OT:RR:CTF:VS H300804 JK
Jan de Beer
Frost Brown Todd LLC
250 West Main Street, Suite 2800
Lexington, KY 40507-1749
RE: Tariff classification of steel wire cartridges; Applicability of subheading 9802.00.50
Dear Ms. Beer:
This in response to your letter, dated May 21, 2018, filed on behalf of MAX USA Corp. (MAX USA). In your letter, you requested a binding ruling pursuant to 19 C.F.R. Part 177 on the classification of imported steel tie wire cartridges and the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS) to the subject merchandise.
FACTS:
MAX USA proposes to import two products, steel tie wire cartridges consisting of either spools of black annealed wire (TW898 USA) or spools of polyester coated wire (TW898-PC USA). The steel tie wire cartridges will be primarily for use in the MAX USA Rebar Tying Tool, a battery-powered handheld power tool. The Rebar Tying Tool is used to tie and secure concrete rebar by holding the crossed reinforcing bars and feeding, winding, cutting and tying the tie wire in one action.
You state that the raw steel material used to make the products will be sourced from the United States. In the United States, the raw steel material will be manufactured into steel wire by undergoing a drawing process to make the wire rod thinner, an annealing process to adjust the wire hardness through heat treatment, and a galvanizing or poly-coating process.
Subsequently, the steel wire will be exported to Japan where it will be cut to length and rewound from a large production spool to small plastic spools. The small plastic spools have a sprocket-like appearance and are specially molded into a unique design that allow them to properly fit inside the designated MAX USA Rebar Tying Tool. The final products will be packaged in Japan and imported to the United States.
You submitted samples of the products, a product data sheet with specifications for the steel tie wire, a video of the Rebar Tying Tool in action, and an Operating and Maintenance Manual for the three models of the MAX USA Rebar Tying Tool that use the products at issue. In reaching our decision, we have considered additional information which was submitted by you on August 21, 2018.
ISSUE:
Whether the steel tie wire cartridges are classifiable under heading 7217, HTSUS, as wire of iron or nonalloy steel, or heading 8467, as parts of tools for working in the hand, pneumatic, hydraulic or with self-contained electric or nonelectric motor.
Whether subheading 9802.00.50, HTSUS, is applicable to the steel wire tie cartridges.
LAW AND ANALYSIS: Tariff Classification of Steel Tie Wire Cartridges
Classification under the HTSUS is in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that the classification of goods is 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 HTSUS provisions under consideration are as follows:
8467 Tools for working in the hand, pneumatic, hydraulic or with self-contained electric or nonelectric motor, and parts thereof:
7217 Wire of iron or nonalloy steel:
The General Notes to Section XVI provide, in pertinent part:
1. This Section does not cover:
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(c) Bobbins, spools, cops, cones, cores, reels or similar supports, of any material (for example, Chapter 39, 40, 44 or 48 or Section XV);
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2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 84.84, 85.44, 85.45, 85.46 or 85.47) are to be classified according to the following rules:
(a) Parts which are goods included in any of the headings of chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings;
(b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 84.79 or 85.43) are to be classified with the machines of that kind or in heading 84.09, 84.31, 84.48, 84.66, 84.73, 85.03, 85.22, 85.29 or 85.38 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 85.17 and 85.25 to 85.28 are to be classified in heading 85.17.
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As Additional U.S. Rule of Interpretation 1(c) provides that a provision for parts shall not prevail over a specific provision for such a part, our initial analysis is whether the subject merchandise is specifically described in a provision in Chapter 72 of the tariff schedule before we examine whether classification as a “part” in Chapter 84 is proper.
Heading 7217, HTSUS, an eo nomine tariff provision, provides for “Wire of iron or nonalloy steel.” Eo nomine provisions are those that describe articles by specific names and not by use. Absent limiting language or contrary legislative intent, eo nomine provisions cover all forms of the named article. Nidec Corporation v. United States, 68 F.3d 1333, 1336 (Fed. Cir. 1995); see also Lon-Ron Mft. Co. v. United States, 334 F.3d 1304, 1309 (Fed. Cir. 2003). Further to the issue of eo nomine classification, it is well-established legal precedent that “[W]here an article is in character or function something other than as described by a specific statutory provision – either more limited or more diversified – and the difference is significant, it cannot find classification within such provision. It is said to be more than the article described in the statute.” Robert Bosch Corp. v. United States, 63 Cust. Ct. 96 (Cust. Ct. 2d Div. 1969) (citing Cragston Corporation v. United States, 51 CCPA 27, C.A.D. 831 (1963)); United States v. The A.W. Fenton Company, Inc., 49 CCPA 45, C.A.D. 794 (1962).
At the outset, we note that the subject tie wire cartridges, referenced as TW898 USA and TW898-PC USA, consist of long lengths of steel wire wrapped around black polypropylene cores. These cores, also referred to as reels, spools or cartridges, do not resemble the typical packaging associated with wire products. Rather, these cores have been specially molded into a unique design that limits their use with certain rebar tying tools. We also note that the Operating and Maintenance Manual for the MAX USA Rebar Tying Tool provides specifications for the tie wire, indicating the specific MAX USA tie wire cartridges that can be used with each model of the rebar tying tool. The manual also indicates that failure to use the specified tie wire cartridges may cause a breakdown of the equipment. It is reasonable to conclude that these cartridges are not generic products and unlikely to be used unless in conjunction with the appropriate MAX USA Rebar Tying Tool. For these reasons, we find that the distinctive features of TW898 USA and TW898-PC USA serve to change the identity of the articles and render them significantly differentiated in function from the exemplars listed in heading 7217, HTSUS. Therefore, we find that the subject steel tie wire cartridges are not prima facie classifiable in heading 7217, HTSUS. See CamelBak Prods., LLC v. United States, 649 F.3d 1361 (Fed. Cir. 2011), in which the court examined whether certain specifications may be considered “merely an improvement” or whether they serve to change the identity of the article described by the statute. See also Headquarters Ruling Letter (HQ) 251008 dated June 14, 2018, in which CBP found that media roll assemblies of pressure-sensitive tape and labels imported on reels designed solely for use with specific printers were not prima facie classifiable under the eo nomine tariff provisions.
We now consider classification of the subject articles within Section XVI, HTSUS, specifically in heading 8467, HTSUS, which provides for, in pertinent part, parts of hand tools with a self-contained electric motor. As an initial matter, we find that the MAX Rebar Tying Tool, as a handheld tool incorporating a self-contained electric motor, is itself classifiable under subheading 8467.29.0090, HTSUS, i.e., “Tools for working in the hand, pneumatic, hydraulic or with self-contained electric or nonelectric motor, and parts thereof: With self-contained electric motor: Other: Other.” We also note that classification of the subject articles in Section XVI is not precluded by Note 1(c) in that they are not classifiable as “[b]obbins, spools, cops, cones, cores, reels or similar supports, of any material (for example, Chapter 39, 40, 44 or 48 or Section XV).” The subject articles are not mere cores, spools or reels used to support wire; rather, the engineered features of the tie wire cartridges allow them to engage mechanically with certain designated rebar tying tools.
The term “part” is not defined in the HTSUS. In the absence of a statutory definition, the courts have fashioned two distinct but reconcilable tests for determining whether a particular item qualifies as a “part” for tariff classification purposes. See Bauerhin Techs. Ltd. Pshp. v. United States, 110 F.3d 774, 779 (Fed. Cir. 1997). Under the test initially promulgated in United States v. Willoughby Camera Stores, Inc., 21 C.C.P.A. 322, 324 (1933), an imported item qualifies as a part only if can be described as an “integral, constituent, or component part, without which the article to which it is to be joined, could not function as such article.” Bauerhin, 110 F.3d at 779. Pursuant to the test set forth in United States v. Pompeo, 43 C.C.P.A. 9, 14 (1955), a good is a “part” if it is “dedicated solely for use” with a particular article and, “when applied to that use…meets the Willoughby test.” Bauerhin, 110 F.3d at 779 (citing Pompeo, 43 C.C.P.A. at 14); Ludvig Svensson, Inc. v. United States, 63 F. Supp. 2d 1171, 1178 (Ct. Int'l Trade 1999) (holding that a purported part must satisfy both the Willoughby and Pompeo tests).
In Mita Copystar America v. United States, 160 F.3d 710 (Fed. Cir. 1998), the court classified toner cartridges that were shaped to fit into specific electrostatic photocopiers as parts of such machines. The court based its decision on Note 2(b), Chapter 90, HTSUS, which provides for the classification of parts and accessories of articles of Chapter 90 and is substantively similar to Note 2, Section XVI, HTSUS, quoted above, in part. In determining that the cartridges were parts of photocopiers, the court noted that the toner cartridges were sold with toner inside, remained with the toner through its use by the photocopier, served as the standard device for providing toner to the photocopier, and were not designed for reuse. Id. at 712-713. See also HQ 251008 dated June 14, 2018 (classifying media rolls imported on plastic reels with code apertures as parts of printers by operation of Note 2(b) to Section XVI).
In this case, the subject steel tie wire cartridges meet the definition of “parts” as defined by the courts because they are integral to, and dedicated solely for use with, the MAX USA Rebar Tying Tool. Similar to the merchandise at issue in Mita Copystar, the subject cartridges are sold with tie wire inside, remain with the tie wire through its use by the rebar tying tool, are the standard device for providing tie wire to the rebar tying tool, and are not designed for reuse. Furthermore, they are designed exclusively for use with the MAX USA Rebar Tying Tool and are sold for use only with such tools, which could not function without these cartridges. As a result, we find that the subject articles are specially designed as a part of certain rebar tying tools as to warrant classification with such machines.
We further note that the subject merchandise at issue is distinguishable from the monofilament at issue in New York Ruling Letter (NY) K81013 dated December 30, 2003. In that ruling, cut-to-length monofilament was considered to be a part of the hand held trimmer while the same monofilament imported in material lengths, either on ordinary packing spools or in a “donut” form, was classified as monofilament. While the subject cartridges contain steel tie wire wound on spools in material lengths, the similarities to the monofilament at issue in K81013 end there. In K81013, the material lengths of monofilament were placed either on non-descript generic spools or on no spools at all. In comparison, the tie wire in this case cannot be bought separately for use with the MAX USA Rebar Tying Tool without it being contained in the cartridge. Furthermore, as discussed above, the cartridge itself is not a generic spool used to support wire but specifically designed for exclusive use with the MAX USA Rebar Tying Tool.
Accordingly, because the subject articles do not fall under the scope of a single heading of Section XVI as goods unto themselves, per Note 2(a) to Section XVI, supra, we find that they are properly classified under heading 8467, HTSUS, as parts of hand tools by operation of Note 2(b) to Section XVI. Specifically, we find that the subject steel tie wire cartridges are classifiable under subheading 8467.29.0090, HTSUS, which provides for other parts of hand tools with a self-contained electric motor. Because the section note provides that goods classifiable as parts of such tools are to be classified as such, CBP need not perform a relative specificity analysis under GRI 3(a).
Applicability of Subheading 9802.00.50
Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles that are returned after having been exported to be advanced in value or improved in condition by means of repairs or alterations, provided that the documentary requirements of 19 CFR 10.8 are met. For qualifying articles, duty is assessed only on the cost or value of the foreign processing.
In circumstances where the operations abroad destroy the identity of the exported article or create a new or commercially different article, entitlement to subheading 9802.00.50, HTSUS, is precluded. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff’d C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corporation v. United States, 3 CIT 9 (1982). Additionally, entitlement to this tariff treatment is not available where the exported articles are incomplete for their intended purposes prior to their foreign processing and the foreign processing is a necessary step in the preparation or manufacture of the finished articles. Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff’d, 599 F.2d 1015 (Fed. Cir. 1979).
In this case, steel wire is exported from the United States to Japan where it is cut and rewound onto smaller plastic spools to create the subject steel tie wire cartridges. CBP has found that cutting and winding of wire, yarn or thread onto spools or similar supporting material qualifies as an alteration under subheading 9802.00.50, HTSUS. See HQ H212675 dated June 4, 2012 (sewing thread rewound onto smaller spools and packaged); HQ 555708 dated September 21, 1990 (thread and yarn rewound onto small plastic spools and packaged into a blister pack); HQ 555411 dated August 11, 1989 (primary wire cut and placed on spools or wound into coils); HQ 555296 dated June 16, 1989 (bulk twine cut and rewound onto smaller cardboard tubes). Here the steel tie wire is cut to length, wound and placed into a cartridge that is specially designed for exclusive use with certain rebar tying tools. The steel wire is treated prior to exportation with its inherent properties for its intended purpose. Accordingly, the processing that occurs in Japan may be considered an alteration, and therefore we find that subheading 9802.00.50, HTSUS, is applicable to the subject articles.
HOLDING:
By application of GRI 1, the steel tie wire cartridges at issue (referenced as TW898 USA and TW898-PC) are classified in subheading 8467.29.0090, HTSUS, which provides for “Tools for working in the hand, pneumatic, hydraulic or with self-contained electric or nonelectric motor, and parts thereof: With self-contained electric motor: Other: Other.” The 2019 applicable column one general rate of duty is free.
Based on the evidence presented, the processing that occurs in Japan may be considered an alteration. Therefore, the subject articles are eligible for subheading 9802.00.50, HTSUS, treatment.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov.
Please note that 19 CFR § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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,
Monika R. Brenner, Chief
Valuation and Special Programs Branch