CLA-2 OT:RR:CTF:TCM H053672 JER/JPJ
Robert T. Givens, Esq.
Givens & Johnston, PLLC
950 Echo Lane, Suite 360
Houston, TX 77024-2788
RE: Revocation of New York Ruling Letter N012463; Classification of a Perforating Gun Assembly
Dear Mr. Givens:
This letter is in response to your request of February 20, 2009, for reconsideration of New York Ruling Letter (NY) N012463, issued to your client, Halliburton Energy Services, Inc. (Halliburton), by U.S. Customs and Border Protection (CBP) on June 18, 2007. In NY N012463, CBP determined that the subject “Perforating Gun Assembly” was classified under heading 9303 of the Harmonized Tariff Schedule of the United States (HTSUS) as “Other firearms and similar devices which operate by the firing of an explosive charge.” We have reviewed NY N012463 and found it to be incorrect for the reasons set forth below. In reaching our decision we have taken into consideration your submission dated February 20, 2009, information obtained during a meeting held on October 29, 2009, between CBP, your office and Halliburton, and your supplemental submission dated November 23, 2009.
On May 16, 2012, 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, notice of the proposed action was published in the Customs Bulletin, Vol. 46, No. 21. One comment was received in support of the notice. However, the commenter suggests that while heading 7326 may indeed be the most appropriate heading, headings 7304, 7305 and 7306 should also be given consideration. The suggested headings are discussed in the Law and Analysis Section herein.
FACTS:
The subject merchandise, referred to as a perforating gun assembly (hereinafter “perforating gun”), was described in NY N012463 as follows:
It is an apparatus consisting of a tube-like device called a charge holder which is a specialized component of a perforating gun. The charge holder is basically a long tube, up to several feet in length, with holes cut out of it. The design of the tube and the placement of the holes are made to exact specifications. The charge holder tube will be fitted with directional, sealed, powdered charges, combined with the perforating gun, and placed in oil or gas wells where its detonation will blow or perforate holes in casings and rock strata.
According to your submission perforating guns are used in connection with onshore oil well drilling and oil production. The subject perforating guns are said to be imported without any explosive charges, sensors, or the like, and are described as “single use” articles which are discarded after use. You have also stated that:
Without the explosives, the perforating tool provides a sealed atmospheric chamber that can withstand collapse pressure when an external pressure is applied, provides alignment for mating parts, has provisions for attaching additional members, and has strength to withstand tension, compression and torsion.
* * *
The explosive charges in question are shaped charges that focus the energy of the explosion in a specific direction. In many applications the charge holder orients these shaped charges so that they focus their energy laterally precisely into a spot on the wall of the well bore...
ISSUE:
Whether the subject perforating gun assembly as imported is classified (1) under headings 7304, 7305, or 7306, HTSUS, as tubes, pipes and hollow profiles, other tubes and pipes, or other tubes, pipes and hollow profiles, (2) under heading 7326, HTSUS, as an other article of iron or steel, or (3) under heading 8430, HTSUS, as an excavating, boring or extracting machine, or (4) under heading 8431, HTSUS, as a part of an excavating, boring or extracting machine, or (5) under heading 8479, HTSUS, as a machine having an individual function not elsewhere specified or included, or (6) under heading 9303, HTSUS, as a firearm or similar device which operates by the firing of an explosive charge.
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall 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 may then be applied in order.
The HTSUS provisions under consideration are as follows:
7304 Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel.
7305 Other tubes and pipes (for example, welded, riveted or similarly closed), having circular cross-sections, the external diameter of which exceeds 406.4 mm, of iron or steel.
7306 Other tubes, pipes and hollow profiles (for example, open seam or welded, riveted or similarly closed), of iron or steel.
7326 Other articles of iron or steel:
8430 Other moving, grading, leveling, scraping, excavating, tamping, compacting, extracting or boring machinery, for earth, minerals or ores; pile-drivers and pile-extractors; snowplows and snowblowers:
8431 Parts suitable for use solely or principally with machines of headings 8425 to 8430:
8479 Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof:
9303 Other firearms and similar devices which operate by the firing of an explosive charge (for example, sporting shot-guns and rifles, muzzle-loading firearms, Very pistols and other devices designed to project only signal flares, pistols and revolvers for firing blank ammunition, captive-bolt humane killers, line-throwing guns):
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While not 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).
EN 73.04 provides, in pertinent part, that:
The heading excludes:
* * *
(f) Tubes, pipes and hollow profiles made up into specific identifiable articles. . .
EN 73.05 provides, in pertinent part, that:
The heading does not cover:
* * *
Tubes or pipes made up into specific identifiable articles.
EN 73.06 provides, in pertinent part, that:
The heading excludes:
* * *
(f) Tubes, pipes and hollow profiles made up into specific identifiable articles. . .
EN 84.30 provides, in pertinent part, that:
(III) EXTRACTING, CUTTING OR DRILLING MACHINERY
This heading covers machinery, other than the self propelled machines of heading 84.29 and agricultural, horticultural or forestry machinery (heading 84.32), for “ attacking ” the earth’s crust (e.g., for cutting and breaking down rock, earth, coal, etc.; earth excavation, digging, drilling, etc.), or for preparing or compacting the terrain (e.g., scraping, levelling, grading, tamping or rolling). It also includes pile drivers, pile extractors, snow ploughs, and snow blowers.
EN 84.79 states, in relevant part, as follows:
This heading is restricted to machinery having individual functions, which :
(a) Is not excluded from this Chapter by the operation of any Section or Chapter Note.
For this purpose the following are regarded as having “individual functions”:
* * *
(B) Mechanical devices which cannot perform their function unless they are mounted on another machine or appliance, or are incorporated in a more complex entity, provided that this function:
* * *
is distinct from that which is performed by the machine or appliance whereon they are to be mounted, or by the entity wherein they are to be incorporated, and
does not play an integral and inseparable part in the operation of such machine or entity.
EN 93.03 provides, in pertinent part, that:
This heading includes all firearms not covered by headings 93.01 and 93.02; it includes some devices which are not weapons but which operate by the firing of an explosive charge.
* * *
In your request for reconsideration, you argue that the instant merchandise does not qualify as a firearm within the meaning of heading 9303, HTSUS, in part, because, it does not meet the definition of a “firearm.” You state that an “arm” is commonly defined as a weapon, specifically a firearm. In turn, a weapon is defined as “an instrument of attack or defense in combat, as a gun, missile or sword. The American Heritage Dictionary of the English Language, 3rd ed., (1992). You further contend that the instant perforating gun is not a “similar device” within the meaning of heading 9303, HTSUS, because the subject perforating gun does not look or function like a firearm. You explain that the name “perforating gun” is a misnomer used within the oil and gas industry that does not describe the functionality of the merchandise. In your February submission, you noted that the subject perforating gun is used for “facilitating the production of oil…[and is] not designed to either fire a projectile or to resemble a firearm firing a projectile.”
In order to classify the subject merchandise under heading 9303, HTSUS, it must be a firearm or ejusdem generis (of the same class or kind) with those devices enumerated in the heading. The Court has held that “As applicable to classification cases, ejusdem generis requires that the imported merchandise possess the essential characteristics or purposes that unite the articles enumerated eo nomine in order to be classified under the general terms.” Nissho-Iwai American Corp. v. United States (Nissho), 10 Court of Int’l Trade 154, 157 (1986). The exemplars named in heading 9303, HTSUS, share several characteristics which include: multiple usage, operating by the firing of an explosive charge activated by an internal triggering mechanism which sends a projectile through a barrel, and being hand-held.
By contrast, the subject perforating device consists of one long tube with multiple perforations along its length from which multiple explosive charges exit in multiple directions. Further, the tube itself is not the explosive device, it does not use an internal firing or triggering mechanism to fire a projectile from a barrel, and it is not capable of re-use as are the articles of heading 9303, HTSUS. Moreover, the subject merchandise is used in connection with oil drilling and production rather than as a weapon. Therefore, under the canon of construction known as ejusdem generis, the subject perforation device can not be said to be similar in function, essential character or purpose to the enumerated examples of heading 9303, HTSUS. Accordingly, it is not described by the term “firearm.” Based on the foregoing, the subject perforating gun cannot be classified in heading 9303, HTSUS, because it is not described by the heading.
You assert that the subject merchandise is classifiable in heading 8430, HTSUS, as other moving, grading, leveling, scraping, excavating, tamping, or boring machinery. In the alternative, you assert classification under heading 8431, HTSUS, as parts suitable for use solely or principally with the machinery of heading 8430, HTSUS, or in heading 8479, HTSUS, as a machine or mechanical appliance having an individual function, not specified or included elsewhere in Chapter 84.
Machinery of heading 8430, HTSUS, by their own mechanical function, directly affects the scraping, leveling, boring, excavation or extraction of the earth, ores or minerals in question. The examples provided in EN 84.30 include: (A) coal or rock cutters, (B) Tunneling machinery, (C) Machines for boring drill holes in rock, coal, etc., (D) Well sinking or boring machines (F) Hydraulic wedges. The machinery of heading 8430, HTSUS, have in common the fact that they break the earth’s crust by physical impact, abrasion or percussion between the machine in question and the rock or earth to be broken. The instant merchandise does not function in the aforementioned manner. While the ultimate objective of the instant perforation device is to stimulate the flow of oil into the well hole, the subject perforating gun does not itself have direct contact with the subsurface strata. Instead, it acts as a single use container or carrier into which explosive charges are inserted. We find that the subject perforating gun assembly does not perform a function which is described by the terms of heading 8430, HTSUS.
Further, the subject perforating gun is not designed to be a part of any of the machines of heading 8430, HTSUS and is therefore not classifiable in heading 8431, HTSUS, as a “part” of a machine of heading 8430, HTSUS. A part is either (1) an integral, constituent, or component part, without which the article to which it is to be joined, could not function as such article, or (2) dedicated solely for use with an article. [internal quotation marks omitted]. ABB, Inc. v. United States, 28 Ct of Int’l Trade 1444, 1452; 346 F. Supp. 2d 1357, 1364; 26 Int'l Trade Rep. (BNA) 2327 (2004), citing Bauerhin Technologies Limited Partnership, & John V. Carr & Son, Inc. v. United States, 110 F.3d 774 (Fed. Cir. 1997).
Heading 8479, HTSUS, specifically provides for machines and mechanical appliances having individual functions not elsewhere specified or included. Accordingly, articles of heading 8479, HTSUS, must be a machine or mechanical appliance that has an individual mechanical function. A machine is a “device that amplifies or replaces human or animal effort to accomplish a physical task…the operating of a machine may involve the transformation of chemical, thermal, electrical or nuclear energy into mechanical energy, or vice versa. Britannica Concise Encyclopedia at www.britannica.com/. Further, EN 84.79 (B)(II) explains that individual functions refers to “[m]echanical devices which cannot perform their function unless they are mounted on another machine or appliance, or incorporated in a more complex entity, provided that this function:… (ii) does not play an integral and inseparable part in the operation of such machine, appliance or entity…”
According to the facts provided, the subject perforating gun acts as a charge holder for explosive charges which are later detonated to perforate the subsurface well hole. Despite its indirect contribution to the drilling and production of oil, the subject merchandise is simply a passive carrier of “shape charges.” It does not provide any mechanical advantage which facilitates the detonation of the charges nor does it, by its own operation, affect any mechanical outcome. Accordingly, we find that the instant merchandise is not a “machine” or a mechanical appliance within the meaning of heading 8479, HTSUS.
The subject perforating gun is not classifiable in headings 7304, 7305, or 7306, HTSUS. The commenter states that, based on the description of the subject merchandise, in relevant part, as a “long tube” with “holes cut out of it”, the product may be “drilled” pipe. The commenter cites HQ 951010, dated May 7, 1992, to argue that CBP has classified “drilled” pipe in heading 7304, HTSUS. However, the merchandise in HQ 951010 was described as “hot finished seamless steel tubes”. The protestant argued that the merchandise was “truck parts”. The ruling found that the merchandise was not “something other than heading 7304, tubes or pipes or that they are made up into specific identifiable articles which would be excluded from heading 7304”. Although the subject perforating gun may be tube-like in form, it is not ordinary tube or pipe. It is advanced beyond the ordinary tube or pipe stage, and made up into a specific identifiable article. The ENs for headings 7304, 7305, and 7306, HTSUS, specifically exclude tubes, pipes and hollow profiles made into specific identifiable articles.
The subject merchandise is a hollow tube-like container which relies on a detonator and other articles in order to function. Therefore, because the subject article has no independent or individual functions or capabilities, we find that the subject perforating gun assembly is properly classified in heading 7326, HTSUS, as an article of steel.
HOLDING:
By application of GRI 1, the subject perforating gun assembly is classifiable under heading 7326, HTSUS. It is specifically classified in subheading 7326.90.85, HTSUS, which provides for: “Other articles of iron or steel: Other: Other.” The 2011 column one, general rate of duty is 2.9% ad valorem.
Duty rates are provided for convenience only and are subject to change. The
text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov.
EFFECT ON OTHER RULINGS:
NY N012463, dated June 18, 2007, is hereby revoked.
In accordance with 19 U.S.C. 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division