CLA-2 CO:R:C:M 089277 MBR

Mr. William J. LeClair
Transborder Customs Services, Inc.
One Trans-Border Drive, P.O. Box 800
Champlain, N.Y. 12919

RE: The EDA Instruments, Inc., MCN.1008 Asynchronous Packet Assembler/Disassembler (PAD); Logic and Support Circuitry Necessary for Asynchronous Communication Over Private or Public Data Networks; Telegraphic Apparatus

Dear Mr. LeClair:

This is in reply to your letter of January 29, 1991, on behalf of EDA Instruments, Inc., requesting classification of MCN.1008 Asynchronous Packet Assembler/Disassembler (PAD), under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

FACTS:

You state that the "Packet Assembler/Disassembler" (PAD) is a data communications multiplexor designed to operate on X.25 networks provided by both public and private communications carriers, in other words, telephone companies. PADs are utilized in the following typical data network communication system configuration: COMPUTER + PAD + MODEM = NETWORK = MODEM + PAD + COMPUTER.

The literature that you have submitted states that EDA Instruments, Inc., MCN.1008 Asynchronous Packet Assembler/Disassembler (PAD) contains the logic and support circuitry necessary for asynchronous communication over private or public data networks. The MCN.1008 PAD is an X.3 Packet Assembler/Disassembler (PAD) which allows from one to eight device interfaces to share a common X.25 communication trunk. The PAD can adapt to different types of devices through the assignment of a set of parameter values for each interface. There are also parameters to control the format of data transfer between a terminal and a computer, to improve communication efficiency by reducing the number of packets generated over the

network. These parameters can be software configured according to the user's needs and are stored in a battery backed up memory called NV (non-volatile) RAM.

X.25 is a document describing internationally standardized protocol to be used by packet switching networks. It was proposed by the Comite Consultatif International Telephonique et Telegraphique (CCITT) and has been adopted by most of the common carriers of the world involved in packet switched data networks. Packet networks offer the ability to statistically multiplex several users onto a single network access point through the use of Packet Assemblers and Disassemblers (PADs).

The PAD requires an external modem in order to transmit and receive data over carrier current line systems. However, the PAD 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 PAD is not intended for the transmission of speech or other sounds.

The Uniscope PAD is used with Unisys Uniscope (formerly Sperry Uniscope) computers and terminals. Burroughs PADs are used with Burroughs equipment and Asynchronous PADs are used with a variety of computer equipment which supports standard asynchronous protocols.

ISSUE:

Whether the "Packet Assembler/Disassembler" (PAD) is 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 PAD is not classifiable as an automatic data processing machine, 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 the PAD does perform some forms of data processing (such as service data which defines protocol, packet size, etc.) it is Customs position that the PAD is not freely programmed, and therefore is not classifiable under -3-

heading 8471.

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 PAD contains the logic and support circuitry necessary for asynchronous communication over private or public data networks, and that the MCN.1008 PAD is an X.3 Packet Assembler/Disassembler (PAD) which allows from one to eight device interfaces to share a common X.25 communication trunk. Therefore, clearly the PAD data communications system is a combination of articles and materials intended, adapted and necessary for the accomplishment of a specific purpose, i.e., that of network data communication.

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 -4-

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 (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 -5-

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, the PAD data communication system is apparatus designed for the transmission of data between two points, by variation of an electric current connecting the transmitting station to the receiving station.

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 the PAD is a "modem." 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.

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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." The PADs do not perform these particular, specialized functions. In fact, the PADs require the use of a modem to function. PADs are utilized in the following typical data network communication system configuration: COMPUTER + PAD + MODEM = NETWORK = MODEM + PAD + COMPUTER.

As you have stated in your submission, the PAD is a "Multiplexor." The Computer Glossary defines a "Multiplexor" as follows:

In communications, a multiplexor brings together several low-speed communications lines, transforms them into one high-speed channel and reverses the operation at the other end. See multiplexing.

The Computer Glossary defines "Multiplexing" as follows:

Multiplexing is the transmission of multiple signals over a single communications line or computer channel. The two common multiplexing techniques are frequency division multiplexing, which separates signals by using different carrier frequencies to hold them in, and time division multiplexing, which separates signals by interleaving them one after the other.

However, the Packet Assembler/Disassembler does not perform "Packet Switching." The Computer Glossary defines "Packet Switching" as follows: -7-

Packet switching is a technique for handling high-volume traffic in a communications network. Packet switching breaks apart all messages to be transmitted into fixed length units called packets. The packets are routed to their destination through the most expedient route, and all the packets in a single message may not travel the same route. The destination computer reassembles the packets into their appropriate sequence. This method is used to efficiently handle messages of different lengths and priorities in a single network. X.25 is an international standard for a packet switching network.

Your product literature further delineates the differences between packet switching equipment and the instant PAD merchandise. Your "System Manual" defines these devices as follows:

SWITCHES: A packet switch has many X.25 trunks. Its purpose is the interconnection of network users so they may exchange information. This is accomplished by establishing permanent intra-network channels or by routing X.25 calls and creating switched virtual circuits. The routing function may include alternate paths or destinations if the primary routing cannot be established. Network optimization can also be performed to achieve a desired cost/performance curve.

PADS: PADs are statistical multiplexors that adhere to the CCITT X.3 or X.25 standards, enabling terminals, printers and computers to transmit and receive data on X.25 trunks. The unique structure of the MPX.25000 allows asynchronous X.3 devices and equipment using proprietary protocols to be supported within the same unit. PADs interface with packet switches to create larger PAD systems or X.25 networks.

The PAD is designed for use either in public or private data networks. Therefore, it is not necessarily principally used for carrier-current line systems.

Therefore, it is Customs position that the PAD data communication system is properly 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 089227, dated July 24, 1991, HQ 086035, dated August 2, 1990, HQ 086478, dated April 9, 1990, HQ 087468, dated -8-

January 8, 1991, HQ 086615, dated April 20, 1990, HQ 085661, dated February 15, 1990, and NY 852403, dated May 31, 1990.

The instant PADs are not similar to the "protocol converters" considered in HQ 088667. The "protocol converter" in that case was held to be simply an adapter unit which converted data in order to interconnect peripherals of one type to the CPU of another type.

HOLDING:

The EDA Instruments, Inc., "Packet Assembler/Disassembler" (PAD) data communication system is properly 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. The rate of duty is Free if the applicable regulations of the United States-Canada Free Trade Agreement are met.

Sincerely,

John Durant, Director
Commercial Rulings Division