CLA-2 OT:RR:CTF:TCM H268537 PJG
Port Director
2108 21st Avenue, South
Great Falls, Montana 59405
RE: Application for Further Review of Protest No. 3304-15-100047; Solids Removal Unit
Dear Port Director:
This is in reference to the Application for Further Review (“AFR”) of Protest No. 3304-15-100047, timely filed on July 15, 2015, by S. Richard Shostak on behalf of AMC North America Limited (“AMC” or “Protestant”). The AFR concerns the tariff classification of a trailer mounted Solids Removal Unit (“SRU”), under the Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
This AFR concerns the tariff classification of a trailer mounted SRU entered in four entries on March 7, 2014, March 11, 2014, March 22, 2014, and April 15, 2014, and liquidated on January 16, 2015, January 23, 2015, January 30, 2015, and February 27, 2015, respectively. The SRU, as imported, includes: a hopper; a control panel; a gear box; pulleys; pumps; 3 storage tanks; hoses; belts; a battery; fuel lines and filters; a 25 kVA generator; trailer; walkways; ladders; a structural steel platform with a ladder; hand rails and kickstands; a centrifuge; Genset (for power); Unimix drilling fluid mixing system; and a shale shaker.
The merchandise was entered under subheading 8474.10.0010, HTSUSA, which provides for “Machinery for sorting, screening, separating, washing, crushing, grinding, mixing or kneading earth, stone, ores or other mineral substances, in solid (including powder or paste) form; machinery for agglomerating, shaping or molding solid mineral fuels, ceramic paste, unhardened cements, plastering materials or other mineral products in powder or paste form; machines for forming foundry molds of sand; parts thereof: Sorting, screening, separating or washing machines: Portable” and was liquidated under subheading 8421.19.0000, which provides for “Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof: Centrifuges, including centrifugal dryers: Other.”
The Protestant describes the SRU as follows:
The AMC Solids Removal Unit (SRU) is a mobile machine usually mounted on a trailer, which operates an entire closed loop system near the drill-site to filter or purify the drilling fluid which is drawn out of the drill hole into and through the machine and back to the drill hole. The shale shaker unit in the SRU removes the larger solids from the drilling fluid, which falls into the shaker tank. The fluid is then pumped through the 9’’ bowl decanting centrifuge …, where the fine and ultrafine cuttings are removed from the drilling fluid. The fluid is then pumped into the mixing chamber having a weir system metered polymer feed and hopper, where the fluid is conditioned with additives to improve the performance of its functions in the drilling process and is then returned to the drill hole. The SRU’s closed loop fluid system improves the efficiency of the drilling operation by reducing the environmental impact of the operation.
The Protestant also indicates that “[t]he subject SRUs will not perform their normal required functions without the shaker units and without the mixing systems.” They also note that the drilling fluid is “95% water.” Finally, the Protestant indicates that the machinery is used by the extractive industry.
The Protestant asserts that the SRU should be classified under heading 8421, HSTUS, and specifically, under subheading 8421.21.00, HTSUS, which provides for “Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof: Filtering or purifying machinery and apparatus for liquids: For filtering or purifying water.” Alternatively, the Protestant suggests classification of the SRU under heading 8474.10.00, HTSUS, which provides, in part, for “Machinery for sorting, screening, separating, washing, crushing, grinding, mixing or kneading earth, stone, ores or other mineral substances, in solid (including powder or paste) form; machinery for agglomerating, shaping or molding solid mineral fuels, ceramic paste, unhardened cements, plastering materials or other mineral products in powder or paste form; machines for forming foundry molds of sand; parts thereof: Sorting, screening, separating or washing machines.”
The Protestant submitted the following five exhibits to support its argument:
AMC letter of October 10, 2013, which describe the machines design and operation;
2) AMC SRU Operations Manual; 3) four-page AMC Minerals Brochure; 4) two-page AMC Minerals Brochure; and 5) a sheet indicating the cost breakdown of the important components of the SRU.
According to the AMC letter dated October 10, 2013, the SRU operates as follows:
Drill fluids are pumped from the drill hole or collar up through the distribution box and over the shale shaker.
The shale shaker is covered in screened panels that work to classify the heaviest cuttings from the drill fluids.
The classified fluids with heaviest solids removed then fall into the shaker tank. The shaker tank fluids are then pumped from the shaker tank up through the centrifuge by the mono pump. The Mono pump’s sole purpose is to feed the centrifuge in a regulated flow to allow for proper solids removal and conditioning of fluids.
The decanter centrifuge embodies the simple principle of a screw conveyer. The decanter comprises a solid cylindrical bowl, rotating at a high rate of speed. Inside the bowl is a scroll (screw conveyer) rotating at a slightly different speed.
The fluids exit the centrifuge and fall into the cleaned fluids tanks.
The cleaned fluids tanks are then pumped through the mixing hopper where they are conditioned.
The conditioned fluids are then sent back to the drill rig pump for pumping down hole where the process repeats.
According to the four-page AMC Minerals Brochure, “[t]he centrifuge is
electrically powered and is supported by a 25kVA silenced generator” and has the following specifications: weighs 4500 kg; measures 6200x3100x2500mm; has a 9’’ stainless steel bowl decanting centrifuge with a g-force of 2900 at 3000 rpm; 40 L per shift fuel; a process capacity of 50-130 L/min; 1000V electric power lead with Masey plug; and an approximately 3x1000L chamber tank capacity.
You have further explained that the screened panels of the shale shaker are
constructed “primarily of a thin steel frame housing with varying size of mesh.”
ISSUE:
What is the proper classification of the Solids Removal Unit under the HTSUS?
LAW AND ANALYSIS:
Initially, we note that the matter protested is protestable under 19 U.S.C.
§ 1514(a)(2) as a decision on classification. The protest was timely filed, within 180 days of liquidation for entries made on or after January 16, 2015. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)).
Further Review of Protest No. 3304-15-100047 is properly accorded to Protestant pursuant to 19 CFR § 174.24(b) because the decision against which the protest was filed is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts.
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (“GRI”). 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 may then be applied.
The 2014 HTSUS provisions under consideration are as follows:
8421 Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof:
Centrifuges, including centrifugal dryers:
* * *
8421.19.00 Other
Filtering or purifying machinery and apparatus for liquids:
8421.21.00 For filtering or purifying water
8421.29.00 Other
Other
* * *
Other
* * *
8421.29.0065 Other
8474 Machinery for sorting, screening, separating, washing, crushing, grinding, mixing or kneading earth, stone, ores or other mineral substances, in solid (including powder or paste) form; machinery for agglomerating, shaping or molding solid mineral fuels, ceramic paste, unhardened cements, plastering materials or other mineral products in powder or paste form; machines for forming foundry molds of sand; parts thereof:
8474.10.00 Sorting, screening, separating or washing machines
Note 4 to Section XVI, HTSUS, states the following:
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.
Note 5 to Section XVI, HTSUS, states the following:
For the purposes of these notes, the expression “machine” means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of chapter 84 or 85.
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System 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 EN to 84.21 states, in pertinent part:
This heading covers:
Machines which, by the use of centrifugal force, completely or partly separate substances according to their different specific gravities, or which remove the moisture from wet substances.
Filtering or purifying machinery and apparatus for liquids or gases, other than, e.g., filter funnels, milk strainers, strainers for filtering paints (generally Chapter 73).
* * *
(II) FILTERING OR PURIFYING MACHINERY AND APPARATUS, FOR LIQUIDS OR GASES
Much of the filtration or purification plant of this heading is purely static equipment with no moving parts. The heading covers filters and purifiers of all types (physical or mechanical, chemical, magnetic, electro magnetic, electrostatic, etc.). The heading covers not only large industrial plant, but also filters for internal combustion engines and small domestic appliances. The heading does not, however, include filter funnels, milk strainers, vessels, tanks, etc., simply equipped with metallic gauze or other straining material, nor general purpose vessels, tanks, etc., even if intended for use as filters after insertion of a layer of gravel, sand, charcoal, etc.
In general, filtering machinery and plant of this heading is of two distinct types according to whether it is intended for liquids or gases.
(A) Filtering and purifying machinery, etc., for liquids, including water softeners.
The liquid filters of this group separate solid, fatty, colloidal, etc., particles from a liquid, for example, by passing it through a sheet, membrane or mass of porous material (e.g., cloth, felt, wire cloth, skin, stoneware, porcelain, kieselguhr, sintered metallic powders, asbestos, paper pulp, cellulose, charcoal, animal black, sand). In the treatment of drinking water, some of these materials (e.g., porcelain and charcoal) remove bacteria, etc., in the process of filtration; filters using these materials are therefore sometimes called “water purifiers.” Filters are also used to eliminate liquids from materials in the form of a slurry (e.g., from ceramic materials or ore concentrates). The heading covers liquid filters whether of the gravity, suction (or vacuum) or pressure types.
* * *
EN 84.74 states, in pertinent part :
This heading covers:
Machinery of a kind used, mainly in the extractive industries, for the treatment (sorting, screening, separating, washing, crushing, grinding, mixing or kneading) of solid mineral products (in general the products of Section V of the Nomenclature) such as earth (including earth colours), clay, stone, ores, mineral fuels, mineral fertilisers, slag cement or concrete.
* * *
Certain machines of the kind normally used for the treatment of mineral products can, as a secondary use, also treat non-mineral products (e.g., wood or bone); such machines remain in this heading. However, the heading does not extend to machinery or screening wood chips; for grinding wood flour; for grinding or mixing chemicals or organic colouring materials; for grinding bone, ivory, etc.; for agglomerating or moulding cork powder).
Protestant asserts that the appropriate tariff classification heading for the trailer mounted SRU is heading 8421, HTSUS, or alternatively, heading 8474, HTSUS. We note that the EN 84.74 states that heading 8474, HTSUS, covers machinery “of a kind used, mainly in the extractive industries, for the treatment … of solid mineral products … such as earth …, clay, stone, ores, mineral fuels, mineral fertilisers, slag cement or concrete.” Furthermore, the text of heading 8474, HTSUS, provides for “[m]achinery for sorting, screening, separating, washing, crushing, grinding, mixing or kneading earth, stone, ores or other mineral substances, in solid … form,” which indicates that the machines classified therein are used for the named processes on substances in solid form. Heading 8474, HTSUS, is a use provision. See Group Italglass U.S.A., Inc. v. United States, 17 Ct. Int’l Trade 226, 228 (1993). As such, it is the principal use of the class or kind of machinery to which the trailer mounted SRU belongs that governs classification under heading 8474, HTSUS. The SRU is a machine used to filter drilling fluid. Drilling fluid is a liquid, as per our prior rulings that have defined what constitutes a “liquid” for tariff classification purposes. See HQ 073775, dated March 22, 1984. The drilling fluid is similar to the pulp slurry discussed in HQ 073775, wherein CBP found that “[p]ulp slurry has a definite volume but not shape, and is capable of flowing freely, typically in the manner of water.” We find that the trailer mounted SRU is used to filter drilling fluid, and the drilling fluid is a liquid and is not an ore or other mineral substance in solid form. Therefore, it is not described by heading 8474, HTSUS.
Moreover, we find that the trailer mounted SRU is a functional unit pursuant to Section XVI, Note 4, HTSUS, because it is a machine that consists of individual components that are intended to contribute together to a clearly defined function, specifically, filtering the drilling liquid. See Note 4 to Section XVI. Based on the facts presented, the shaker and the centrifuge (two of the three main components comprising the SRU) contribute together to the clearly defined function of removing solids from drilling fluid, while the function of the mixing system/agitator (the conditioning of the drilling fluid) is subordinate to the SRU’s intended purpose.
Pursuant to Note 4 to Section XVI, HTSUS, the SRU is classified in heading 8421, HTSUS, and subheading 8421.29, HTSUS. It is not classified in subheading 8421.21, HTSUS, which provides for “Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof: Filtering or purifying machinery and apparatus for liquids: For filtering or purifying water” because although Protestant’s submission suggests that the drilling fluid is water-based, it is not water. According to the Encyclopedia Brittanica, at https://www.britannica.com/technology/drilling-mud, “[a] typical water-based drilling mud contains a clay, usually bentonite, to give it enough viscosity to carry cutting chips to the surface, as well as a mineral such as barite (barium sulfate) to increase the weight of the column enough to stabilize the borehole. Smaller quantities of hundreds of other ingredients might be added, such as caustic soda (sodium hydroxide) to increase alkalinity and decrease corrosion, salts such as potassium chloride to reduce infiltration of water from the drilling fluid into the rock formation, and various petroleum-derived drilling lubricants.” This definition suggests that drilling fluid contains components in addition to water, or does not contain water at all. According to a description of drilling fluid on the website of a directional drilling specialist company, “[t]he major base component of any drilling fluid is water, and in some rare instances, water alone might work. However, in most cases, straight water is not satisfactory. There are numerous products on the market that can be added to the water to enhance the drilling fluids' performance. Which additives to use will largely be dictated by the ground conditions encountered.”
We find that the trailer mounted SRU is classified in subheading 8421.29.0065, HTSUSA, which provides for “Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof: Filtering or purifying machinery and apparatus for liquids: Other: Other: Other: Other.”
HOLDING:
Under the authority of GRIs 1 and 6, the trailer mounted SRU is classified in heading 8421, HTSUS, specifically, under subheading 8421.29.0065, HTSUSA, which provides for “Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof: Filtering or purifying machinery and apparatus for liquids: Other: Other: Other: Other.” The 2014 column one, general rate of duty is Free. Duty rates are provided for convenience and are subject to change.
Since re-classification of the merchandise as indicated above will result in the same rate of duty as claimed, you are instructed to GRANT the protest in full.
In accordance with sections IV and VI of the CBP Protest/Petition Processing Handbook, you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Any re-liquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision, the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the
public on the CBP Home Page on the World Wide Web at http://www.cbp.gov by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division