CLA-2 R:C:M 957790 JAS
Mr. Ned H. Marshak, Esq.
Sharretts, Paley, Carter & Blauvelt, P.C.
67 Broad Street
New York, New York 10004
RE: Unassembled Railway Cars; Railway Cars, Incomplete,
Unfinished Self-Propelled Railway or Tramway Coaches Powered
From an External Source of Electricity, Subheading
8603.10.00; Essential Character, GRI 2(a); HQ 950118
Modified
Dear Mr. Marshak:
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C.
1625(c)(1)), as amended by section 623 of Title VI (Customs
Modernization) of the North American Free Trade Agreement
Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993),
notice of the proposed modification of HQ 950118 was published in
the Customs Bulletin, Volume 29, Number 17.
In HQ 950118, dated December 10, 1991, we replied to a
ruling request of August 9, 1991, on behalf of Breda Costruzioni
Ferroviarie, on the classification of certain rapid transit
subway railcars from Italy.
The ruling held that the railcars were classifiable in
subheading 8603.10.00, Harmonized Tariff Schedule of the United
States (HTSUS), as self-propelled railway or tramway coaches,
vans and trucks, other than those of heading 8604, powered from
an external source of electricity. We have reviewed the matter
and are now of the opinion that the ruling is partially
incorrect. Accordingly, it is modified by this ruling.
FACTS:
The transit cars in this request are distinct carbodies
consisting of A and B sections, which must be joined together as
"married pairs" into an articulated self-propelled railway coach.
The separate A and B carbodies cannot independently function as a
self-propelled railcar. Each A and B carbody is essentially - 2 -
complete in and of itself, lacking only minor electrical and
propulsion components supplied by the other car to be fully
operational.
These cars were imported in three factual situations: two
fully outfitted A carbodies and two fully outfitted B carbodies
on the same vessel, requiring minor assembly operations for
completion into a functioning unit; A carbodies on one vessel and
B carbodies on another vessel; and incomplete A and incomplete B
carbodies imported unassembled on the same vessel. In this last
situation, each carbody consists of a structural shell, windows,
doors, underframe, interior lighting and fixtures, air diffuser
ducting, wiring and tubing for connection to the electrical and
mechanical components. The imported components in the third
situation constitute 49.7 percent of the cost or value of a
complete self-propelled railcar. The remaining 50.3 percent of
the cost or value of the completed car is represented by
components to be added in the United States including the
propulsion system, ATC equipment, brake equipment, couplers, air
conditioning system, intercommunication radio system, wheel
assembly, seats, bearings, and trucks.
The provisions under consideration are as follows:
8603 Self-propelled railway or tramway coaches,
vans and trucks, other than those of heading
8604:
8603.10.00 Powered from an external source of
electricity...6 percent
* * * *
8607 Parts of railway or tramway locomotives or
rolling stock:
Other:
8607.99 Other:
8607.99.50 Other...3.7 percent
ISSUE:
Whether A and B carbodies imported in each of the three fact
patterns, as described, are self-propelled railway or tramway
coaches of heading 8603; if not, whether they are parts of
heading 8607.
- 3 -
LAW AND ANALYSIS:
Merchandise is classifiable under the Harmonized Tariff
Schedule of the United States (HTSUS) in accordance with the
General Rules of Interpretation (GRIs). GRI 1 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, and provided the headings or notes do not
require otherwise, according to GRIs 2 through 6. GRI 2(a)
states, in part, that incomplete or unfinished articles are to be
classified in the same heading as the complete or finished
article, provided that, as entered, the incomplete or unfinished
article has the essential character of the complete or finished
article. It also applies to complete or finished articles
entered unassembled or disassembled.
The Harmonized Commodity Description And Coding System
Explanatory Notes (ENs) constitute the Customs Cooperation
Council's official interpretation of the Harmonized system.
While not legally binding on the contracting parties, and
therefore not dispositive, the ENs provide a commentary on the
scope of each heading of the Harmonized System and are thus
useful in ascertaining the classification of merchandise under
the System. Customs believes the notes should always be
consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23,
1989).
In the first factual situation, A and B carbodies imported
on the same vessel are unassembled or disassembled articles under
GRI 2(a). They will continue to be classifiable in subheading
8603.10.00, HTSUS, as self-propelled railway or tramway coaches
powered from an external source of electricity.
In the second factual situation, each A and B carbody,
though imported separately, is nevertheless recognizable as a
complete railway coach consisting of a fully outfitted passenger
compartment, underframe and truck. Each carbody lacks only minor
electrical and propulsion components supplied by the other car to
make the articulated car operational. We note that the General
Explanatory Notes (EN) to Chapter 86, at p. 1414, list motorized
railway or tramway coaches not fitted with a power unit as
examples of incomplete or unfinished vehicles. For these
reasons, we remain of the opinion that each A and B carbody has
the essential character of a self-propelled railway coach because
each car has the aggregate of distinctive component parts that
establishes its identity as a railway coach.
In the third factual situation, HQ 950118 concluded that the
incomplete A and B carbodies, as described, imported unassembled
on the same vessel, had the essential character of complete or
finished railway coaches. We have reconsidered this position and - 4 -
are now of the opinion that undue reliance may have been placed
on legal principles developed under the HTSUS predecessor tariff
code, the Tariff Schedules of the United States. While we
recognize that on a case-by-case basis administrative and
judicial decisions under a prior nomenclature can be instructive
in interpreting provisions of the HTSUS this is not the case
here. We also believe that the characterization of a railway
passenger coach first and foremost as a vehicle capable of a
transport function must be more fully considered. In this latter
regard, the previously cited EN to Chapter 86 states that
incomplete or unfinished vehicles are classified with the
corresponding complete or finished vehicles, provided they have
the essential character thereof. The note then lists examples of
vehicles that would be considered incomplete or unfinished for
tariff purposes. However, the EN then continues by stating that
bodies of motorized railway or tramway coaches, of vans, wagons
or trucks, or of tenders, not mounted on underframes, are
classified as parts of railway or tramway locomotives or rolling
stock (heading 86.07). For these reasons, it is now our position
that the incomplete or unfinished A and B carbodies, as
described, do not have the essential character of complete or
finished self-propelled railway passenger coaches.
HOLDING:
Under GRI 2(a), the A and B carbodies in the first factual
situation are unassembled articles provided for in heading 8603.
They are classifiable in subheading 8603.10.00, HTSUS. Under GRI
2(a), each A and B carbody in the second factual situation has
the essential character of a railway or tramway coach of heading
8603. Each A and B carbody is classifiable in subheading
8603.10.00, HTSUS. The incomplete A and B carbodies in the third
factual situation lack the essential character of a self-
propelled railway coach of heading 8603. Under GRI 1, they are
provided for in heading 8607. These carbodies are classifiable
in subheading 8607.99.50, HTSUS.
EFFECT ON OTHER RULINGS:
HQ 950118, dated December 10, 1991, is modified consistent
with this decision. In accordance with 19 U.S.C. 1625(c)(1),
this ruling will become effective 60 days after its publication
in the Customs Bulletin. Publication of rulings or decisions
pursuant to 19 U.S.C. 1625(c)(1) does not constitute a change of
practice or position in accordance with section 177.10(c)(1),
Customs Regulations (19 U.S.C. 177.10(c)(1)).
Sincerely,
John Durant, Director
Commercial Rulings Division