CLA-2 OT:RR:CTF:TCM H020406 HkP
Lawrence M. Friedman, Esq.
Carolyn D. Amadon, Esq.
Barnes, Richardson & Colburn
303 East Wacker Drive
Suite 1100
Chicago, IL 60601
RE: Classification of heat exchange assemblies; NAFTA eligibility
Dear Mr. Friedman & Ms. Amadon:
This is in response to your request, received on November 29, 2007, in which you requested a binding ruling on behalf of Electrolux Home Products (“Electrolux”). At issue is the correct classification of heat exchanger assemblies for refrigerators and freezers under the Harmonized Tariff Schedule of the United States (“HTSUS”). You also seek guidance on whether refrigerators and freezers that incorporate the finished goods will be eligible for preferential treatment under the North American Free Trade Agreement (NAFTA).
FACTS:
The assemblies at issue are evaporator shelving that will be placed in upright freezer units manufactured in the United States and in refrigerator units manufactured in Mexico. The assemblies themselves will be imported fully assembled from China.
According to the submitted information, each assembly consists of an evaporator coiled into shelf form with an inlet and outlet and a heat exchanger with two inlets and two outlets. One heat exchanger inlet is directly connected to the evaporator outlet and the corresponding heat exchanger outlet connects it to the compressor. The other heat exchanger inlet is connected directly to the dryer and the corresponding heat exchanger outlet is directly connected to the evaporator inlet. The compressor and dryer are both also connected to the condenser; however, the compressor, the dryer, and the condenser are not parts of the subject assemblies. Connecting tubing is not used to attach the heat exchanger to the evaporator or to the compressor or dryer. You state that the assemblies for the refrigerators and freezers are substantially identical. Schematic drawings and pictures of the assemblies at issue were submitted for our review.
You have also asked CBP to address whether refrigerators and freezers that have evaporator heat exchanger assemblies incorporated into them in Mexico are eligible for preferential treatment under NAFTA, when the assemblies are the only non-originating component.
ISSUE:
What is the correct classification of the evaporator heat exchanger assemblies?
Do refrigerators and freezers that have evaporator heat exchanger assemblies from China installed into them in Mexico qualify for preferential treatment under NAFTA when imported into the United States?
LAW AND ANALYSIS:
Classification
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 2 through 6 may then be applied in order.
The HTSUS provision under consideration is as follows:
8418 Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps, other than the air conditioning machines of heading 8415; parts thereof:
* * *
Parts:
* * *
8418.99 Other:
* * *
8418.99.80 Other …..
* * *
Other:
* * *
8418.99.8060 Other …..
Legal Note 2 to Section XVI, which includes Chapter 84, provides, in relevant part:
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:
* * *
(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 or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. 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[.]
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the HTSUS 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. EN 84.18 provides, in relevant part:
REFRIGERATORS, FREEZERS AND OTHER REFRIGERATING
OR FREEZING EQUIPMENT
The refrigerators and refrigerating equipment of this heading are in the main machines or assemblies of apparatus for the production, in a continuous cycle of operations, of low temperatures (in the region of 0 °C or less) at the active cooling element, by absorption of the latent heat of evaporation of liquefied gases (e.g., ammonia, halogenated hydrocarbons), of volatile liquids or, in the case of certain marine types, of water.
* * *
COMPRESSION TYPE REFRIGERATORS
Their essential elements are:
* * *
(3) The evaporator, the active cooling element, consisting of a tubular system in which the condensed refrigerant, released through an expansion valve, evaporates rapidly with the absorption of heat from the surrounding air or, in the case of large cooling installations, from brine or a solution of calcium chloride kept in circulation around the evaporator coils.
* * *
PARTS
Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI), parts of the goods of this heading, whether for domestic or industrial uses, are also classified here, e.g., condensers, absorbers, evaporators, generators, cabinets, counters and other refrigerating furniture, of the kind referred to in paragraph (2) above, not yet fitted with a complete refrigerating unit or with an evaporator but clearly designed to receive such equipment.
Both an evaporator and a heat exchanger are parts of refrigeration or freezing equipment that are solely or principally used with such equipment. This fact is supported by the explanations provided in EN 84.18. Legal Note 2(b) to Section XVI directs that parts suitable for use solely or principally with a particular kind of machine are to be classified with machines of that kind. Heading 8418 provides for parts of refrigerating or freezing equipment of the heading. Based on the information provided to us, we find that the subject evaporators and heat exchangers are used solely or principally with refrigerators, freezers and other refrigerating or freezing equipment. Applying Note 2(b) to Section XVI, we find that the subject heat exchanger assemblies are classified under heading 8418, specifically in subheading 8418.99.8060, HSTSUA, as parts of refrigerators, freezers or other refrigerating or freezing equipment.
Origin of Refrigerators and Freezers Incorporating Subject Assemblies
General Note 12 of the HTSUS incorporates Article 401, North American Free Trade Agreement, as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993) and the interim amendments to the CBP Regulations, published as T.D. 94-4 (59 Fed. Reg. 109, January 3, 1994), into the HTSUS. Note 12(b) provides in relevant part:
For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if –
* * *
ii) they have been transformed in the territory of Canada,
Mexico and/or the United States so that--
A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivision (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note[.]
Originating good status is conferred on household type refrigerators, other than compression type, and freezers classified under subheading 8418.29 through 8418.40, HTSUS, by GN 12(t)/84.42, which allows:
A change to subheadings 8418.29 through 8418.40 from any subheading outside that group, except from subheading 8418.91 or tariff item 8418.99.40 or from assemblies incorporating more than one of the following: compressor, condenser, evaporator, connecting tubing.
We have already found that heat exchanger assemblies are classified in subheading 8418.99.8060, HTSUSA. Based on the information in the schematic drawing and photographs of the evaporator heat exchanger assemblies described above, we find that the assemblies do not incorporate more that one of the devices listed in GN 12(t)/84.42. Consequently, we find that incorporation of the assemblies into a refrigerator or freezer made in Mexico of originating components fulfills the tariff shift requirement set forth in GN 12(t)/84.42. Such a refrigerator or freezer may be treated as a good of a NAFTA country for origin purposes.
HOLDING:
By application of GRI 1 and Legal Note 2 to Section XVI, the evaporator heat exchanger assemblies at issue are classified under heading 8418, HTSUS. They are specifically provided for in subheading 8418.99.8060, HTSUSA, which provides for: Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps, other than the air conditioning machines of heading 8415; parts thereof: Parts: Other: Other: Other: Other.” The 2008 column one, general rate of duty is Free.
Duty rates are provided for your convenience and 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.
The refrigerators and freezers made in Mexico of originating components and which incorporate the subject assemblies made in China are eligible for NAFTA preferential treatment.
A copy of this ruling letter should be attached to entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Gail A. Hamill, Chief
Tariff Classification and Marking Branch