CLA-2 OT:RR:CTF:TCM H186956 LWF
Ms. Marilyn Viruet
1395 South Marietta Parkway
Building 500, Suite 100
Marietta, GA 30067-4440
RE: Reconsideration of New York Ruling Letter (NY) N158275, dated May 3, 2011; classification of machines for the manufacture of wire fencing
Dear Ms. Viruet:
This is in response to your request for reconsideration of U.S. Customs and Border Protection (CBP) New York Ruling Letter (NY) N158275, dated May 3, 2011, issued to Bekaert Corp. (“Bekaert”) concerning the classification of machines for the manufacture of wire fencing. Your request for reconsideration was received by the National Commodity Specialist Division (NCSD) in New York and was forwarded to this office for reply.
The issues addressed by this reconsideration ruling originated in a request for a ruling by Bekaert on March 30, 2011, pertaining to the tariff classification of machinery from New Zealand used for the manufacture of wire fencing. The resulting ruling, NY N158275, classified the machinery under subheading 8463.30.00, of the Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “Other machine tools for working metal or cermets, without removing material: Machines for working wire.”
The merchandise involved in this request for reconsideration consists of three models of machinery – the Fixed Knot Machine, the Stiff Stay Machine, and the Hinge Joint Machine – used for the manufacture of rolls of wire fencing. In NY N158275, CBP described the machines as follows:
All the models use galvanized steel wire which varies in physical specifications according to the specific application to be employed by the end user. None of the machines use precrimped wire. If a crimp is needed, it will be applied after the knot is made. While all the models in question are designed to manufacture wire fencing, they differ as to the method used at the wire intersections to keep the wires together, i.e., how the knots are made.
The Fixed Knot Machine has two model designations: Model # FKM 27-3D which produces a fence width of 2610mm (103”) and Model #FKM 30-3D which produces a fence width of 3050mm (120”). The Fixed Knot Machines utilize the following manufacturing steps: (1) 10 wires (“line wires” whose number may vary depending upon the type of fence being manufactured) lie parallel in the horizontal plane at a certain distance from each other, (2) a stay wire is placed in the same plane but at a 90 degree angle over the 10 parallel wire and cut so the ends do not extend pass the 10 wires, (3) the 10 wires called knot wires are fed through a mechanical device where a knot is formed at each intersection of the line and stay wire, (4) once the knots are formed, the machine will pull the 10 line wires forward at a predetermined amount of inches, (5) the roll of fence which is being formed through this process rotates sufficiently to pick up the extra length that was formed, and (6) manufacturing steps 2, 3 and 4 are continuously repeated as necessary until the fence has reached its predetermined length at which point the 10 line wires are cut and the roll is turned out. During this process, an additional process takes place such as straightening of the wire. Electric trip systems are also present to ensure that the machine stops automatically in the event of a tangled wire, a breakage or an incorrect machine function. The Fixed Knot Machine contains a take-up mechanism which incorporates an electrically driven stripper for the easy removal of the finished roll.
The Stiff Stay Machine has two model designations: Model #SSM 20-3 which is a 20 line x 2.0m machine and Model #SSM 26-3D which is a 25 line x 2.5m dual fence machine capable of manufacturing two rolls at a time. Both of these machines can operate at speeds of up to 80 stays per minute. While the Stiff Stay models operate in basically the same manner as the Fixed Knot models, there is one main difference, i.e., the knots produced have a different form. The Stiff Stay Machine features a tri-drive feed unit which ensures an accurate wire delivery directly into the knot forging system. The Stiff Stay Machine contains a servo-driven indexing crimp drum which simplifies the change of stay wire spacing at the push of a button without any mechanical changes which eliminates long down times during change over. The finished roll is mechanically removed from the slotted mandrel by the automated stripping system. The Stiff Stay Machine also features light screens and electric trip systems and guards to keep the operating staff safe and stop the machine automatically in the event of a wire breakage or tangle.
The Hinge Joint Machine is available in two models that both have interchangeable stay wire pitches of 6” (152mm) and 12” (304mm). The standard machines are designed for fences with up to 11 line wires to a maximum height of 55 inches (1.410 metres), which is found on Model #HJM-S2, and the wide machines allow for up to 14 line wires with a maximum fence height of 78 inches (2 metres) which is found on Model #HJM-W2. The wide machines can produce the same fence specifications which can be made on standard machines. This allows for the manufacture of Deer Fence, Predator Control Fence or low cost Security Fence, all of which require greater than normal height. The Hinge Joint Machine operates differently from the Fixed Knot and the Stiff Stay models in that it utilizes the following manufacturing steps: (1) 10 wires (number may vary depending upon the type of fence being manufactured) lie parallel in the horizontal plane at a certain distance from each other, (2) the 1st stay wire is placed at a 90 degree angle over those 10 parallel line wires and wrapped around the 1st line wire and the 2nd line wire; this is where the wire will be cut. This is repeated for stay wire 2 till 9. The 9th stay wire will connect the 9th and 10th line wire, (3) once all the knots are formed, the machine will pull the 10 lines wires to a predetermined amount of inches forward, (4) the roll of fence being formed rotates sufficiently to pick up the extra length thus formed, (5) steps 2, 3 and 4 are continuously repeated as necessary until the fence has reached its predetermined length at which point the 10 line wires are cut and the roll is turned out.
Whether the subject machines for the manufacture of wire fencing qualify for duty free treatment under subheading 9817.00.50, HTSUS, as machines to be used for agricultural or horticultural purposes.
LAW AND ANALYSIS:
Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.
GRI 1 provides that the classification of goods shall be determined according to the terms of the heading 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 heading and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
The HTSUS provisions under consideration in this case are as follows:
8463: Other machine tools for working metal or cermets, without removing metal:
8463.30.00: Machines for working wire…
* * * * *
9817.00.50: Machinery, equipment, and implements to be used for agricultural or horticultural purposes…
* * * * *
Subheading 8463.30.00, HTSUS, provides, in relevant part, for “Other machine tools for working metal or cermets, without removing metal: Machines for working wire.” Inasmuch as the three machines are fully described by the terms of subheading 8463.30.00, HTSUS, there is no dispute that the instant merchandise is properly classified in subheading 8463.30.00, HTSUS, pursuant to GRI 1. However, you assert that the subject machinery is eligible for duty-free treatment under subheading 9817.00.50, HTSUS, which provides for, “Machinery, equipment and implements to be used for agricultural or horticultural purposes.”
Once an article is classified using the GRIs and any pertinent section and chapter notes, consideration may then be given to the special classification provisions, if appropriate. If an article is described by a provision of Chapter 98, HTSUS, and all applicable requirements are met, then the Chapter 98, HTSUS provision and its duty rate prevail over the classification and tariff rate from the international portion of the tariff. See Chapter 98, U.S. Note 1. The Chapter 98, HTSUS provision would then be the classification for purposes of importation into the United States.
Section XXII of the HTSUS, under the heading “Special Classification Provisions; Temporary Legislation; Temporary Modifications Established Pursuant To Trade Legislation; Additional Import Restrictions Established Pursuant To Section 22 Of The Agricultural Adjustment Act, As Amended,” provides for a number of alternate rates of duty for specific goods that meet the conditions of that Section.
Within Subchapter XVII of Section XXII of the HTSUS, subheading 9817.00.50, HTSUS, provides for the duty-free entry of “machinery, equipment, and implements to be used for agricultural or horticultural purposes.” In your request for reconsideration, you assert that the instant merchandise satisfies the terms of subheading 9817.00.50, HTSUS, because it consists of fence manufacturing machines used in the agricultural pursuit of keeping livestock.
The phrase “to be used” indicates that subheading 9817.00.50, HTSUS, is an actual use provision. As such, an article must satisfy the statutory requirements concerning “actual use,” as set forth in Additional U.S. Rule of Interpretation 1(b), HTSUS, which reads as follows:
[A] tariff classification controlled by the actual use to which the imported goods are put in the United States is satisfied only if such use is intended at the time of importation, the goods are so used and proof thereof is furnished within 3 years after the date the goods are entered.
Additionally, Headquarters Ruling Letter (“HQ”) 086211, dated March 24, 1990, was the first of many U.S. Customs Service, now CBP, rulings to apply a three-part test to any good which claimed subheading 9817.00.50 or 9817.00.60, HTSUS, treatment. CBP requires that before an article can be classified in either of these headings the following three-part test must be applied:
The articles must not be among the long list of exclusions to subheading 9817.00.50 or 9817.00.60 under Section XXII, Chapter 98, Subchapter XVII, U.S. Note 2;
The terms of subheading 9817.00.50 or 9817.00.60 must be met in accordance with GRI 1; and
The merchandise must meet the actual use conditions required in accordance with sections 10.131-10.139 of the Customs Regulations (19 CFR §§10.131-10.139).
A good must satisfy each part of the test. If a good fails any part of the test, then it is treated according to its primary classification.
As the instant machines are provided for under heading 8463, HTSUS, they are not excluded under Section XXII, Chapter 98, Subchapter XVII, U.S. Note 2. Consequently, the crux of this case lies within the second part of the test, which requires that the merchandise meet the terms of subheading 9817.00.50, HTSUS. For purposes of defining the terms of subheading 9817.00.50, HTSUS, CBP refers to the definitions found in The Merriam-Webster’s Collegiate Dictionary, Tenth Edition (1999). It is undisputed that machines used for the manufacture of wire fencing conform to the definition of machinery. However, as stated in CBP’s Informed Compliance Publication, “What Every Member of the Trade Community Should Know About: The Agricultural Actual Use Provisions,” to fully satisfy the terms of subheading 9817.00.50, HTSUS, a nexus must exist between the use of the imported merchandise and an identifiable agricultural or horticultural pursuit:
For example, in HQ 952796, dated January 29, 1993, CBP determined that certain plastic sheeting which assists in raising swine by its use as a floor mat, wall liner, and for easy sanitary maintenance, is clearly engaged in an agricultural pursuit, since the care and maintenance of livestock is agricultural in nature. However, in HQ 089936, dated November 15, 1991, CBP determined that “aquaculture,” the “farming” of fish for commercial purposes, does not conform to the definition of agriculture and that, therefore, certain fish tanks and their supporting equipment could not be considered agricultural equipment. Also, in HQ 089242, dated August 13, 1991, CBP determined that a sap evaporator used to process sap into maple syrup was not involved in an agricultural pursuit. CBP found that, although the collection of sap was agricultural in nature, the processing of sap into maple syrup, and the use of the evaporator in the process, was not an agricultural purpose, and that this process was more than a simple preparation of a product for market.
Sometimes, however, certain distinctions are not quite so clear. In NY 873312, dated May 8, 1992, CBP held that certain fly catchers, strips of glue on paper, which were used to control pests around cattle, demonstrated an agricultural purpose, that is, the good assisted in the care and maintenance of livestock. On the other hand, certain insect traps of NY 880892, dated December 14, 1992, which were used to control the insect population in forests and thus helped to conserve the trees, were held to serve an environmental purpose and not an agricultural purpose of subheading 9817.00.50, HTSUS. See Informed Compliance Publication, CBP, supra note 1 at *11-12.
It is important to emphasize that the cases discussed in CBP’s Informed Compliance Publication illustrate the direct and immediate relation between the imported merchandise and its direct use in agricultural or horticultural pursuits. The articles identified in the above rulings are not used to produce secondary goods for subsequent use in agricultural or horticultural applications. Instead, they are exclusively used in close proximity to livestock or crops, in a manner that demonstrates an immediate relationship between the imported article and the agricultural endeavor.
By contrast, machines for the manufacture of wire fencing are used only for the general purpose of producing bulk fencing materials. While it may be an appropriate inquiry to determine if imported fencing materials for use to enclose livestock or field crops satisfies the terms of subheading 9817.00.50, HTSUS, it is an entirely different and distinct question to examine the relationship between a machine used to produce general, bulk materials and the use of those materials in agricultural or horticultural applications. Such machines are not used in close proximity with livestock or crops, and the goods that they produce can be used for any number of non-agricultural or non-horticultural purposes. By analogy, it would similarly be inappropriate to conclude that machines for the manufacture of articles of general use, e.g., plastic sheeting, fish tanks, sap evaporators, or insect traps, are necessarily used for agricultural or horticultural activities. Consequently, we find that a nexus does not exist between machines used for the manufacture of bulk, rolled wire fencing and agricultural or horticultural pursuits, as the identity and use of the rolls of wire fencing is not fixed with certainty. See HQ 955597 (quoting HQ 952796, dated January 29, 1993).
In your request for reconsideration, you assert that, “[f]ence produced with these fence making machineries are used solely as farm field enclosure to hold animals, often farm animals such as cow and horses and to keep domestic animals in or out, for wildlife, and exotic animal control.” You also cite HQ 951325, dated May 12, 1992, and HQ 955597, dated May 31, 1994, in support of applying Chapter 98, duty-free treatment to the machines. In both HQ 951325 and HQ 955597, CBP determined that the use of finished materials to construct or accessorize livestock stalls constituted an agricultural purpose. As demonstrated supra, the manufacture of rolls of wire fencing substantially differs from the use of the articles classified in HQ 951325 and HQ 955597, because a nexus does not exist between the simple process of manufacturing rolls of wire fencing materials and the specific activities of agricultural or horticultural pursuits. As such, the instant machines do not satisfy the terms of subheading 9817.00.50, HTSUS, and do not satisfy the second part of the three-part test. Therefore, the instant machines cannot be classified in subheading 9817.00.50, HTSUS.
By application of GRI 1, the machines for the manufacture of wire fencing are classifiable under heading 8463, HTSUS. Specifically, they are classifiable under subheading 8463.30.00, HTSUS, which provides for “Other machine tools for working metal or cermets, without removing metal: Machines for working wire.” The 2014 column one, general rate of duty is 4.4% ad valorem.
Duty rate are provided for your convenience and are subject to change. The text of the most recent HTSUS, with accompanying duty rates, is provided on the World Wide Web at http://www.usitc.gov.
EFFECT ON OTHER RULINGS:
NY N158275, dated May 3, 2011, is hereby AFFIRMED.
Myles B. Harmon, Director
Commercial Trade Facilitation Division