CLA-2 OT:RR:CTF:TCM H010810 RM
Port Director
Port of Savannah
United States Customs and Border Protection
1 East Bay Street Savannah, GA 31401
RE: Classification of an Electric Generating Set; Protest No. 1703-07-100066
Dear Port Director:
The following is our decision regarding the Application for Further Review (“AFR”) of Protest No. 1703-07-100066, timely filed on behalf of Mitsubishi Heavy Industries, Ltd., concerning the tariff classification of a generator, a turbine, and fixing devices necessary for the assembly and maintenance of the units, under the Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
The merchandise at issue consists of a generator, imported with one assembly kit from Sweden, and a turbine, imported with 23 assembly kits from Japan, designed and built for use with each other. The assembly kits contain an assortment of parts, e.g., fasteners, gaskets, brackets, etc., and tools necessary for the assembly and operation of the generator/turbine set.
Protestant was not allowed to enter the generator and turbine into a Foreign Trade Zone (“FTZ”) upon their arrival into the United States on July 3 and July 13, 2006, respectively. Instead, on July 20, 2006, the goods were constructively entered into a bonded warehouse (an actual physical deposit was not possible due to the size of the merchandise). The generator and turbine
were thereafter withdrawn together on July 21, 2007. CBP classified the goods separately, along with their respective assembly kits; the generator in subheading 8501.64.00, HTSUS, and the turbine in subheading 8406.82.10, HTSUS. This Protest was timely filed on February 12, 2007.
ISSUE:
Whether the generator and turbine are classified together, as an electric generating set, or separately, upon withdrawal from the bonded warehouse?
LAW AND ANALYSIS:
Initially, we note that the matter is Protestable under 19 U.S.C. § 1514(a)(2) as a decision on classification. The Protest was timely filed, within 180 days of liquidation for all involved entries (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)).
Further Review of Protest No. 1703-07-100066 was properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(a) because the decision against which the Protest was filed is alleged to be inconsistent with a ruling of the Commissioner of Customs or his designee, or with a decision made at any port with respect to substantially similar merchandise. Specifically, Protestant alleges that the ruling is inconsistent with Headquarters Ruling Letter (“HQ”) 088013, dated November 21, 1991, Customs Service Decision (“C.S.D.”) 83-102, dated June 17, 1983, and New York Ruling Letter (“NY”) H86578, dated January 10, 2002, and F84620, dated March 20, 2000.
The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (“GRIs”). GRI 1 provides, in part, that “for legal purposes, classification shall be determined according to terms of the headings 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 in order.
GRI 2 provides, in relevant part:
Any 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. It shall also include a reference to that article complete or finished (or failing to be classified as a complete or finished by virtue of this rule), entered unassembled or disassembled.
The 2006 HTSUS provisions under consideration are as follows:
8406 Steam turbines and other vapor turbines, and parts thereof:
Other turbines:
Of an output not exceeding 40 MW:
Steam turbines …
* * *
8501 Electric motors and generators (excluding generating sets):
AC generators (alternators):
8501.64.00 Of an output exceeding 750 kVA
* * *
8502 Electric generating sets and rotary converters:
Other generating sets:
8502.39.00 Other …
* * *
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 nor dispositive, 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. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
EN (V) to GRI 2(a) states:
The second part of Rule 2 (a) provides that complete or finished articles presented unassembled or disassembled are to be classified in the same heading as the assembled article. When goods are so presented, it is usually for reasons such as requirements of convenience of packing, handling or transport.
EN (VII) to GRI 2(a) states:
For purposes of this Rule, “articles presented unassembled or disassembled” means articles the components of which are to be assembled either by means of fixing devices (screws, nults, bolts, etc.) or by riveting or wielding, for example, provided only assembly operations are involved.
The ENs to heading 8502, HTSUS, read, in relevant part:
(I) ELECTRIC GENERATING SETS
The expression “generating sets” applies to the combination of an electric generator and any prime mover other than an electric motor (e.g., hydraulic turbines, steam turbines, wind engines, reciprocating steam engines, internal combustion engines). Generating sets consisting of the generator and its prime mover which are mounted (or designed to be mounted) together as one unit or on a common base) are classified here provided they are presented together (even if packed separately for convenience of transport).
Protestant submits that the merchandise should have been classified together, in heading 8502, HTSUS, which provides for “Electric generating sets,” at the time of withdrawal from the warehouse. In support of this argument, Protestant cites to C.S.D. 83-102, 17 Cust. B. & Dec. 945 (1983), wherein CBP held that parts of firearms shipped on separate vessels and entered into bonded warehouse at different times, where they are manipulated by repacking and sorting, and subsequently withdrawn for consumption on a single withdrawal, are classified as firearms, provided that the parts withdrawn constitute a complete but unassembled firearm or firearms. Furthermore, Protestant argues that HQ 088013 and NY H86578 contain analogous factual scenarios. In those rulings, CBP classified a generator and turbine entered separately into an FTZ, where they were combined and subsequently withdrawn together, in heading 8502, HTSUS, as an electric generating set.
It is well-established that articles are classified in the condition as imported. See United States v. Citroen, 223 U.S. 407, 414-415 (1911). However, warehoused goods represent an exception to the general rule. While technically “imports,” foreign-made goods stored in a bonded warehouse remain exempt from duties and taxes until either they are withdrawn or five years pass from the date of importation. See 19 U.S.C. § 1557(a). See also United States v. Commodities Export Co., 733 F. Supp. 109, 171 (Ct. Int’l Trade 1990). In this case, the generator and turbine, while shipped at different times, were aggregated and withdrawn together from a bonded warehouse, for on-site assembly.
GRI 1, by application of GRI 2(a), extends the terms of a heading to include an article complete or finished that is entered unassembled or disassembled. The merchandise at issue constitutes a complete electric generating set, i.e., a generator and its prime mover, presented together but unassembled. See EN 85.02. It was so entered for convenience of transport, and can be assembled by means of fixing devices, namely the assortment of parts and tools with which it was imported. Thus, in accordance with GRI 2(a) and the rationale set forth in C.S.D. 83-102, we conclude that the merchandise should be classified together, in heading 8502, HTSUS, as an electric generating set, at the time of warehouse withdrawal.
HOLDING:
By application of GRI 1 and GRI 2(a), the generator and turbine are classified in heading 8502, specifically in subheading 8502.39.00, HTSUS, which provides for: “Electric generating sets and rotary converters: Other generating sets: Other.” The 2006 column one, general rate of duty is 2.5 percent ad valorem.
Duty rates are provided for convenience only and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov/tata/hts/.
The protest should be allowed in full. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, 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 International Trade will make the decision available to CBP personnel, and to the public on the CBP 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 and Trade Facilitation Division