CLA-2 CO:R:C:M 953859 RFA
District Director of Customs
1 East Bay Street
Savannah, GA 31401
RE: Protest No. 1704-93-100061; 8436.10.00; agricultural or
horticultural purposes; dehydrator; actual use; Headings
8419 and 8436; EN 84.36; HQs 083930, 086883, 087076, 089936,
066323; 19 CFR 10.131 through 10.139; Appraised Value
Dear District Director:
The following is our decision regarding the request for
further review of Protest No. 1704-93-100061, which concerns the
classification and appraised value of a dehydrator under the
Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The subject merchandise is a Ziwex dehydrator, model 2000
DH, which converts waste by-products from the fish, meat,
poultry, and pork industries into by-products for the feed and
fertilizer industries. The raw material is entered into a
agitator through which air is blown at a temperature of 700
degrees Celsius. Water is evaporated and as a result of the
sudden dehydration, the raw material is broken down into small
particles which are dried and screened.
The merchandise was entered on January 31, 1992, under
subheading 8436.10.00, HTSUS, as other agricultural machinery.
The entry was liquidated on October 30, 1992, under subheading
8419.89.50, HTSUS, as machinery, whether or not electrically
heated, for the treatment of materials by a process involving a
change of temperature. The protest was timely filed on January
28, 1993.
Classification of the merchandise under heading 9817.00.50,
HTSUS, as machinery to be used for agricultural purposes, is also
under consideration.
The subheadings under consideration are as follows:
8419.89.50: Machinery, . . .whether or not electrically
heated, for the treatment of materials by a
process involving a change in temperature
such as heating, . . ., drying, evaporating,
vaporizing . . .: [o]ther machinery, plant or
equipment: [o]ther: [o]ther. . . .
Goods classifiable under this provision have a general,
column one rate of duty of 4.2 percent ad valorem.
8436.10.00 Other agricultural, horticultural. . .
machinery . . .: [m]achinery for preparing
animal feeds
Goods classifiable under this provision have a general,
column one free rate of duty.
9817.00.50 Machinery, equipment and implements to be
used for agricultural or horticultural
purposes. . . .
Goods classifiable under this provision have a general,
column one free rate of duty.
At the time of entry, the imported merchandise was appraised
on the basis of the invoice price of $375,000. The protestant
seeks to have the dehydrator appraised based on a second invoice
price of $120,000. The import specialist [IS] is of the opinion
that the protestant has failed to show that the invoice price of
the dehydrator was not $375,000. According to the IS, in a phone
conversation with the protestant, the IS was told that the
$120,000 is the cost of manufacture of the dehydrator, and that
the correct CIF price is $375,000. No payment has been made by
the protestant to the shipper.
The National Import Specialist [NIS] report concludes that
transaction value is not an appropriate basis of appraisement as
the dehydrator was consigned rather than sold for exportation to
the United States. The NIS report found that appraisement on the
basis of identical or similar merchandise, deductive or computed
value was not appropriate because no information on identical or
similar merchandise had been provided, no merchandise had been
sold in the U.S., and no information on the computed value of the
machine had been submitted. In the event that the merchandise is
appraised pursuant to TAA 402(f), the NIS report recommends
appraisement on the basis of the lower, $120,000, invoice price.
The NIS has determined that the cost of purchasing a 5,000,000
BTU burner for installation in the dehydrator by the protestant
is approximately $75,000 and therefore, taking into consideration
the other expenses involved in the resale of the dehydrator, the
lower invoice price does not seem unreasonably low.
ISSUE:
I. Does the dehydrator qualify for duty-free entry as
agricultural or horticultural implements under the HTSUS?
II. Whether the imported merchandise was appraised appropriately
under the circumstances presented?
LAW AND ANALYSIS:
CLASSIFICATION
Classification of merchandise under the HTSUS is in
accordance with the General Rules of Interpretation (GRI's),
taken in order. GRI 1 provides that classification shall be
determined according to the terms of the headings and any
relative section or chapter notes.
Heading 9817.00.50, HTSUS, grants duty free treatment for
"[m]achinery, equipment and implements to be used for
agricultural or horticultural purposes. . . ." This is an actual
use provision. See HQ 083930 (May 19, 1989). To fall within
this special classification, a three part test must be met.
First, the subject merchandise must not be excluded from the
heading under Section XXII, Chapter 98, Subchapter XVII, U.S.
Note 2, HTSUS. Secondly, the terms of the headings must be met
in accordance with GRI 1, which provides that classification is
determined according to the terms of the headings and any
relative section or chapter notes. Thirdly, the article must
comply with the actual use provisions required under section
10.131 through, and including, 10.139, Customs Regulations (19
CFR 10.131 through 10.139). See HQ 086883 (May 1, 1990); HQ
087076 (June 14, 1990); HQ 089936 (November 15, 1991).
The first part of the test is to determine whether the
dehydrator is excluded from heading 9817.00.50, HTSUS. To do
this, we must first determine under which subheading it is
classified. The importer states that the dehydrator is provided
for under heading 8436, HTSUS, as other agricultural machinery.
The Harmonized Commodity Description and Coding System
Explanatory Notes (EN) constitute the Customs Cooperation
Council's official interpretation of the HTSUS. While not
legally binding, the ENs provide a commentary on the scope of
each heading of the HTSUS and are generally indicative of the
proper interpretation of these headings. EN 84.36, pages 1217-
1218, states that this:
heading covers machinery, not falling in heading 84.32
to 84.35, which is of the type used on farms . . . .
However it excludes machines clearly of a kind designed
for industrial use.
* * * * *
Th[is] heading does not cover: . . . [m]achinery and
plant operating by processes involving a change of
temperature (heading 84.19). . . .
According to the information submitted, the dehydrator makes
by-products for the feed and fertilizer industries by processes
involving a change of temperature. EN 84.36 specifically
excludes machinery which operates by processes involving a change
in temperature. Based upon EN 84.36, the dehydrator is excluded
from classification under heading 8436, HTSUS.
Because the dehydrator is a machine which processes material
by involving a change of temperature, it is classifiable under
subheading 8419.89.50, HTSUS. This subheading is not excluded
from classification in Heading 9817.00.50, HTSUS, by operation of
Section XXII, Chapter 98, Subchapter XVII, U.S. Note 2.
The second part of the test calls for the dehydrator to be
included within the terms of heading 9817.00.50, HTSUS, as
required by GRI 1. The dehydrator must be "machinery",
"equipment" or "implements" used for "agricultural or
horticultural purposes". There is no question that the
dehydrator is "machinery". The next determination to be made is
what agricultural or horticultural pursuit is in question.
Under the Tariff Schedules of the United States (TSUS), the
precursor to the HTSUS, Customs held that a processor, which
converts waste into usable fuel gas and fertilizer, used in an
agricultural environment by a farmer who directly benefits, is
considered an agricultural pursuit within item 870.40, TSUS (the
precursor provision to heading 9817.00.50, HTSUS). See HQ 066323
(July 30, 1981). Congress has indicated that earlier rulings
must not be disregarded in applying the Harmonized Code. The
conference report to the Omnibus Trade Bill states that on a case
by case basis prior decisions should be considered instructive in
interpreting the HTSUS, particularly where the nomenclature
previously interpreted in those decisions remains unchanged and
no dissimilar interpretation is required by the text of the
HTSUS. H.Rep No. 100-576, 100th Cong., 2D Sess. 548 (1988) at
550.
The agricultural pursuit provision under HTSUS does not
materially differ from item 870.40, TSUS. Therefore, we find
that the dehydrator's production of usable animal feed or
fertilizer if used in an agricultural environment, that is, one
that directly benefits a farmer, is sufficiently related to the
purpose of agriculture within the provision of heading
9817.00.50, HTSUS.
The importer must also meet the third requirement of the
actual use provisions required under 19 CFR 10.131 through
10.139. Three conditions must be met to receive duty preferences
for actual use. The three conditions required by 19 CFR 10.133
are:
(a) Such use is intended at the time of importation;
(b) The article is so used; and
(c) Proof of use is furnished within 3 years
after the date the article is entered or
withdrawn from warehouse for consumption.
"A showing of intent by the importer as to the actual use of
imported merchandise shall be made by filing with the entry for
consumption or. . . by entering the proper subheading of an
actual use provision of the . . . HTSUS". 19 CFR 10.134. At the
time of entry, the subject merchandise was entered for
consumption under heading 8436, HTSUS, as other agricultural
machinery for preparing animal feed. Even though the subject
merchandise is precluded from classification under that heading,
we find that the importer had the intent of entering the
merchandise for the use of agriculture. However, the importer
has not submitted further documentation to meet the other
requirements of the Customs Regulations. If the importer
complies with all of the actual use requirements of sections
10.131 through and including 10.139, Customs Regulations, then
the dehydrator will be eligible for free entry under heading
9817.00.50, HTSUS.
APPRAISEMENT
Section 500 of the Tariff Act of 1930, as amended by the
Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1500) is the
general authority for Customs to appraise merchandise. Section
500(a) states that the appraising officer shall, under rules and
regulations prescribed by the Secretary:
appraise merchandise by ascertaining or estimating the value
thereof, under section 1401a of this title, by all
reasonable ways and means in his power, any statement of
cost or costs of production in any invoice, affidavit,
declaration, or other document to the contrary
notwithstanding....
As noted in the Statement of Administrative Action:
Section 500 authorize [sic] the appraising officer to weigh
the nature of the evidence before him in appraising the
imported merchandise. This could be the invoice, the
contract between the parties, or even the recordkeeping of
either of the parties to the contract.
In this case, the information submitted by or on the behalf
of the protestant does not provide a basis for finding that the
imported merchandise was appraised incorrectly.
HOLDING:
The submitted merchandise is classifiable under subheading
8419.89.50, HTSUS, which provides for: "[m]achinery, . . .whether
or not electrically heated, for the treatment of materials by a
process involving a change in temperature such as heating, . . .,
drying, evaporating, vaporizing . . .: [o]ther machinery, plant
or equipment: [o]ther: [o]ther. . . ." Goods classifiable under
this provision have a column one, general rate of duty of 4.2
percent ad valorem.
However, these articles may be eligible for free entry under
heading 9817.00.50, HTSUS, upon compliance with the actual use
requirements of sections 10.131 through and including 10.139,
Customs Regulations.
Because reclassification of the merchandise as indicated
above will result in the same rate of duty as claimed, you should
grant the protest in full with regard to the classification
issue.
Under the circumstances presented, the imported merchandise
was appraised appropriately under the TAA. Therefore, you should
deny the protest with regard to the value issue.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, this decision, together with the Customs Form 19,
should be mailed by your office to the protestant no later than
60 days from the date of this letter. Any reliquidation of the
entry in accordance with the decision must be accomplished prior
to mailing of the decision. Sixty days from the date of the
decision the Office of Regulations and Rulings will take steps to
make the decision available to Customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette
Subscription Service, Lexis, Freedom of Information Act and other
public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division