HQ 953453: Internal Advice No. 74/92; desktop computer terminal with telephone components; composite machine; Note 3, Section XVI; data processing; telephone communications; HRL 086553; General EN (VI); principal function; GRI 3(c); 8471.91.00

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                              HQ 953453

                            July 16, 1993

CLA-2 CO:R:C:M 953453 KCC

CATEGORY:  Classification

TARIFF NO.:  8517.10.00

District Director
U.S. Customs Service
Lincoln Juarez Bridge, Building #2
P.O. Box 3130
Laredo, Texas  78044-3130

RE:  Internal Advice No. 74/92; desktop computer terminal with
     telephone components; composite machine; Note 3, Section XVI;
     data processing; telephone communications; HRL 086553; General
     EN (VI); principal function; GRI 3(c); 8471.91.00

Dear District Director:

     This is in response to your memorandum of October 21, 1992,
requesting internal advice regarding the tariff classification of
desktop computer terminals with telephone components under the
Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

     The articles at issue are the "Rolm Cedar" and "Rolm Cypress"
units.  You state that, pursuant to General Rule of Interpretation
(GRI) 3(c), HTSUS, the Cedar and Cypress units are properly
classified under subheading 8517.10.00, HTSUS, which provides for
"Electrical apparatus for line telephony or telegraphy, including
such apparatus for carrier-current line systems; parts
thereof...Telephone sets...."  However, Rolm Systems (Rolm) contends
that the Cedar and Cypress units are classified under subheading
8471.20.00, HTSUS, which provides for "Automatic data processing
machines and units thereof; magnetic or optical readers, machines
for transcribing data onto data media in coded form and machines for
processing such data, not elsewhere specified or included...Digital
automatic data processing machines, containing in the same housing
at least a central processing unit and an input and output unit,
whether or not combined...."

     The Cedar is described by Rolm's brochure as "A Complete
Personal Communication Computer."  It integrates an IBM-compatible
computer with an extremely flexible digital telephone system.  A
complete Cedar unit includes a monitor (CRT screen, dashboard and
disk drives), keyboard and telephone system.  As imported, the Cedar
lacks the keyboard, telephone handset and personal data module.  The
personal data module is where all information entered by the user, 


such as phone numbers, terminal profiles and log-on sequences is
contained.  

     The Cedar's data processing machine is an IBM PC compatible
personal computer with two disk drives and 384KB of usable memory. 
The Cedar also contains Personal Communications Software (PCS).  The
PCS is a module attached to the CBX unit and is not in diskette
form.  The PCS allows easy access to data bases stored in
mainframes, minicomputers and public information services via rapid
transfer of data files.  The Cedar provides terminal emulation, data
communication capability, the ability to run DOS compatible personal
computer applications, calculator, reminders, telephone list, and
other features.  

     The Cedar's digital telephone is used for both voice and data
communication (telecommunication).  The telephone can be used at any
time, regardless of the other tasks being performed by the computer
or whether the computer is turned on or not.

     The Cypress is described by Rolm's brochures as "A Personal
Communication Terminal with an Integrated Digital Telephone."  The
Cypress is a personal communication terminal which combines a
digital telephone, productivity, and communication services, and a
high-quality computer terminal in one unit.  It has the same
features as the Cedar, except that it does not include disk drives
and does not provide the personal computer compatibility.  As
imported, the Cypress also lacks the keyboard, telephone handset,
and personal data module.  It is described as a device that combines
the information retrieval capabilities of a smart terminal with the
flexibility of a sophisticated digital telephone.  
     
ISSUE:

     Are the Cedar and Cypress units classified under heading 8471,
HTSUS, as automatic data processing machines, or under heading 8517,
HTSUS, as telephone apparatus? 

LAW AND ANALYSIS:

     The classification of merchandise under the HTSUS is governed
by the General Rules of Interpretation (GRI's).  GRI 1, HTSUS,
states, in part, that "for legal purposes classification shall be
determined according to the terms of the headings and any relative
section or chapter notes."

     Headings 8471 and 8517 fall within Section XVI, making the
Section XVI Notes applicable to the classification of the Cedar and
Cypress units.  Note 3, Section XVI, HTSUS, states that:

     ...composite machines consisting of two or more machines fitted
     together to form a whole and other machines adapted for the
     purpose of performing two or more complementary or alternative
     functions are to be classified as if consisting only of that
     component or as being that machine which performs the principal
     function.

The Cedar and Cypress units are fitted together to form a whole by
means of being incorporated together and mounted together.  They
perform at least two alternative functions, data processing and
telecommunication.  Therefore, the Cedar and Cypress units are
composite machines pursuant to Note 3, Section XVI, HTSUS.

     In Headquarters Ruling Letter (HRL) 086553 dated May 11, 1990,
we classified a similar composite machine, the Navigator, as a
telegraphic apparatus under subheading 8517.82.00, HTSUS.  The
Navigator was an integrated telephone, facsimile machine and
personal computer.  HRL 086553 held that the degree of physical and
functional integration of the Navigator's functions made it
difficult to isolate one of the functions and identify it as the
principal function.  Additionally, the Navigator's functions were
not just physically integrated; they were complementary functions
which were used with each other.  The Navigator was marketed as an
integrated office machine and not one of the three complementary
functions was significantly emphasized over the others.  Since no
principal function could be found, the Navigator was classified
pursuant to GRI 3(c), HTSUS, under the last subheading among the
subheadings which equally merited consideration.

     Rolm contends that the principal function of its products is
the data processing function, i.e. the monitor, keyboard and disk
drives for the Cedar, and the monitor and keyboard for the Cypress. 
Rolm states that HRL 086553 does not apply to their products because
the Cedar and Cypress provide only two functions which are
significantly different in complexity.  Rolm contends that the Cedar
and Cypress telephone functions are less sophisticated than the
Navigators in HRL 086553.  Rolm states that it is easy to separate
the telephone function from the data processing function; even if
the data processing function is not powered on, the telephone (ring,
hold, transfer and connect buttons) still function so that a call
can be made or answered.  

     We are not convinced that the data processing function is the
principal function or that it can be separated from the
telecommunication (voice and data) function.  As stated in HRL
086553, certain data processing operations which are associated with
telecommunication functions would be attributed to those functions
for classification purposes.  See, Note 5, Chapter 84, HTSUS, which
states, in part, that "Heading 8471 does not cover machines
incorporating or working in conjunction with an automatic data
processing machine and performing a specific function.  Such
machines are classified in the headings appropriate to their
respective functions...."  The PCS operations associated with the
telecommunication functions are performed by components within the
monitor and would not be considered as separate articles for
classification purposes.  The data processing functions would
include the PCS operations of reminders, calculators, date/time, 

etc., whereas the telecommunication functions would include the PCS
operation of phone lists.  

     Moreover, the information provided by Rolm states that their
products integrate a personal communication computer (Cedar) or
personal communication terminal (Cypress) with an extremely flexible
digital telephone system to provide both the productivity tools of
data processing and superior digital communications capabilities. 
Additionally, the digital telephone operates in conjunction with PCS
in both the Cedar and Cypress to greatly simplify data access and
information gathering.  Therefore, the physical and functional
integration of the data processing and data communication functions
makes it difficult to identify the principal function.

     It is our opinion that no single function can be determined to
be the principal function of the Cedar or Cypress units.  The Cedar
and Cypress units cannot be classified according to GRI 1 through
3(b), HTSUS,  Therefore, they are classified pursuant to GRI 3(c),
HTSUS.  Additionally, General Explanatory Note (VI) to Section XVI
of the Harmonized Commodity and Description Coding System (HCDCS)
(pg. 1133), states that "[w]here it is not possible to determine the
principal function, and where, as provided in Note 3 to the Section,
the context does not otherwise require, it is necessary to apply GRI
3(c)...." 

     GRI 3(c), HTSUS, provides that goods "...shall be classified
under the heading which occurs last in numerical order among those
which equally merit consideration."  Of the headings which equally
merit consideration, heading 8517, HTSUS, occurs last in numerical
order.  Therefore, both the Cedar and Cypress units are classified
as telephone apparatus under subheading 8517.10.00, HTSUS.

HOLDING:

     The Cedar and Cypress are classified as telephone apparatus
under subheading 8517.10.00, HTSUS.  

     For your information, subheading 8517.10.00, HTSUS, is an
eligible tariff provision for preferential treatment under the
Generalized System of Preferences (GSP).  However, as of July 4,
1993, the GSP program expired.  If the GSP program is re-instated
and if the articles meet the requirements of General Note 3(c)(ii),
HTSUS, and section 10.171-10.178, Customs Regulations (19 CFR
10.171-10.178), they may receive duty-free treatment.  

     You should advise the internal advice applicant of this
decision.

                                     Sincerely,



                                     John Durant, Director
                                     Commercial Rulings Division