CLA-2 OT:RR:CTF:TCM H243821 PTM
TARIFF NO: 8431.43.8090
Port Director
U.S. Customs and Border Protection
Port of Pembina
112 W. Stutsman
Pembina, ND 58271
ATTN: Lorie Vagle, Import Specialist
RE: Application for Further Review of Protest 3304-2013-150006; Tariff Classification of a Float Collar / Float Shoe; NAFTA Preferential Treatment.
Dear Port Director,
This is in response to your correspondence forwarding protest 3304-2013-150006 and application for further review (“AFR”) to this office for review, filed on behalf of CTE Industries Ltd. (“CTE Industries”). The protest concerns the tariff classification of a float collar and float shoe under the Harmonized Tariff Schedule of the United States (“HTSUS”). Our response follows.
FACTS:
On February 10, 2013, CTE Industries entered the instant merchandise under subheading 8481.30.9000 HTSUS as “check, (nonreturn) valves: Other.” On March 14, 2013 CTE Industries filed an amended entry claiming preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”) pursuant to 19 U.S.C. §1520(d). On March 27, 2013, U.S. Customs and Border Protection (“CBP”) issued a CBP Form 29 Notice of Action stating that CBP proposed reclassification under subheading 8431.43.8090 HTSUS, which provides for “parts of boring or sinking machinery.” The CBP Form 29 also stated “please provide an amended NAFTA Certificate of Origin to cover the merchandise at this classification.” CTE Industries did not file an amended NAFTA Certificate of Origin. The entry liquidated on May 10, 2013, with both the float collar and float shoe classified under subheading 8431.43.8090 HTSUS. CTE Industries filed the instant protest on May 15, 2013.
CTE Industries provided a product catalog for the merchandise at issue. The literature states:
CTE offers a complete range of high performance innovative float equipment. Different Series have been designed for various downhole operating conditions. The…equipment use HV (High Volume) float valves that are designed for high flow rates through incorporation of the largest valve flow areas to eliminate valve erosion…Standard features include shoes that have a composite integral protective nose for all popular long and intermediate casing sizes and API threads that are coated to eliminate galling during makeup. Side ports, down jets, up jets, double valves, and aluminum spade noses can be incorporated in the equipment as options….
Thus, the product literature characterizes the float collars and float shoes as equipment used in downhole drilling operations that incorporate float valves. Further, the literature shows that the float collars and float shoes incorporate additional integral features, and may also be modified with additional features to suit.
CTE Industries protests the tariff classification of the float collar and the float shoe. In support of its position, it provided copies of prior entries supporting its proposed classification at a different CBP port of entry and cites to prior CBP rulings. Additionally CTE Industries protests CBP’s denial of a claim for preferential tariff treatment as a good qualifying under the NAFTA rules of origin pursuant to 19 U.S.C. §1520(d).
ISSUES:
What is the proper tariff classification of a float collar and a float shoe?
Whether CTE Industries’ NAFTA preferential tariff treatment claims under 19 U.S.C. §1520(d) should have been granted.
LAW AND ANALYSIS:
Initially we note that the matter is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification and the rate and amount of duties chargeable. The protest was timely filed on May 14, 2013, within 180 days of liquidation, pursuant to 19 U.S.C. §1514(c)(3). Further Review of Protest No. 3304-2013-150006 is 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 the rulings and decisions made by CBP. Specifically, CTE Industries has identified prior CBP rulings concerning similar merchandise that are purportedly inconsistent with the classification of the merchandise at issue here.
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (“GRI’s”). 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. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and mutatis mutandis, to the GRIs 1 through 5.
The Explanatory Notes (EN) to the Harmonized Commodity Description and Coding System represent the official interpretation of the tariff at the international level. While neither 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).
The HTSUS provisions at issue are as follows:
8431 Parts suitable for use solely or principally with the machinery of headings 8425 to 8430:
8431.43 Parts for boring or sinking machinery of subheading 8430.41 or 8430.49:
8431.43.80 Other
Of oil and gas field machinery:
8431.43.8090 Of other boring or sinking machinery
* * *
8481 Taps, cocks, valves and similar appliances, for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and thermostatically controlled valves; parts thereof:
8481.30 Check (nonreturn) valves:
Note 2 to Section XVI, HTSUS, which encompasses Chapter 84, HTSUS, states, in pertinent part, the following:
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: (a) Parts which are goods included in any of the headings of chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings; (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;
As an initial matter, it is necessary to determine whether the float collar and float shoe are considered “parts” for the purposes of tariff classification. A “part” is defined as an article that is “an integral, constituent component [of another article], necessary to the completion of the article with which it is used, and which enables that article to function in the matter for which it was designed, without which the article to which the [part] is joined could not function.” See HQ H007677 (Dec. 22, 2008), citing United States v. Cody Manufacturing Co., 44 CCPA 67 (1956). The float collar and float shoe perform vital functions in the drilling operation by preventing drilling mud from entering the casing, guiding the casing, and easing the load on the derrick or mast. Therefore, we find that the float collar and float shoe are integral constituent components and are in fact “parts.” Consequently, they are to be classified in accordance with Note 2 to Section XVI.
Under Section XVI Note 2 (a), parts which are also goods, are in all cases to be classified in their own respective heading. As the ENs to Section XVI explain, the rules governing parts suitable solely or principally with a particular machine or apparatus are inapplicable where a good is covered by a heading of this Section. The ENs to Section XVI, Note 2 provide that:
The above rules do not apply to parts which in themselves constitute an article covered by a heading of this Section (other than headings 84.87 and 85.48); these are in all cases classified in their own appropriate heading even if specially designed to work as part of a specific machine. This applies in particular to:
* * *
(4) Taps, cocks, valves, etc. (heading 84.81).
Even where an article is designed to work solely or principally as a part of a machine, a provision for parts does not prevail over a specific provision for such parts. In Nidec Corporation v. United States, 861 F. Supp. 136, 142, 18 Ct. Int’l Trade 821, aff'd 68 F. 3d 1333 (Fed. Cir. 1995), the Court of International Trade held that:
Note 2(b) provides that 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 are to be classified with the machines of that kind. The explanatory notes state that parts which are suitable for use solely or principally with particular machines or apparatus are classified in the same heading as those machines or apparatus. This statement, however, does not apply to parts which in themselves constitute an article covered by a heading of this section; these are in all cases classified in their own appropriate heading even if specifically designed to work as part of a specific machine.
According to the decision in Nidec, a part which is also classifiable as a good shall in all instances be classified in its respective heading according to Section XVI 2(a). Because valves are prima facie classifiable under heading 8481 HTSUS, if the float collar and float shoe serve no other function beyond that of a valve then they are not classifiable as parts of boring or sinking machinery under heading 8431 by virtue of Section XVI Note 2(a).
As a general matter, we note that The Occupational Safety & Health Administration (“OSHA”) describes float collars and float shoes as devices used in down-hole drilling. Both the float collar and float shoe help guide an oil well casing into a wellbore. A float collar is a coupling device inserted above the bottom of a casing string that contains a check valve that permits fluid to pass downward but not upward through the casing. Couplings are used to connect shafts together at their ends for the purpose of transmitting power. Float collars are also guides for the casing and they lessen the load from the drilling derrick or mast. The float collar prevents drilling mud from entering the casing while it is in use, which permits the casing line to “float.” A float shoe is a cylindrical steel part with a rounded bottom that is attached to the bottom of the casing string. It contains a check valve to prevent fluid from entering the casing. It also serves as a guide shoe for the casing. In addition to functioning as a valve, the float shoe also guides the casing toward the center of the hole and allows the casing to float, relieving the derrick or mast from the entirety of the load.
The provided literature for the subject merchandise submitted by CTE Industries shows that the instant float collar and float shoe are in line with the above OSHA definition. Although the float collar and float shoe do contain a valve, they provide additional functions. The float collar helps guide an oil well casing into a wellbore. The float collar also functions as a coupling and are used to connect shafts together at their ends for the purpose of transmitting power. The float collar lessens the load from the derrick or mast because it permits the casing line to float. For the float shoe, in addition to functioning as a valve, it also guides the casing toward the center of the hole and allows the casing to float, relieving the derrick or mast from some of the load. Based on the fact that the float collar and float shoe provide functions beyond that of a valve, they are not classifiable pursuant to Note 2(a), consequently we apply Note 2(b) to Section XVI. Pursuant to Note 2(b), if the parts are suitable for use solely or principally with a particular kind of machine then “they 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.” (Emphasis added). The float collar and float shoe serve vital functions for downward drilling operation. Our research has not provided any evidence that a float collar or float shoe are used in any applications other than in drilling.
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The ENs provide additional guidance. The ENs for Section 84.31 provides that the heading includes:
(4) Rotary tables, swivels, kellies, kelly drive bushings, tool joints, drill collars, subs, drill pipe guides, stop collars, spider bowls, split bushing slips, beams, swivel sockets, and drilling jars, for well drilling machines (rotary or percussion).
(Emphasis added)
The primary function of the float collar and float shoe is to guide an oil well casing into a wellbore. As such, it operates as a drill pipe guide, which is an exemplar under the EN for heading 84.31.
Prior CBP rulings that have found that devices used in drilling equipment are classified under heading 8431 HTSUS. For example, in NY N043049 (Nov. 5, 2008), CBP classified the head assembly for a mineral drill bit fitted on a drilling rig under subheading 8431.43.8090 HTSUS. Similarly, in N249636 (Feb. 19, 214) CBP classified various parts used in down-hole drilling under subheading 8431.43.8090 HTSUS. These items included drifter rods, extension rods, drill pipes, tapered rods and adaptors.
By contrast, the rulings cited by CTE Industries are dissimilar to drilling equipment and perform different functions than the float collar and float shoe. It cites rulings NY N161399 (May 13, 2011) and N220186 (June 27, 2012) in support of its proposed classification under subheading 8481.30.9000 HTSUS as check valves. In N161399, CBP classified a manifold package comprised of several individual components packaged together and used to install a water storage tank in a well system. CBP found that the package was classifiable as a set, and that the ball valve imparted the essential character and therefore it was classifiable under heading 8481 by application of GRI 3(b). The float collar and float shoe perform vastly different functions from the manifold package, and thus the analysis contained in N161399 is not applicable. Furthermore, the float collar and float shoe are not packaged as components in a set, and it is therefore not necessary to classify them by application of GRI 3(b). In N220186, CBP classified a check valve under subheading 8481.30.9000. Unlike the check valve described in N220186, the float collar and float shoe act primarily as a guide for an oil well casing in addition to acting as a valve.
CTE Industries has not demonstrated that the float collar and float shoes that are the subject of this protest function simply as valves. The product literature submitted describes the float collar and float shoes as equipment for downhole drilling. Although they both function as valves, they incorporate other integral components providing additional functionality. Further, they may be customized with additional features depending on customer need. Based on the foregoing, we find that the float collar and float shoe are parts suitable for use solely or principally with boring or sinking machinery. Therefore, they are classifiable under heading 8431 HTSUS by operation of GRI 1.
CTE Industries also protests CBP’s denial of preferential treatment under NAFTA pursuant to 19 U.S.C. §1520(d). That provision states in pertinent part that:
Notwithstanding the fact that a valid protest was not filed, the Customs Service may . . . reliquidate an entry to refund any excess duties (including any merchandise processing fees) paid on a good qualifying under the rules of origin set out in section 202 of the North American Free Trade Agreement Implementation Act [19 USCS § 3332], . . . for which no claim for preferential tariff treatment was made at the time of importation if the importer, within 1 year after the date of importation, files, in accordance with those regulations, a claim that includes--
(1) a written declaration that the good qualified under the applicable rules at the time of importation;
(2) copies of all applicable NAFTA Certificates of Origin (as defined in section 508(b)(1) [19 USCS § 1508(b)(1)]), or other certificates or certifications of origin, as the case may be . . . .
The CBP regulation promulgated thereunder, 19 C.F.R. §181.32, sets forth the filing procedures for filing a proper NAFTA preference claim under 19 U.S.C. §1520(d). The regulation provides:
A post-importation claim for a refund shall be filed by presentation of the following:
(1) A written declaration stating that the good qualified as an originating good at the time of importation and setting forth the number and date of the entry covering the good;
(2) Subject to § 181.22(d) of this part, a copy of each Certificate of Origin (see § 181.11 of this part) pertaining to the good;
(3) A written statement indicating whether or not the importer of the good provided a copy of the entry summary or equivalent documentation to any other person. . . . ;
(4) A written statement indicating whether or not the importer of the good is aware of any claim for refund, waiver or reduction of duties relating to the good within the meaning of Article 303 of the NAFTA (see subpart E of this part). . . ; and
(5) A written statement indicating whether or not any person has filed a protest or a petition or request for reliquidation relating to the good under any provision of law, and if any such protest or petition or request for reliquidation has been filed, the statement shall identify the protest, petition or request by number and date.
Notably, the regulation requires a Certificate of Origin, which requires the requesting party to provide the correct classification of the merchandise at issue. CTE Industries states that it provided the requisite documentation required to fulfill the requirements of 19 U.S.C. §1520(d).
The CBP regulation 19 C.F.R. §181.33(d) states:
(d) Denial of claim -- (1) General. The port director may deny a claim for a refund filed under this subpart if the claim was not filed timely, if the importer has not complied with the requirements of this subpart, if the Certificate of Origin submitted under § 181.32(b)(3) of this part cannot be accepted as valid (see § 181.22(c) of this part), or if, following initiation of an origin verification under § 181.72(a) of this part, the port director determines either that the imported good did not qualify as an originating good at the time of importation or that a basis exists upon which preferential tariff treatment may be denied under § 181.72(d), § 181.74(c) or § 181.76(c) of this part.
Thus, a claim may be denied by the port director if the claim is untimely or does not comply with the requirements for a claim. Additionally, 19 C.F.R. §181.22(c) states, “[i]f the port director determines that a Certificate is illegible or defective…the importer shall be given a period of not less than five working days to submit a corrected Certificate.” CBP issued a request for a revised NAFTA Certificate of Origin in the Notice of Action issued on March 23, 2013 to reflect the corrected classification. CTE Industries did not file an amended Certificate of Origin as requested. Thus, CTE Industries did not comply with the requirements for a claim under 19 U.S.C. §1520(d).
CTE Industries states that it did not receive the March 23, 2013 Notice of Action. However, it provided no proof that it did not receive the notice. The Court of International Trade, in Hanover Insurance Co. v. United States, (23 Int'l Trade Rep. (BNA) 1495 (Ct. Intl. Trade 2001), stated that “[w]here a notice is required to be given by Customs officials, the burden of going forward with the evidence initially falls upon the plaintiff because the notice is deemed to have been given by virtue of the presumption of regularity which attaches to official acts.” Thus, when CBP is required to give notice, a rebuttable presumption arises that notice was provided. A mere assertion that notice was not received does not rebut the presumption that the notice was properly delivered. See, Bar Bea Truck Leasing Co., Inc. v. United States, 5 CIT 124, 126 (1983) (holding that mere assertions made by counsel are not evidence of non-delivery). Therefore, CTE Industries has not demonstrated that the Notice of Action was properly delivered.
CTE Industries also argues that CBP’s denial of its claim under §1520(d) is inconsistent with prior treatment, which granted claims for similar merchandise. CTE Industries provided copies of two prior shipments that were granted refunds under 19 U.S.C. §1520(d). In order to demonstrate inconsistent treatment, a protestant must demonstrate evidence to establish that “[o]ver a 2-year period immediately preceding the claim of treatment, Customs consistently applied that determination on a national basis as reflected in liquidations of entries…or other Customs actions with respect to all or substantially all of that person’s Customs transactions involving materially identical facts and issues.” See 19 C.F.R. 177.12(c)(i)(C). CTE provided copies of two prior entries but did not demonstrate treatment over a 2 year period as required by the regulation. Based on the foregoing, CTE Industries did not satisfy the requirements of 19 U.S.C. §1520(d) and CBP did not improperly deny its claim for a refund.
HOLDING:
By application of GRI 1 and Note 2(b) to Section XVI, the float collar and float shoe are classified under heading 8431 HTSUS, and specifically in subheading 8431.43.8090, which provides for “Parts suitable for use solely or principally with the machinery of headings 8425 to 8430: Parts for boring or sinking machinery of subheading 8430.41 or 8430.49: Other: Of other boring or sinking machinery.” Additionally, CTE Industries did not fulfill the requirements of 19 U.S.C. §1520(d). Therefore, no NAFTA refund is due. You are instructed to DENY the protest.
The 2015 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. You are to mail this letter together with the Customs 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 this letter, the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Joanne Roman Stump, Acting Director
Commercial and Trade Facilitation Division