CLA-2 CO:R:C:M 951873 KCC
District Director
U.S. Customs Service
Patrick V. McNamara Building
477 Michigan Avenue
Detroit, Michigan 48266
RE: Protest No. 3801-92-100517; 19 CFR Part 177; skids;
powertrains; GRI 2(a); 8427.20.00; unfinished forklift
truck; EN VII to GRI 3(b); essential character; HRL 086555;
HRL 088524; 8431.20.00; part of forklift truck; Note 2 to
Section XVI; EN 84.08; engine
Dear Sir:
This is in response to the Application for Further Review of
Protest No. 3801-92-100517 dated February 13, 1992, which
pertains to the tariff classification of skids for fork-lift
trucks under the Harmonized Tariff Schedule of the United States
(HTSUS). Arguments made in a meeting on September 18, 1992, and
additional submissions dated June 30, and November 17, 1992, were
also taken into consideration in rendering this decision.
FACTS:
The articles under consideration are four identical "skids."
After importation into the U.S., the protestant, Ford New
Holland, stated that the skids were incorporated into forklift
trucks. The skids are comprised of 6 component groups, an
engine, transmission, drive and steer axles, hydraulics,
steering, and miscellaneous. The cost of each skid is
approximately 59.6% of the cost of the completed forklift truck.
A description of the materials contained within each component
group and the cost percentage of each group which is compared to
the cost of the imported skid are as follows:
1) a diesel engine which consists of the following
additional components:
- alternator
- radiator and fan
- battery
- starter motor, switch and cables
- flywheel and housing
- fuel tank
- thermostat
- vertical muffler
- front harness
- cold start
- 26.081% of the cost of the skid,
2) a 4x4 transmission consisting of:
- electric transmission shift control
- torque converter shift lever
- transmission attaching hardware
- transmission control valve lever and shift
- transmission assembly less PTO
- 12.546% of the cost of the skid,
3) drive and steer axles consisting of:
- rear wheel nuts
- differential lock linkage
- PTO cover, gaskets, plate and hardware
- rear axle oil level indicator
- axle RR INDS
- differential
- brakes
- front wheel nuts
- front axle center drive
- drive shaft coupling and hardware
- transfer case - FRT CTR DRV
- 49.668% of the cost of the skid,
4) hydraulics consisting of:
-hydraulic rear axle
- hydraulic final line
- hydraulic oil cooler
- 2.603% of the cost of the skid,
5) power steering tubing, pump, clamps and reserve (less
steering column)
- 1.657% of the cost of the skid, and
6) miscellaneous sheet metal and decals
- 7.444% of the cost of the skid.
Upon importation, the entry was liquidated under subheading
8408.90.90, HTSUS, which provides for "Compression-ignition
internal combustion piston engines (diesel or semi-diesel
engines)...Other engines...Other."
The protestant contends that the skids are properly
classified under subheading 8427.20.00, HTSUS, which provides for
"Fork-lift trucks; other works trucks fitted with lifting or
handling equipment...Other self-propelled trucks", or
alternatively, under subheading 8431.20.00, HTSUS, which provides
for "Parts suitable for use solely or principally with the
machinery of headings 8425 to 8430...Of machinery of heading
8427."
In addition to the proper tariff classification of the skids
in this protest, the protestant has requested guidance from
Customs Headquarters concerning the classification of skids in
general. The protestant states that its skids always consist of
an engine, a transmission and a drive axle. However, the skids
may enter the U.S. with various other add-on features depending
upon each customer's order.
An Application for Further Review of a Protest is designed
to address questions arising in connection with an entry of
merchandise which has been liquidated, or in connection with any
other completed Customs transaction and it is not the proper
format to address general classification issues.
Moreover, for prospective transactions Customs will consider
written requests for rulings and information with respect to
specifically described transactions. Section 177.1, Customs
Regulations (19 CFR 177.1). Specifically, "the Customs
transaction to which the ruling request relates must be described
in sufficient detail to permit the proper application of relevant
Customs and related laws." 19 CFR 177.2(b)(2). Customs cannot
address the tariff classification of skids generally where there
are many possible variations of the composition of a skid
depending on which of the options are chosen.
ISSUE:
Are the skids properly classified under subheading
8408.90.90, HTSUS, as engines, under subheading 8427.20.00,
HTSUS, as fork-lift trucks, or under subheading 8431.20.00,
HTSUS, as parts for fork-lift trucks?
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...."
The protestant contends that pursuant to GRI 2(a), HTSUS,
the skids are unfinished forklift trucks classifiable under
subheading 8427.20.00, HTSUS. GRI 2(a), HTSUS, states that:
Any reference in a heading to an article shall be taken to
include a reference to that article incomplete or
unfinished, provided that, as presented, the incomplete or
unfinished article has the essential character of the
complete or finished article...
According to GRI 2(a), HTSUS, if an incomplete article has
the essential character of the complete or finished article of a
heading, it is classified as the complete or finished article.
In general, essential character has been construed to mean the
attribute which strongly marks or serves to distinguish what an
article is; that which is indispensable to the structure, core or
condition of the article. In addition, Explanatory Note (EN)
VIII to GRI 3(b) of the Harmonized Commodity Description and
Coding System (HCDCS) provides further factors which determine
the essential character of goods. Factors such as bulk,
quantity, weight or value, or the role of a constituent material
in relation to the use of the goods are to be utilized, though
the importance of certain factors will vary between different
kinds of goods. HCDCS, Vol. 1, p. 4. The Explanatory Notes,
although not dispositive, are to be examined for the proper
interpretation of the HTSUS. 54 Fed. Reg. 35127, 35128 (Aug. 23,
1989).
For machinery, the nature of the item is generally
determinative. In the instant case, it is reasonable to say that
in order to have the essential character of a forklift truck, the
skid must be advanced to the point that it is recognizable as a
forklift truck, i.e., having the essential features of a forklift
truck.
Customs has examined the essential character of similar
vehicles, i.e., excavators. In Headquarters Ruling Letter (HRL)
086555 dated April 16, 1992, we held that excavators which were
missing the link-bucket, arm, boom, counterweight and cab
assembly were classified pursuant to GRI 2(a), HTSUS, as
unfinished excavators in heading 8429, HTSUS. It was determined
that the propelling base of the excavator imparted the essential
character of the excavator. HRL 086555 found that the propelling
base was substantial enough so that it had the essential
character of a unfinished excavator within the meaning of GRI
2(a), HTSUS.
However, in HRL 088524 dated August 27, 1991, we held that
excavators missing the link-buckets, arms, booms, arm and boom
cylinders, lower frames and upper frames did not have the
essential character of an excavator. The components missing from
the merchandise in HRL 088524 had a substantially greater value
and more integral function than the components missing from the
merchandise in HRL 086555. Without the missing components, the
merchandise in HRL 088524 did not even consist of a base which
can be self-propelled. The components were classified as parts
of the machinery of heading 8429, HTSUS, under heading 8431,
HTSUS.
In this case, we have an engine, a transmission, a drive and
steer axle with wheels and brakes, approximately 50% of the
electrical system, a lubrication system, a steering system
without the steering wheel, hydraulics and some miscellaneous
sheet metal. The protestant states that the engine can be used
in a variety of vehicles, whereas the transmission and drive axle
are specially designed for the end use of the skid as a forklift
truck. Specifically, the axle is heavy duty and designed to bear
a vertical load. The transmission has a shuttling capability; it
is designed to move the vehicle quickly from forward to reverse
without clutching and numerous gear changes. The protestant
contends that the design features of the transmission and drive
axle make the skids particularly suited for forklifts. Customs
personnel are of the opinion that the skids are powertrains which
can be used for various applications other than as forklift
trucks. The foreign manufacturer uses the same unmodified
powertrains to make their "tractor-loader-backhoe" product line.
Moreover, Customs has determined that the skids represent only
one third of the finished forklift truck's total weight and
approximately 59.6% of its total cost.
Based on the information gathered by Customs and provided by
the protestant, we are of the opinion that the skids are
powertrains which can be used in various vehicles that require
the ability to handle vertical weight loads and move back and
forth comparatively easily without major shifting of gears. This
type of powertrain can be used in any type of construction or
moving vehicle, such as tractor, loader, backhoe, excavator or
forklift truck. Additionally, approximately two-thirds of the
weight and 41% of the material cost are attributable to the
components which will be added in the U.S. We cannot conclude
that the powertrains at issue have the essential character of a
forklift truck. Therefore, the skids are not classified as
unfinished forklift trucks under subheading 8427.20.00, HTSUS.
As classification under subheading 8427.20.00, HTSUS, is
inapplicable, the protestant alternatively contends that the
skids are classifiable under subheading 8431.20.00, HTSUS, as
parts suitable for use solely or principally with the machinery
of heading 8427, HTSUS (forklift trucks). Chapter 84, HTSUS,
falls within Section XVI, making the Section XVI notes applicable
to the tariff classification of the skids.
Note 2 to Section XVI states that "Subject to note 1 to this
section, note 1 to chapter 84 and to note 1 to chapter 85, parts
of machines (not being parts of the articles of heading 8484,
8544, 8545, 8546 or 8547) are to be classified according to the
following rules:
(a) Parts which are goods included in any of the headings
of chapters 84 and 85 (other than heading 8485 and
8548) are in all cases to be classified in their
respective headings;
(b) Other parts, if suitable for use solely or principally
with a particular kind of machine, or with a number of
machines of the same heading (including a machine of
heading 8479 or 8543) are to be classified with the
machines of that kind. However, parts which are
equally suitable for use principally with the goods of
headings 8517 and 8525 to 8528 are to be classified in
heading 8517;
(c) All other parts are to be classified in heading 8485 or
8548.
According to Note 2(a) to Section XVI, articles which are
specifically provided for by name in the headings of chapters 84
and 85 are to classified therein. Therefore, the first
determination to be made is whether the skids are classifiable
under subheading 8408.90.90, HTSUS, as engines. EN 84.08 states
that:
The engines of this heading may be equipped with fuel
injection pumps, ignition parts, fuel or oil reservoirs,
water radiators, oil coolers, water or oil pumps, blowers,
air or oil filters, clutches or power drives, or starting
devices (electric or other). Change speed gears may also be
fitted. The engines may also be equipped with a flexible
shaft.
It also covers mobile motors consisting of engines
mounted on a wheeled chassis or on runners, including those
with driving mechanisms permitting their self-propulsion to
a certain extent (but not constituting vehicles of Chapter
87).
HCDCS, Vol. 3, p. 1151.
The protestant states that EN 84.08 lists common accessories
to engines, but not the sophisticated systems that comprise the
imported skids. The protestant maintains that EN 84.08 does not
list the miscellaneous items, braking, steering, hydraulics,
transmission and the drive and steer axles found on the skids as
components which are classified with an engine. The protestant
contends that the skids are much more than an engine with
associated accessories as contemplated by heading 8408, HTSUS.
However, although the skids are not mobile motors as described in
EN 84.08, we consider them to be sufficiently akin so that EN
84.08 may be used as guidance in the classification of the skids.
HOLDING:
The skids are properly classified under subheading
8408.90.90, HTSUS, which provides for "Compression-ignition
internal combustion piston engines (diesel or semi-diesel
engines)...Other engines...Other."
This protest should be denied. 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