Modification of HQ 951331; Local Area Network Interface Boards; LAN; Automatic Data Processing Machine; Control or Adapter Units

HQ 952659 October 7, 1992 CLA-2 CO:R:C:M 952659 MBR CATEGORY: Classification TARIFF NO.: 8471.99.15 Mr. John C. Dibble Venable, Baetjer, Howard & Civiletti Suite 1000 1201 New York Ave., N.W. Washington, D.C.20005-3917 RE: Modification of HQ 951331; Local Area Network Interface Boards; LAN; Automatic Data Processing Machine; Control or Adapter Units Dear Mr. Dibble: On September 18, 1992, we issued HQ 951331 to you regarding the classification of "Network Interface Boards," on behalf of the Western Digital Corporation, IBM Corporation, NCR Corporation, and Madge Networks, under the Harmonized Tariff Schedule of the United States (HTSUS). FACTS: The merchandise in question is Local Area Network ("LAN") Interface Boards. These stuffed printed circuit boards are designed for physical incorporation into a personal computer (PC) or into an automatic data processing (ADP) system. LAN boards are connectable to other PCs and units (e.g., input units, output units, storage units, and gateway equipment) over a variety of local area network (LAN) media including coaxial cables and twisted pair wire. These LAN network interface boards (NIBs) convert, process, and format data so that several ADP machines or systems are able to communicate and function as a local area network. The LAN boards perform two major functions. They receive binary information from a PC and convert this to digital data so that it can be used at other locations within the LAN. Examples of this conversion are character format conversion and file conversion. Once converted, this data is either formatted separately or grouped into units of data known as packets. This data is then transmitted to different locations within the LAN. -2- Once received by another NIB, the packets are converted into a form usable by the destination device. Thus, essentially, LAN boards process, translate, convert, and transmit data for use within the LAN. The NIBs also perform such additional functions as encoding, decoding, LAN protocol implementation, temporary memory storage, control logic for access to the host computer, and LAN processor local memory. The LAN boards consist of various programmed chips (including microprocessors), resistors, transistors, and logic devices which operate within the network transmission and protocol software. ISSUE: Are local area network interface boards classifiable under subheading 8517.99.15, HTSUS, which provides for "control or adapter units" or are they classifiable under subheading 8471.99.60, HTSUS, which provides for "other" ADP 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 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 agreed that the NIBs are essential to the ADP systems with which they are integrated because they process and format the data of the computers they serve. -3- In HQ 951331 we also cited the Harmonized Commodity Description and Coding System Explanatory Notes (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 digital data processing machines, or to groups of input or output units which may comprise visual display units, remote terminals, etc. It is now our opinion that rather than "processing" being the principal function of the network interface board, 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 NIBs did not have the essential character of control or adapter units because of their processing capabilities. However, it has come to our attention that the NIBs processing capabilities are designed principally to perform the control and adaption functions, as described by the ENs. However, the NIBs are prima facie classifiable under both subheadings. Subheading 8471.99.15, HTSUS, provides for "Control or adapter units" whereas, subheading 8471.99.60, HTSUS, provides for "Other." General Rule of Interpretation (GRI) 3(a) states in pertinent part: "The heading which provides the most specific description shall be preferred to headings providing a more general description. Thus, since the NIBs are more specifically described in subheading 8471.99.15, HTSUS, they are more appropriately classifiable in that subheading. This modification has no other effect than to change the subheading classification of local area network interface boards from subheading 8471.99.60, HTSUS, to subheading 8471.99.15, HTSUS. HQ 951331 remains in effect to revoke the following rulings: HQ 089596, dated September 17, 1991, HQ 089597, dated September 5, 1991, 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 086615, dated April 20, 1990, NY 843415, dated August 8, 1989, and NY 852403, dated May 31, 1990. -4- HOLDING: The instant local area network interface boards are 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. EFFECT ON OTHER RULINGS: For the reasons stated above, HQ 951331 is modified under authority of Section 177.9(d), Customs Regulations. The following rulings remain revoked in accordance with HQ 951331, and this ruling: HQ 089596, dated September 17, 1991, HQ 089597, dated September 5, 1991, 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 086615, dated April 20, 1990, NY 843415, dated August 8, 1989, and NY 852403, dated May 31, 1990. Sincerely, John Durant, Director