CLA-2 CO:R:C:M 089469 JMH
Mr. Thomas B. Teubner
Valmont Industries, Inc.
Valley, Nebraska 68084
RE: Modification of Headquarters Ruling 084704, dated August 17,
1989; irrigation pipe; United States-Canada Free Trade
Agreement ("CFTA"); General Note 3(c)(vii)(B); General Note
3(c)(vii)(R)(7)(aa); agricultural or horticultural
machinery, equipment and implements; agricultural use
Dear Mr. Teubner:
This is a modification of Headquarters Ruling 084704 ("HQ
084704"), dated August, 17, 1989, concerning certain irrigation
pipe imported from Canada. The reasoning for this modification
follows.
FACTS:
The article in question is irrigation pipe imported from
Canada. The pipe is manufactured in Canada from raw resin
imported from Austria. Once it is manufactured, the raw resin
becomes medium density polyethylene irrigation pipe which is
noted for its flexibility and safe operation over a broad
temperature range. The pipe is designed for mounting onto reels
for use with portable irrigation equipment trailers. The
irrigation equipment trailers are primarily used in agricultural
applications.
New York Ruling 840315, undated, classified the irrigation
pipe in subheading 3917.32.00, Harmonized Tariff Schedule of the
United States Annotated ("HTSUSA"), as "Tubes, pipes and hose
and fittings therefor) for example, joints, elbows, flanges) of
plastics...Other tubes, pipes and hoses...Other, not reinforced
or otherwise combined with other materials, without fittings..."
We affirm this classification.
ISSUE:
Whether the polyethylene irrigation pipe is entitled to any
agricultural use duty exemptions.
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LAW AND ANALYSIS:
HQ 084704 stated that the irrigation pipes which are to be
placed onto reels on irrigation equipment trailers are entitled
to duty free entry under heading 9817.00.50, HTSUSA. Headings
9817.00.50 and 9817.00.60 are actual use provisions. To resolve
this issue both classification principles within the HTSUSA and
the Customs Regulations must be utilized.
The classification of merchandise under the HTSUSA is
governed by the General Rules of Interpretation (GRI's). GRI 1,
HTSUSA, 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 9817.00.50 and 9817.00.60 provide duty free
treatment to certain articles if the articles are used for
agricultural or horticultural purposes. Heading 9817.00.50
describes "Machinery, equipment and implements to be used for
agricultural or horticultural purposes..." Heading 9817.00.60
describes the following:
Parts to be used in articles provided for in headings
8432, 8433, 8434 and 8436, whether or not such parts
are principally used as parts of such articles and
whether or not covered by a specific provision within
the meaning of additional U.S. rule of interpretation
1(c)...
Headings 8432, 8433, 8434 and 8436 refer to specific types of
agricultural and horticultural machinery.
To fall within either special classification a three part
test must be met. First, the articles must not be among the long
list of exclusions to headings 9817.00.50 and 9817.00.60,
HTSUSA, under Section XXII, Chapter 98, Subchapter XVII, U.S.
Note 2, HTSUSA. Secondly, the terms of the headings must be met
in accordance with GRI 1. Thirdly, the merchandise must meet the
conditions required under 19 C.F.R. 10.133. See Headquarters
Ruling Letter 086883 ("HQ 086883"), dated May 1, 1990, and
Headquarters Ruling Letter 087076 ("HQ 087076"), dated June 14,
1990.
Heading 9817.00.50
The first heading, heading 9817.00.50 describes "Machinery,
equipment and implements to be used for agricultural or
horticultural purposes..." This determination focuses upon the
specific agricultural or horticultural pursuit in question and
what machine, equipment or implement fulfills this pursuit.
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The first part of the test is to determine whether the
irrigation pipe is excluded from heading 9817.00 50. The
irrigation pipe is classified within subheading 3917.32.00.
Section XXII, Chapter 98, Subchapter XVII, U.S. Note 2(t),
HTSUSA, lists the exclusions to heading 9817.00.50 from Chapter
84, HTSUSA. Subheading 3917.32.00 is not excluded by Subchapter
XVII, U.S. Note 2(t). The first prerequisite is met.
Secondly, the irrigation pipe must be included within the
terms of the heading. The irrigation pipe must be "machinery,"
"equipment" or "implements" used for an "agricultural or
horticultural purposes." For this step in the test, the initial
determination to be made is what agricultural or horticultural
pursuit is in question. The irrigation pipe is incorporated into
irrigation equipment trailers. Therefore, the agricultural or
horticultural pursuits in question is irrigation.
The next determination to be made in order to decide if the
terms of the heading are met is what "machinery", "equipment" or
"implement" performs the irrigation. The irrigation pipe is used
on irrigation equipment trailers. The larger item, the
irrigation equipment trailer, is the machine, equipment or
implement which is used in irrigation. The irrigation pipe,
although a necessary component of the machine, equipment or
implement that performs the pursuit, does not itself fulfill the
task as HQ 084704 ruled. The irrigation pipe by itself does not
accomplish the pursuit of irrigating, but is merely a part of the
machine, equipment, or implement which does so. Therefore, the
irrigation pipe does not meet the terms of heading 9817.00.50.
Whether or not the irrigation is actually used in an agricultural
pursuit does not become an issue since the terms of the heading
are not met.
The conclusive factor in this interpretation is the intent
of Congress. When Congress enacted the HTSUSA and the two
provisions that grant special treatment to articles used for
agricultural and horticultural purposes, only heading 9817.00.60
specifically provides for parts. This specificity of parts
within heading 9817.00.60 establishes that Congress considered
the issue of parts of machinery. Since heading 9817.00.50 has no
reference to parts it is evident that Congress did not intend
that all items used as a part of agricultural or horticultural
equipment should receive duty free treatment. See HQ 086883,
and HQ 087076.
Heading 9817.00.60
The second heading, heading 9817.00.60, provides duty free
treatment to parts of articles of heading 8432, 8433, 8434 and
8436, HTSUSA. These headings describe the following:
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8432 Agricultural, horticultural or forestry
machinery for soil preparation or
cultivation; lawn or sports ground rollers;
parts thereof...
* * * * * * * * * * * * *
8433 Harvesting or threshing machinery, including
straw or fodder bales; grass or hay mowers;
machines for cleaning, sorting or grading
eggs, fruit or other agricultural produce,
other than machinery of heading 8437; parts
thereof...
* * * * * * * * * * * * *
8434 Milking machines and dairy machinery, and parts
thereof...
* * * * * * * * * * * * *
8436 Other agricultural, horticultural, forestry,
poultry-keeping or bee-keeping machinery,
including germination plant fitted with
mechanical or thermal equipment; poultry
incubators and brooders; parts thereof...
The irrigation pipe in question is not excluded from
heading 9817.00.60 by Section XXII, Chapter 98, Subchapter XVII,
U.S. Note 2. If the importer can establish that the irrigation
equipment which incorporates the irrigation pipe is classified in
one the four mentioned headings of heading 9817.00.60, then the
terms of the heading are met.
Irrigation systems are classified in heading 8424, HTSUSA,
as "Mechanical appliances...for projecting, dispersing or
spraying liquids..." See Explanatory Note 84.24(E), Vol. 3
Harmonized Commodity Description and Coding System ("HCDCS"), p.
1189. Heading 8424 is not one of the listed headings within
heading 9817.00.60. Therefore, the irrigation pipe does not meet
the terms of the heading and is not entitled to duty free entry
under heading 9817.00.60.
United States-Canada Free Trade Agreement
However, articles which are imported from Canada may be
entitled to certain tariff preferences under the United States-
Canada Free Trade Agreement ("CFTA") if the articles are
"originating goods" as defined by General Note 3(c)(vii)(B),
HTSUSA. There are two primary means in General Note 3(c)(vii)(B)
by which articles imported into the United States may be "goods
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originating in the territory of Canada." The first method is if
the goods are "wholly obtained or produced in the territory of
Canada and/or the United States." General Note 3(c)(vii)(B)(1).
The second method is if the goods are "transformed in the
territory of Canada and/or the United States." General Note
3(c)(vii)(B)(2).
A product which is "wholly obtained or produced in the
territory of Canada and/or United States" is one which is grown,
mined, harvested, born and raised in Canada and/or the United
States, or otherwise intimately connected to the two countries
and their land, air and sea territories as defined in General
Note 3(c)(vii)(L), HTSUSA. Since the irrigation pipe is
manufactured from Austrian raw resin, the pipe is not "wholly
obtained or produced in the territory of Canada and/or United
States."
The second method to become an originating good for CFTA
purposes is for an article made of foreign materials to be
transformed in Canada and/or the United States in accordance with
General Note 3(c)(vii)(B)(2). A transformation is evident when a
change in tariff classification occurs that is authorized by
General Note 3(c)(vii)(R), HTSUSA.
In this instance, raw resin from Austria is manufactured
into irrigation pipe. Polyethylene resin is classified under
heading 3901, HTSUSA. The manufactured irrigation pipe is
classified under heading 3917, HTSUSA. Thus, a change in
classification occurs for the third country goods from heading
3907 to heading 3917. General Note 3(c)(vii)(R)(7)(aa), HTSUSA,
states that a change from one heading to another heading within
Chapter 39 is an authorized transformation, providing that the
value of the materials originating in Canada and/or the United
States plus the direct cost of processing performed in the
territory of Canada and/or the United States is not less than 50
percent the value of the irrigation pipe when it is exported to
the United States. This office does not have sufficient
information to make this determination. Should the irrigation
pipe meet the requirements of General Note 3(c)(vii)(R)(7)(aa),
then the pipe is an originating good under General Note
3(c)(vii)(B) and is entitled to the tariff preferences under the
CFTA.
HOLDING:
The polyethylene irrigation pipe is properly classified in
subheading 3917.32.00, as "Tubes, pipes and hose and fittings
therefor) for example, joints, elbows, flanges) of plastics...
Other tubes, pipes and hoses...Other, not reinforced or otherwise
combined with other materials, without fittings..."
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The irrigation pipe does not meet the terms of heading
9817.00.50, as HQ 084704 determined, nor does it meet the terms
of heading 9817.00.60. It is the irrigation equipment trailer,
and not the irrigation pipe, which performs an agricultural
pursuit as machinery, equipment or implements. Therefore, the
irrigation pipe is not entitled to duty free entry because of its
agricultural use.
The irrigation pipe in question may be an originating good
under General Note 3(c)(vii)(B). The polyethylene raw resin from
Austria is classified under heading 3907 and then transformed in
the manufacturing process into irrigation pipe which is
classified under heading 3917. According to General Note
3(c)(vii)(R)(7)(aa), this is an authorized classification
transformation if the value of the materials originating in
Canada and/or the United States plus the direct cost of
processing performed in the territory of Canada and/or the United
States is not less than 50 percent the value of the irrigation
pipe when it is exported to the United States. If General Note
3(c)(vii)(R)(7)(aa) is met, then the irrigation pipe is an
originating good in Canada and it is entitled to the CFTA tariff
preferences.
In order to insure uniformity in Customs classification of
merchandise of this type and to eliminate uncertainly, we are
modifying HQ 084704 to reflect the above classification effective
with the date of this letter. This letter is notice to you of
the modification of HQ 084704 under Customs Regulation
177.9(d)(1), 19 C.F.R. 177.9(d)(1). This notice is not to be
applied retroactively to HQ 084704 and will not affect past
transactions for the importation of your merchandise under that
ruling. Customs Regulation 177.9(d)(2), 19 C.F.R. 177.9(d)(2).
However, for the purposes of future transactions regarding
merchandise of this type HQ 084704 will not be valid precedent.
We recognize that pending transactions may be adversely affected
by this modification, in that current contracts for importations
arriving at a port subsequent to this decision will be classified
pursuant to it. If such a situation arises, you may at your
discretion notify this office and apply for relief from the
binding effects of this decision as warranted by the
circumstances.
Sincerely,
John Durant, Director
Commercial Rulings Division