HQ H303399
DRA 4
OT:RR:CTF:ER
H303399 SMS
Steven B. Zisser, Esq.
Zisser Group
9355 Airway Road, Suite 1
San Diego, CA 92154
Re: Solar Turbines, Inc.: Request for Determination of Eligibility of Gas Turbines for Same Condition Drawback under 19 U.S.C. § 1313(j)(2)
Dear Mr. Zisser:
This is in response to your application, dated March 20, 2019, on behalf of Solar Turbines, Inc., requesting a binding ruling on the eligibility of gas turbines turboshaft engines (“gas turbines”) for same condition drawback under 19 U.S.C. § 1313(j)(2), and as amended pursuant to Section 906 of the Trade Enforcement and Trade Facilitation Act of 2015 (“TFTEA”).
FACTS:
Solar Turbines develops, manufactures, performs maintenance on and distributes gas turbine turboshaft engines, which are used to generate power or to compress and transmit gas in different industrial applications. These gas turbines are both imported and exported from the United States. Solar Turbines explains that its turboshaft engines are restricted from “being used in non-aircraft applications,” and “are classified under the alternative ‘Other’ classification [of the Harmonized Tariff System of the United States (“HTSUS”) subheadings] 8411.81.80 and 8411.82.80,” which currently states:
8411 Turbojets, turbopropellers and other gas turbines, and parts thereof:
Other gas turbines:
8411.81 Of a power not exceeding 5,000 kW:
8411.81.80 Other
8411.82 Of a power exceeding 5,000 kW:
8411.82.80 Other
The rate of duty is 2.5 percent ad valorem, for both subheadings, 8411.81.80 and 8411.82.80.
Solar Turbines asserts that “all gas turbine turboshaft engines classified under subheading 8411.81.80 or 8411.82.80 (depending on their power type) for any application are commercially interchangeable as they perform the same identical purpose and application[, i.e.,] to drive a power shaft . . . . In their condition as imported or exported they essentially perform exactly the same function.” It further contends that “because there is no 8-digit HTS classification” for the gas turbine turboshafts, at issue, the “other other” restriction found under 19 U.S.C. § 1313(j)(5) should not apply to its proposed substitution. Accordingly, Solar Turbines requests a binding ruling confirming their assertion of eligibility for gas turbine turboshaft engines under same condition substitution drawback.
ISSUE:
Whether the imported and substituted gas turbines are eligible for same condition drawback pursuant to 19 U.S.C. §§1313(j)(2) and (j)(5).
LAW AND ANALYSIS:
On February 24, 2016, TFTEA (Pub. L. 114–125, 130 Stat. 122, February 24, 2016) was signed into law. Section 906 of TFTEA made significant changes to the drawback laws which generally liberalize the standards for substituting merchandise, ease recordkeeping requirements, extend and standardize timelines for filing drawback claims, and simplify the claims process by requiring electronic filing. TFTEA provides a new standard for substitution claims which is based, generally, on the eight-digit Harmonized Tariff Schedule of the United States (“HTSUS”) subheading number. This standard replaces the commercial interchangeability standard that applied to substitution unused merchandise drawback claims under §1313(j)(2).
Specifically, Section 313 of the Tariff Act of 1930, as amended by TFTEA (19 U.S.C. § 1313(j)), provides that drawback may be claimed on imported duty-paid merchandise that is substituted; however the ability to substitute merchandise under §1313(j)(2) is limited to non-residual provisions. Specifically, §1313(j)(2) states, in pertinent part, that drawback is allowed if:
(2) imported merchandise on which was paid any duty, tax, or fee imposed under Federal law upon entry or importation, any other merchandise (whether imported or domestic), that—
(A) is classifiable under the same 8-digit HTS subheading number as such imported merchandise
. . .
(5)(A) For purposes of paragraph (2) and except as provided in subparagraph (B), merchandise may not be substituted for imported merchandise for drawback purposes based on the 8-digit HTS subheading number if the article description for the 8-digit HTS subheading number under which the imported merchandise is classified begins with the term “other”.
(B) In cases described in subparagraph (A), merchandise may be substituted for imported merchandise for drawback purposes if—
(i) the other merchandise and such imported merchandise are classifiable under the same 10-digit HTS statistical reporting number; and
(ii) the article description for that 10-digit HTS statistical reporting number does not begin with the term “other”.
19 U.S.C. §§ 1313(j)(2) and (j)(5).
Pursuant to the Omnibus Trade and Competitiveness Act of 1988, as amended (19 U.S.C. § 3004), the Harmonized Tariff Schedule of the United States is a statute enacted by Congress and made effective on January 1, 1989. See 19 U.S.C. § 3004(c). The HTSUS comprises a hierarchical structure for describing all goods in trade for duty, quota, and statistical purposes. The United States International Trade Commission (“ITC”) describes this structure as “based upon the international Harmonized Commodity Description and Coding System (HS), administered by the World Customs Organization in Brussels; the 4- and 6-digit HS product categories are subdivided into 8-digit unique U.S. rate lines and 10-digit non-legal statistical reporting categories.” https://www.usitc.gov/harmonized_tariff_information (last visited Sep. 5, 2019). The HTSUS is merely “Annotated for Statistical Reporting Purposes” with the ten-digit stat. suffix. See Harmonized Tariff Schedule of the United States (2019).
Included in the General Notes of the HTSUS is a detailed explanation of the ten-digit statistical suffix.
2. Statistical Annotations.
(a) The statistical annotations to the Harmonized Tariff Schedule of the United States consist of—
(i) the 2-digit statistical suffixes and any article descriptions applicable thereto,
(ii) the indicated units of quantity, and
(iii) the statistical notes and annexes.
(b) The legal text of the Harmonized Tariff Schedule of the Unites States consists of the remaining text as more specifically identified in the general rules of interpretation.
3. Statistical Reporting Number.
Except as provided in paragraph (b) of this note, and in the absence of specific instructions to the contrary elsewhere, the statistical reporting number for an article consists of the 10-digit number formed by combining the 8-digit subheading number with the appropriate 2-digit statistical suffix. Thus, the statistical reporting number for live monkeys dutiable under subheading 0106.00.50 is “0106.00.5010”.
General Statistical Notes 2 and 3 (emphasis added). Accordingly, the legally binding subheading information is contained in the eight-digits preceding the two-digit suffix. Additionally, the statistical reporting numbers are inserted pursuant to 19 U.S.C. § 1484(f), which is contained in a separate chapter of the U.S. Code, and are merely added to the HTSUS statute for reference and reporting reasons. The fact that the two-digit suffix is placed on the same line as the eight-digit subheading number, does not negate the existence of statutory binding effect of such eight-digit.
Therefore, in this case, the provisions cited in the HTSUS are the eight-digit provisions, and there are no separate ten-digit provisions, associated with the cited classification. The eight-digit is the final provision of the HTSUS, (i.e., the statute). The final two digits are actually part of the HTSUSA (HTSUS Annotated), and the statistical breaks are not part of the binding statute. In this case, 8411.81.80 and 8411.82.80, the eight-digit was not subdivided for statistical purposes, and because this division is not further subdivided it automatically remains a basket residual provision, and substitution is prohibited under 19 U.S.C. § 1313(j)(5). Accordingly, here as prohibited in §1313(j)(5), both the eight-digit HTSUS and the ten-digit HTSUSA, starts with other.
HOLDING:
For the reasons discussed above, Solar Turbines’ proposed substitutions are prohibited under 19 U.S.C. § 1313(j)(2) and (5). We note that if Solar Turbines disagrees with the HTSUS eight- and ten-digit provisions related to its merchandise, it can file a request with the ITC to update the Tariff Schedule.
Please note that 19 C.F.R. § 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.” If the activities vary from the facts stipulated to herein, this decision shall not be binding on CBP, as provided for in 19 C.F.R. § 177.9(b).
Sincerely,
Gail G. Kan, Chief
Entry Process and Duty Refunds Branch