CLA-2 OT:RR:CTF:TCM H245568 ALS
Alan R. Klestadt, Esq.
Mika M. McLafferty, Esq.
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt
399 Park Avenue, 25th Floor
New York, New York 10022-4877
RE: Request for Reconsideration of Customs and Border Protection (CBP) Ruling NY N234515 (November 15, 2012) regarding tariff classification of Nozzles designed for use in polycrystalline diamond cutter (PDC) matrix drill bits
Dear Mr. Klestadt and Ms. McLafferty:
This letter is in response to your request for reconsideration of CBP Ruling NY N234515 (November 15, 2012), as noted above, regarding the legal tariff classification of Nozzles designed for use in PDC matrix drill bits. Our decision is set forth below.
FACTS:
These are the facts as were noted in NY N234515:
The nozzles are designed for use in polycrystalline diamond cutter (“PCD”) matrix drill bits used in oil and gas exploration applications. Their function is to direct drilling mud/liquid to expedite removal of rock cuttings while drilling. They provide direct fluid flow in the dome and across the cutting area of the bits. This action reduces bit balling and increases the rate of penetration. The nozzles have no mechanical features such as valves nor do they contain any abrasive material. The threaded section is steel with the balance being a pressed and sintered tungsten carbide/cobalt component. Markings on the submitted sample, i.e., “36” and “09”, designate the series and size respectively.
You request reconsideration of NY N234515 because you believe “the ruling erroneously concluded that the drill nozzles at issue are classifiable as base metal parts of interchangeable tools for handtools or machine tools under HTSUS 8207.19.6090, rather than as parts for boring or sinking machinery under HTS 8431.43.8060.”
ISSUE:
Is the Nozzle, which is designed for use in polycrystalline diamond cutter (PDC) matrix drill bits, properly classified under HTSUS heading 8207 as an interchangeable tool for handtools, whether or not power-operated, or for machine-tools (for example, for pressing, stamping, punching, tapping, threading, drilling, boring, broaching, milling, turning or screwdriving), including dies for drawing or extruding metal, and rock drilling or earth boring tools; base metal parts thereof, or under HTSUS heading 8431 as a part suitable for use solely or principally with the machinery of headings 8425 to 8430?
LAW AND ANALYSIS:
Classification under the HTSUS is determined in accordance with the General Rules of Interpretation and, in the absence of special language or context which otherwise requires, by the Additional U.S. Rules of Interpretation (“ARI”). GRI 1 provides that the classification of goods shall be “determined according to the 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, GRIs 2 through 6 may be applied in order.
The following HTSUS provisions are under consideration:
8207 Interchangeable tools for handtools, whether or not power-operated, or for machine-tools (for example, for pressing, stamping, punching, tapping, threading, drilling, boring, broaching, milling, turning or screwdriving), including dies for drawing or extruding metal, and rock drilling or earth boring tools; base metal parts thereof:
8431 Parts suitable for use solely or principally with the machinery of headings 8425 to 8430:
Legal Note 1(k) of Section XVI of the HTSUS states that articles of chapter 82 or 83 are not covered under Section XVI. Legal Note 1(o) of Section XVI states that “[t]his section does not cover... [i]nterchangeable tools of heading 8207....” Chapter 84 falls within Section XVI. Thus, we must first determine if the subject article is an article of chapter 82.
Legal Note 1 of Chapter 82 of the HTSUS states the following:
1. Apart from blow torches and similar self-contained torches, portable forges, grinding wheels with frameworks, manicure or pedicure sets, and goods of heading 8209, this chapter covers only articles with a blade, working edge, working surface or other working part of:
(a) Base metal;
(b) Metal carbides or cermets;
(c) Precious or semiprecious stones (natural, synthetic or reconstructed) on a support of base metal, metal carbide or cermet; or
(d) Abrasive materials on a support of base metal, provided that the articles have cutting teeth, flutes, grooves or the like, of base metal, which retain their identity and function after the application of the abrasive. [Emphasis added.]
As noted above, the Nozzle is constructed of a pressed and sintered tungsten carbide/cobalt composite metal. You state that tungsten carbide constitutes “roughly 93%” of the Nozzle while cobalt constitutes the remaining seven percent (7%). The Nozzle is used by attaching it to a PDC Matrix Drill Bit that has PDCs embedded into its head. The Nozzle, while attached to the PDC Matrix Drill Bit, performs the function of supplying direct fluid flow into the dome of the drill bit, thereby removing debris away from the face of the drill to which the drill bit is attached while drilling is in process. As the Nozzle is a working part of metal carbide, we find that it is prima facie an article of Chapter 82 of the HTSUS in accordance with Legal Note 1(c), Chapter 82, HTSUS. As such, it is excluded from Chapter 84 by virtue of Note 1(k) of Section XVI, HTSUS.
You contend that the Nozzle is not classifiable under Chapter 82 because it “is not comprised of a base metal,” citing Legal Note 3 of Section XV, HTSUS, and CBP Rulings HQ 967225 (November 16, 2004), HQ 958704 (April 23, 1996), and HQ 958293 (April 23, 1996). You note that tungsten carbide is not a “base metal” as the term applies here. Legal Note 3 of Section XV states the following:
3. Throughout the schedule, the expression "base metals" means: iron and steel, copper, nickel, aluminum, lead, zinc, tin, tungsten (wolfram), molybdenum, tantalum, magnesium, cobalt, bismuth, cadmium, titanium, zirconium, antimony, manganese, beryllium, chromium, germanium, vanadium, gallium, hafnium, indium, niobium (columbium), rhenium and thallium.
In HQ 967225, HQ 958704, and HQ 958293, we held that a PDC that was bonded to a tungsten carbide substrate is properly classified under HTSUS subheading 7116.20.50 as an article of precious stone (natural, synthetic, or reconstructed). In each case, it was the PDC itself that was the subject of the ruling, not an article (e.g., nozzle) that is designed to be attached to a tool (e.g., PDC matrix drill bit) of which the PDC was a part. As such, those cases are clearly distinguished from the present case in that this case concerns article that is designed to be attached to a tool of which PDCs are a part, and not the PDCs themselves. Thus, HQ 967225, HQ 958704, and HQ 958293 have no bearing on this case.
GRI 1 states in pertinent part the following:
1. The table of contents, alphabetical index, and titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes...
As noted above, heading 8207 covers interchangeable tools for handtools or machine-tools. We have previously ruled on an interchangeable tool consisting of mostly tungsten carbide combined with secondary amount of cobalt. In CBP Ruling HQ 966944 (October 16, 2003), we ruled that a Router Bit, consisting of 92% tungsten carbide and eight percent (8%) cobalt and is used as a milling tool, is properly classified under heading 8207. In doing so, we stated the following:
In HQ 966199, dated April 18, 2003, Customs Headquarters examined how router bits should be classified. We pointed out that heading 8207, HTSUS, covers, among other things, interchangeable tools for handtools or for machine-tools. We noted that goods of heading 8207, HTSUS, are excluded from headings 8465 and 8466, HTSUS, by Section XVI, Note 1(o), HTSUS. EN [Explanatory Note] 82.07 states in relevant part that for this heading: Whereas (apart from a few exceptions such as machine saw blades) the preceding headings of this Chapter apply in the main to hand tools ready for use as they stand or after affixing handles, this heading covers an important group of tools which are unsuitable for use independently, but are designed to be fitted, as the case may be, into ...: * * * (B) machine-tools, of headings 84.57 to 84.65, or of heading 84.79 by reason of Note 7 to Chapter 84, (C) tools of headings 84.67, for pressing, stamping, punching, tapping, threading, drilling, boring, reaming, broaching, milling, gear-cutting, turning, cutting, morticing or drawing, etc., metals, metal carbides, wood, stone, ebonite, certain plastics or other hard materials, or for screwdriving.
We determined that because the router bits at issue, were for use in machine-tools of heading 8465, HTSUS, they met this description (i.e., tools which are incapable of use independently but are designed to be fit into machine-tools of heading 8465, HTSUS). Thus, the router bits, fell under heading 8207, HTSUS. [Emphasis added.]
Moreover, we find the following language from that EN most pertinent: “The heading also includes tools for use with the rock drilling or earth boring machines of heading 8430.” Heading 8430, HTSUS, is as follows:
8430 Other moving, grading, leveling, scraping, excavating, tamping, compacting, extracting or boring machinery, for earth, minerals or ores; pile-drivers and pile-extractors; snowplows and snowblowers:
The Nozzle, as a tool that is intended to be used in oil and gas drilling operations, is, by definition, a tool for use with rock drilling machines. Specifically, it is a tool for use with excavating, extracting, or boring machinery, for minerals. Thus, given that the Nozzle is a tool for use with a rock drilling machine of HTSUS heading 8430, we find that it is an interchangeable tool for handtools or machine-tools, specifically drilling, of HTSUS heading 8207. Consequently, it is further excluded from Chapter 84 by virtue of Note 1(o) of Section XVI, HTSUS.
Given the foregoing, the proper legal classification of the Nozzle is under HTSUS subheading 8207.19.60 as an “Interchangeable tool[] for handtools, whether or not power-operated, or for machine-tools (for example, for pressing, stamping, punching, tapping, threading, drilling, boring, broaching, milling, turning or screwdriving), including dies for drawing or extruding metal, and rock drilling or earth boring tools; base metal parts thereof: Rock drilling or earth boring tools, and parts thereof: Other, including parts: Other....”
HOLDING:
In accordance with GRI 1 and applicable legal notes, the Nozzle, designed for use in polycrystalline diamond cutter (PDC) matrix drill bits, is properly classified under HTSUS subheading 8207.19.60 as “Interchangeable tools for handtools, whether or not power-operated, or for machine-tools (for example, for pressing, stamping, punching, tapping, threading, drilling, boring, broaching, milling, turning or screwdriving), including dies for drawing or extruding metal, and rock drilling or earth boring tools; base metal parts thereof: Rock drilling or earth boring tools, and parts thereof: Other, including parts: Other....” The general column one rate of duty, for merchandise classified under this subheading is 2.9%.
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.
EFFECT ON OTHER RULINGS:
CBP Ruling NY N234515 (November 15, 2012) is hereby affirmed.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division