CLA-2 RR:CR:GC 966480 DSS
Port Director
U.S. Customs and Border Protection
2350 North Sam Houston Parkway, East
Suite 1000
Houston, TX 77032-3126
RE: Internal Advice request; components of spar platform
Dear Port Director:
This is in response to your memorandum dated May 12, 2003, addressed to the Office of Regulations and Rulings regarding an Internal Advice request. This is in reference to a letter in which Givens & Johnston on behalf of ABB Vetco Gray, Inc. (importer), requests internal advice on the classification of certain oil well drilling equipment under the Harmonized Tariff Schedule of the United States (HTSUS). The Chief, Metals and Machinery Branch, National Commodity Specialist Division (NCSD), forwarded your memorandum to our office with an accompanying NCSD memorandum dated July 23, 2003. The importer also made a factual and legal presentation during a teleconference with members of my staff on December 11, 2003, which was considered when rendering our decision.
FACTS:
The articles at issue are described as certain components of a Production Riser Tensioner system (“PRT”) and a Production Riser System (“PRS”).
The components are associated with deep water offshore oil drilling platforms known as “spars.” The importer states that the components are used to encase, stabilize and maintain required tension of the fluid transmission or drilling casing extending from just below the top of the subsea wellhead at the floor of the ocean to the floating platform during production and/or drilling operations. Spars are floating platforms built upon a vessel with a circular cross-section that sits vertically in the water and is supported by buoyancy chambers at the top and stabilized by a structure hanging from the buoyancy chambers. The PRS is the actual portion of the system hooked to the wellhead that pumps oil and, as such, is a part of the drilling portion of the system. The PRT is a stabilizer and stabilizes the spar.
Each PRT consists of a “shock absorber” at the top of the spar vessel and encases the top part of its PRS. There may be a dozen or more PRTs installed in a spar platform. The PRT maintains a relatively constant vertical load on the PRS, while allowing relative vertical motion as the spar platform moves up and down with the ocean. The PRS is comprised of high strength “joints” constructed to enable maximum horizontal movement from the seabed to the spar platform. The PRS is connected to the PRT at the top of the spar platform and extends down to the subsea wellhead on the bottom of the ocean. In operation, the PRT both exerts upward pressure (tension) on the PRS and moderates downward movement or weight upon the PRS.
The imported components of the PRT and PRS are primarily of forged steel conforming to designated proprietary chemical and physical specifications. Each part has been forged to specified general dimensions, and will be machined to final dimensions in either the United States, abroad, or both. Some of these parts, but not all, have been imported already, mainly through the Port of Houston.
The PRT: the PRT is the upper portion of the two-part system and is analogous to a large shock absorber. Wave action continuously moves the deepwater platform up and down and side to side on its moorings, which are affixed to the ocean floor, which could be thousands of feet below the spar platform.
PRT components:
The conductor flange is a forged nonalloy steel flange attached to the top of the conductor, a large heavy cylinder or tubular component. The flange joins the tension ring and the top plate. It appears that the flanges may be imported in either an unmachined or machined condition.
The conductor is described by the importer as a “large very heavy-weight protective barrel.” Dimensions of the barrel vary, but typical dimensions may be five feet in inside diameter and from 1 inch to 3 inches in wall thickness. The primary function of the conductor is to act as a protective sleeve for the tension joint of the PRS.
The PRT top frame is described as a large weldment constructed of multiple steel plates, between 8 to 14 inches square and approximately 3 inches thick. The article is cut, rolled, and welded together to form the protective top of the PRT. At each of the PRT top frame’s four corners is a cylindrical upper housing for each of the rods (i.e., the upper portion of each “shock absorber”). At the center is a larger cylindrical upper housing for the conductor. The bottom of the PRT top frame is welded on to the cylindrical upper housings into which are fitted the four rods. The importer states it is specifically made for offshore oil and natural gas drilling.
The rod is the “piston” portion of the “shock absorber.” It is hollow and is closed at one end. The condition as entered is forged and/or rough machined; finishing is done after importation. The rod is approximately 25 feet five inches in length, 19.7 inches in diameter, and the walls of the cylinder are one inch thick.
The cylinder barrel is the bottom part of the “shock absorber” portion of the PRT and seems to be imported with the rod. The condition of the barrel as entered is forged and/or rough machined; the finishing is done after importation. The diameter of the barrel is approximately 26 inches (outer diameter). The cylinder barrels are forged over a mandrel (i.e., “open die forged”) and are then machined to specification. There are four cylinder barrels per PRT, each encasing the “unstroked” portion of its inner rod. The cylinder barrel internal elements are assembled or welded in position after importation.
The tension joint is a forged pipe. The pipe is machined and finished after importation. The forged and machined tension joint runs through the center of the conductor at the top of the PRT and is connected to the PRT top frame with the tension ring. The tension joint is tapered at one end and both ends are upset and machined, with the top part of the tension joint having specially machined threads that mate to grooves on the tension ring. The tension joint is approximately 28 feet long, and has a wall thickness ranging from about 1.3 to 7 inches.
The PRS:
The PRS protects the enclosed piping used to transport fluids from the subsea wellhead to the spar platform. The PRS is comprised primarily of “riser joints” which regulate the amount of horizontal movement of the conducting piping within. The importer claims that most of the components of this system will be imported by other parties. The PRS is composed primarily of “riser joints” which regulate the amount of horizontal movement of the conducting piping within. The PRS consists of the following components made specifically for the PRS, which protects the enclosed piping used to transport fluids from the subsea wellhead to the SPAR platform: keel joint, upper keel joint, ball, lower keel joint, stress joint, wellhead tieback and inner barrel.
ISSUE:
How to classify the instant spar platform components, i.e., whether they are made up into specific, identifiable articles.
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied.
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While not legally binding, the ENs provide a commentary on the scope of each heading of the HTSUS and are thus useful in ascertaining the classification of merchandise under the System. The Bureau of Customs and Border Protection (Customs) believes the ENs should always be consulted. See T.D. 89-90, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The HTSUS provisions under consideration are as follows:
Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel:
Other, of circular cross-section of iron or nonalloy steel:
7304.39.00 Other
* * * *
Other tubes and pipes (for example, welded, riveted or similarly closed), having circular cross sections, the external diameter of which exceeds 406.4 mm, of iron or steel:
Other, welded:
Longitudinally welded:
Other:
Of iron or nonalloy steel
* * * *
7307 Tube or pipe fittings (for example, couplings, elbows, sleeves), of iron or steel:
Other:
Flanges:
Not machined, not tooled and not otherwise processed after forging:
Of iron or nonalloy steel
Other
* * * *
Parts suitable for use solely or principally with the machinery of headings 8425 to 8430:
Of machinery of heading 8426, 8429 or 8430:
Parts for boring or sinking machinery of subheading 8430.41 or 8430.49:
8431.43.40 Of offshore oil and natural gas drilling and productions platforms
Chapter 73 provides for articles of iron and steel. Tubes and pipes are classified under headings 7304 or 7305, HTSUS, depending upon method of manufacture and manner of use for classification. Fittings of iron and steel fall under heading 7307, HTSUS. The General ENs to Chapter 73 provide, in pertinent part, as follows:
This Chapter covers a certain number of specific articles in headings 7301 to 7324, and in headings 7325 and 7326 a group of articles not specified or included in Chapter 82 or 83 and not falling in other Chapters of the Nomenclature, of iron (including cast iron as defined in Note 1 to this Chapter) or steel. For the purposes of this Chapter, the expressions "tubes and pipes" and "hollow profiles" have the following meanings hereby assigned to them:
Tubes and pipes
Concentric hollow products, of uniform cross-section with only one enclosed void along their whole length, having their inner and outer surfaces of the same form. Steel tubes are mainly of circular, oval, rectangular (including square) cross-sections but in addition may include equilateral triangular and other regular convex polygonal cross-sections. Products of cross-section other than circular, with rounded corners along their whole length, and tubes with upset ends, are also to be considered as tubes. They may be polished, coated, bent (including coiled tubing), threaded and coupled or not, drilled, waisted, expanded, cone shaped or fitted with flanges, collars or rings.
Based upon the information provided, certain PRT components are classified as nonalloy steel tubes and pipes for tariff purposes and will be classified under headings 7304 or 7305, HTSUS, which provides for such articles. The subheading determination will be made in consideration of the size and the manner of use of the articles. Steel flanges are a type of fitting and fall under heading 7307, HTSUS.
The ENs to headings 7304, 7305 and 7307 HTSUS, contain similar language providing that “identifiable parts of articles” are excluded from those headings, such that machinery parts are provided for in Section XVI.
An article is to be classified according to its condition as imported. See XTC Products, Inc. v. United States, 771 F. Supp. 401, 405 (1991). See also United States v. Citroen, 223 U.S. 407 (1911). In their condition as imported some of the components can be construed as “identifiable parts of articles” classifiable under a heading outside of Chapter 73, while others are classified in Chapter 73, as explained below.
Goods of Chapter 73:
Conductor flange: The importer claims that the conductor flange, whether it is machined or not, is classified under subheading 7307.91.10, HTSUS, as a steel flange. The conductor flange is a forged nonalloy steel flange attached to the flange attached to the top of the conductor, a large heavy cylinder or tubular component. The flange joins the tension ring and the top plate. It appears that the flanges may be imported in either an unmachined or machined condition. The conductor flange falls under heading 7307, HTSUS, as a tube or pipe fitting of steel. If it is imported unmachined, as a rough forging not processed in any manner after forging, then it is classified under subheading 7307.91.10, HTSUS; if it is imported machined or processed after forging, then it is classified under subheading 7307.91.50, HTSUS.
Conductor: It is the importer’s position that because the conductors are made to specifications specific to each spar platform and are machined with welds and ribs to guide the conductor to fit with the other components that it is a specific, identifiable part of heading 8431, HTSUS. However, the conductor also meets the specification for American Petroleum Institute (API) standard 5L and certain ribs are added to strengthen the pipe. The modifications made to the conductor are consistent with those listed in the notes for tubes and pipe in the general notes to Chapter 73. Thus, based on the information provided, the conductor is a steel pipe that falls under heading 7305, HTSUS. Because it is longitudinally welded, it is classified under subheading 7305.31.40, HTSUS, which provides for “other tubes and pipes.” If it is imported with the conductor flange attached, it remains under this subheading.
Tension joint: This article essentially is a pipe that is forged and then machined and finished after importation. It has the characteristics of a pipe, as it is tapered at one end and both ends are upset and machined, with the top part of the tension joint having specially machined threads that mate to grooves on the tension ring. The importer states that it is forged and then the barrel taper is machined to specification. However, threading and machining to specification alone are not enough to make this article into a specific, identifiable part. As it is imported seamless, then it is classified under subheading 7304.39.00, HTSUS, which provides for seamless steel tubes, pipes and hollow profiles.
This conclusion comports with prior Customs decisions. In HQ 966408, dated July 22, 2003 and HQ 082905, dated October 21, 1988, various pipes similar to those at issue were classified in headings 7305, with classification depending on method of manufacture, size and constituent material.
Goods of heading 8431:
Relevant ENs exclude from the relevant headings of chapter 73, tubes, pipes and hollow profiles made up into specific identifiable articles, including other machinery parts of Section XVI. Section XVI, Note 2(b), HTSUS, states that parts other than goods included in a heading of chapters 84 or 85 by virtue of Section XVI, Note 2(a), are to be classified with the machine or machines of the same heading with which they are suitable for sole or principal use, or in one of many other headings, including heading 8431, as appropriate. The EN for heading 8431, also excludes casing, tubing and drill pipes, such as the articles classified above.
PRT top frame: The PRT top frame is described as a large weldment constructed of multiple steel plates, which is cut, rolled, and welded together to form the protective top of the PRT. Based on the information presented the PRT top frame is designed solely and principally for the PRT and is essential for its operation. It is classified under subheading 8431.43.40, HTSUS, as parts of offshore oil drilling machinery.
The rod is the “piston” portion of the “shock absorber.” It is hollow and is closed at one end. Because it is closed at one end, the rod cannot be defined as a pipe or tube. The cylinder barrel is the bottom part of the “shock absorber” portion of the PRT. Based on the information provided, it seems to be imported with the rod. The condition of both articles as entered is forged and/or rough machined; the finishing is done after importation. The instant cylinder barrels are forged over a mandrel (i.e., “open die forged”) and are then machined to specification. There are four cylinder barrels per PRT, each encasing the “unstroked” portion of its inner rod. The cylinder barrel internal elements are assembled or welded in position after importation. Since both the rod and cylinder barrel are machined to specifications specific to each spar, and are essential to its operation, these articles also are classified under subheading 8431.43.40, HTSUS.
Production Riser System (PRS) Components: As stated above, these components
are made of forged steel and are components of the PRS, which is hooked to the wellhead that pumps the oil as parts of the drilling portion of the system. The PRS protects the enclosed piping used to transport fluids from the subsea wellhead to the spar platform. These components include the keel joint, upper keel joint, ball, lower keel joint, stress joint, wellhead tieback, and inner barrel. In their imported condition, these components are machined and/or processed to the point where they can only be used in this specific application, i.e., to form part of the PRS for the spar. As such, they are classified under subheading 8431.43.40, HTSUS.
Moreover, in HQ 966134, dated March 26, 2003, Customs determined that other tubes and similar material were made up into specific identifiable articles such that they were found to be parts of heading 8431, HTSUS, similar to the PRS and other components above.
Section 201 Duties:
To facilitate positive adjustment to competition from imports of certain steel products (so-called Section 201 steel safeguard duties), Presidential Proclamation 7529 authorized the assessment of certain additional duties under subheadings 9903.73.84 and 9903.73.85 on certain tubes and pipes of steel, included in subheading 7305.31.40 entered or withdrawn from warehouse after March 20, 2002, the effective date of the proclamation, through March 20, 2005 (exact application of the duty depends on the date of entry or withdrawal). Flanges classified under subheading 7307.91.50 were originally also subject to the duties under subheadings 9903.73.93 and 9903.73.94, HTSUS, entered or withdrawn from warehouse after March 20, 2002, the effective date of the proclamation, through March 20, 2005 (again, exact application of the duty depends on the date of entry of withdrawal). However, Presidential Proclamation 7741 terminated the assessment of these duties with respect to goods entered or withdrawn from warehouse for consumption, on or after 12:01 a.m., EST, December 5, 2003. See 68 Fed. Reg. 68483 (December 8, 2003). Entry of these articles after March 20, 2002, and prior to December 5, 2003, however, would subject the articles to Section 201 steel duties. The conductor is subject to these duties and the conductor flange may be subject to these duties depending on its condition as imported.
HOLDINGS:
Under the authority of GRI 1 (and Section XVI, Note 2(b) for the articles of Chapter 84), the components are classified as follows:
The conductor flange is provided for in heading 7307, HTSUS. If unmachined, it is classified in subheading 7307.91.10, HTSUS, which provides for, “Tube or pipe fittings (for example, couplings, elbows, sleeves), of iron or steel: Other: Flanges: Not machined, not tolled and not otherwise processed after forging: Of iron or nonalloy steel.” If machined, it is classified under subheading 7307.91.50, HTSUS, which provides for “Tube or pipe fittings (for example, couplings, elbows, sleeves), of iron or steel: Other: Flanges: Other.”
The conductor is provided for in heading 7305, HTSUS. Whether or not it is imported with the conductor flange attached, it is classified under subheading 7305.31.40, HTSUS, which provides for “Other tubes and pipes (for example, welded, riveted or similarly closed), having circular cross sections, the external diameter of which extends 406.4 mm, of iron or steel: Other, welded: Longitudinally welded: Other: Of iron or nonalloy steel.”
The tension joint is provided for in heading 7304. It is classified under subheading 7304.39.00, HTSUS, which provides for “Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel: Other, of circular cross-section of iron or nonalloy steel: Other.”
The PRT top frame, rod, cylinder barrel, and the PRS components (keel joint, upper keel joint, ball, lower keel joint, stress joint, wellhead tieback, and inner barrel), are provided for in heading 8431, HTSUS. They are classified under subheading 8431.43.40, HTSUS, which provides for, “Parts suitable for use solely or principally with the machinery of headings 8425 to 8430: Of machinery of heading 8426, 8429 or 8430: Parts of boring or sinking machinery of subheading 8430.41 or 8430.49: Of offshore oil and natural gas drilling and production platforms.”
Pursuant to the Section 201 steel safeguard measures implemented by Presidential Proclamation 7529, and terminated by Presidential Proclamation 7741, certain steel pipes and tubes classified in subheading 7305.31.40, and entered or withdrawn from warehouse after March 20, 2002 through December 5, 2003, are subject to the additional ad valorem duties specified by subheadings 9903.73.84 and 9903.73.85, HTSUS, depending on the date they were entered or withdrawn from warehouse. The conductor is subject to duties under subheading 9903.73, HTSUS, subject to the above date of entry conditions.
Flanges classified under subheading 7307.91.50 are also subject to the duties under subheadings 9903.73.93 and 9903.73.94, HTSUS, if entered or withdrawn from warehouse after March 20, 2002, through December 5, 2003 (again, exact classification depends on the date of entry or withdrawal). If the conductor flange is machined, it is subject to duties under subheading 9903.73.93 or 9903.73.94, HTSUS, depending on the date it was entered or withdrawn from warehouse; if it is unmachined, then it is not subject to Section 201 duties.
This decision should be mailed by your office to the internal advice requestor no later than 60 days from the date of this letter. On that date, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs and Border Protection Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon
Director,
Commercial Rulings Division