OT:RR:CTF:EMAIN HQ H302168 TPB
Joseph Acayan
Givens & Johnston PLLC
950 Echo Lane, Suite 360
Houston, TX 77024-2788
Re: Revocation of NY N300353; Classification of a distillation refining module
Dear Mr. Acayan:
The following is our decision regarding your request for reconsideration of New York Ruling Letter (NY) N300353, dated September 27, 2018, on behalf of your client, Fluor Enterprises, Inc. (Fluor; Importer), regarding the tariff classification of a certain plant module under the Harmonized Tariff Schedule of the United States (HTSUS).
In that ruling letter, the product at issue, “Module 1101JB,” is described as interfacing with various other modules and consists of interconnected components that include reboilers, condensers, pumps, drums and interconnecting pipes. The module was classified under subheading 8419.89.9585, Harmonized Tariff Schedule of the United States (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; Other machinery, plant or equipment: Other: Other.” In your request for reconsideration, you argue that the proper classification of the module is under subheading 8419.50.50, HTSUS, which provides for other heat exchange units.
We have now determined that the distillation refining module subject to N300353 is classifiable in subheading 8419.60.50. Notice of the proposed action was published in the Customs Bulletin,Vol. 54, No. 42, on October 28, 2020. No comments were received in response to that notice. For the reasons set forth below, we hereby revoke NY N300353.
FACTS:
The article at issue in NY N300353 is Module 1101JB, which is described in the ruling as follows:
The Distillation Refining Module, module 1101JB, interfaces with various other modules and consists of interconnected components that include reboilers, condensers, pumps, drums and interconnecting pipes. It is noted that the distillation module does not include the distillation columns and does not complete a distillation process. The function of the multi-tiered module is to complete a transfer of heat process that vaporizes liquid and a cooling process that liquefies gas. The reboilers are configured as shell and tube heat exchangers that use steam or gas to vaporize liquid. The vapor is then returned to the boilers and liquid drawn from the boilers is collected by a drum and subsequently pumped to another module. The condensers, which are also said to be configured as a shell and tube heat exchangers, cool vapor and liquefy gas. The condensed liquid produced by the condensers is sent to a drum and later pumped to another module.
As implied above, the subject module is one of several separately imported modules that comprise the South Louisiana Methanol Plant (the Plant). The Plant includes a 93-tray distillation column (the "column") that is used to separate a mixed stream of liquid methanol and water. The column produces a stream of 99%+ pure methanol gas out of the top and a steam of 99%+ pure water out of the bottom. You note that the subject distillation module does not include the distillation columns and does not complete a distillation process. While the reboilers and the condensers are both included in Module 1101JB and are imported together, they are two separate systems supporting the column, which performs two distinctly different, albeit complementary, functions.
In your submission, you note that the reboilers provide the heat necessary for the distillation column to function by boiling and recycling a portion of the column's bottom liquid fraction back into the column, while the condensers dissipate heat from the column to help regulate the temperature in the column by condensing and recycling a portion of the column's top gaseous fraction back into the column.
NY N300353 states that the function of the multi-tiered module is to complete a transfer of heat process that vaporizes liquid and a cooling process that liquefies gas. The reboilers are configured as shell and tube heat exchangers that use steam or gas to vaporize liquid. The vapor is then returned to the boilers and liquid drawn from the boilers is collected by a drum and subsequently pumped to another module. The condensers, which are also said to be configured as a shell and tube heat exchangers, cool vapor and liquefy gas. The condensed liquid produced by the condensers is sent to a drum and later pumped to another module.
ISSUE:
What is the classification of the distillation refining module?
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.
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:
8419.50 - Heat exchange units
8419.60 - Machinery for liquefying air or other gases
Other machinery, plant and equipment
8419.89 - - Other
You note that while the reboilers and the condensers are both included in Module 1101JB and are imported together they are two separate systems supporting the column that perform two distinctly different, albeit complementary, functions. As such, they should be classified separately. However, from the schematics provided with your request, the Module 1101JB comprises a complete system where the component reboilers and condensers are interconnected. As such, Note 4 to Section XVI is applicable. That Note states:
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.
The components, reboilers and condensers, contribute together to perform a function covered by heading 8419, i.e., the treatment of materials by a process involving a change of temperature. As such, there is no difference of opinion between Importer and CBP as to the heading for these modules are classified under.
With regard to the subheading, GRI 6 instructs that for legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related Subheading Notes and, mutatis mutandis, to GRIs 1 – 5, on the understanding that only subheadings at the same level are comparable. For the purposes of this Rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.
In your submission, you argue that the reboilers and the condensers are all shell and tube heat exchangers and based on their function, should be classified under subheading 8419.50 as heat exchangers.
We agree that the reboilers are shell and tube heat exchangers, and if these were the sole components of the module, they would be classified under subheading 8419.50, HTSUS. However, the module is comprised of additional components, which include condensers. As you indicate, the gaseous fraction of the methane feed enters the condensers shell, where it is cooled to the point of condensing. Subheading 8419.60, HTSUS, specifically provides for machinery for liquefying air or other gases, and therefore covers the instant condensers regardless of whether they accomplish their function by virtue of heat transfer.
Taking the above into consideration, the instant Module 1101JB performs the functions of vaporizing liquid and liquefying gas through a combination of reboilers and condensers. Looking again at Note 4 to Section XVI, it states 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 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. Application of this Note at the subheading level does not resolve the classification issue, since neither subheading 8419.50 or 8419.60 describes a clearly defined function performed by the module; each subheading describes only a part of the module’s operation. Subheading 8419.89 is a residual subheading, which provides for other machinery or plant equipment not described in any of the previous subheadings. But in this case, the functions of the module have been described in two preceding subheadings of heading 8419, HTSUS. As such, GRI 1 (via GRI 6) instructs us to proceed to the subsequent GRIs.
In this case, we have a product comprised of components described in two different subheadings, i.e., subheading 8419.50 and 8419.60, making it a composite good. These types of goods are classified by application of GRI 3. Further, because both the reboilers and the condensers provide necessary functions to the module, neither component imparts the essential character of the module. Therefore, by application of GRI 3 (c), the module will be classified under the subheading which occurs last in numerical order among those which equally merit consideration. In this case, subheading 8419.60, which provides for machinery for liquefying air or other gases.
HOLDING:
As explained above, by application of GRI 1 (Note 4 to Section XVI) Module 1101JB is classified under heading 8419, 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. Further, by application of GRIs 6 and 3 (c), the module is classified in subheading 8419.60.50, HTSUS, which provides for other machinery for liquefying air or other gases. The general rate of duty is free.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8419.60.50, HTSUS, unless specifically excluded, are subject to an additional 25-percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.01, in addition to subheading 8419.60.50, HTSUS, listed above.
The HTSUS is subject to periodic amendment so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading. For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/trade/remedies/301-certain-products-china, respectively.
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 World Wide Web at https://hts.usitc.gov/current.
EFFECT ON OTHER RULINGS:
New York Ruling Letter N300353, dated September 27, 2018, is hereby REVOKED. 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