Reconsideration of NY 869010; "TROLI" Module; ADP Unit; Control or Adapter Unit; HQ 951331; HQ 952659

HQ 955907 July 6, 1994 CLA-2 CO:R:C:M 955907 MBR CATEGORY: Classification TARIFF NO.: 8471.99.15 Ms. Susan Kohn Ross Ross & Associates 5777 West Century Blvd. Suite 520 Los Angeles, CA 90045-5659 RE: Reconsideration of NY 869010; "TROLI" Module; ADP Unit; Control or Adapter Unit; HQ 951331; HQ 952659 Dear Ms. Ross: This is in response to your letter of February 14, 1994, on behalf of Pulse Engineering, Inc., requesting reconsideration of NY 869010, dated December 18, 1991, issued by the Area Director of Customs, New York Seaport, to a Customs broker on behalf of Pulse Engineering, Inc., regarding the classification of the "TROLI" Module for Local Area Networking ("LAN"), under the Harmonized Tariff Schedule of the United States (HTSUS). FACTS: The "TROLI" Module (Token Ring Optimized Interface) is a module that is mounted on a Network Interface Board "NIB" to provide an analog connection between a Texas Instruments COMMprocessor and the connector used to transmit and receive encoded signals over either 150 Ohm standard twisted pair ("STP") cable or 100 Ohm UTP cable. The TROLI module performs the major portion of the local area networking ("LAN") interface board and facilitates the encoding and decoding of information moving to and from the personal computer ("PC"). Pursuant to section 625, Tariff Act of 1930 (19 U.S.C. 1625), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. No. 103-182, 107 Stat. 2057, 2186 (1933)(hereinafter "section 625"), notice of the proposed revocation of NY 869010 was published June 1, 1994, in the Customs Bulletin, Volume 28, Number 22. No comments were received. Our decision in this matter is set forth below. -2- ISSUE: What is the classification of the "TROLI" Module, under the HTSUS? LAW AND ANALYSIS: NY 869010, dated December 18, 1991, held that the instant TROLI modules were classified in subheading 8517.82.00, HTSUS, which provides for telegraphic apparatus. 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. However, in HQ 951331, dated September 18, 1992, (as modified by HQ 952659, dated October 7, 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 TROLI Modules 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 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: -3- (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 our opinion that rather than "processing" being the principal function of such 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. HOLDING: The instant TROLI Modules 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. NY 869010, dated December 18, 1991, is revoked. In accordance with section 625, this ruling will become effective 60 days after publication in the Customs Bulletin. Publication of rulings or decisions pursuant to section 625 does not constitute a change of practice or position in accordance with section 177.10(c)(1), Customs Regulations (19 CFR 177.10(c)(1)). Sincerely, John Durant, Director