CLA–2 OT:RR:CTF:TCM H148455 AMM
Mr. Sydney H. Mintzer
Mayer Brown LLP
1909 K St. NW
Washington, DC 20006
RE: Modification of Headquarters Ruling Letter H024848; Modification of New York Ruling Letter N021063; Classification of Components of a Wind Turbine Generator Upon Withdrawal from a Foreign Trade Zone
Dear Mr. Mintzer,
This is in reference to Headquarters Ruling Letter (HQ) H024848, dated December 4, 2008, issued to Suzlon Wind and Energy Corporation, Inc. (Suzlon), regarding the classification by U.S. Customs and Border Protection (CBP) of certain wind turbine components (namely, the blade assembly and nacelle) under the Harmonized Tariff Schedule of the United States (HTSUS) upon their withdrawal from a Foreign Trade Zone (FTZ) and formal entry into U.S. territory. We have reviewed HQ H024848 and found it to be incorrect with respect to the classification of the nacelle. For the reasons set forth below, we are modifying that ruling.
CBP is also modifying New York Ruling Letter (NY) N021063, dated January 9, 2008, issued to Suzlon, regarding the classification of certain wind turbine components under the HTSUS.
Pursuant to section 625(c), Tariff Act of 1930, (19 U.S.C. §1625(c)), 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 treatment relating to the tariff classification of nacelles for wind turbines was published on September 14, 2011, in the Customs Bulletin, Volume 45, Number 38. Comments from two interested parties were received on this proposal. Both parties disagreed with the proposed classification of the subject nacelle. A discussion of the comments and CBP’s reasoning are found in the “Law and Analysis” section below.
FACTS:
The wind turbine at issue in HQ H024848, the Suzlon S88 2.1 MW Wind Turbine, converts wind energy into useful electrical energy. It is composed of three major components: the nacelle, blade assembly, and a 77.5 meter tall metal tower. CBP considered the classification of the nacelle and the individual components of the blade assembly (i.e., the hub, nose cone, blades, and pitch system) upon their withdrawal from an FTZ and formal entry into U.S. territory.
A. The Nacelle of HQ H024848
The nacelle of the Suzlon S88 2.1 MW Wind Turbine is a lozenge-shaped housing which contains mechanical equipment and electronics necessary to convert the rotational energy of a shaft into useful electrical energy. It rests on top of a metal tower, which stands 77.5 meters tall. The nacelle consists of a main frame, a rotor shaft, a rotor bearing with housing, a gear box, an oil pump, a mechanical hydraulic brake system, a generator coupling, a generator system, and a yaw system. CBP classified this product in subheading 8502.31.00, HTSUS. A cutaway diagram of the nacelle, taken from your submission dated December 14, 2007, showing which components are included, is pictured below:
B. The Blade Assembly of HQ H024848
The wind turbine’s hub, nose cone, blades, and pitch system are collectively referred to as the blade assembly. The hub, which attaches directly to the nacelle, is made of cast iron and shaped into spheres. Its primary function is to hold the blades in place. The nose cone, which is attached to the hub, protects the hub from the elements and improves aerodynamics by speeding up air flow as it approaches the blades. The blades are made of a fiberglass epoxy and measure 43.35 meters in length. The pitch system, housed inside the hub, rotates the blades to optimize wind capture.
C. Withdrawal from an FTZ
The wind turbine’s nacelle and blade assembly are separately purchased and separately invoiced by Suzlon, but they are admitted together into an FTZ upon arrival from a single vessel. The components are separately entered for consumption as Non-Privileged Foreign Status merchandise. While at the FTZ, those components are not further assembled, disassembled, manufactured, or produced. On occasion, the components are withdrawn separately and on separate days from the FTZ (e.g. when the size and weight of the components is so great that they require individual shipping, or when intended for different customers).
During the reconsideration of HQ H024848, CBP uncovered a similar ruling which requires modification. In New York Ruling Letter (NY) N021063, dated January 9, 2008, CBP considered the classification of a nacelle assembly (hereinafter referred to as a “nacelle”), described as “a structure that houses a generator, gearbox, rotor shaft, main frame and bed plate among other components. It is primarily responsible for converting wind energy into electrical energy.” See NY N021063. CBP classified this product in subheading 8502.31.00, HTSUS. According to HQ H024848, the nacelle at issue in both rulings is identical.
ISSUE:
I. What is the proper classification of the wind turbine’s nacelle under the HTSUS?
II. What is the proper classification of the wind turbine’s blade assembly under the HTSUS?
III. Upon withdrawal from an FTZ and entry for consumption, separately on separate days into U.S. territory, are the wind turbine’s blade assemblies and nacelles to be classified separately or as a single unassembled or disassembled entity?
LAW AND ANALYSIS:
I. Classification of the Nacelle
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification 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 GRI may then be applied.
The 2014 HTSUS provisions at issue are as follows:
8412 Other engines and motors, and parts thereof:
8412.90 Parts:
8412.90.90 Other
------------------------------
8502 Electric generating sets and rotary converters:
Other generating sets:
8502.31.00 Wind-powered
------------------------------
8503.00 Parts suitable for use solely or principally with the machines of heading 8501 or 8502:
Other:
8503.00.95 Other
GRI 2(a) states:
Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.
Note 2 to Section XVI, HTSUS, states, in pertinent part:
Subject to note 1 to this section, note 1 to chapter 84 and to note 1 to chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules:
(a) Parts which are goods included in any of the headings of chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings;
(b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate.
* * *
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs), constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the EN provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the headings. It is CBP’s practice to consult, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89–80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
EN (I) to GRI 2(a) states:
The first part of Rule 2(a) extends the scope of any heading which refers to a particular article to cover not only the complete article but also that article incomplete or unfinished, provided that, as presented, it has the essential character of the complete or finished article.
The General EN to Section XVI (which covers headings 8502 and 8503), states:
(IV) INCOMPLETE MACHINES
(See General Interpretative Rule 2(a))
Throughout the Section any reference to a machine or apparatus covers not only the complete machine, but also an incomplete machine (i.e., an assembly of parts so far advanced that it already has the main essential features of the complete machine). Thus a machine lacking only a flywheel, a bed plate, calender rolls, tool holders, etc., is classified in the same heading as the machine, and not in any separate heading provided for parts. Similarly a machine or apparatus normally incorporating an electric motor (e.g., electro mechanical hand tools of heading 84.67) is classified in the same heading as the corresponding complete machine even if presented without that motor.
EN 84.12 states, in pertinent part:
(D) WIND ENGINES (WINDMILLS)
This group includes all power units (wind engines or wind turbines), which directly convert into mechanical energy the action of the wind on the blades (often of variable pitch) of a propeller or rotor.
Usually mounted on a fairly tall metal pylon, the propellers or rotors have an arm perpendicular to their plane, forming a vane, or some similar device for orientating the apparatus according to the direction of the wind. The motive force is generally transmitted by reduction gearing through a vertical shaft to the power take-off shaft at ground level …
* * *
Electric generator units composed of wind motors mounted integrally with an electric generator (including those for operation in aircraft slipstreams) are excluded (heading 85.02).
EN 85.01 states, in pertinent part:
(II) ELECTRIC GENERATORS
Machines that produce electrical power from various energy sources (mechanical, solar, etc.) are classified here, provided they are not more specifically covered by any other heading of the Nomenclature.
* * *
Electric generators may be hand or pedal operated, but usually they have prime movers (e.g., hydraulic turbines, steam turbines, wind engines, reciprocating steam engines, internal combustion piston engines). However, this heading only covers generators when presented without prime movers.
* * *
EN 85.02 states, in pertinent part:
(I) ELECTRIC GENERATING SETS
The expression ‘generating sets’ applies to the combination of an electric generator and any prime mover other than an electric motor (e.g., hydraulic turbines, steam turbines, wind engines, reciprocating steam engines, internal combustion engines). Generating sets consisting of the generator and its prime mover which are mounted (or designed to be mounted) together as one unit or on a common base (see the General Explanatory Note to Section XVI), are classified here provided they are presented together (even if packed separately for convenience of transport).
* * *
PARTS
Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI), parts of the machines of this heading are classified in heading 85.03.
Heading 8502, HTSUS, provides for “Electric generating sets”. EN 85.02 states that “[t]he expression ‘generating sets’ applies to the combination of an electric generator and any prime mover other than an electric motor (e.g., … wind engines, …).” Furthermore, EN 85.01 explains that “electric generators” are “[m]achines that produce electrical power from various energy sources (mechanical, solar, etc.) …”.
The term “prime mover” is not defined in the HTSUS or in the ENs. The Merriam-Webster Online Dictionary defines the term “prime mover” as “1.a: an initial source of motive power (as an engine) designed to receive and modify force and motion as supplied by some natural source and apply them to drive other machinery (as a waterwheel, turbine, or steam engine).” See (last viewed on November 12, 2013). Other relevant technical definitions of the phrase “prime mover” are similar. Wind Turbine Technology defines a “prime mover” as “A source of mechanical power that turns an electric generator.” See Ahmed Hemani, Wind Turbine Technology, p. 98 (Centage Learning, 2011). The Electric Power Engineering Handbook states, “The system that drives the generator rotor is often referred to as the prime mover. The prime mover system includes the turbine (or other engine) driving the shaft, the speed control system, and the energy supply system for the turbine.” See Leonard Grigsby, et. al., Power System Stability and Control: Electric Power Engineering Handbook, 2nd Ed., p. 13-6 (CRC Press, 2007). The Comprehensive Dictionary of Electrical Engineering defines “prime mover” as “the system that provides the mechanical power input for a mechanical-to-electrical energy conversion system (generator), e.g., the diesel engine of an engine-generator set.” See Phillip A. Laplante, Comprehensive Dictionary of Electrical Engineering, 2nd Ed., p. 543 (CRC Press, 2005). The Electric Generators Handbook states that “Electric energy (power) is produced by coupling a prime mover that converts the mechanical energy (called a turbine) to an electrical generator, which then converts the mechanical energy into electrical energy …”. See Ian Boldea, The Electric Generators Handbook: Synchronous Generators, pp. 1-5 to 1-6 (CRC Press, 2006). Drawing from the above definitions, we conclude that the “prime mover” of a wind turbine is a system which performs three functions: it captures the kinetic energy of the wind, converts that energy to rotational mechanical energy, and feeds that energy into a generator.
EN 85.02 lists “wind engines” as an example of a prime mover. According to EN 84.12, wind engines are “power units … which directly convert into mechanical energy the action of the wind on the blades (often of variable pitch) of a propeller or rotor.” The phrase “wind engines” does not appear to be used by the trade, which instead prefers the term “prime mover.” Therefore, because wind engines are a type of prime mover, these terms are identical with respect to wind turbine technology.
The process by which a complete wind turbine (which consists of a prime mover and a generator; See EN(I) to 85.02) generates electricity can be summarized as follows: First, wind energy is captured by the rotor blades, hub, and nose cone. The pitch system and yaw drive both optimize this function, by rotating the blades or the nacelle housing, respectively. Next, the kinetic energy is converted into a force which turns the rotor shaft. Once the wind energy has been converted into rotational energy of the rotor shaft, this force is transmitted to the generator through the gear box and brake system. The generator then converts the rotational energy to useful electricity. See James Manwell, et. al., Wind Energy Explained: Theory, Design, and Application, 2nd Ed., pp. 3-5 (Wiley Publ., 2009). The rotor bearing and main frame support the weight of these components, and ensure proper alignment.
The wind engine (prime mover) is comprised of the following components: the blade assembly, rotor shaft, rotor bearing, gear box, brake system, mainframe, nacelle housing, and yaw system. The point where the shaft is attached to the generator, at the generator coupling, represents the boundary of the “prime mover,” because that is the exact point at which the rotational mechanical energy is fed into the generator, and the force of the wind is applied to drive other machinery.
Both commenters assert that the instant nacelle does not include a prime mover. One commenter argued that the prime mover consists solely of the blade assembly, because that is the portion which captures the wind energy used to propel the wind turbine. We note that the blade assembly is entirely missing from the instant nacelle assembly. The other commenter argued that the prime mover consists only of those components designed and intended to convert the energy of the wind to mechanical energy, and that components which work to transmit that energy to the generator (the rotor shaft, rotor bearing, gear box, brake system, mainframe, and yaw system) are not part of the “wind engine.” The commenters cite to a specific portion of EN 84.12 in support of their position.
CBP disagrees with the commenters for several reasons. First, as discussed above, the technical definitions of the term “prime mover” indicate that it is a system which captures kinetic energy, converts that energy to mechanical energy, and then feeds that energy to a generator. See Hemani, p. 98; Grigsby, et. al., p. 13-6; Laplante, p. 543; and Boldea, pp. 1-5 to 1-6. The commenters have provided no technical definitions to support their assertion that the prime mover consists solely of the portion which captures the wind energy.
Second, a proper reading of EN 84.12 does not support the commenters’ definition of a prime mover. EN 84.12 states, in pertinent part:
(D) WIND ENGINES (WINDMILLS)
This group includes all power units (wind engines or wind turbines), which directly convert into mechanical energy the action of the wind on the blades (often of variable pitch) of a propeller or rotor. Usually mounted on a fairly tall metal pylon, the propellers or rotors have an arm perpendicular to their plane, forming a vane, or some similar device for orientating the apparatus according to the direction of the wind. The motive force is generally transmitted by reduction gearing through a vertical shaft to the power take-off shaft at ground level.
* * *
See EN(D) to heading 84.12. A wind engine is described as a “power unit” which converts wind energy to mechanical energy through the use of a propeller or rotor. This “power unit” also includes a vane or similar device for orienting the apparatus according to the direction of the wind, and components for transmitting the motive force. The yaw system, which connects the nacelle housing to the tower, is used to rotate the entire wind turbine in accordance with the direction of the wind. The yaw system and nacelle housing form a “vane” as described in EN(D) to heading 84.12, such that it would be properly considered to be a part of a wind engine. The rotor shaft, rotor bearing, gear box, brake system, and mainframe allow the captured motive force to be transmitted to the generator. Because EN(D) to heading 84.12 contemplates this transmission function within the definition of a “wind engine,” it is appropriate for CBP to consider the transmission components to be a part of the wind engine.
Finally, we note that CBP has previously issued rulings on the classification of certain wind turbine components. The commenters assert that the prime mover consists only of the blade assembly, which consists of hub, nose cone, blades, and pitch system. As discussed below (and in previous rulings, such as HQ H024848, HQ H023502, dated July 8, 2008, NY N007816, dated March 28, 2007, and NY M80880, dated April 17, 2006), CBP has already determined that this blade assembly is classified as a part of a wind engine (in 8412.90.90, HTSUS), not as a wind engine itself (in 8412.80.90, HTSUS).
Furthermore, CBP has previously classified the inner workings of a wind turbine nacelle assembly as “parts of a wind engine” under heading 8412, HTSUS, specifically under subheading 8412.90.90, HTSUS. In NY N058766, dated May 26, 2009, CBP considered the classification of wind turbine nacelles, imported both with and without the blade assemblies. The nacelles consisted of a housing, metal frame, gear box, shafts, brake system, yaw system, and controllers. CBP stated that “The gears, shafts, brake, and yaw drive and motor, together with the blade assembly, operate as the engine of the completed wind turbine.” In one scenario, a nacelle was imported without a generator, blades, hub, or nose cone. CBP classified it under subheading 8412.90.90, HTSUS, which provides for “Other engines and motors, and parts thereof: Parts: Other”.
CBP has also classified certain other individual components contained inside the nacelle housing as parts of a wind engine. See NY N112600, dated July 27, 2010 (a mechanical brake-hydraulic unit, which is a nacelle assembly component located behind the gear box as a part of a wind engine, was classified under subheading 8412.90.90, HTSUS); NY N138276, dated December 16, 2010 (a bedplate cast, used inside a nacelle assembly to support the yaw drive, brakes, rotor shaft, and gear box, as a part of a wind engine, was classified under subheading 8412.90.90, HTSUS).
CBP’s understanding of the term “prime mover” contemplates a wind engine that not only receives the force and motion of the wind, but modifies that force and applies it to drive other machinery. The blade assembly (blades, nose cone, hub, and pitch system) and vane (nacelle housing and yaw system) are designed to receive the force, the remaining components (rotor shaft, rotor bearing, gear box, brake system, and mainframe) are designed modify that force and to drive other machinery (the generator).
Thus, CBP finds the commenters’ arguments to be unpersuasive, and reiterates its position that the “wind engine” portion of a complete wind turbine is comprised of the blades, pitch system, nose cone, hub, rotor shaft, rotor bearing, gear box, brake system, mainframe, nacelle housing, and yaw system.
Now that the components which comprise the prime mover of a wind turbine have been specifically identified, we turn to consideration of the instant nacelle. The imported nacelle contains a generator and most of the component parts of a wind engine (namely, the rotor shaft, rotor bearing, gear box, brake system, main frame, nacelle housing, and yaw system), but lacks a blade assembly. As such, the nacelle does not contain a complete prime mover, and therefore does not satisfy the definition of an electric generating set contained in EN(I) to 85.02. The instant nacelle assembly cannot be classified under heading 8502, HTSUS, by application of GRI 1, because it is incomplete.
GRI 2(a) provides that “[a]ny reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, [it] has the essential character of the complete or finished article.” Therefore, the instant nacelle will be properly classified as a generating set under heading 8502, HTSUS, if it has the essential character of the complete or finished article.
The term “essential character” under GRI 2(a) applies to articles that are imported substantially complete. CBP has consistently interpreted the term to mean the attribute that serves to distinguish what an article is; that which is indispensable to the structure, core or condition of the good; the aggregate of distinctive component parts that establishes the identity of an article as what it is, its very essence. See HQ 967975, dated March 24, 2006. “Factors found to be relevant in other contexts are the significance of the imported components or their role in relation to the use or overall functioning of the completed article and, to the extent that it validates that comparison, the cost or value of the completed article versus the cost or value of the imported merchandise.” See HQ 967894, dated October 26, 2005 (classifying a motor vehicle which lacked its engine and transmissions a motor vehicle of heading 8703, HTSUS). See also HQ 962985, dated December 13, 1999; HQ 962690, dated September 22, 1999 (both classifying three-wheeled, battery-operated, motorized golf carts, which lacked rear wheels and batteries, as motor vehicles of heading 8704).
The overall function of a wind turbine is to capture kinetic wind energy and convert that energy into useful electricity. This process requires three steps: “[s]teady wind speeds turn a wind turbine’s blades, which then turn the turbine’s generator, which is then used to generate electricity.” See David Craddock, Renewable Energy Made Easy, 92-93 (Atlantic Publ. 2008).
In its condition as imported, the instant nacelle contains components necessary to capture wind energy and convert it into useful electrical energy. It contains the rotor shaft and yaw system, which, together with the separately-imported blade assembly, convert wind energy into rotational mechanical energy. It contains the rotor shaft, gear box, brake system, generator coupling, and rotor bearing, all of which transmit the rotational mechanical energy to the generator. It contains the nacelle housing, which encapsulates and protects the individual components. Finally, it contains the generator, which is responsible for converting rotational energy into useful electrical energy.
We conclude that the imported nacelle does not have the essential character of an electric generating set because it does not constitute the aggregate of distinctive parts that establish its identity for what it is, i.e., an electric generating set. CBP agrees with the commenters that the blades are the most important aspect of the prime mover, and are indispensable to its structure. Although the instant nacelle contains a generator and some of the parts of the prime mover, it lacks the blades, an essential element of the overall structure. Thus, the nacelle cannot be classified as an incomplete electric generating set in heading 8502, HTSUS, pursuant to GRI 2(a).
Note 2(b) to Section XVI, HTSUS, provides that parts suitable for use solely or principally with a particular kind of machine, such as a wind powered generating set, are to be classified with the machines of that kind or in one of the headings that specifically provide for parts of machines.
The courts have considered the nature of “parts” under the HTSUS and two distinct though not inconsistent tests have resulted. See Bauerhin Technologies Limited Partnership, & John V. Carr & Son, Inc. v. United States, 110 F.3d 774, 779. The first, articulated in United States v. Willoughby Camera Stores, 21 C.C.P.A. 322 (1933), requires a determination of whether the imported item is “an integral, constituent, or component part, without which the article to which it is to be joined, could not function as such article.” Bauerhin, 110 F.3d at 778 (quoting Willoughby Camera, 21 C.C.P.A. at 324). The second, set forth in United States v. Pompeo, 43 C.C.P.A. 9 (1955), states that an imported item “dedicated solely for use” with another article is a part of that article provided that, “when applied to that use,” the article will not function without it. Pompeo, 43 C.C.P.A. 9, 14. Under either line of cases, an imported item is not a part if it is “a separate and distinct commercial entity.” ABB, Inc. v. United States, 28 Ct. Int’l Trade 1444, 1452-53 (2004); Bauerhin, 100 F. 3d at 1452-32. “A subpart of a particular part of an article is more specifically provided for as a part of the part than as a part of the whole.” Mitsubishi Electronics America v. United States, 19 CIT 378, 383 n.3 (Ct. Int’l. Trade 1995).
The instant nacelle is specifically designed as a component of a wind turbine, which is classified under heading 8502, HTSUS. See HQ H010810. The nacelle houses the generator and many of the components which are considered parts of a wind engine. It is designed to be attached to a blade assembly, at which time it becomes a complete generating set, classifiable under heading 8502, HTSUS. Thus, the instant nacelle is a part suitable for use solely with a generating set, and is classifiable under heading 8503, HTSUS, specifically, under subheading 8503.00.95, HTSUS. See Note 2(b) to Section XVI, HTSUS; EN 85.02.
The commenters assert that the instant nacelle is classified under heading 8412, HTSUS, as a part of a wind engine. CBP disagrees with the commenters. Because the instant nacelle is presented with a generator, attaching the blade assembly results in a wind turbine (classifiable in heading 8502, HTSUS), not a wind engine. The instant nacelle is not a subpart of a wind engine, within the meaning of Mitsubishi Electronics, because it is presented with a generator. See EN(D) to 84.12 (which excludes “Electric generator units composed of wind motors mounted integrally with an electric generator”). Therefore, the instant nacelle is not properly classified under heading 8412, HTSUS, as a part of a wind engine.
In NY N021063, CBP considered the classification of a nacelle described as “a structure that houses a generator, gearbox, rotor shaft, main frame and bed plate among other components.” In this ruling, CBP classified the nacelle in subheading 8502.31.00, HTSUS. It is CBP’s position that the nacelle under consideration in NY N021063 is substantially similar to the nacelle under consideration in HQ H024848. Both nacelles contain a generator and many of the components of the prime mover, and both nacelles are missing the blade assembly. Thus, for the reasons discussed above with respect to the nacelle of HQ H024848, the nacelle of NY N021063 is also properly classified under heading 8503, HTSUS, specifically, under subheading 8503.00.95, HTSUS.
II. Classification of the Blade Assembly Components
The 2014 HTSUS provisions at issue are as follows:
8412 Other engines and motors, and parts thereof:
8412.90 Parts:
8412.90.90 Other
In HQ H024848, CBP classified the wind turbine’s hub, nose cone, pitch system, and blades – all of which are blade assembly components – in heading 8412, HTSUS, which provides for “Other engines and motors, and parts thereof”, pursuant to GRI 1. They were specifically classified under subheading 8412.90.90, HTSUS, as parts of wind engines.
Applying Bauerhin, we affirm the previous ruling’s conclusion that the instant hub, nose, cone, pitch system, and blades are “parts” of the wind turbine’s wind engine. Indeed, the blade assembly is indispensable to the wind engine (as it captures the wind energy used to propel the wind engine to which it is attached). The blade assembly is dedicated for use solely with a wind engine. Therefore, as no other heading in the HTSUS describes the blade assembly, the components of the instant blade assembly (i.e., the hub, nose cone, pitch system, and blades) are properly classified under heading 8412, HTSUS, in accordance with Note 2(b) to Section XVI, HTSUS, as parts suitable for use solely with a wind engine. This position is consistent with HQ H023502, NY N021063, NY N007816, and NY M80880.
III. Withdrawal of the Blade Assemblies and Nacelles from an FTZ
FTZs are established under the authority of the Foreign Trade Zones Act of 1934, as amended, 19 U.S.C. §§81a-81u. Section 81c provides for the admission of merchandise into a FTZ and its treatment and shipment to U.S. Customs Territory. Section 81c(a) explains that:
[F]oreign and domestic merchandise of every description, except such as is prohibited by law, may, without being subject to the customs laws of the United States, except as otherwise provided in this chapter, be brought into a zone and may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, or otherwise manipulated, or be manufactured except as otherwise provided in this chapter, and be exported . . .
For tariff classification purposes, goods are “admitted,” not “entered,” into an FTZ. Only after such goods are withdrawn from the FTZ and enter U.S. territory, are they deemed entered for purposes of tariff classification. Classification of articles entered from an FTZ is, in part, dependent upon whether the articles have Privileged Foreign (PF) Status or Non-Privileged Foreign (NPF) status. According to Suzlon, the subject merchandise is entered under NPF status. Under Section 146.65(a)(2) of the CBP Regulations (19 C.F.R. §146.65(a)(2)), NPF status merchandise is subject to tariff classification in accordance with its character, condition and quantity as constructively transferred to customs territory at the time of entry or when an entry summary is filed with CBP.
NPF status is a residual provision which applies to foreign merchandise which does not have the status of privileged foreign merchandise or zone-restricted merchandise or is deemed as waste. See 19 C.F.R. §146.42(a). Insofar as the subject merchandise has NPF status, it is not subject to classification upon admission into the FTZ. Moreover, under 19 C.F.R. §146.32, goods may only be admitted into an FTZ upon submission of Customs Form 214 (“Application for Foreign Trade Zone Admission and/or Status Designation”). Classification of such goods is governed by their status at the time that application is submitted. The instant products hold NPF status, and may therefore be classified separately upon admission to the FTZ despite arriving on the same vessel.
In HQ H024848, CBP considered whether the instant blade assemblies and nacelles should be classified separately or as a single unassembled or disassembled entity pursuant to 19 U.S.C. §1484(j)(1) upon withdrawal from an FTZ. CBP found that the importer may elect to do either.
19 U.S.C. §1484(j)(1), provides, in pertinent part, that:
(j) Treatment of multiple entries of merchandise as single transaction
In the case of merchandise that is purchased and invoiced as a single entity but - -
(1) is shipped in an unassembled or disassembled condition in separate shipments due to the size or nature of the merchandise, or
(2) is shipped in separate shipments due to the inability of the carrier to include all of the merchandise in a single shipment (at the instruction of the carrier),
the Customs Service may, upon application by the importer in advance, treat such separate shipments for entry purposes as a single transaction.
Section 1484 does not apply to the instant case because (1) the subject merchandise is both invoiced and purchased separately and (2) under the above provision, providing a single entry for separate conveyances is at the importer’s election.
A single entry for unassembled or disassembled entities imported on multiple conveyances is provided for in 19 C.F.R. §141.58, which states, in pertinent part:
Single entry for separately arriving portions of unassembled or disassembled entities.
(a) At election of importer of record. At the election of the importer of record, an unassembled or disassembled entity arriving on multiple conveyances as contemplated under section 484(j)(1), Tariff Act of 1930 (19 U.S.C. 1484(j)(1)), may be processed as a single entry, as prescribed under the procedures set forth in this section.
(b) Unassembled or disassembled entities covered. An unassembled or disassembled entity for purposes of this section is an entity which:
(1) Cannot, due to its size or nature, be shipped on a single conveyance, and is thus imported in an unassembled or disassembled condition;
* * *
As Section 141.58 explains, treating dissembled or unassembled entities arriving on multiple conveyances is at the election of the importer. Accordingly, there is nothing in the regulations or in the statutes which require an importer to file a single entry for unassembled or dissembled merchandise arriving on multiple shipments or which make mandatory the treatment of separate shipments as a single transaction. More importantly, however, the instant merchandise is not an unassembled or disassembled good insofar as the imported components are often sold separately and will be shipped on separate conveyances. As such, we affirm HQ H024848 and find that Suzlon may elect to enter the instant blade assemblies and nacelles separately or as a single unassembled or disassembled entity, after they are withdrawn from an FTZ.
HOLDING
By application of GRI 1 and Note 2(b) to Section XVI, HTSUS, the nacelle assemblies described in HQ H024828 and NY N021063 are properly classified under heading 8503, HTSUS, specifically under subheading 8503.00.95, HTSUS, which provides for: “Parts suitable for use solely or principally with the machines of heading 8501 or 8502: Other: Other”. The general column one rate of duty is 3% ad valorem.
By application of GRI 1 and Note 2(b) to Section XVI, HTSUS, the blade assembly and its components, as described in HQ H024848, are classified under heading 8412, HTSUS, specifically under subheading 8412.90.90, HTSUS, which provides for: “Other engines and motors and parts thereof: Parts: Other”. The column one, general rate of duty is free.
Suzlon may elect to enter the instant blade assemblies and nacelles separately or as a single unassembled or disassembled entity, after they are withdrawn from an FTZ.
Duty rates are provided for your convenience and are subject to change.
EFFECT ON OTHER RULINGS:
HQ H024848, dated December 4, 2008, and NY N021063, dated January 8, 2008, are hereby MODIFIED, in accordance with the analysis contained herein.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division