CLA-2 OT:RR:CTF:TCM H269853 NCD
Matthew D. Anderson
Charter Brokerage
22762 Westheimer Parkway, Suite 530
Katy, TX 77450
RE: Modification of NY N047164; classification of refinery modules
Dear Mr. Anderson:
This is in reference to New York Ruling Letter (NY) N047164, issued to you on January 8, 2009 by U.S. Customs and Border Protection (CBP), in which CBP provided a determination as to the proper classification of various refinery modules under the Harmonized Tariff Schedule of the United States (HTSUS). We have reviewed NY N047164, determined that it is partially incorrect, and, for the reasons set forth below, are modifying that ruling.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. §1625(c)(1)), as amended by section 623 of Title VI, notice of the proposed action was published in the Customs Bulletin, Vol. 50, No. 38, on September 21, 2016. Two comments opposing the proposed action were received. Those comments will be addressed in this decision.
FACTS:
The articles at issue in NY N047164 consist of three types of prefabricated, interconnecting modules designed for installation in a pre-existing oil refinery complex.
NY N047164 was issued in response to your letter of October 23, 2008, in which a determination from CBP as to the classification of the modules was requested (“ruling request”). The ruling request included descriptions and technical renderings of the modules, as well as photos of the modules taken at various stages of their construction. The diagrams and photos depict the modules as consisting primarily of multilevel steel frameworks within which numerous pipes are affixed to load-bearing crossbeams, and the photos indicate that the pipes are installed in the course of the modules’ assembly.
On November 3, 2008, prior to issuing the requested ruling, CBP issued a letter requesting additional information concerning the modules at issue. CBP specifically requested, inter alia, descriptions of “each component, its purpose and by what means its purpose is achieved.” The following response to our request was provided in a letter of December 9, 2008 (“supplemental submission”):
Module Type #1 – Interbattery Connection (“IBC”) Pipe Racks
The IBC pipe racks are fabricated structural steel skeletal structures that can be shipped and installed on foundations built to receive the modules…These module racks support several pipe lines, that are connected on the site in order to quickly and efficiently build the necessary infrastructure between various new and existing refinery units as well [as] conveying the received crude and products… Once the piping on these racks is connected this provides the interconnecting piping that primarily receive input streams (called feedstock streams) from prior (called upstream) process units or crude tanks to subsequent (called downstream) process units or storage tankage for product blending.
In addition to the piping used to move refinery product streams between units, the IBC pipe racks will also support piping that will be used to convey utilities such as raw water, clarified water and filtered water required to operate a new…[p]ower facility, cooling water, natural gas, plant and instrument air. This piping will also convey other utility streams and…process storm water for treatment and disposal…Finally, in addition to the piping used for products and utilities the IBC racks will provide additional levels to support cable trays to support electrical cables for distributing electrical power from the power facility to a main substation and to the local process unit substation.
Module #2 – Power Station 4 (“PS4”) Pipe Racks
The PS4 pipe racks are fabricated metal skeletal structures that can be shipped and connected to one another on-site at the refinery in order to quickly and efficiently build the necessary infrastructure between the refinery units and the on-site power plant in the refinery. The structures are connected together to create the steam and water distribution system for the power plant. The connection of these units uses piping to transport and circulate steam, cooling water and filtered water to and/or from various units and the on-site power plant[.]
Module #3 – Stair Tower Modules
The stair tower modules are fabricated modules with…stairways. These modules are strictly used as stairways and have no process functions. These modules connect with the other modules described herein, to allow for plant employees to have access to the various modules and the contents of the modules (i.e. piping, utilities, etc.).
The supplemental submission also states as follows with respect to the functions performed by the modules:
The IBC pipe racks purpose is to support the pipes that carry the various fluids to and from the refinery process units. The electrical cables will be installed after importation and once the modules are in the processing of being connected at the Port Arthur Refinery. Some of the IBC pipe rack piping is insulated and some has electric heat tracing on it, however, the primary function of the pipes is to convey liquids.
The PS4 pipe racks purpose is also to support the pipes that carry various types of water and steam. The PS4 pipe racks also support cable trays that will hold electrical cables. The electrical cables will be installed after importation and once the modules are in the processing of being connected at the Port Arthur Refinery.
On the basis of the information provided in the ruling request and supplemental submission, NY N047164 contained the following descriptions of the modules at issue:
Module Type 1, referred to as Interbattery Connection Pipe Racks, are steel skeletal structures that are used to support pipes that carry the various fluids to and from the refinery process units as well as supporting electrical trays which hold electrical cables. Module Type 2, known as Power Station 4 Pipe Racks, function in the same manner as do the Interbattery Connection Pipe Racks. However, they support piping which transports and circulates steam, cooling water and filtered water to and from the power station. Module Type 3, Stair Towers, are pre-fabricated stairways that are used in conjunction with, and allow access to, the other modules.
All three refinery modules were classified in heading 7308, HTSUS. They were specifically classified in subheading 7308.90.95, HTSUS, which provides for: “Structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge sections, lock gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns) of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel: Other: Other: Other.”
On October 14, 2015, in the course of reviewing NY N047164, we contacted you to inquire as to whether the modules at issue contained pipes and/or other components at the time of entry. In your response of October 19, 2015, you indicated your understanding that pipes are in fact present in the modules at entry, based on the following statement by a project coordinator:
All of the pipe rack modules have structural steel columns and beams that comprise the skeleton, with internal piping. There are a few valves. Depending on the nature of the flow stream in each pipe, the material for that pipe may differ. The bulk of the piping is either a type of carbon steel or stainless steel.
We have not received any further information concerning the modules and their constituent components at any point prior to, during, or following the above-mentioned comment period.
ISSUE:
Whether the subject refinery modules are properly classified as seamless steel pipe in heading 7304, HTSUS, as “other” steel pipes with circular cross-sections of an external diameter exceeding 406.4 mm, in heading 7305, HTSUS, as “other” steel pipes in heading 7306, HTSUS, or as structures of steel in heading 7308, HTSUS.
LAW AND ANALYSIS:
Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.
GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in their appropriate order. GRI 3 governs the classification of goods that are prima facie classifiable in two or more headings, including, inter alia, composite goods. GRI 3(b) provides, in relevant part, that “composite goods consisting of different materials or made up of different components…shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.”
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).
For purposes of this ruling, we consider whether the subject refinery modules are classified in the following 2018 HTSUS provision:
7304 Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel
7305 Other tubes and pipes (for example, welded, riveted or similarly closed), having circular cross sections, the external diameter of which exceeds 406.4 mm, of iron or steel
7306 Other tubes, pipes and hollow profiles (for example, open seamed or welded, riveted or similarly closed), of iron or steel
7308 Structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge sections, lock gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns) of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel
Heading 7308 applies, by its own terms, to steel “structures” and their parts, including “bridges and bridge sections, lock gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns.” The term “structure” is not defined in the HTSUS. It is axiomatic that undefined tariff terms are to be understood in accordance with (inter alia) lexicographical definitions and relevant Explanatory Notes (“ENs”). See GRK Can., Ltd. v. United States, 761 F.3d 1354, 1357 (Fed. Cir. 2014) (“Where the HTSUS does not expressly define a term…a court…may consult standard lexicographic and scientific authorities…In particular, a court also refers to the Explanatory Notes accompanying the HTSUS, which, though not controlling, provide interpretive guidance.”).
In undertaking to define “structure” for classification purposes, the courts have observed that “a complete definition of ‘structural’ or ‘structure’ is not to be found” in lexicographic sources. Supermarket Systems, U.S. v. United States, 13 C.I.T. 907, 912 (1989) (citing S.G.B. Steel Scaffolding & Shoring Co., Inc. v. United States, 82 Cust. Ct. 197 (1979)). Likewise, EN 73.08 lacks a comprehensive definition of “structure” for purposes of heading 7308. The EN, however, does provide the following indicia as to the term’s meaning:
This heading covers complete or incomplete metal structures, as well as parts of structures. For the purpose of this heading, these structures are characterised by the fact that once they are put in position, they generally remain in that position. They are usually made up from bars, rods, tubes, angles, shapes, sections, sheets, plates, wide flats including so called universal plates, hoop, strip, forgings or castings, by riveting, bolting, welding, etc. Such structures sometimes incorporate products of other headings such as panels of woven wire or expanded metal of heading 73.14. Parts of structures include clamps and other devices specially designed for assembling metal structural elements of round cross section (tubular or other). These devices usually have protuberances with tapped holes in which screws are inserted, at the time of assembly, to fix the clamps to the tubing.
Apart from the structures and parts of structures mentioned in the heading, the heading also includes products such as:
Pit head frames and superstructures; adjustable telescopic props, tubular props, extensible coffering beams, tubular scaffolding and similar equipment; sluice-gates, piers, jetties and marine moles; lighthouse superstructures; masts, gangways, rails, bulkheads, etc., for ships; balconies and verandas, shutters, gates, sliding doors; assembled railings and fencing; level-crossing gates and similar barriers; frameworks for greenhouses and forcing frames; large-scale shelving for assembly and permanent installation in shops, workshops, storehouses, etc.; stalls and racks; certain protective barriers for motorways, made from sheet metal or from angles, shapes or sections.
(emphasis added).
Notably, like the legal text of heading 7308 itself, EN 73.08 sets forth various examples of articles to be considered “structures” for purposes if the heading. We consider these examples to be probative of the term’s scope, particularly in the absence of a “complete definition” anywhere in the instructional sources. See LeMans Corp. v. United States, 660 F.3d 1311, 1320-21 (Fed. Cir. 2011) (endorsing use of EN examples to clarify the scope of a tariff term where they are consistent with the provision in which the term is found). In reviewing the combined examples of structures set forth in heading 7308 and EN 73.08 – including bridges, lock-gates, towers, lattice masts, roofs and frameworks, masts, gangways, lighthouse superstructures, balconies and verandas, fences, level-crossing gates, greenhouse frames, shelving systems, and protective barriers – we observe that they unfailingly include only items which enclose, partition, or support the weight of persons or separate objects. Not one of the exemplars is in and of itself capable of conducting a separate mechanical or otherwise non-structural function; nor do the exemplars support or contain separate articles capable of such.
That “structures” are to be considered limited in this regard comports with CBP’s prior treatment of heading 7308, HTSUS. For example, we ruled in Headquarters Ruling Letter (HQ) 085145, dated September 15, 1989, that oil rig “jackets” were structures within the meaning of the heading because they provided the foundations for the topside platforms, but did not contain any drilling or production equipment. See also HQ 964757, dated September 25, 2001 (classifying wind turbine towers in heading 7308 upon finding that “[t]he towers do not provide operational or mechanical interaction with the turbine or its rotor”) and HQ 087730, dated September 5, 1990 (classifying telephone booths without telephones in heading 7308). By contrast, we determined in HQ 966175, dated January 30, 2003, that the topside platforms were not classifiable in the heading because, unlike the jackets, they housed the equipment that was used to drill for and extract oil. Insofar as this classification practice is supported by the legal text and EN 73.08 alike, it reflects a correct interpretation of heading 7308, HTSUS.
Here, of the three refinery modules at issue, the subject IBC Pipe Racks and PS4 Pipe Racks are described as “steel skeletal structures” which “support several pipelines.” By all available indications, including the photos included with your ruling request and the statements provided in your October 19, 2015 communication, the referenced pipes are installed in the modules at the time the modules are entered. As stated in the supplemental submission, these pipes are not used to form the crossbeams, uprights, or other components comprising the “steel skeletal structures”; rather, they are separate items that conduct a multitude of functions directly supporting refinery operations within the complex. According to your supplemental submission, the pipes installed in the IBC Pipe Racks transport feedstock from various upstream units to downstream units for product blending, transport water necessary for the operation of an on-site power facility, direct other utility streams, and transport storm water for treatment and disposal. Meanwhile, the PS4 Pipe Racks support pipes which transport steam and water to and from the on-site power plant. These functions – i.e., supply of power, supply of raw materials for processing, and conveyance other fluids necessary for refinery operations – go far beyond structural functions such as enclosure, support, or partitioning. Accordingly, as entered, the IBC Pipe Racks and PS4 Pipe Racks are cannot be considered structures of heading 7308, HTSUS. To the extent that we determined otherwise in NY N047164, this determination was in error. However, our determination concerning the Stair Tower Modules, which consist only of metal frames that bear the weights of their users, and do not include separate items which conduct “process functions,” remains correct.
Both commenters challenge this conclusion, averring that EN 73.08 broadly permits structures to “incorporate products of other headings,” including pipes. One commenter further asserts that this interpretation is supported by a proffered technical reference. We disagree with both assertions. The EN states that structures are “usually made up from…tubes” and “sometimes incorporate products of other headings such as panels of woven wire or expanded metal of heading 73.14.” (emphasis added). “Panels of woven wire or expanded metal of heading 7314,” included to contextualize and qualify the “products of other headings” that may be used, are articles designed to create or complete enclosures or to reinforce existing portions of a structure. See EN 73.14 (“Expanded metal…is used instead of wire grill or perforated sheets for fencing, safety guards for machines, flooring of foot-bridges or crane runways, reinforcement of various building materials (e.g., concrete, cement, plaster, glass), etc.”). There is no indication that these materials and others, including tubes, may be in the form of separate articles with functions fully tangential to those of the structures in which they are incorporated. Nor is such a reading of “structure” supported by above-mentioned technical reference. See Richard M. Drake and Robert J. Walter, Design of Structural Steel Pipe Racks, Engineering Journal 241 (2010) (indicating only that pipe racks “support” pipes, power cables and instrument trays without clarifying whether the latter are considered components of the former).
One commenter further asserts that all refinery modules at issue satisfy descriptions of structures set forth in EN 73.08 because they remain stationary once placed; include allowable protuberances to fix clamps to tubes; and are analogous in function to sluice-gates, which the EN lists as a product classifiable in heading 7308. We do not contest that the pipe racks remain stationary once positioned or that they include clamps and other devices for affixing tubing. With respect to the latter point, the EN specifies that tubes affixed by permissible clamps are structural in function. Moreover, we do not agree that the modules can be likened to sluice-gates or to any of the other exemplars listed in EN 73.08. Whereas sluice-gates operate as partial enclosures to prevent or reduce the outflow of water already present in sluices, the IBC Pipe Racks and PS4 Pipe Racks function as conveyance mechanisms by transporting various liquids between refinery units, as described above. Accordingly, our determination that those modules fall outside the scope of heading 7308, HTSUS, is not inconsistent with EN 73.08. We remain of the position that they cannot be considered structures of heading 7308 when entered replete with pipes.
Rather, the IBC Pipe Racks and PS4 Pipe Racks are “composite goods” within the meaning of GRI 3(b) insofar as they are made up of components described in separate headings. Specifically, whereas the steel structural frameworks are products of heading 7308, HTSUS, the pipes are products of headings 7304, 7305, or 7306, HTSUS, as determined by their construction, profiles, and dimensions.* The modules are accordingly classified “as if they consisted of the…component which gives them their essential character.” While “essential character” is not defined in the HTSUS, EN(VIII) to GRI 3(b) states as follows:
The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.
As stated in the above-referenced EN, as well as in various court decisions, the essential character of a given article turns on its particular attributes and the facts of the case at hand. See, e.g., Alcan Food Packaging (Shelbyville) v. United States, 771 F.3d 1364, 1366 (Fed. Cir. 2014) (“The ‘essential character’ of merchandise is a fact-intensive issue.”). With this understanding, courts have consistently applied the factors listed in the EN(VIII) to GRI 3(b), as well as additional factors, to determine essential character. See id. at 1367 (Fed. Cir. 2014); Home Depot USA, Inc. v. United States, 491 F.3d 1334, 1337 (Fed. Cir. 2007) (“Many factors should be considered when determining the essential character…specifically including but not limited to those factors enumerated in Explanatory Note (VIII) to GRI 3(b).”). Among the additional factors previously considered are “ordinary common sense," an article's recognized names, its primary function, and its uses. See Tyco Fire Products v. United States, 841 F.3d 1353, 1361 (Fed. Cir. 2016).
Here, it is unclear whether the steel frameworks or the pipes are the predominant components of the IBC Pipe Racks and PS4 Pipe Racks in terms of quantity, weight, or value. The diagrams and photos indicate that the steel frames and collective pipes account for comparably sizable portions of each refinery module’s overall mass. However, we are unable to make quantifiable size and weight determinations without precise product specifications. The absence of probative information concerning the modules’ components was initially noted in proposed ruling letter HQ H269853, published in conjunction with the above-mentioned notice of proposed action, yet we have not received any additional information that could assist in our analysis. Accordingly, we look to the roles of the components in relation to the finished refinery modules, as well as the additional factors previously considered by the courts, to inform our determination of essential character.
To this end, we find that the pipes are the most important components in relation to the modules’ use and primary function. Simply put, the primary function of the modules is to support the pipes, which, as explained above, directly contribute to refinery operations by transporting liquids as needed for production, power supply, and waste disposal. This is all but explicitly confirmed in the supplemental submission, which states that “[t]he IBC pipe racks purpose is to support the pipes that carry the various fluids to and from the refinery process units” and that [t]he PS4 pipe racks purpose is also to support the pipes that carry various types of water and steam.” The pipes themselves are clearly the most important components in relation to this function, whereas the steel frameworks cannot be considered more than auxiliary components. This is further evident in the modules’ commercial designation as “Pipe Racks.” See Tyco, 841 F.3d at 1361 (determining an explicit reference to a component or material in a product’s commercial name to be probative of essential character). It is therefore our determination that the essential character of the IBC Pipe Racks and PS4 Pipe Racks is imparted by their component pipes, and that those modules are therefore classified in heading 7304, 7305, or 7306, in accordance with the construction, profiles, and dimensions of these pipes.
One commenter opposes our application of GRI 3(b) to pipe-equipped modules generally, averring that it may incur increases in expenditures for importers and bring about a negative economic impact. However, because classification is governed by the HTSUS, which constitutes binding, statutory law, it must be determined by the strict application of the GRIs. As stated above, because the refinery modules are composite articles that cannot be classified by application of GRI 1, we must unequivocally apply GRI 3(b) in reaching a classification determination.
HOLDING:
By application of GRIs 1 and 3(b), the IBC Pipe Racks and PS4 Pipe Racks are classified in heading 7304, HTSUS, if the pipes contained therein are predominantly seamless with hollow profiles. They are classified in heading 7304, HTSUS, if the pipes contained therein are predominantly non-seamless or non-hollow and have circular cross-sections, the external diameter of which exceeds 406.4 millimeters. They are classified in heading 7306, HTSUS, if the pipes contained therein are non-seamless or do not have a circular cross-section with an external diameter exceeding 406.4 millimeters. By application of GRI 1, the Stair Tower Modules remain classified in heading 7308, HTSUS.
On March 8, 2018, Presidential proclamations 9704 and 9705 imposed additional tariffs and quotas on a number of steel and aluminum mill products. Exemptions have been made on a temporary basis for some countries. Quantitative limitations or quotas may apply for certain exempted countries and can also be found in Chapter 99. Additional duties for steel of 25 percent and for aluminum of 10 percent are reflected in Chapter 99, subheading 9903.80.01 for steel and subheading 9903.85.03 for aluminum. Products classified under headings 7304, 7305, and 7306, HTSUS, may be subject to additional duties or quota. At the time of importation, you must report the Chapter 99 subheading applicable to your product classification in addition to the Chapter 72, 73 or 76 subheading listed above. The Proclamations are subject to periodic amendment of the exclusions, so you should exercise reasonable care in monitoring the status of goods covered by the Proclamations and the applicable Chapter 99 subheadings.
Should you require a determination as to the specific classification of the IBC Pipe Racks and PS4 Pipe Racks, please submit a request for a binding ruling, along with any information required for this determination, to CBP’s National Commodities Specialist Division (NCSD). Requests for a binding ruling may be made electronically via CBP’s website, https://apps.cbp.gov/erulings/index.asp, or by writing to NCSD at the following address:
Director, National Commodity Specialist Division
Regulations and Rulings
Office of Trade
U.S. Customs an d Border Protection
201 Varick Street, Suite 501
New York, NY 10014
Attn.: Binding Ruling Request
EFFECT ON OTHER RULINGS:
New York Ruling Letter N047164 is hereby MODIFIED in accordance with the above analysis.
In accordance with 19 U.S.C. §1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Craig T. Clark, Director
Commercial and Trade Facilitation Division