Customs Ruling HQ H289651 - Application for Further Review of Protest No. 4101-16-100256; Classification of air data computer; Applicability of preferential treatment under the Agreement on Trade in Civil Aircraft; Applicability of special provision 9801.00.1055; Applicability of General Note 3(e), HTSUS.

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HQ H289651
Mar 20, 2020

Type : Classification • HTSUS : 9014.20.80; 9801.00.10
Related: 963183; 563353; H251594

OT: RR: CTF: EMAIN H289651 NVF

Port Director
U.S. Customs and Border Protection
6747 Engle Road
Middleburg Heights, OH 44130-7907

RE: Application for Further Review of Protest No. 4101-16-100256; Classification of air data computer; Applicability of preferential treatment under the Agreement on Trade in Civil Aircraft; Applicability of special provision 9801.00.1055; Applicability of General Note 3(e), HTSUS.

Dear Port Director:

This letter is in response to the Application for Further Review (“AFR”) of Protest No. 5309-2016-100128, timely filed by Baker & McKenzie, LLC on behalf of protestant, Atlas Air Inc. (“Atlas”). The protest contests the classification and liquidation by Customs and Border Protection of an air data computer (“ADC”) under heading 8543 of the Harmonized Tariff Schedule of the United States (“HTSUS”). The protest also contests the applicability of the Agreement on Trade in Civil Aircraft (“ATCA”) to the entry of a fan air temperature sensor (“FATS”), the applicability of subheading 9801.00.1055, HTSUS to the entry of a fuel jettison control card (“FJCC”), and the applicability of General Note 3(e), HTSUS to the entry of a full authority digital engine control (“FADEC”). We apologize for our delay in responding to you.

FACTS:

There are four line items at issue in this protest. The first is an ADC, which is a component of the air data system in an aircraft. The ADC consists of two pressure sensor modules, four plug-in circuit card assemblies, a plug-in power supply assembly, and a chassis assembly with a front panel containing input connectors, an external fault LED display, a fail annunciator, and a functional test pushbutton switch. The ADC receives information from various inputs and computes altitude, airspeed, angle of attack, Mach, and temperature. This information is sent to the integrated display system, which is used by pilots in the cockpit during aircraft navigation.

The ADC at issue in this protest was installed on a U.S. registered aircraft and failed while the aircraft was in international traffic in Taipei, Taiwan. Atlas shipped the ADC to the Netherlands for repair and it was subsequently shipped to Atlas in the United States. When it entered the United States, CBP classified the ADC under heading 8543, HTSUS as electrical machines and apparatus, having individual functions, not specified or included elsewhere. Atlas argues that the ADC is properly classified under heading 9014, HTSUS as other navigational instruments and appliances.

The second item in this protest is a FATS, which is a component of the bleed air precooler system of an aircraft. The FATS at issue was used in civil aircraft until it was removed for failure in the United States and shipped to the Netherlands for repair. When it was subsequently returned to the United States, CBP classified the FATS under subheading 9032.10.0090, HTSUS. Subheading 9032.10.0090 has a Column 1 Special rate of duty for goods that qualify for preferential treatment under the Agreement on Trade in Civil Aircraft (“ATCA”). Atlas contends that the FATS meets the requirements and thus qualifies for preferential treatment under ATCA.

The third item in this protest is an FJCC, which is a component of a fuel jettison system on an aircraft. Atlas states that the FJCC at issue was manufactured in the United States and is of U.S. origin. It was sold by KLM in the Netherlands to Atlas as an exchange part for a failed FJCC that was removed from a U.S. registered aircraft and sent to KLM for replacement. Atlas contends that the FJCC is eligible for duty free treatment under subheading 9801.00.1055, HTSUS.

The fourth item in this protest is a FADEC, which is a dual-channel computer that is part of the aircraft fuel control system. Atlas states that the FADEC at issue was manufactured in the United States. It was removed from U.S.-registered aircraft No. N858GT on February 21, 2015, during maintenance while the aircraft was in Hong Kong. Atlas shipped the FADEC back to the United States for repair on February 24, 2015. Atlas argues that the FADEC is eligible for duty free treatment under subheading 9801.00.1055, HTSUS. In the alternative, Atlas contends that the FADEC is exempt from duty pursuant to General Note 3(e), HTSUS and 19 C.F.R. § 141.4.

ISSUES:

Whether the ADC is classified under heading 8543, HTSUS as a machine having individual functions not specified elsewhere, or under heading 9014, HTSUS as navigational instrument.

Whether the FATS qualifies for preferential treatment under ATCA.

Whether the FJCC is eligible for duty free treatment under subheading 9801.00.1055, HTSUSA.

Whether the FADEC is eligible for duty free treatment under subheading 9801.00.1055, HTSUSA, or exempt from formal duty and entry pursuant to General Note 3(e)(vi).

LAW AND ANALYSIS:

We observe as an initial matter that the matters protested are protestable under 19 U.S.C. § 1514(a)(2) as decisions on classification and amount of duties chargeable. The subject merchandise was entered by Atlas on February 17, 2015 and February 24, 2015. On December 28, 2015, CBP liquidated the entries. On June 24, 2016, Atlas timely filed a protest and AFR, within 180 days of liquidation of the first entry. 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 the protest is properly accorded to protestant pursuant to 19 C.F.R. § 174.24(b) because the decision against which the protest was filed is alleged to involve matters not previously ruled upon by CBP or by the Customs courts.

ADC

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 classification 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. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the heading and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.

The 2015 HTSUS subheadings under consideration are as follows:

8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof.

9014 Direction finding compasses; other navigational instruments and appliances; parts and accessories thereof.

Note 1(m) to Section XVI of the HTSUS, which encompasses Chapter 85, states that “This Section does not cover articles of Chapter 90.” Therefore, we must first determine whether the ADC is classified under heading 9014, HTSUS.

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System. While not legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System and are generally indicative of the proper interpretation of these headings. See T.D. -80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

EN 90.14 states that heading 9014 includes:

(C) Special instruments for air navigation, such as: (1) Altimeters. A type of barometer calibrated in height units and based on the fact that atmospheric pressure decreases with altitude. (2) Air speed indicators. These operate by differential pressure measurements of the aircraft’s slipstream, and show the speed of the aircraft in relation to the surrounding air. (3) Climbing or diving speed indicators. These show the vertical speed of descent or ascent of the aircraft, by means of a differential pressure gauge. (4) Artificial horizons or gyrohorizons and turning and banking indicators. These are based on gyroscopic principles, the former indicating the angle of the aircraft by reference to the transversal or longitudinal axis, and the latter by reference to the vertical axis. (5) Machmeters. These indicate the ratio between the air speed and the local speed of sound. The ratio is expressed as a “Mach number”. (6) Accelerometers. These determine the maximum limit (not to be exceeded) of the inert forces produced by acceleration during highspeed evolutions. (7) Automatic pilots. This apparatus temporarily replaces the pilot by controlling the equilibrium and flight of the aircraft in accordance with a preestablished setting (altitude, course, etc.). It consists chiefly of directoperated or servomotor controls (usually hydraulic motors which replace the pilot’s movements), and of automatic acting apparatus (highspeed gyroscopes) which coordinate instrument readings and the action of the servomotors.

These exemplars, however, are not intended to be exclusive and CBP has classified other navigational instruments under heading 9014, HTSUS. See HQ 963183 (Mar. 2, 2001) (spacecraft control processor).

In this case, the information provided indicates that the ADC computes various navigational functions, particularly as related to airspeed and altitude. The ADC receives information from other aircraft instruments, computes the data, and delivers it to the aircraft’s pilot display system and the autopilot system. Variables that the ADC compiles include altitude, airspeed, angle of attack, Mach level, and temperature, most of which are included in EN 90.14. The ADC does not appear to exert any control function, nor does it appear to have any significant additional functionality other than the navigational functions already discussed. Therefore, the ADC is properly classified under heading 9014, HTSUS, as other navigational instruments.

FATS The ATCA was implemented by Title VI, "Civil Aircraft Agreement" of the Trade Agreements Act of 1979 (Sec. 601, Pub. L. 9639, 93 Stat. 144, 96th Cong., 1st Sess. 1979), effective January 1, 1980, and became headnote 3 to schedule 6, part 6, Tariff Schedules of the United States (TSUS). Headnote 3 to schedule 6, part 6, TSUS, became General Note (GN) 3(c)(iv) when the HTSUS was enacted, and became GN 6, HTSUS, with minimal changes in 1995. GN 6, HTSUS, was then amended by section 12 of the Miscellaneous Trade and Technical Corrections Act of 1996, Pub. L. 104-295, 110 Stat. 3514 (Oct. 11, 1996). GN 6 of the 2015 HTSUS, provides:

Whenever a product is entered under a provision for which the rate of duty “Free (C)” appears in the “Special” subcolumn and a claim for such rate of duty is made, the importer—

shall maintain such supporting documentation as the Secretary of the Treasury may require; and

shall be deemed to certify that the imported article is a civil aircraft, or has been imported for use in a civil aircraft and will be so used.

In order to be considered a “civil aircraft” under GN 6(a)(ii), the product must meet the description of “civil aircraft,” as laid out in GN 6(b)(i) of the 2015 HTSUS:

For purposes of the tariff schedule, the term “civil aircraft” means any aircraft, aircraft engine, or ground flight simulator (including parts, components, and subassemblies thereof) - - that is used as original or replacement equipment in the design, development, testing, evaluation, manufacture, repair, maintenance, rebuilding, modification, or conversion of aircraft; and

(1) that is manufactured or operated pursuant to a certificate issued by the Administrator of the Federal Aviation Administration under [49 U.S.C. § 44704], or pursuant to the approval of the airworthiness authority in the country of exportation, if such approval is recognized by the FAA as an acceptable substitute for such an FAA certificate; . . . The regulations implementing GN 6, HTSUS, are enumerated in 19 C.F.R. § 10.183, and the documentation requirements are in subsection 10.183(e). Subsection 10.183(e) provides that each entry claiming duty-free treatment under GN 6 as “civil aircraft” must be supported by documentation verifying that claim, including the written order or contract and other evidence. The regulation states that:

Evidence that the merchandise qualifies under the general note includes evidence of compliance with paragraph (a)(1) of this section concerning use of the merchandise and evidence of compliance with the airworthiness certification requirement of paragraph (a)(2)(i), (a)(2)(ii), or (a)(2)(iii) of this section, including, as appropriate in the circumstances, an FAA certification; [and/or] approval of airworthiness by an airworthiness authority in the country of export and evidence that the FAA recognizes that approval as an acceptable substitute for an FAA certification. . . .

19 C.F.R. § 10.183(e). The regulation proceeds to state that this documentation does not need to be filed with the entry, but must be maintained in accordance with the general note and the recordkeeping requirements of 19 C.F.R. Part 163. U.S. Customs and Border Protection (CBP) may also request production at any time to verify the ATCA claim. See 19 C.F.R. § 10.183(e).

In this case, Atlas asserts that the FATS it imported is eligible for duty free treatment under the ATCA because it is a part of a civil aircraft that was repaired in the Netherlands and returned for use in a civil aircraft under an authorized certificate issued by the appropriate airworthiness authority in the country of exportation, which in this case is the Civil Aviation Authority in the Netherlands. Atlas attached the certificate as Exhibit 12 to its protest and AFR. The certificate, dated June 7, 2012 is titled “EASA FORM 1” states that the FATS, part number 790390-5, serial number 200105104, was repaired, tested, and considered ready for release to service. Therefore, the requirements set forth in 19 C.F.R. § 10.183(e) have been satisfied and the FATS qualifies for preferential treatment under ATCA.

FJCC

Subheading 9801.00.10, HTSUS, provides for the free entry of products of the United States that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 C.F.R. § 10.1) are met. Some change in the condition of the product while it is abroad is permissible. However, operations, which either advance the value or improve the condition of the exported product render it ineligible for duty-free entry upon return to the United States. Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970).

CBP has previously ruled that parts removed from aircraft engines that were returned to the United States for repair or replacement were eligible for duty-free treatment under subheading 9801.00.10, HTSUS. HQ 563353 (Dec. 1, 2005); see also HQ H251594 (Sep. 22, 2014). In HQ 563353, CBP ruled that imported aircraft engine parts were not advanced in value or improved in condition abroad when they were disassembled. Since the aircraft engines had been assembled in the U.S., the parts were considered to be of U.S.-origin and eligible for duty-free treatment pursuant to subheading 9801.00.10, HTSUS, assuming that the documentary requirements of 19 CFR 10.1 were satisfied.

The documentation requirements for goods to qualify for duty free entry under subheading 9801.00.10, HTSUS are set forth in 19 C.F.R § 10.1. Subsection 10.1(a)(1) requires that the foreign shipper make a declaration that the articles claimed to be free of duty under subheading 9801.00.10, HTSUS, were exported from the United States and that they are returned without having been advanced in value or improved in condition while abroad. The declaration is to include the port from which the goods were exported and the approximate date. In addition, section 10.1(a)(2) requires that “...the owner, importer, consignee, or agent having knowledge of the facts regarding the claim for free entry...” sign a declaration that the foreign shipper’s declaration is true and provide the name and location of the manufacturer of the articles. Further, the declaration must state that the articles were exported from the United States without the benefit of duty drawback, and that the articles were not manufactured or produced in the United States under the Temporary Importation Under Bond (“TIB”) provision 9813.00.05, HTSUS.

In this case, Atlas argues that the FJCC is eligible for duty free treatment under subheading 9801.00.10, HTSUS because it is a replacement part that was manufactured in the United States and shipped back from the Netherlands without having been advanced in value or improved in condition while in the Netherlands. Atlas provided a manufacturer’s affidavit from Margee Manley of BAE Systems, dated June 22, 2016, stating that the FJCC was manufactured by BAE Systems in Fort Wayne, Indiana, and that no drawback has been claimed or will be claimed on the export of the FJCC. In its August 8, 2016 supplement, Atlas provided the foreign shipper declaration required by 10 C.F.R. § 10.1(a)(1). The foreign shipper declaration states that the FJCC was shipped outside the United States on or around December 7, 2014 from Chicago and is being returned to the United States without having been advanced in value or improved in condition. Finally, Atlas provided the importer declaration required by 10 C.F.R. § 10.1(a)(2). The importer declaration, dated June 24, 2016, states that the attached foreign shipper declaration is true, that the FJCC was manufactured by BAE Systems in Fort Wayne, Indiana, and that it was not manufactured or produced in the United States under subheading 9813.00.05, HTSUS. The requirements set forth in 10 C.F.R. § 10.1(a) have therefore been met and the FJCC is eligible for duty-free treatment under subheading 9801.00.10, HTSUS. FADEC

Atlas also argues that the FADEC is eligible for duty free entry under subheading 9801.00.10, HTSUS because it was manufactured in the United States and removed from an aircraft in Hong Kong and shipped back to the United States without having been advanced in value or improved in condition. In the alternative, Atlas argues that the FADEC is exempt from entry and duty pursuant to General Note 3(e)(vi).

Under General Note 3(e)(vi), aircraft parts that are removed from a United States-registered aircraft while being used abroad in international traffic due to breakdown are exempt from formal entry and duty provided that they are returned to the United States within 45 days of removal and did not leave the custody of the carrier or foreign customs service while abroad. We find that HQ 563353, discussed above, is on point and that the FADEC removed from the aircraft in Hong Kong is eligible for duty free treatment under subheading 9801.00.10, HTSUS provided that Atlas can produce the documents required by 10 C.F.R. § 10.1(a). However, Atlas has been unable to provide the foreign shipper declaration upon request as required by 10 C.F.R. § 10.1(a) and therefore does not meet the requirements to qualify for duty free entry under subheading 9801.00.10.

However, the FADEC is exempt from formal entry and duty pursuant to General Note 3(e)(vi). It was removed from a U.S. registered aircraft while in international traffic in Hong Kong on February 15, 2015. The FADEC was subsequently shipped back to the United States for repair and entered the United States on February 24, 2015, within the 45 day limit set forth in General Note 3(e)(vi). Therefore, the FADEC qualifies as a part removed from civil aircraft that is exempt from entry and duty pursuant to General Note 3(e)(vi).

HOLDING: By application of GRIs 1 and 6, the ADC is classified in heading 9014, specifically subheading 9014.20.80 of the 2015 HTSUS, which provides for: Direction finding compasses; other navigational instruments and appliances; parts and accessories thereof: Instruments and appliances for aeronautical or space navigation (other than compasses): Other: Other. The 2015 general column one rate of duty is free.

For the reasons discussed above, the FATS qualifies for duty free treatment under the ATCA, the FJCC is eligible for duty free treatment under subheading 9801.00.10, HTSUS, and the FADEC is exempt from formal entry and duty pursuant to General Note 3(e)(vi).

You are instructed to GRANT the protest.

In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), 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 reliquidation 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 Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/, which can be found on the CBP website at http://www.cbp.gov and other methods of public distribution.

Sincerely,

Craig T. Clark, Director
Commercial and Trade Facilitation Division