CLA-2 CO:R:C:M 954059 MBR

Mr. Richard Kibler
Telematics International Inc.
1201 Cypress Creek Road
Ft. Lauderdale, Florida 33309

RE: Communications Processors ACP 10, 20, 40, 50; Network Access Controller; X.25 Packet Switch; LAN; Automatic Data Processing Machine; Control or Adapter Units; Telegraphic Switch; Packet Switch; HQ 086035 (revoked by HQ 951331); HQ 952628

Dear Mr. Kibler:

This is in response to your letter of March 26, 1993, to the Area Director of Customs, New York Seaport, requesting classification of automatic data processing ("ADP") communications processors (models ACP 10, 20, 40, and 50), under the Harmonized Tariff Schedule of the United States ("HTSUS"). Your letter was forwarded to this office for reply.

FACTS:

The Telematics line of Access Communication Products ("ACP") are communications processors consisting of a base unit which includes a chassis, power supply, central processor unit (CPU), internal storage devices, and may contain a 3.5 inch disk drive. These products enable users to establish and manage private data networks in corporate environments for the simultaneous transmission of synchronous and asynchronous data utilizing the X.25 public packet switched networks such as U.S. Sprint, Telenet, AT&T, and British Telecom Tymnet, in the United States.

These products provide interconnection and call routing between X.25 compliant equipment, such as Packet Assemblers/ Disassemblers, X.25 host computers, gateways and other switches within a data network. Standard functions include packet data switching, data concentration, data routing, data error recovery and network data flow control. The common or commercial designation for these products is "Network Access Controller" or "X.25 Packet Switch."

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ISSUE:

Are the Telematics "Access Communication Products" classifiable under subheading 8517.30.50, HTSUS, which provides for telegraphic switching apparatus, or are they classifiable under subheading 8471.99.15, HTSUS, which provides for ADP "control or adapter units"?

LAW AND ANALYSIS:

Since the HTSUS came into effect there has been a great deal of controversy regarding the classification of LAN boards. However, there is no clear classification guidance from either the HTSUS or the Harmonized Commodity Description and Coding System Explanatory Notes (ENs), primarily due to the technological advancements in this area.

In HQ 951331, dated September 18, 1992, we cited Legal Note 5(B) to chapter 84, HTSUS, which provides guidance regarding units of automatic data processing machines. It states: Automatic data processing machines may be in the form of systems consisting of a variable number of separately housed units. A unit is to be regarded as being a part of the complete system if it meets all of the following conditions:

(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 (it must, in particular, unless it is a power supply unit, be able to accept or deliver data in a form (code or signals) which can be used by the system).

We agree that the Communication Processors are essential to the ADP systems with which they are integrated because they process and format the data of the computers they serve.

In HQ 951331 we also cited the ENs, pages 1299-1300, which describe separately presented ADP units as follows: This heading also covers separately presented constituent units of data processing systems. Constituent units are those defined in Parts (A) and (B) above as being parts of a complete system.

Apart from central processing units and input and output units, examples of such units include:

(4) Control and adaptor units such as those to effect interconnection of the central processing unit to other

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digital data processing machines, or to groups of input or output units which may comprise visual display units, remote terminals, etc.

However, it is our opinion that rather than "processing" being the principal function of Local Area Network ("LAN") and Wide Area Network ("WAN") equipment, their principal function is, in fact, to effectuate interconnection of the CPU unit to other units or ADP machines, thereby serving "control" and "adaption" functions. In HQ 951331 it was our opinion that the LAN equipment did not have the essential character of control or adapter units because of its processing capabilities. However, it has come to our attention that the LAN equipment's processing capabilities are designed principally to perform the control and adaption functions, as described by the ENs.

The issue has been raised whether HQ 086035, dated August 2, 1990, is controlling since it classified a Digital Packet Network under heading 8517, HTSUS. However, HQ 086035 was revoked by HQ 951331, dated September 18, 1992. The current legal precedent for this merchandise is HQ 952628, dated October 13, 1992, which held that a Packet Assembler/Disassembler was classifiable in subheading 8471.99.15, HTSUS, which provides for control or adapter units. In HQ 952628 we stated:

It is now our conclusion that the data processing features of control and adaption do in fact represent the principal function of the PAD unit, directing classification 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."

HOLDING:

The Telematics ADP Access Communication Products ACP 10, 20, 40, 50 are properly classifiable under 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 rate of duty is Free.

Sincerely,

John Durant, Director