CLA-2 CO:R:C:M 950118 LTO
Mr. Carlo Bruzzone
Bruzzone Shipping, Inc.
132 Nassau Street
New York, New York 10038
RE: Railway cars; 8607.99.50; GRI 2(a); HQ 084845; HQ 086555; EN
86.03; EN to Section XVII, Chapter 86; American Import Co.
v. United States
Dear Mr. Bruzzone:
This is in response to Ms. Graciela Bruzzone's letter of
August 9, 1991 to this office, requesting the classification of
subway cars under the Harmonized Tariff Schedule of the United
States (HTSUS).
FACTS:
The transit cars, 100 of which are to be delivered to the
Washington Metropolitan Area Transit Authority (WMATA), are
composed of two distinct carbody sections called "married pairs"
("A" and "B"). When the two sections are joined together they
form one operational passenger railcar. The initial delivery
consists of four prototype cars (two "A" carbodies and two "B"
carbodies). They will be shipped in operating condition, except
for minor disassembly needed for shipping purposes. The importer
states that the "A" carbody and the "B" carbody may be shipped
together on the same vessel or may be shipped separately on
different vessels.
The other 96 units will be shipped partially assembled.
49.72 percent of the carbodies' constituent parts will be
assembled in Italy. This assembly includes the structural shell,
windows, doors, underframe, interior lighting and fixtures, air
diffuser ducting, and wiring and tubing for connection to the
electrical and mechanical components. The balance of 50.28
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percent of the constituent parts, to be completed in the United
States, includes the Westinghouse Electric Co. (Welco) propulsion
system and ATC equipment, the Westinghouse Air Brake Co. (Wabco)
brake equipment and couplers, the Stone Safety Co. air-
conditioning system, the Midwest/Harmon intercommunication radio
system, the Standard Steel Co. wheel assembly, Teperman seats,
Timken bearings, and Sofer Co. trucks. The final assembly of
these vehicles will be performed at a facility located in
Harrison, New Jersey.
The transit cars are powered by electrical energy received
from a stationary external source. The "A" and "B" carbodies
consist of different equipment and must be joined together to be
operational. The separate cars do not function as self-propelled
railcars.
ISSUE:
Situation number one: Whether the subject "married pairs"
of railcars, when imported on the same ship, are classifiable
under subheading 8603.10.00, HTSUS, which provides for "[s]elf-
propelled railway . . . coaches . . . [p]owered from an external
source of electricity."
Situation number two: Whether the subject "married pairs"
of railcars, when imported on separate ships, are classifiable
under subheading 8603.10.00, HTSUS, or under subheading
8607.99.50, HTSUS, which provides for "[p]arts of railway or
tramway locomotives or rolling stock . . . [o]ther . . .
[o]ther."
Situation number three: Whether the partially assembled
railcars are classifiable under subheading 8603.10.00, HTSUS, or
under subheading 8607.99.50, HTSUS.
LAW AND ANALYSIS:
The General Rules of Interpretation (GRI's) to the HTSUS
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...
Heading 8603, HTSUS, provides for "[s]elf-propelled railway or
tramway coaches, vans and trucks, other than those of heading
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8604." Subheading 8603.10.00, HTSUS, provides for railway cars
"[p]owered from an external source of electricity." The
Harmonized Commodity Description and Coding System Explanatory
Note (EN) 86.03, pg. 1415, HTSUS, states that "[t]hese vehicles
may be designed to travel singly, or to be coupled to one or more
vehicles of the same type, or to one or more trailer vehicles."
Situation number one describes the importation of complete
"A" and "B" cars, or "married pairs," on the same ship. These
"married pairs" must be joined together to be operational. When
together, the "married pairs" are powered from a stationary
external source, and are, thus, classifiable under subheading
8603.10.00, HTSUS.
Situation number two describes the importation of complete
"A" and "B" cars when imported on separate ships. Situation
number three describes the importation of unassembled carbodies
that will be completed in the United States. 49.72 percent of
the carbodies' constituent parts will be assembled in Italy.
This assembly consists of the structural shell, windows, doors,
underframe, interior lighting and fixtures, air diffuser ducting,
wiring and tubing for connection to the electrical and mechanical
components. The balance of 50.28 percent of the constituent
parts, to be completed in the United States, includes the
propulsion system, ATC equipment, brake equipment, couplers, air-
conditioning system, intercommunication radio system, wheel
assembly, seats, bearings, and trucks.
General Rule of Interpretation (GRI) 2(a) states that "[a]ny
reference in a heading to an article shall be taken to include a
reference to that article incomplete or unfinished, provided
that, as entered, the incomplete or unfinished article has the
essential character of the complete or finished article."
Moreover, the Explanatory Notes to Section XVII, Chapter 86, pg.
1414, state that "[i]ncomplete or unfinished vehicles are
classified with the corresponding complete or finished vehicles,
provided they have the essential character thereof." For an item
to have the essential character of the finished product, it must
be recognizable as such a product. In determining an article's
essential character, one must look to the merchandise in
question--as it changes, so too may the factors which determine
its essential character. Factors found to be relevant in other
contexts include the significance of the imported components or
their role in relation to the use or overall functioning of the
complete article and, to the extent that it validates the
comparison, the cost or value of the complete article versus the
cost or value of the imported components. See HQ 084845, dated
November 24, 1989; HQ 086555, dated April 16, 1990.
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A complete railway or tramway passenger coach is a wheeled
rail vehicle designed to carry passengers for travel. As
designed, a complete coach would ordinarily consist of a
structural shell outfitted with seats and other customary
furnishings relative to passenger comfort and convenience, an
underframe and trucks to support the shell, wheels, axles,
brakes, electric subassemblies, and the mode of propulsion.
In situation number two, the "A" and "B" cars are
recognizable as a complete railway passenger car. The "married
pairs" each contain all of the above components, and must only be
joined together to complete the finished product. Thus, the cars
have the essential character of "[s]elf-propelled railway . . .
coaches . . . [p]owered from an external source of electricity,"
and are classifiable under subheading 8603.10.00, HTSUS.
In situation number three, noting the list of components,
the incomplete or unfinished railcar also has the essential
character of a "[s]elf-propelled railway . . . coach[] . . .
[p]owered from an external source of electricity," which is
classifiable under subheading 8603.10.00, HTSUS. The term
"unfinished" was defined in American Import Co. v. United States,
26 CCPA 72, 74, T.D. 49612 (1938), wherein the court stated:
It has long been the generally accepted rule
that a thing may be classified for tariff duty
purposes under the eo nomine provision for the
article unfinished if that thing has been so far
processed towards its ultimate completed form as
to be dedicated to the making of that article or
class of articles alone.
In the instant case, the absence of the parts added in the United
States does not detract from the railcar's identity as a self-
propelled railway passenger car. The unassembled carbodies are
clearly dedicated to the making of the complete article. They
possess the aggregate of distinctive component parts which
identify the components in general as a wheeled rail vehicle.
Thus, the railcars described in situation number three are also
classifiable under subheading 8603.10.00, HTSUS.
The importer contends that the railcars described in
situation number three are classifiable under subheading
8607.99.50, HTSUS, which provides for "[p]arts of railway or
tramway locomotives or rolling stock . . . [o]ther . . .
[o]ther." However, according to GRI 2(a) and the Explanatory
Notes to Section XVII, Chapter 86, pg. 1414, an article cannot be
classified as a part of an item if it has the "essential
character" of a finished product described in another heading.
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HOLDING:
The railcars, described in situations one, two, and three,
are classifiable under subheading 8603.10.00, HTSUS, which
provides for "[s]elf-propelled railway . . . coaches . . .
[p]owered from an external source of electricity." The
applicable rate of duty for these articles is 6.3% ad valorem.
Sincerely,
John Durant, Director
Commercial Rulings Division