CLA-2 CO:R:C:M 089356

District Director
U.S. Customs Service
111 West Huron St.
Buffalo, N.Y. 14202

RE: Protest No. 0901-9-000522; Motorola Communications Processors; Unit; Automatic Data Processing; ADP; Telegraphic; Local Area Network

Dear Sir:

This is in response to the request for further review of protest number 0901-9-000522, dated June 1, 1989, on behalf of Motorola Information Systems, regarding classification of various Communications Processors, under the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The protestant states that the merchandise at issue are various products that control the flow of data in an automatic data processing system (ADP), which encode data to be sent to remote locations of the system. These products interact with the host computer and other units in the ADP system to control the communication of data. The products are specifically described as follows:

1. The Intelligent Network Processors (INPs). Each of Motorola's "600 Series" INPs (including the 6002, 6003, 6005, and 6015 models) incorporates a microprocessor connected to a set of ports. Ports are the access points for the entry and exit of data. When in use, a computer terminal is connected via an interface to an assigned "terminal port" of the INP. A separate "control port" on the INP gives the user centralized control of configuration, monitoring, and diagnostics in the system. Each INP also has a "network port," which generates or receives data and provides data communications control functions.

ISSUE:

Whether the subject communications processors are classified within heading 8517, HTSUS, as "Electrical apparatus for line telephony or telegraphy, including such apparatus for carrier- current line systems; parts thereof...", or within heading 8471, HTSUS, as "Automatic data processing machines and units thereof...."

LAW AND ANALYSIS:

The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (GRI's). GRI 1 states in part:

for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes...

The competing headings in the instant case are headings 8517 and 8471, HTSUS. These headings describe:

8517 Electrical apparatus for line telephony or telegraphy, including such apparatus for carrier-current line systems; parts thereof...

8517.30.30 Telephonic or telegraphic switching apparatus...Other

* * * * * * * * * * * * *

8471 Automatic data processing machines and units thereof...Other

8471.99.15 Other...control or adapter units...

8471.99.90 Other...Other...

Chapter 84, Legal Note 5, HTSUS, defines the term "automatic data processing machines" for the purposes of heading 8471, HTSUS. Chapter 84, Note 5(A)(a) states that "automatic data processing machines" includes:

-3-

Digital machines, capable of (1) storing the processing program or programs and at least the data immediately necessary for execution of the program; (2) being freely programmed in accordance with the requirements of the user; (3) performing arithmetical computations specified by the user; and, (4) executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run..."

Legal Note 5(b) further provides that ADP machines may be in the form of systems consisting of a variable number of separately housed units. A unit must meet the following requirements to be regarded as part of a complete system:

(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.

HQ 085666, dated November 8, 1989, held that certain communications controllers imported by Fujitsu America, were classifiable under subheading 8471.99.15, HTSUSA, which provides for automatic data processing machines and units thereof, other control or adapter units. You argue that the instant merchandise is similar, and therefore, should be similarly classifiable. We agree. The instant merchandise is essentially an enormous, highly diverse, front end processor. The result is that the main frame computer spends less time servicing the "teleprocessing network" and CPU resources are available for more application processing. Thus, these communications controllers have taken over certain processing functions originally performed by the CPU of an ADP system. Furthermore, the Controller meets the requirements of chapter 84, Legal Note 5(b), as a unit of an ADP system.

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) to heading 8471, HTSUS, defines "control or adapter units" as follows:

[Units which] 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.

Therefore, the IBM Model 3745 Communications Controller is properly classifiable within 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 importer argues that the instant merchandise is "Data -4-

Terminal Equipment" (DTE) which is separate and distinct from "Data Communications Equipment" (DCE). The Basics Book of Data Communications, by Codex, in reference to DTE and DCE, states the following:

Now, a data communications network can be divided into three distinct parts. The Data Terminal Equipment (DTE) is any digital device such as a terminal, printer or computer that transmits and/or receives data. We call them "digital" because they operate in binary. The Data Communications Equipment (DCE) is any other device attached to the communications line that manipulates the transmitted signal or data (you'll see why it needs to be manipulated in a second). The third part is the medium over which the signal is sent. Often, the medium used is a telephone line. The point at which these devices connect with one another is called the interface....If two digital devices want to communicate over an analog telephone line, then equipment must be added at either end to convert the digital signal to analog so it can travel the phone line, and then convert it back to digital so it can feed directly into a DTE at the receiving end. These devices that modulate and demodulate or manipulate the signal are called modems and belong to the DCE category.

However, Customs has consistently held that the most important factor to be considered, for classification purposes, is whether the merchandise is principally used for data processing or for the transmission of data between two points.

HOLDING:

The IBM Model 3745 Communications Controller is classifiable in 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."

Sincerely,

John Durant, Director
Commercial Rulings Division