to handle large scale, wide area data networks (WANs) supporting from less than 100 lines to over 1,000,000 lines. This enables users to send data between multiple points,
usually host computers and terminals. Typical user applications include electronic funds transfers, electronic mail, file transfers between computers, and point of sale or credit card authorization terminal transaction processing with a host computer. These applications usually involve industries such as banking, utilities, government, public telephone companies, large corporations, and retail industries.

The data switching device requires an external modem to transmit and receive data over carrier current line systems. However, it is dedicated to the transmission between two points of electrical impulses representing text and/or images and other data using a line connection connecting the transmitting station to the receiving station. The device is not intended for the transmission of speech or other sounds.

ISSUE:

Whether the data switching device is classifiable under subheading 8471.80.10, HTSUS, as an ADP control or adapter unit, or under subheading 8517.50.60, HTSUS, as other telegraphic apparatus for carrier-current 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:
8517.50.60 For carrier-current line systems. . . .

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 data switching device is similar to a router and that it needs an external modem to transmit and receive data. The commenter concludes that because the device is not imported with telephone switching equipment, it cannot be classified under heading 8517.

In resolving this issue, importers must provide evidence of sole or principal use. An unsupported claim 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 the 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 data switching device, we note that it is designed for an enterprise-wide communication system for the interconnection of diverse hosts, applications, and end-user environments. Its principal design function is packet switching over a wide area network. The expectations of the ultimate purchaser is to use X.25 packet switching technology and protocol to connect remote offices together to form a WAN over a public switched packet data network (PSPDN). It allows the user to connect and support dissimilar equipment. The use (class of merchandise) includes electronic fund transfer, electronic mail, file transfer, point-of-sale or credit card transaction processing, global access to reservation and multiple listing systems, public subscription services, etc. It has not been demonstrated that this apparatus is used solely or principally to interconnect units within a LAN. Based on these facts and the Lenox factors, we find that the data switching device, which allows for the connection of disparate devices of a PSPDN, is not of a kind solely or principally used in an ADP system. It therefore does not meet the definition of an ADP unit as defined in Legal Note 5(B), and is precluded from classification in 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 CARRIERCURRENT
LINE SYSTEMS OR FOR DIGITAL LINE SYSTEMS

These systems are based on the modulation of an electrical carriercurrent or of a light beam by analogue or digital signals. Use is made of the carriercurrent 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 opticalfibre cables. “Line equipment” includes transmitters and receivers or electrooptical converters. Combined modulatorsdemodulators (modems) are also classified here.

Because the data switching device functions 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 8517.50.60, HTSUS.

HOLDING:

Under the authority of GRI 1, the data switching device is classifiable under subheading 8517.50.60, 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: [f]or carrier-current line systems. . . .”

EFFECT ON OTHER RULINGS:

HQ 956406, dated September 26, 1994, 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

Previous Ruling Next Ruling

See also: