CLA-2 CO:R:C:M 089597 MBR

Annette Smith
Intertrans Corporation
322 East Grand Avenue
South San Francisco, CA 94080

RE: TSVME 551 68020 Dual-Port Ethernet Controller; TSVME 541 X.25 Communication Board; Logic and Support Circuitry Necessary for Communication Over Private or Public Data Networks; Local Area Network; Wide Area Network; Telegraphic Apparatus

Dear Ms. Smith:

This is in reply to your letter of March 19, 1991, on behalf of Themis Computer, requesting classification of the TSVME 551 68020 Dual-Port Ethernet Controller, and the TSVME 541 X.25 Communication Board, under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

FACTS:

The submitted literature states that the "TSVME 551 68020 Dual-Port Ethernet Controller" is an intelligent, single board interface between a VMEbus host system and two ETHERNET Networks. ETHERNET connections are operated at their maximum rate by the tri-bus architecture, the 5 port 1 megabyte shared memory, and a VME Fast Transfer Module. A "powerful" 16 MHz 68020 processor can support high level protocols and management of data migration control without being disturbed by the two ETHERNET controllers.

The 1 megabyte shared memory is accessed through a port- based system by the following users: the 68020 CPU, both ETHERNET controllers, the VME Interface and the VME Fast Transfer Module.

The Fast Transfer Module, based upon a 2K FIFO buffer, shortens VMEbus occupation times and offers extremely high data rates (up to 20 megabytes per second).

The standard EPROMs supplied with the TSVME 551 board contain an autotest which is executed upon "power-on," a debug monitor (VBUG), and basic functions to be called in order to command the ETHERNET controllers, the Fast Transfer Module and the EPROM.

The TSVME 541 (X.25 Communication Board) Intelligent Serial Communications (ISCC) board is a VMEbus-compatible (Versa Module Europe) double Eurocard (revision C) with intelligent serial line controller capability. The onboard controller circuit provides management of two independent multiprotocol serial lines.

The TSVME 541 is designed around an intelligent peripheral controller (IPC) architecture based on a 68010-10 onboard microprocessor, and it supports the X.25 level-3 communications software. This architecture makes it a self-contained and efficient communications management module. It allows the host system to be connected to a national network of the Transpac, Telenet, Tymnet, or any other type that manages the X.25 protocol. Physical line interfacing is implemented on removable PC adaptation boards connected to the main board.

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 TSVME 551 68020 Dual-Port Ethernet Controller is designed for Local Area Network (LAN) applications, usually within 300 meters or less, and functions at extremely high data rates. It does not function as a modem.

The TSVME 541 X.25 communication board is designed for Wide Area Network (WAN) applications and requires an external modem in order to transmit and receive data over carrier current line systems. However, both the 551 and the 541 are 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.

ISSUE:

Whether the TSVME 541 X.25 Communication Board and the TSVME 551 68020 Dual-Port Ethernet Controller are 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...

Neither the TSVME 541 communication board ("541 communication board") nor the TSVME 551 68020 Dual-Port Ethernet Controller ("551 Ethernet controller") is 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 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.

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 541 communication board architecture makes it a self-contained and efficient communications management module. It allows the host system to be connected to a national network such as the Transpac, Telenet, Tymnet, or any other type that manages the X.25 protocol. Your literature also states that the 551 Ethernet controller can support high level protocols and management of data migration control without being disturbed by the two ETHERNET controllers, and offers extremely high data rates (up to 20 megabytes per second).

Therefore, both the 541 X.25 communication board, and the 551 Ethernet controller data communications systems are a combination of articles and materials intended, adapted and necessary for the accomplishment of a specific purpose, i.e., that of network data communication (LAN & WAN).

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 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, 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, both the 541 X.25 communication board, and the 551 Ethernet controller data communications systems 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.

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 551 Ethernet controller or the 541 X.25 communication board 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." Neither article in question performs these particular, specialized functions. In fact, the importer states that this merchandise requires the addition of a modem in order to function over twisted pair cable.

Based upon the design and intended applications of the instant merchandise, it is Customs opinion that the 551 Ethernet controller (for Local Area Networks) is not principally used for carrier current line systems, however, the 541 X.25 communication board (for Wide Area Networks) is principally used for carrier current line systems.

Therefore, the TSVME 551 68020 Dual-Port Ethernet Controller data communication system is 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." Whereas, the TSVME 541 X.25 communication board is classifiable under subheading 8517.40.70, which provides for: "[e]lectrical apparatus for line telephony or telegraphy, including such apparatus for carrier-current line systems: [o]ther apparatus, for carrier-current line systems: [o]ther: [t]elegraphic." For similar holdings regarding similar data communications merchandise, see 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 TSVME 551 68020 Dual-Port Ethernet Controller data communication system is 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 TSVME 541 X.25 communication board is classifiable under subheading 8517.40.70, which provides for: "[e]lectrical apparatus for line telephony or telegraphy, including such apparatus for carrier-current line systems: [o]ther apparatus, for carrier-current line systems: [o]ther: [t]elegraphic." The rate of duty is 4.7% ad valorem.

Recorded media (Software) of heading 8524, HTSUSA, remains classifiable within that heading, whether or not it is entered with the apparatus for which it is intended. Therefore, the software for the above articles is classifiable under subheading 8524.90.40, HTSUSA, which provides for: "[r]ecords, tapes and other recorded media for sound or other similarly recorded phenomena...: [o]ther: [o]ther."

Sincerely,

John Durant, Director
Commercial Rulings Division