CLA-2 OT:RR:CTF:EMAIN H249755 ALS
TARIFF NOs.: 8421.39.80; 8708.99.81
Port Director
U.S. Customs and Border Protection
200 N. Mariposa Road
Cargo Facility
Nogales, Arizona 85621
Attn.: Sherri Rudy - Import Specialist
RE: Application for Further Review of Protest 2604-13-100009; Tariff Classification of an Oil Separator and a Pneumatic Harness; North American Free Trade Agreement (“NAFTA”)
Dear Port Director:
This letter is in response to the above-referenced protest and application for further review (“AFR”) filed by Miniature Precision Components (“MPC” or “Protestant”). The protest concerns the tariff classification of an Oil Separator and a Pneumatic Harness under the Harmonized Tariff Schedule of the United States (“HTSUS”) and to deny preferential treatment for these articles under the North American Free Trade Agreement (NAFTA). Our response is set forth below.
FACTS:
The Oil Separator (MPC Part No. A2868) serves as a filter by controlling the flow of blow-by gasses out of a vehicle engine’s crankcase and preventing the flow of external air from entering the crankcase through the vent. Gas is pulled from the crankcase and drawn through the oil separator. The gas then passes around the baffles, with lubricating droplets hitting the baffles. The lubricating droplets are collected by impact and gravity and drain back into the crankcase. The Oil Separator contains a baffle, a positive crankcase ventilation (“PCV”) valve, at least one hose, and a case.
The Pneumatic Harness (MPC Part No. H19691) consists of hoses, solenoid valves, a heating shield, clamps and tie strips. It serves as a conduit between the vehicle engine’s turbo systems and the waste gate or the compressor bypass valve. The hoses allow for the flow of gas from the turbo system to alleviate pressure from the engine vacuum. The solenoids are controlled by an engine control unit and serve as on and off switches, based on engine performance and/or requirements.
The Protestant entered an unspecified number of the Oil Separators under subheading 8421.39.80, HTSUS, as other filtering machinery, and an unspecified number of the Pneumatic Harnesses under subheading 8708.99.81, HTSUS, as other parts of a motor vehicle of HTSUS heading 8703. Your office liquidated the subject entry under subheading 8481.80.90, HTSUS, as other appliances and, as noted above, denied the claim for NAFTA preferential treatment for lack of documentation verifying country of origin.
ISSUES:
Is the Oil Separator, as described above, properly classified under heading 8421, HTSUS, which provides for “Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof”, or heading 8481, HTSUS, which provides for “Taps, cocks, valves and similar appliances, for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and thermostatically controlled valves; parts thereof”?
Is the Pneumatic Harness, as described above, properly classified under heading 8481, HTSUS, which provides for “Taps, cocks, valves and similar appliances, for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and thermostatically controlled valves; parts thereof”, or heading 8708, HTSUS, which provides for parts and accessories of motor vehicles of heading 8701 to 8705”?
Does the Oil Separator meets the requirements of tariff shift rules 12(t)/53(A) and 19 CFR 102.20, therefore making it eligible for preferential treatment under the NAFTA?
Does the Pneumatic Harness meets the requirements of tariff shift rule 36(A), therefore making it eligible for preferential treatment under the NAFTA?
LAW AND ANALYSIS:
Initially, we note that the Protest was timely filed on July 3, 2013, which is within 180 days of the date of the liquidation of the subject entry, May 17, 2013. See 19 U.S.C. §1514(c)(3)(B). Additionally, CBP's classification of the merchandise is a protestable matter under 19 U.S.C. §1514(a)(2). Further Review of Protest No. 2604-13-100009 is properly accorded to the Protestant pursuant to 19 CFR 174.24(a).
Classification under the Harmonized Tariff Schedule of the United States (HTSUS) is determined in accordance with the General Rules of Interpretation (GRI). Classification under the Harmonized Tariff Schedule of the United States (HTSUS) is determined in accordance with the General Rules of Interpretation (GRI). 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 may then be applied.
The following headings and subheadings of the HTSUS are under consideration in this case:
8421 Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof:
Filtering or purifying machinery and apparatus for gases:
8421.39 Other:
8421.39.80 Other…
* * *
8481: Taps, cocks, valves and similar appliances, for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and thermostatically controlled valves; parts thereof:
8481.80 Other appliances:
8481.80.90 Other…
* * *
8708 Parts and accessories of the motor vehicles of headings 8701 to 8705:
Other parts and accessories:
8708.99 Other:
Other:
8708.99.81 Other…
* * * * * *
Note 1(l) to Section XVI, HTSUS, provides the following:
This section does not cover:
(l) Articles of section XVII;…
Note 2(e) to Section XVII, HTSUS, provides the following:
The expressions "parts" and "parts and accessories" do not apply to the following articles, whether or not they are identifiable as for the goods of this section:
(e) Machines or apparatus of headings 8401 to 8479, or parts thereof, other than the radiators for the articles of this section; articles of heading 8481 or 8482 or, provided they constitute integral parts of engines or motors, articles of heading 8483;
Note 3 to Section XVI, HTSUS, provides the following:
3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.
Thus, given that Note 2(e) to Section XVII excludes goods of headings 8421 and 8481, we must first determine whether the subject merchandise is prima facie classifiable under those provisions.
Oil Separator
The Protestant contends that the Oil Separator’s principal function is to filter “a sufficient amount of oil from the crankcase exhaust-air/oil mix.” While acknowledging the PCV valve’s function of controlling the flow of gas into the Oil Separator, the Protestant argues that such function is secondary to the filtering function of the Oil Separator itself.
Upon review, we find that the function performed by the PCV valve is in fact secondary to principal function performed by the Oil Separator itself, which, while serving as filter, controls the flow of gas through the crankcase of a motor vehicle, and traps particles of oil as the gas flows out through the crankcase. The subject “Oil Separator” is distinguished from somewhat similar articles that CBP has previously concluded were articles of heading 8481. In CBP Ruling NY F88727 (July 19, 2000), CBP classified a good identified as an “oil separator” comprised of a plastic canister with a diaphragm in subheading 8481.80.9015, HTSUS, after finding that the instant merchandise was essentially a valve used to control the re-circulation of pollutants contained in the blow-by gases. In CBP Ruling NY N125716 (October 25, 2010), CBP classified an Oil Control Valve Assembly in subheading 8481.20.0020, HTSUS, after determining that the article, which was comprised of solenoids, a spool valve, and several other parts, was a solenoid type directional control hydraulic valve used in a hydraulic system and designed to control the flow of pressurized fluids for the purpose of transmitting mechanical energy. In CBP Ruling NY N237899 (February 28, 2013), CBP also classified a Switching Valve in subheading 8481.20.0020, noting “[a]lthough the subject valve may be, prima facie, a part used in a motor vehicle transmission system, it is nevertheless a valve.” None of the articles in those rulings, however, included a filtering function. Therefore, those rulings are not germane to this case.
Given such, inasmuch as the subject Oil Separator is in fact a filtration device, albeit with the ability to control the flow of gas, we conclude that it is properly classified under heading 8421 as filtering machinery. Consequently, the subject Oil Separator is not classifiable under Section XVII, HTSUS, which includes heading 8708, by virtue of Note 2(e) to Section XVI. Specifically, it is properly classified under subheading 8421.39.80, HTSUS, which provides for “Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof: Filtering or purifying machinery and apparatus for gases: Other: Other…”
Pneumatic Harness
Your office determined that the solenoid valves provide the principal use of the Pneumatic Harness. The Explanatory Notes (ENs) to the Harmonized Commodity Description and Coding System represent the official interpretation of the tariff at the international level. While neither 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). The EN for heading 8481 states, in pertinent part, the following:
Taps, cocks, valves, etc., remain in this heading even if specialized for use on a particular machine or apparatus, or on a vehicle or aircraft. However, certain machinery parts which incorporate a complete valve, or which regulate the flow of a fluid inside a machine although not forming a complete valve in themselves, are classified as parts of the relative machines,… [Emphasis in original.]
The Pneumatic Harness serves as a conduit within a machine of heading 8703, specifically a motor vehicle for the transport of persons. As such, it regulates the flow of waste from a turbo system to another part of the engine in which it is installed. The multiple valves incorporated in the Pneumatic Harness do not by themselves define the article, however. The Pneumatic Harness consists of many different components that contribute to its overall function. None of the various components, whether it be the solenoid valves or the hoses, can be said to contribute more to the Pneumatic Harness’ function as a conduit than the others. To that extent, the Pneumatic Harness cannot be said to be a merely a valve any more than it can be said to be just a hose or network of hoses.
Using the EN for heading 8481 for guidance, we note that a part of a machine that regulates flow of fluid inside the machine but is not a complete valve is to be classified as a part of the machine. Given such, we find that the Pneumatic Harness, not being a complete valve, is a part of the machine in which it is installed. The machine in this case is a vehicle for the transport of persons, which is an article of heading 8703, HTSUS. As a part of a machine of heading 8703, the Pneumatic Harness is properly classified under heading 8708, which is a heading under Section XVII. Thus, in accordance with Note 1(l) to Section XVI, the Pneumatic Harness is excluded from being classified under Section XVI, specifically heading 8481, HTSUS. More specifically, the Pneumatic Harness is properly classified under subheading 8708.99.81, which provides for “Parts and accessories of the motor vehicles of Headings 8701 to 8705: Other: Other: Other…”
NAFTA Preferential Treatment
The NAFTA is implemented in General Note (GN) 12 of the Harmonized Tariff Schedule of the United States (HTSUS). GN 12(a)(i) states that goods are eligible for the NAFTA rate of duty if they originate in the territory of a NAFTA party and qualify to be marked as goods of Mexico. GN 12(b) sets forth the various methods for determining whether a good originates in the territory of a NAFTA party. Specifically, these provisions provide, in relevant part, as follows:
Goods originating in the territory of a party to the North American Free Trade Agreement (NAFTA) are subject to duty as provided herein. For the purposes of this note—
Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn followed by the symbol "MX" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
(b) For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if—
(i) they are goods wholly obtained or produced entirely in the territory Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that—
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivision (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; ….
The Oil Separator is produced in Mexico from NAFTA originating and non-originating components. As such, the production in Mexico must cause the non-originating components to meet the requisite tariff shift rule set forth in GN 12(t). GN 12(t) 53. (A) provides the following:
53. (A) A change to subheadings 8421.19 through 8421.39 from any other heading; or
(B) A change to subheadings 8421.19 through 8421.39 from subheadings 8421.91 through 8421.99,
whether or not there is also a change from any other heading, provided there is a regional value
content of not less than:
(1) 60 percent where the transaction value method is used, or
(2) 50 percent where the net cost method is used.
The non-originating component in the Oil Separator is a Metal/Iron Compression Limiter, which is generally classified under heading 7326, HTSUS, and thus is classified in headings other than heading 8421. After importation into Mexico, it will be combined with other components to manufacture the Oil Separator, which is classified under subheading 8421.39, HTSUS. Therefore, we find that the non-originating components meet the applicable tariff shift rule.
As the non-originating component of the Oil Separator undergo the requisite tariff shift, the Oil Separator will qualify for preferential tariff treatment under the NAFTA if it also qualifies to be marked as a good of Mexico in accordance with GN 12(a)(ii). The NAFTA Marking Rules are contained in 19 CFR Part 102 of the Federal Regulations. Section 102.11 sets forth the General Rules for determining the country of origin of imported merchandise, with the exception of textile goods which are subject to the provisions of 19 CFR 102.21. Section 102.11(a)(3) provides that the country of origin of a good is the country in which:
Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
“Foreign material” is defined in 19 CFR 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” The applicable tariff shift requirement in 19 CFR 102.20 for the Oil Separator is “a change to subheading 8421.11 through 8421.39 from any other subheading, including another subheading within that group.”
The classification of each of the foreign materials components of the oil separator is as follows:
The Resin of Polyamide is classified in heading 3908, HTSUS. See, e.g., CBP Ruling NY N189679 (November 15, 2011).
The Rubber O-Ring, Gasket is classified in heading 4016, HTSUS. See, e.g., CBP Ruling HQ 560359 (January 29, 1998).
The Gasket is classified in heading 4016, HTSUS. See, e.g., CBP Ruling HQ 560359, supra.
The Plastic Label is classified in heading 3919, HTSUS. See, e.g., CBP Ruling NY I85281 (August 22, 2002).
Metal/Iron Compression Limiter, classified in 7326, HTSUS, as an article of iron, other.
We note that all of the above components are classifiable in headings other than heading 8421, HTSUS. Therefore, all of the above components undergo the requisite tariff shift to be marked as a product of Mexico.
As we have determined that the Oil Separator qualifies as a NAFTA originating good under GN 12(b) of the HTSUS, and qualifies to be marked as a good of Mexico per GN 12(a)(i), the Oil Separator qualifies for preferential tariff treatment under NAFTA.
With respect to whether or not the Pneumatic Harness is eligible for preferential treatment pursuant to NAFTA, the Pneumatic Harness is produced in Mexico with NAFTA originating and non-originating components. As such, the production in Mexico must cause the non-originating components to meet the requisite tariff shift rule set forth in GN 12(t). Under GN 12(t), the applicable tariff shift rule is as follows:
36. (A) A change to subheading 8708.99 from any other heading; or
(B) No required change in tariff classification to subheading 8708.99, provided there is a regional value content of not less than 50 percent under the net cost method.
The non-originating components of the Pneumatic Harness are generally classified as follows:
Plastic Label, classified under subheading 3919.10, HTSUS.
Solenoid Valve, classified under subheading 8481.80, HTSUS.
Metal Clamp (part # CS22106), classified under subheading 7326.90, HTSUS.
Metal Clamp (part # CS9160), classified under subheading 7326.90, HTSUS.
After importation into Mexico, these components will be combined with other components to manufacture the Pneumatic Harness, which is classified under subheading 8708.99.81, HTSUS. None of the non-originating components are classified under heading 8708. Therefore, we find that the non-originating components of the Pneumatic Harness meets the applicable tariff shift rule.
As the non-originating components of the Pneumatic Harness undergoes the requisite tariff shift, the Pneumatic Harness will qualify for preferential tariff treatment under the NAFTA if it also qualifies to be marked as a good of Mexico in accordance with GN 12(a)(ii). As noted above, the NAFTA Marking Rules are contained in 19 CFR Part 102 of the Federal Regulations. Section 102.11(a)(3) provides that the following rule applies for purposes of determining the country of origin of imported goods other than textile and apparel products:
Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
“Foreign material” is defined in 19 CFR 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” The applicable tariff shift requirement in 19 CFR 102.20 for the pneumatic harness is:
A change to subheading 8708.99 from any other subheading, except from parts or accessories of the goods of subheading 8708.40, 8708.50, 8708.80, 8708.91, 8708.92, 8708.94, or 8708.95.
Here, the foreign materials incorporated in the good are:
Plastic Label (part # CS16195), classified in subheading 3910.10, HTSUS.
Plastic Label (part # CS16195-8), classified in subheading 3910.10, HTSUS.
Plastic Label (part # CS16195-10), classified in subheading 3910.10, HTSUS.
Plastic Label (part # CS1028), classified in subheading 3910.10, HTSUS.
Solenoid Valve (part # CS42180), classified in subheading 8481.80, HTSUS.
Metal Clamp (part # CS22106), classified in subheading 7326.90, HTSUS.
Metal Clamp (part # CS9160), classified in subheading 7326.90, HTSUS.
Plastic Connector, Fitting (part # P1208PL-MPC), classified in subheading 3917.40, HTSUS.
Plastic Connector, Fitting (part # P241A-MPC), classified in subheading 3917.40, HTSUS.
Plastic Connector, Fitting (part # P27N-MPC), classified in subheading 3917.40, HTSUS.
Check Valve (part # A845MPC), classified in subheading 8481.30, HTSUS.
Rubber Fittings/Connectors (part # MR0425), classified in subheading 4016.99, HTSUS.
Rubber Fitting with Clamp (part # SA3347), classified in subheading 4016.99, HTSUS.
Rubber Hose (part # CS8604), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS8605), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS8606), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS9778), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS9780), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS9782), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS9785), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS9792), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS9793), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS41193), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS41196), classified in subheading 4009.11, HTSUS.
Rubber Hose (part # CS442190, classified in subheading 4009.11, HTSUS.
Plastic Tie (part # CS39133), classified in subheading 3926.90, HTSUS.
Aluminum Reflect Wrap (part # CS43129), classified in subheading 7607.20, HTSUS.
Tie Strap, (part # CS43182), classified in subheading 3926.90, HTSUS.
We note that all of the above components are classifiable in headings other than heading 8708, HTSUS. Therefore, all of the above components undergo the requisite tariff shift to be marked as a product of Mexico.
As we have determined that the Pneumatic Harness qualifies as a NAFTA originating good under GN 12(b) of the HTSUS, and qualifies to be marked as a good of Mexico per GN 12(a)(i), the Pneumatic Harness qualifies for preferential tariff treatment under NAFTA.
HOLDING:
By application of GRI 1, HTSUS, the Oil Separator is properly classified under heading 8421, HTSUS. Specifically, it is properly classified under subheading 8421.39.80, HTSUS, which provides for “Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof: Filtering or purifying machinery and apparatus for gasses: Other...”
By application of GRI 1, HTSUS, the Pneumatic Harness is properly classified under heading 8708, HTSUS, as a part of a machine that is classified under heading 8703. Specifically, it is properly classified under subheading 8708.99.81, which provides for “Parts and accessories of the motor vehicles of Headings 8701 to 8705: Other: Other: Other…”
The Oil Separator is eligible for preferential treatment under the NAFTA.
The Pneumatic is eligible for preferential treatment under the NAFTA.
You are instructed to GRANT the Protest in accordance with the LAW AND ANALYSIS section above. A copy of this ruling should be attached to the CBP Form 19 or equivalent document and provided to the Protestant as part of the notice of action on the protest.
Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/, which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
Craig T. Clark, Director
Commercial and Trade Facilitation Division