CLA-2 OT: RR: CTF: TCM H250636 ERB
Port Director
Port of Laredo
U.S. Customs and Border Protection
Lincoln/Juarez Bridge
Administrative Building #2
Laredo, TX 78040
Attn: Gregory Westrick, National Account Manager
RE: Request for Internal Advice; Tariff Classification of Condensing Units
Dear Acting Port Director:
This letter is in response to a request from your office on November 15, 2013 for internal advice in accordance with 19 C.F.R. § 177.11, concerning importations made by Tecumseh Products Company (TPC). At issue is U.S. Customs and Border Protection’s classification under the Harmonized Tariff Schedule of the United States of entries of condensing units. No samples were provided for this analysis.
FACTS:
In its submission to CBP in accordance with the request for internal advice, Tecumseh describes its product as having the following components: compressor, condenser, tubes, fan motor, blade, shroud and electrical components, all of which are mounted on a common base, for use in refrigerating condensing units. Tecumseh stated that some but not all entries of its product include a vertical receiver, which is an optional component that holds extra refrigerant.
Condensing units are heat-exchange systems. A gas refrigerator, relevant here, uses ammonia as the coolant and water, ammonia, and hydrogen gas to create a continuous cycle for the ammonia, which eliminates heat extracted from the interior of the unit to the outside air. The cycle works thusly: heat is applied to the ammonia and water solution in the compressor. As the mixture reaches the boiling point of ammonia, it flows into the separator. Ammonia gas flows upward into the condenser, dissipates heat and converts back to a liquid. The liquid ammonia makes its way to the evaporator where it mixes with hydrogen gas and evaporates, producing cold temperatures inside the refrigerator’s cold box. The ammonia and hydrogen gasses flow to the absorber where the water collected in the compressor mixes with the ammonia and hydrogen gases. The ammonia forms a solution with the water and releases the hydrogen gas, which flows back to the evaporator. The ammonia and water solution flows towards the compressor to repeat the cycle. In sum, the latent heat is given up by the substance (food, or other articles in the refrigerator) and will transfer to the condenser coolant, also called refrigerant, to be cycled away from the unit.
ISSUE:
Whether a condensing unit imported in some cases with and in other cases without a vertical receiver is classified as refrigerating equipment, of subheading 8418.69, HTSUS, or whether it is classified as parts of refrigerating equipment, of subheading 8418.99, HTSUS.
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 2 through 6 may then be applied in order.
GRI 2(a) states:
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 falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.
The following HTSUS provisions are under consideration:
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:
Other refrigerating or freezing equipment; heat pumps:
8418.69 Other:
8418.69.0180 Other refrigerating or freezing equipment
Parts:
8418.99 Other:
8418.99.80 Other
Note 4 to Section XVI, which covers articles of Chapter 84 states:
Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function.
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 HS and are thus useful in ascertaining the proper classification of merchandise. See T.D. 89-90, 54 Fed. Reg. 35127 (August 23, 1989).
The EN 84.18, Section (I) Refrigerators, Freezers, and Other Refrigerating or Freezing Equipment, Subsection (A) Compression Type Refrigerators provides as follows, in relevant part:
Their essential elements are:
The compressor which receives expanded gas from the evaporator and delivers it under pressure to
The condenser or liquefier where the gas is cooled and liquefied, and
The evaporator, the active cooling element, consisting of a tubular system in which the condensed refrigerant, released through an expansive 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.
The EN to 84.18 continues, in the subsection called “PARTS” as follows:
Subject to the general provisions regarding the classification of parts…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.
In Headquarters Ruling Letter (HQ) 965635, dated July 16, 2002, CBP revoked a previous ruling, HQ 965123. In doing so, CBP clarified, by citing to the EN 84.18, and GRI 2(a), that the condensing units being imported, comprised of a vertical receiver, a compressor, a finned coil-type condenser (called a heat exchanger), a fan with motor, mounted on a common base, “represents the aggregate of distinctive component parts that establish the identity of the goods as other refrigerating or freezing equipment of heading 8418, HTSUS”, and were not classified in heading 7326, HTSUS, as articles of iron or steel. See HQ 965635.
This ruling is of note, because is reiterates that there are three essential elements necessary for compression type refrigerators of heading 8418, HTSUS; the compressor, the condenser, and the evaporator. See EN 84.18 (A) Compression Type Refrigerators. However, the ENs specifically state, and thus guide CBP, that parts of the goods of this heading, are also classified in heading 8418, HTSUS, even if they are not yet fitted with a complete refrigerating unit or are missing the evaporator but it is clearly designed to receive such equipment post importation. See EN 84.18, subsection Parts.
Therefore, entries of incomplete condensing units, which have the essential character of complete refrigerating or freezing equipment are classified in subheading 8418.69, HTSUS. Entries of incomplete condensing units which do not have the essential character of complete refrigerating or freezing equipment, may be classified in subheading 8418.99, HTSUS, as parts thereof.
New York Ruling Letters (NY) R02106, dated June 20, 2005, and NY N241608, dated May 30, 2013, do not contradict this principle, nor do they contradict HQ 965635. Both rulings classified condensers. However, the entries were missing the compressor and the evaporator. Therefore, they were incomplete condensing units, not having the essential character of complete refrigerating or freezing equipment. As such, they were classified in the relevant parts provision, subheading 8418.99.80, HTSUS.
Turning now to Tecumseh’s product. Tecumseh states in its submission that its product is being imported with the compressor, the condenser, tubes, fan motor, blade, shroud and electrical components, all of which are mounted on a common base. Some include the refrigerant holder, the vertical receiver, and others do not. Tecumseh states that the evaporator is not imported with the subject merchandise, but it will be connected to it post-importation. However, the schematics Tecumseh included with its submissions do not clearly show a compressor or an evaporator.
Therefore, pursuant to the analysis in HQ 965635, and GRI 2(a) and the EN 84.18, Section (I) Refrigerators, Freezers, and Other Refrigerating or Freezing Equipment, Subsection (A) Compression Type Refrigerators, and subsection Parts, we conclude that an importation of Tecumseh’s product consisting of a compressor with fan and motor, and a condenser, together in some cases with the vertical receiver, an optional part not considered one of the three essential elements, and in other cases without the vertical receiver, mounted on a common base ready to be attached to the evaporator post importation represents the aggregate of distinctive component parts that establish the identity of the goods as other refrigerating equipment of subheading 8418.69, HTSUS. However, if Tecumseh’s products are not imported with the compressor, then they are provided for in the parts provision, of subheading 8418.99, HTSUS, as parts of refrigerating equipment.
HOLDING:
By application of GRI 2(a), the subject condensing units if they are found to include the condenser and the compressor, are classified in subheading 8418.69.0180, HTSUSA (Annotated), 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: Other refrigerating or freezing equipment; heat pumps: Other: Other refrigerating or freezing equipment.”
If they are found to be imported only with the condenser and not the compressor, then they are classified in subheading 8418.99.80, HTSUS, 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.” The 10-digit level would be determined by the unit’s output in kilowatts.
In either case, the column one, general rate of duty is free.
Sixty days from the date of this decision, the Office of International Trade, Regulations and Rulings, will make this decision available for CBP personnel, and to the public on the CBP Home Page at http://www.cbp.gov by means of the Freedom of Information Act, and other methods of publication.
Sincerely,
Joanne Roman Stump, Acting Director
Commercial and Trade Facilitation Division