Protest No. 5501-9X-XXXXXX; Smart AT Ringnodes; Local Area Network; LAN; NIB; ADP Machine; Control And Adapter Unit; HQ 951331; HQ 952659

HQ 951165 October 14, 1992 CLA-2 CO:R:C:M 951165 MBR CATEGORY: Classification TARIFF NO.: 8471.99.15 District Director U.S. Customs Dallas/Ft. Worth International Airport P.O. Box 619050 Texas, 75261 RE: Protest No. 5501-9X-XXXXXX; Smart AT Ringnodes; Local Area Network; LAN; NIB; ADP Machine; Control And Adapter Unit; HQ 951331; HQ 952659 Dear Sir: This is in reply to your protest and request for further review number 5501-9X-XXXXXX, dated January 17, 1991, on behalf of the Tandy Corporation, regarding the classification of the Smart At Ringnodes LAN Network Interface Board, under the Harmonized Tariff Schedule of the United States (HTSUS). We have recently reconsidered the classification of LAN equipment in general, and Network Interface Boards in particular. See HQ 951331, dated September 18, 1992, as modified by HQ 952659, dated October 7, 1992. FACTS: The Smart AT Ringnode ("add-in adapter card") is a Network Interface Board (NIB) for a local area network. The Computer Glossary, Fourth Edition, Alan Freedman (1989), defines a "Local Area Network" as follows: A local area network is a communications network that serves several users within a confined geographical area. Although the term may refer to any communications network within a building or plant, it typically refers to the interconnection of personal computers. Personal computer local area networks function as distributed processing systems in which each computer, or node, in the network does its own processing and manages some of its data. Shared data is stored in a high-performance pc in the network, called a file server or network server, which acts as a remote -2- disk drive to all the users in the network. The printers that are attached to the network can function on a first-come, first-served basis, or they can be connected to a computer, called a print server, which collects the print output and feeds it to the printer one job at a time. A local area network is the backbone of office automation and allows electronic mail and other information to be communicated between all users of the system. Local area networks are becoming essential for small work groups that enter, share and exchange the same information. With the use of a gateway, local area network can connect to minicomputer and mainframe networks. BASEBAND NETWORKS Baseband networks are all digital networks that require information in digital form. Examples are ARCNET, Token Ring, Ethernet and Starlan. All of these networks are driven by network management software that resides in the file servers and the work stations. Examples of network software are Microsoft's NetBIOS and LAN Manager, Apple Talk, TPC/IP and Novell's NetWare. BROADBAND NETWORKS Broadband networks use carrier frequencies and can handle voice and video transmission as well, for example, Wang Computer's WangNET. ISSUE: What is the classification of the LAN "Smart AT Ringnode" Network Interface Board? Is it classifiable under heading 8471, HTSUS, which provides for ADP machine "Control or adapter units," or under heading 8517, HTSUS, which provides for "[e]lectrical apparatus for line telephony or telegraphy"? 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. However, Legal Note 5(B) to chapter 84, HTSUS, provides guidance regarding units of automatic data processing machines. It states: -3- 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 NIBs are essential to the ADP systems with which they are integrated because they process and format the data of the computers they serve. The Harmonized Commodity Description and Coding System Explanatory Notes (ENs), pages 1299-1300, 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. After extensive research and analysis, it is now our opinion that the principal function of the NIBs is, in fact, to effectuate the interconnection of the CPU unit to other units or ADP machines, thereby serving "control" and "adaption" functions, as described by the ENs. Therefore, the "Smart AT Ringnode" NIBs are properly classifiable in subheading 8471.99.15, HTSUS, which provides for "Control or adapter units." HOLDING: The Smart AT Ringnode Network Interface Boards for Local Area Networking are classifiable 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." The rate of duty is Free. -4- Since reclassification of the merchandise as indicated above will result in the same rate of duty as claimed, you should allow the protest in full. A copy of this decision should be attached to the Customs Form 19 and provided to the protestant as part of the notice of action on the protest. Sincerely, John Durant, Director Commercial Rulings Division ATTACHMENT: HQ 951331