OT:RR:CTF:EMAIN H316373 SKK
Center Director
Automotive and Aerospace Center of Excellence and Expertise
U.S. Customs and Border Protection
477 Michigan Avenue, Rm. 281 Detroit, MI 48226
Attn: Matteo Rubino, Import Specialist
Re: Protest No. 2809-20-105171; Classification of heat exchangers
Dear Center Director:
This is our decision regarding an Application for Further Review (“AFR”) of Protest No. 2809-20-105171 (“lead” protest), filed by Livingston International, Inc. on behalf of Tesla, Inc. (“Tesla” or “Protestant”). The Protest and AFR concern the classification under the Harmonized Tariff Schedule of the United States (“HTSUS”) of heat exchangers. The AFR was forwarded to this office for consideration. No samples were provided for examination.
FACTS:
The articles at issue in this Protest and AFR are described as Tesla Part Numbers (“TPN”) 1093326-00-C, 1093326-99-C, 1096215-00-C, 1478201-00-B, and 1125292-00-B.
TPN 1093326-00-C and TPN 1093326-99-C
TPN 1093326-00-C and TPN 1093326-99-C are used within a “Tesla Powerwall,” a residential scale stationary energy storage system. Tesla did not specify the material composition for the subject merchandise.
Protestant describes TPN 1092236-00-C (including the functionally identical one-time trial version TPN 1093326-99-C) as follows:
TPN 1093326-00-C functions as a heat exchanger whereby heated fluid (mixture of water and glycol) from the battery module heat pipe is interfaced for heat transfer with coolant as it flows through the micro channels (i.e., separate layers of metal) thereby cooling the heated fluid from the battery module to ambient temperatures. The coolant flows through a closed loop, and itself is cooled by air flowing through the fins on the side, while the cooled fluid flows back into the battery module in a closed loop.
Protestant describes TPN 1096215-00-C, TPN 1478201-00-B and TPN 1125292-00-B as follows:
TPN 1096215-00-C and TPN 1478201-00-B
TPN 1096215-00-C and TPN 1478201-00-B are heat exchangers used as part of a Tesla drive unit, which is Tesla’s proprietary alternating current (“AC”) induction electric motor and gear train, which provides motive power to the vehicles we manufacture. TPN 1096215-00-C is specific to Tesla Model 3, while TPN 1478201-00-B is updated architecture from TPN 1096215-00-C and used across all Tesla vehicles (i.e., Model S, Model X, Model 3, and Model Y).
Both TPN 1096215-00-C and TPN 1478201-00-B function by transferring heat from the oil within the drive unit to the vehicle coolant system. The oil flows through sumps inside the drive unit and heats up due to thermodynamic heat losses generated by the electric motor and gear train within the drive unit. This heated oil is then pumped from these sumps in the drive unit into TPN 1096215-00-C / TPN 1478201-00-B where the heated oil is interfaced for heat transfer with coolant through separate layers of metal, allowing the heat to be exchanged from the oil to the coolant. The cooled oil is then returned into the drive unit, and the coolant returns to the vehicle coolant system.
Both TPN 1096215-00-C and TPN 1478201-00-B are constructed of layers of stamped aluminum with machined aluminum ports (bosses) that are assembled onto the stacked aluminum stampings and then brazed together in an oven.
…heated oil contained within the combined electric motor and gear train … is pumped directly into TPN 1096215-00-C through the bottom inlet. Once this heated oil is inside TPN 1096215-00-C, the heated oil is interfaced for heat transfer with coolant through separate layers of metal pumped into TPN 1096215-00-C via the inlet coolant hose…. This coolant traverses parallel paths with the heated oil, exchanging heat in the process; the coolant is then returned via the outlet coolant hose… in a closed loop to the vehicle coolant system while the cooled oil returns to the drive unit through the bottom outlet. TPN 1478201-00-B functions in the same capacity.
TPN 1125292-00B
TPN 1125292-00-B is used within the thermal door assembly of a Tesla Powerpack, which is a utility scale stationary storage solution… Within the Tesla Powerpack thermal door assembly, TPN 1125292-00-B functions as a heat exchanger whereby warm coolant from the battery module is interfaced for heat transfer with refrigerant through separate layers of metal, allowing the heat to be exchanged from the coolant to the refrigerant. Once cooled, the coolant flows back to the coolant loop, while the refrigerant flows back to the condenser loop.
TPN 1125292-00-B is constructed of layers of stamped aluminum that are brazed together in an oven, after which machined aluminum ports are attached to the brazed aluminum stampings. An electronic expansion valve made from a circuit board and stepper motor is attached to the aluminum assembly after brazing to form the finished unit. When properly installed, heated coolant contained within a battery module in a Tesla Powerpack is pumped into TPN 1125292-00-B, via the coolant inlet …. where the coolant is then interfaced for heat transfer with refrigerant through separate layers of metal.... This refrigerant is pumped in from the condenser… and traverses parallel paths with the coolant, exchanging heat in the process. The coolant is then returned into the battery module of the Tesla Powerpack via the coolant outlet…. The refrigerant is returned to the condenser to be cooled for another loop of the above process via the refrigerant outlet….
The subject articles were liquidated on July 3, 2020, under heading 8419, HTSUS, specifically subheading 8419.89.95, HTSUS, which provides for “[M]achinery, 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: Other machinery, plant or equipment: Other.” As products of China, the merchandise was subject to duties imposed by subheading 9903.88.02, HTSUS, which provides for “[E]xcept as provided in headings 9903.88.12, 9903.88.17, or 9903.88.20, articles the product of China, as provided for in U.S. note 20(c) to this subchapter and as provided for in the subheadings enumerated in U.S. note 20(d) [to this subchapter].”
Protestant submits that the subject articles are properly classified under subheading 8419.50.50, HTSUS, which provides for “[M]achinery, 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: Heat exchange units: other.” Protestant further claims the subject articles are covered by the exclusion provided for under subheading 9903.88.14, HTSUS, and set forth in U.S. Note 20(q)(42) to Subchapter III to Chapter 99, HTSUS, for “[H]eat exchangers, each valued not over $17,000 (described in statistical reporting number 8419.50.5000).”
ISSUE:
What is the proper classification of the subject merchandise under the HTSUS?
LAW AND ANALYSIS:
A decision on classification and the rate and amount of duties chargeable is a protestable matter under 19 U.S.C. §1514(a)(2). The subject Protest was timely filed July 6, 2020, and amended on December 22, 2020, within 180 days of liquidation, pursuant to 19 U.S.C. 1514(c)(3).
Further Review of Protest No. 2809-20-105171 is properly accorded to the Protestant pursuant to 19 C.F.R. §174.24(a) because the protested decision is alleged to be inconsistent with the ruling of the Commissioner of CBP or his designee, or with a decision made at any port with respect to the same or substantially similar merchandise. As regards TPN 1125292-00-B, Protestant alleges that in Headquarters Ruling Letter (“HQ”) H257923, dated May 9, 2016, CBP classified substantially similar merchandise under subheading 8419.50.50, HTSUS.
Classification under the HTSUS is in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods will 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 will then be applied in order.
The following 2018 provisions of the HTSUS are under consideration:
8419 Machinery, plant or laboratory equipment, whether or not electrically heated, for
the treatment of materials by a process involving a change in 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:
8419.89 Other machinery, plant or equipment:
As the subject merchandise consists of machines that cool liquids, they are prima facie classified in heading 8419, HTSUS.
Subheading 8419.50, HTSUS, provides for heat exchanger units. Subheading 8419.50, HTSUS, is an eo nomine provision as it specifically names a covered article. 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).
The term “heat exchange unit” is not defined in the HTSUS, however it is interpreted by the Explanatory Notes (ENs) to the Harmonized Commodity Description and Coding System which represent the official interpretation of the Harmonized System (HS) 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). The ENs to heading 84.19(I)(B) describe “heat exchange units” of heading 8419 as follows:
(I) HEATING OR COOLING PLANT AND MACHINERY
This group covers plant of general use in many industries for the simple treatment of materials by heating, boiling, cooking, concentration, evaporation, vaporisation, cooling, etc. They include:
* * *
(B) Heat exchange units in which a hot fluid (hot gas, steam or hot liquid) and a cold fluid are made to traverse parallel paths, but usually in opposite directions, separated by thin metal walls in such a manner that the one fluid is cooled and the other heated. These units are usually of the three following types, viz., in the form of:
Concentric tube systems: one fluid flows in the annular interval, the other in the central tube.
A tubular system for the one fluid, enclosed in a chamber through which flows the other fluid, or
Two parallel series of interconnected narrow chambers formed of baffle plates.
Tariff terms are construed according to their common commercial meaning. See Millennium Lumber Distrib. Ltd., v. United States, 558 F.3d 1326, 1329 (Fed. Cir. 2009). To ascertain the common commercial meaning of a tariff term, CBP “may rely on its own understanding of the term as well as lexicographic and scientific authorities.” See Lon-Ron Mft. Co. v. United States, 334 F.3d 1304, 1309 (Fed. Cir. 2003). CBP consulted several lexicographic sources that defined “heat exchanger” as a device for transferring heat “from one fluid to another” without allowing the fluids to mix. See https://www.merriam-webster.com/dictionary/heat%20exchanger (site last visited August 27, 2021). Other lexicographic sources provide a broader definition of “heat exchanger” that include devices for transferring the heat “of one substance to another.” See https://www.dictionary.com/browse/heat-exchanger (site last visited August 27, 2021). See also https://www.oxfordlearnersdictionaries.com/definition/english/heat-exchanger (site last visited August 27, 2021), which defines “heat exchanger” as “[A] device for making heat pass between a solid object and a liquid or gas, or between two liquids/gases, without allowing the liquids/gases to mix.”
Based on the foregoing, the subject articles fall within the common commercial meaning of “heat exchanger” and are prima facie classified in subheading 8419.50, HTSUS, as “heat exchange units.” As the subject articles do not feature plate fins, classification is proper under subheading 8419.50.50, HTSUS, which provides for “other” heat exchange units. See HQ H257923 in which CBP classified substantially similar merchandise under subheading 8419.50.50, HTSUS.
HOLDING:
By application of GRIs 1 and 6, the subject heat exchangers are properly classified under heading 8419, HTSUS, specifically subheading 8419.50.50, HTSUS, which provides for “[M]achinery, 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: Heat exchange units: Other.” The 2018 column one, general rate of duty is free. Because the merchandise is valued not over $17,000, it qualifies to also be classified under 9903.88.14, i.e., it falls under the scope of the exclusion to Section 301 remedy on products of China set forth under U.S. Note 20(q)(42).
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 online at http://www.usitc.gov/tata/hts/.
You are instructed to ALLOW 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, CBP will make the decision available to CBP personnel and the public via www.cbp.gov, the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Craig T. Clark, Director
Commercial and Trade Facilitation Division