HQ 086035

August 2, 1990

CLA-2 CO:R:C:G 086035 MBR

CATEGORY: Classification

TARIFF NO.: 8517.30.50

Mr. Richard T. Deane

Northern Telecom, Inc.

77 Oriskany Drive

Tonawanda, NY 14150

RE: Reconsideration of NY 843415 (August 8, 1989) regarding the

Northern Telecom Digital Packet Network (DPN) from Canada.

Dear Mr. Deane:

This is in reply to your letter of September 25, 1989, on

behalf of Northern Telecom, Inc., requesting reconsideration of

NY 843415 (August 8, 1989), regarding the classification of the

Digital Packet Network, under the Harmonized Tariff Schedule of

the United States Annotated (HTSUSA).

FACTS:

The Digital Packet Network (DPN) is designed to handle large

scale, wide area data networks supporting from less than 100

lines to over 1,000,000 lines. This enables users to send data

between multiple points - usually host computers and terminals.

Typical user applications include electronic funds transfers,

electronic mail, file transfers between computers, and point of

sale or credit card authorization terminal transaction processing

with a host computer. These applications usually involve

industries such as banking, utilities, government, public

telephone companies, large corporations and retail industries.

The DPN requires an external modem in order to transmit and

receive data over carrier current line systems. However, the DPN

is 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. The DPN is not intended for the transmission

of speech or other sounds.

ISSUE:

Whether the Northern Telecom Digital Packet Network is

classifiable under 8471, Harmonized Tariff Schedule of the United

States Annotated (HTSUSA), which provides for \"\[a\]utomatic data

processing machines,\" or under 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\...

You argue that the Digital Packet Network is classifiable as

an automatic data processing machine as defined by Legal Note

5(A)(a) to Chapter 84, HTSUSA. However, 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.\" You argue this Legal Note is met because \"Service Data\"

is downloaded into the processors. \"Service Data\" defines

protocol, packet size, and password/security selections of the

resident program. However, it is Customs position that the

Digital Packet Network is not freely programmed, and therefore is

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 (EN) 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. (Emphasis

added).

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). The Digital Packet Network is clearly a combination of

articles and materials intended, adapted and necessary for the

accomplishment of a specific purpose, i.e., that of processing

and preparing data for the transmission of line telegraphy.

Therefore, the Digital Packet Network and each of its components

can be appropriately termed \"apparatus\" for line telegraphy, even

though the DPN requires the addition of a modem.

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 (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.

You argue that the DPN is designed for the switching of user

data, not the switching of voice or \"telephony signals\" which, by

definition, you argue, is the transmission of speech or other

sounds. However, heading 8517 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)

Clearly, the Digital Packet Network is telegraphic apparatus

designed for the transmission of data between two points.

Therefore, it is Customs position that the Digital Packet Network

is properly classifiable under subheading 8517.30.50, which

provides for: \"\[e\]lectrical apparatus for line telephony or

telegraphy\...: \[t\]elegraphic or telephonic switching apparatus:

\[o\]ther.\" See HQ 086478 (April 9, 1990), NY 843415 (August 8,

1989), NY 838270 (March 24, 1989).

HOLDING:

We concur with NY 843415 (August 8, 1989). The Northern

Telecom Digital Packet Network is classifiable under subheading

8517.30.50, HTSUSA, (whether imported together or as separate

components) which provides for: \"\[e\]lectrical apparatus for line

telephony or telegraphy\...: \[t\]elegraphic or telephonic switching

apparatus: \[o\]ther.\"

Goods classifiable under subheading 8517.30.50, HTSUSA,

which have originated in Canada, under the United States - Canada

Free Trade Agreement, will be entitled to a 2.8% percent ad

valorem rate of duty, upon compliance with all applicable

regulations.

Sincerely,

John Durant, Director

Commercial Rulings Division