CLA-2 R:C:M 957790 JAS

Mr. Ned H. Marshak, Esq.
Sharretts, Paley, Carter & Blauvelt, P.C.
67 Broad Street
New York, New York 10004

RE: Unassembled Railway Cars; Railway Cars, Incomplete, Unfinished Self-Propelled Railway or Tramway Coaches Powered From an External Source of Electricity, Subheading 8603.10.00; Essential Character, GRI 2(a); HQ 950118 Modified

Dear Mr. Marshak:

Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. 1625(c)(1)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), notice of the proposed modification of HQ 950118 was published in the Customs Bulletin, Volume 29, Number 17. In HQ 950118, dated December 10, 1991, we replied to a ruling request of August 9, 1991, on behalf of Breda Costruzioni Ferroviarie, on the classification of certain rapid transit subway railcars from Italy.

The ruling held that the railcars were classifiable in subheading 8603.10.00, Harmonized Tariff Schedule of the United States (HTSUS), as self-propelled railway or tramway coaches, vans and trucks, other than those of heading 8604, powered from an external source of electricity. We have reviewed the matter and are now of the opinion that the ruling is partially incorrect. Accordingly, it is modified by this ruling.

FACTS:

The transit cars in this request are distinct carbodies consisting of A and B sections, which must be joined together as "married pairs" into an articulated self-propelled railway coach. The separate A and B carbodies cannot independently function as a self-propelled railcar. Each A and B carbody is essentially - 2 -

complete in and of itself, lacking only minor electrical and propulsion components supplied by the other car to be fully operational.

These cars were imported in three factual situations: two fully outfitted A carbodies and two fully outfitted B carbodies on the same vessel, requiring minor assembly operations for completion into a functioning unit; A carbodies on one vessel and B carbodies on another vessel; and incomplete A and incomplete B carbodies imported unassembled on the same vessel. In this last situation, each carbody consists of a structural shell, windows, doors, underframe, interior lighting and fixtures, air diffuser ducting, wiring and tubing for connection to the electrical and mechanical components. The imported components in the third situation constitute 49.7 percent of the cost or value of a complete self-propelled railcar. The remaining 50.3 percent of the cost or value of the completed car is represented by components to be added in the United States including the propulsion system, ATC equipment, brake equipment, couplers, air conditioning system, intercommunication radio system, wheel assembly, seats, bearings, and trucks.

The provisions under consideration are as follows:

8603 Self-propelled railway or tramway coaches, vans and trucks, other than those of heading 8604:

8603.10.00 Powered from an external source of electricity...6 percent

* * * *

8607 Parts of railway or tramway locomotives or rolling stock:

Other:

8607.99 Other:

8607.99.50 Other...3.7 percent

ISSUE:

Whether A and B carbodies imported in each of the three fact patterns, as described, are self-propelled railway or tramway coaches of heading 8603; if not, whether they are parts of heading 8607. - 3 -

LAW AND ANALYSIS:

Merchandise is classifiable under the Harmonized Tariff Schedule of the United States (HTSUS) in accordance with the General Rules of Interpretation (GRIs). GRI 1 states in part that for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 through 6. GRI 2(a) states, in part, that incomplete or unfinished articles are to be classified in the same heading as the complete or finished article, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It also applies to complete or finished articles entered unassembled or disassembled.

The Harmonized Commodity Description And Coding System Explanatory Notes (ENs) constitute the Customs Cooperation Council's official interpretation of the Harmonized system. While not legally binding on the contracting parties, and therefore not dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System and are thus useful in ascertaining the classification of merchandise under the System. Customs believes the notes should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).

In the first factual situation, A and B carbodies imported on the same vessel are unassembled or disassembled articles under GRI 2(a). They will continue to be classifiable in subheading 8603.10.00, HTSUS, as self-propelled railway or tramway coaches powered from an external source of electricity.

In the second factual situation, each A and B carbody, though imported separately, is nevertheless recognizable as a complete railway coach consisting of a fully outfitted passenger compartment, underframe and truck. Each carbody lacks only minor electrical and propulsion components supplied by the other car to make the articulated car operational. We note that the General Explanatory Notes (EN) to Chapter 86, at p. 1414, list motorized railway or tramway coaches not fitted with a power unit as examples of incomplete or unfinished vehicles. For these reasons, we remain of the opinion that each A and B carbody has the essential character of a self-propelled railway coach because each car has the aggregate of distinctive component parts that establishes its identity as a railway coach.

In the third factual situation, HQ 950118 concluded that the incomplete A and B carbodies, as described, imported unassembled on the same vessel, had the essential character of complete or finished railway coaches. We have reconsidered this position and - 4 -

are now of the opinion that undue reliance may have been placed on legal principles developed under the HTSUS predecessor tariff code, the Tariff Schedules of the United States. While we recognize that on a case-by-case basis administrative and judicial decisions under a prior nomenclature can be instructive in interpreting provisions of the HTSUS this is not the case here. We also believe that the characterization of a railway passenger coach first and foremost as a vehicle capable of a transport function must be more fully considered. In this latter regard, the previously cited EN to Chapter 86 states that incomplete or unfinished vehicles are classified with the corresponding complete or finished vehicles, provided they have the essential character thereof. The note then lists examples of vehicles that would be considered incomplete or unfinished for tariff purposes. However, the EN then continues by stating that bodies of motorized railway or tramway coaches, of vans, wagons or trucks, or of tenders, not mounted on underframes, are classified as parts of railway or tramway locomotives or rolling stock (heading 86.07). For these reasons, it is now our position that the incomplete or unfinished A and B carbodies, as described, do not have the essential character of complete or finished self-propelled railway passenger coaches.

HOLDING:

Under GRI 2(a), the A and B carbodies in the first factual situation are unassembled articles provided for in heading 8603. They are classifiable in subheading 8603.10.00, HTSUS. Under GRI 2(a), each A and B carbody in the second factual situation has the essential character of a railway or tramway coach of heading 8603. Each A and B carbody is classifiable in subheading 8603.10.00, HTSUS. The incomplete A and B carbodies in the third factual situation lack the essential character of a self- propelled railway coach of heading 8603. Under GRI 1, they are provided for in heading 8607. These carbodies are classifiable in subheading 8607.99.50, HTSUS.

EFFECT ON OTHER RULINGS:

HQ 950118, dated December 10, 1991, is modified consistent with this decision. In accordance with 19 U.S.C. 1625(c)(1), this ruling will become effective 60 days after its publication in the Customs Bulletin. Publication of rulings or decisions pursuant to 19 U.S.C. 1625(c)(1) does not constitute a change of practice or position in accordance with section 177.10(c)(1), Customs Regulations (19 U.S.C. 177.10(c)(1)).

Sincerely,


John Durant, Director
Commercial Rulings Division