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.
FACTS:
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.
ISSUE:
What is the correct tariff classification of the gas water
heaters manufactured in Mexico?
-2-
LAW AND ANALYSIS:
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
-3-
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."
-4-
HOLDING:
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.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: Area Director, New York, NIS