CLA-2-87:OT:RR:NC:N1:101
Marian E. Lander, Attorney
Ladner & Associates PC
The Kirby Mansion
2000 Smith Street
Houston, TX 77002-8652
RE: The tariff classification of Mobile FRAC Unit from Canada
Dear Ms. Lander:
In your letter dated April 22, 2013 you requested a tariff classification ruling on behalf of your client Calfrac Well Services Ltd., located in Alberta, Canada.
The mast type coiled tubing unit (the “Unit”) is comprised of a trailer frame, mast, reel with coiled tubing, and injector, hauled by a tractor equipped with a wet kit and control cabin. You state that prior to importation, the tractor is modified with a specially designed hydraulic power pack kit that is used to power the Unit. It is then “married” to the Unit after this modification, specifically set up to run the Unit and used for no other purpose except in conjunction with the Unit. You claim that this modification renders the tractor incapable of use outside of this application. T-800® coiled tubing, a modification of ATSM A-606 Type 4 high strength low alloy (HSLA) steel, also travels with the coiled tubing mast unit. The Unit is used in fracturing operations for oil and gas extraction and drilling.
In operation, the mast positions the injector head into the air to align the blowout preventer and lubrication string underneath the injector. Once positioned, the Unit performs multiple tasks, including cleanouts, stimulations, drilling, fishing and cementing. To achieve this, fluids are pumped though the coiled tubing down hole to the required depth. You state in your request that the fluid pumped through the Unit are capable of “attacking the Earth’s crust.”
In your request you suggest classification of the Unit under 8428.90.0290 Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Other lifting, handling, loading or unloading machinery….”
In your request you state,
“That the tractor and trailer comprise a single entity, which the trailer cannot operate without the tractor to provide locomotion and power and the tractor after modification cannot be used to haul regular trailers…That because the Unit handles the tubing and injector for work down hole via a cable, pulley and winch system that moves the injector head up and down the mast, it is akin to an Iron Roughneck that CBP classified in 8428.90.0290 (H033596)”.
We have considered this suggested classification and find that although the device lifts and moves the tubing from the coil through the injector, its movement is in conjunction with its primary use of fracing, which is a drilling function using hydraulic fluid to fracture (frac) stone to release gas and/or oil.
General Note 3 (h) (vi) to the HTSUS states “ ... a reference to “headings” encompasses subheadings indented thereunder.” Subheading 8705.20 provides for “Special purpose motor vehicles,…: Mobile drilling derricks.”
The Explanatory Notes (ENs) to the Harmonized Commodity Description and Coding System, which represent the official interpretation of the tariff at the international level, facilitate classification under the HTSUS by offering guidance in understanding the scope of the headings and the GRIs.
The ENs to Chapter 87 state that “an incomplete or unfinished vehicle is classified as the corresponding complete or finished vehicle provided it has the essential character of the latter….” The Unit, whether imported with or without the tractor, has the essential character of a mobile drilling derrick.
In addition, the ENs to 87.05 state that “(t)his heading covers a range of motor vehicles, specially constructed or adapted, equipped with various devices that enable them to perform certain non-transport functions, i.e., the primary purpose of a vehicle of this heading is not the transport of people or goods. This heading includes: (8) Mobile drilling derricks (i.e., lorries (trucks) fitted with a derrick assembly, winches and other appliances for drilling, etc.). It is the opinion of this office that despite the Unit being capable of separation into two components it is, for classification purposes, a single entity designed for a specific and specialized purpose.
The applicable subheading for the Unit will be 8705.20.0000, HTSUS, which provides for “Special purpose motor vehicles…: Mobile drilling derricks”. The rate of duty will be Free.
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 http://www.usitc.gov/tata/hts/.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Matthew Sullivan at (646) 733-3013.
Sincerely,
Thomas J. Russo
Director
National Commodity Specialist Division