HQ H267791
CLA-2 OT:RR:CTF:TCM H267791 TSM
Mr. Michael Leightman
Ernst & Young LLP
5 Houston Center, Suite 1200
1401 McKinney Street
Houston, TX 77010
RE: The tariff classification of an ethane processing plant
Dear Mr. Leightman,
This is in response to your request, on behalf of your client, Sasol Chemicals (USA), LLC, dated August 4, 2015, for a tariff classification ruling regarding an ethane processing plant.
FACTS:
The subject merchandise is an ethane processing plant - a large scale chemical plant which, once put into operation, will produce ethylene and other products from an ethane feedstock. It will contain various interconnected units and subunits. The subunits of the ethane processing complex will include Steam Cracking Furnaces, a Quench Tower, a Caustic Wash Tower, driers, a high pressure Deethanizer, an Acetylene Hydrogenation Vessel, a Demethanizer System featuring a C2 splitter, a Depropanizer, a Debutanizer, an Engine Compressor, and reactors in which chemical reactions occur via the introduction of a reactant and the application of heat. The plant will also contain typical process equipment including vessels, drums, exchangers, pipe and piping components, utilities, and instrumentation. These subunits operate as a single, highly integrated process unit with extensive internal energy integration.
The plant subjects ethane gas to a molecular conversion and a series of separation reactions prior to the distillation processes. In the first separation reaction, the cracker furnace cracks ethane feedstock molecules by exposing them to high temperatures. Next, the quenching tower separates contaminants from the ethane and ethylene by cooling them through direct contact with cold water. The gas component of the stream continues through a series of compressors and heat exchangers to remove impurities. Next, the gas stream goes through a Caustic Wash Tower. The caustic is introduced and absorbs additional impurities. Once the caustic is expelled, the stream is exposed to a propylene refrigerant. The stream then passes through a separator vessel, where the water is separated from the stream and absorbed in a drier.
After the initial separation processes are complete, the plant subjects the stream to a purification process involving distillation, evaporation and condensation. The stream undergoes fractionalization in a deenthanizer tower. Fractionalization is similar to simple distillation except that a fractionating column is placed between the boiling column and the condenser. The stream is then sent to the depropanizer and debutanizer for distillation. The stream continues to the Acetylene Hydrogenation vessel and is sent to the dementhanizer for fractionalization. The stream is then sent to the C2 Splitter Fractionation tower for distillation and compression, resulting in a purified ethylene.
The purified ethylene is processed within subsequent units. For instance, to produce low density polyethylene, some purified ethylene is compressed in an engine compressor. The stream of purified ethylene may undergo a reaction process, which produces low density polyethylene. Also, the purified ethylene may undergo the Ziegler Alcohol Production Process. This process involves various distillation towers in which the feed is separated into a number of products. A portion of the resulting product is sent to undergo a reaction process that results in a series of ethoxylates. The remaining product is further purified by a distillation process and results in Guerbert Alcohols.
ISSUE:
What is the proper tariff classification of the ethane processing plant?
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.
In addition, in interpreting the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
The HTSUS provisions under consideration are as follows:
8419 Machinery, plant or laboratory equipment, whether or not electrically heated (excluding furnaces, ovens and other equipment of heading 8514), for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, nonelectric; parts thereof:
8419.40.00 Distilling or rectifying plant
Note 4 to Section XVI, HTSUS, in which Chapter 84 is located, provides that:
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 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.
Explanatory Note 84.19 explains that:
[T]he heading covers machinery and plant designed to submit materials … to a heating or cooling process in order to cause a simple change of temperature, or to cause a transformation of the materials resulting principally from the temperature change (e.g., … evaporating, vaporizing, …processes). But the heading excludes machinery and plant in which the heating or cooling, even if essential, is merely a secondary function designed to facilitate the main mechanical function of the machine or plant [.]
* * * *
(II) DISTILLING OR RECTIFYING PLANT
With the exception of distillation apparatus of ceramics (heading 69.09) or of glass (heading 70.17 or 70.20), this group comprises all plant designed for distilling substances (whether liquid or solid).
* * * *
(B) Fractionating or rectifying plant.
These are more complicated continuous installations incorporating vertical fractionating columns which enable complex mixtures to be separated in one operation. The most usual type of column is divided into interconnecting sections by plates fitted with bubbling caps and down flow tubes. Vapour rising from one section is thus brought into intimate contact with a condensed portion of the vapour in the section above and, since the temperature decreases as the vapours rise in the column, they can be separated at different levels corresponding to their boiling points.
* * * *
Continuous distillation plant (simple or fractional) is used in many industries (e.g., for the distillation of …liquid air…).
You state that the ethane processing plant at issue is a combination of integrated units consisting of individual components connected by piping that combine together to a clearly defined function covered by a heading in Chapter 84, HTSUS.
Note 4 to Section XVI, HTSUS, provides for the classification in a single heading of a combination of machines which together contribute to a single clearly defined function. The subject ethane processing plant will include various interconnected units and subunits, which together distill ethane feedstock to produce purified ethylene and other products. The purification of the ethane streams that occurs within the plant results from a process involving distillation, evaporation and condensation once the initial separation processes are complete.
As referenced above, in the instant case the individual interconnected units are the following: deenthanizer tower, depropanizer, debutanizer, dementhanizer, C2 splitter fractionation tower, engine compressor, distillation towers, cracker furnace, quenching tower, compressors, heat exchangers, caustic wash tower and separator vessel. In the instant case, the individual units are classifiable in their own respective HTSUS provisions when imported separately. However, once assembled into the subject ethane processing complex, they contribute to a single clearly defined function of fractionation and distillation of gasses through changes in temperature. Fractionating and rectifying machinery are provided for eo nomine in heading 8419, HTSUS, and are described in EN 84.19.
Based on the function of the ethane processing complex at issue, we find that it is classified in heading 8419, HTSUS. See Headquarters Ruling Letter (“HQ”) 952810, dated December 9, 1992 (when imported together, an incubator and gas mixture apparatus is a functional unit because the collection of machinery contributed to a clearly defined function, described within the terms of heading 8419, HTSUS). See also HQ H062209, dated August 10, 2009 (when imported together, machines comprising a rare gases purification plant, contributing to a single clearly defined function of gases fractionation, are classified in heading 8419, HTSUS).
Accordingly, provided that all the components of the subject ethane processing plant are part of a single entry, they are classified under subheading 8419.40.0080, HTSUS, which provides for “Machinery, plant or laboratory equipment, whether or not electrically heated (excluding furnaces, ovens and other equipment of heading 8514), for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, nonelectric; parts thereof: Distilling or rectifying plant: Other.”
HOLDING:
By application of GRI 1, the ethane processing complex at issue, when entered in its entirety, is classified under heading 8419, HTSUS, and is specifically provided for in subheading 8419.40.00, HTSUS, which provides for “Machinery, plant or laboratory equipment, whether or not electrically heated (excluding furnaces, ovens and other equipment of heading 8514), for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, nonelectric; parts thereof: Distilling or rectifying plant.” The 2016 column one, general rate of duty is Free.
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/. 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,
Ieva K. O’Rourke, Chief
Tariff Classification and Marking Branch