CLA-2 CO:R:C:S 555936 SER

TARIFF NOs.: 8419.11.00, 8419.19.00

Mr. Vincent J. Debo
Assistant General Counsel
Rheem Manufacturing Co.
405 Lexington Avenue, 22nd Floor
New York, NY 10174-0307

RE: Modification of HRL 555532; classification and eligibility of gas water heaters from Mexico for duty-free treatment under GSP

Dear Mr. Debo:

This is in reference to Headquarters Ruling Letter (HRL) 555532 dated September 18, 1990, which was issued to you on behalf of Rheem Manufacturing Company, concerning the eligibility of electric and gas water heaters from Mexico for duty-free treatment under the Generalized System of Preferences (GSP)(19 U.S.C. 2461-2466). One factor in the determination of eligibility for duty-free treatment under the GSP is the classification of the articles to be imported into the U.S. In that ruling, we stated that the gas water heaters would be classified in subheading 8419.11.0000, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for nonelectric instantaneous storage water heaters, and is a GSP eligible provision. It has now been determined that the classificaton provided is in error. Accordingly, pursuant to section 177.9, Customs Regulations (19 CFR 177.9), we are modifying HRL 555532.


The gas water heaters at issue are residential storage water heaters. The tanks of the heaters are stated to have 30, 40 and 50 gallon storage capacity. The tanks are filled with water which is subjected to the heating elements at the bottom of the heaters.


What is the correct tariff classification of the gas water heaters manufactured in Mexico?



Under the GSP, eligible articles the growth, product, or manufacture of a designated beneficiary developing country (BDC), which are imported directly from a BDC into the U.S. qualify for duty-free treatment if the sum of 1) the cost or value of the constituent materials produced in the BDC plus 2) the direct cost involved in processing the eligible article in the BDC is at least 35% of the article's appraised value at the time it is entered into the U.S. See 19 U.S.C. 2463.

Determining whether articles are eligible for GSP treatment is initially dependent on the proper classification of the articles, as stated in General Note 3(c)(ii), HTSUSA, which provides, in pertinent part:

"[a]rticles provided for in a [classification] provision for which a rate of duty of "Free" appears in the "Special" subcolumn followed by the symbols "A" or "A*" in parenthesis are those designated by the President to be eligible articles for purposes of the GSP pursuant to section 503 of the Trade Act of 1974. The symbol "A" indicates that all beneficiary developing countries are eligible for preferential treatment with respect to all articles provided for in the designated provision. The symbol "A*" indicates that certain beneficiary developing countries, specifically enumerated in subdivision (c)(ii)(D) in this note, are not eligible for such preferential treatment with regard to any article provided for in the designated provision.

Classification of goods under the HTSUSA is governed by the General Rules of Interpretation (GRI's), taken in order. GRI 1 provides that classification is determined first in accordance with the terms of the headings of the tariff and any relative section or chapter notes.

Heading 8419, HTSUSA, provides for ". . .instantaneous or storage water heaters, nonelectric; . . . ." The subheadings further delineate as follows:

8419.11 -- Instantaneous gas water heaters

8419.19 -- Other


In your letters of November 14, 1989, and May 9, 1990, which resulted in HRL 555532 you claimed that the gas water heaters were properly classified in subheading 8419.11, HTSUSA, and we erroneously applied this classification subheading. Subheading 8419.11.00, HTSUSA, provides for instantaneous gas water heaters. Clearly, the heaters at issue are storage water heaters and are properly classified in subheading 8419.19.00, HTSUSA, which provides for nonelectric water heaters other than instantaneous water heaters. This provision is designated with the symbol A* in the special subcolumn and, thus, subject to limitations on duty-free treatment of articles from certain beneficiary developing countries. The limitations are set forth in General Note 3(c)(ii)(D), HTSUSA, which provides that articles from Mexico that are classified in subheading 8419.19.00, HTSUSA, are excluded from receiving duty-free treatment under the GSP.

Our regulations allow for the modification or revocation of ruling letters. As stated in 19 CFR 177.9(d)(1), "[a]ny ruling letter found to be in error or not in accordance with the current views of the Customs Service may be modified or revoked. Modification or revocation shall be effected by Customs Headquarters by giving notice to the person to whom the ruling letter was addressed . . . ." As provided in 19 CFR 177.9(d)(2), "[t]he modification or revocation of a ruling letter will not be applied retroactively with respect to the person to whom the ruling was issued, or to any person directly involved in the transaction to which that ruling related . . . ."

This notice to you should be considered a modification of HRL 555532 dated September 18, 1990, under 19 CFR 177.9(d)(1). It is not to be applied retroactively to HRL 555532, and, therefore, it will not affect past transactions of the merchandise imported by Rheem Manufacturing Company under this ruling. However, for the purposes of future transactions of gas water heaters under GSP, HRL 555532 will not be a valid ruling. We recognize that pending transactions may be adversely affected by this modification. As provided in section 177.9(d)(3), Customs affords some remedial relief. "Generally, a ruling letter modifying or revoking an earlier ruling letter will be effective on the date it is issued. However, the Customs Service may, upon application . . ., delay the effective date of such a ruling for a period of up to 90 days from the date of issuance."



The gas water heaters are properly classified in subheading 8419.19.00, HTSUSA, which provides for "[i]nstantaneous or storage water heaters, nonelectric: other. Articles from Mexico which are classified in this tariff provision are ineligible for duty-free treatment under the GSP.

HRL 555532 is hereby modified accordingly.


John Durant, Director
Commercial Rulings Division

cc: Area Director, New York, NIS