CLA-2 OT: RR: CTF: TCM H252424 DSR
Port Director, Great Falls Port
U.S. Customs and Border Protection
1600 Airport Drive
Great Falls, MT 59404-5508
Attn: Richard Kreit, Import Specialist: Center for Expertise and Excellence –
Automotive and Aerospace
Re: Application for Further Review of Protest No. 3304-13-100094; tariff classification of
Coil Tubing Unit
Dear Port Director:
This is in response to the Application for Further Review (AFR) of Protest No. 3304-13-100094 filed on August 6, 2013, on behalf of the importer, Hydra Rig (Protestant), contesting U.S. Customs and Border Protection’s (CBP) classification and liquidation of an article identified as a Coil Tubing Unit under the Harmonized Tariff Schedule of the United States (HTSUS). Our response follows.
FACTS:
The article under consideration is called a “coiled tubing unit” (hereinafter “CT Unit”). It is designed to recover oil and gas by running coiled tubing in and out of a hole in the ground. Additional uses include cleanout and perforating a wellbore, retrieving and replacing damaged equipment, obtaining real-time downhole measurements, sand control and cementing. It consists of a tractor specially fitted with a hydraulic system (a “wet kit”) powered by the tractor’s engine and a coiled tubing apparatus permanently affixed to a customized trailer. The trailer and coiled tubing are integral and permanent parts of the entire CT Unit and cannot be separated from the tractor without removing and disengaging various parts of the hydraulic system from the tractor, trailer and coiled tubing apparatus.
The CT Unit is constructed, bought and sold only as a single, integrated unit. The coiled tubing apparatus cannot be operated without the power provided by the modified tractor with the installed wet kit. The wet kit has no other use other than operating the CT Unit and the CT Unit itself is not used for hauling items from one place to another.
ISSUE:
Whether the subject CT Unit is a special purpose motor vehicle of heading 8705, HTSUS; lifting or handling machinery of heading 8428, HTSUS; or a machine or mechanical appliance, having individual functions, of heading 8479, HTSUS, not specified or included elsewhere in Chapter 84.
LAW AND ANALYSIS:
Initially, we note that this matter is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification. The protest was timely filed within 180 days of liquidation of the first entry. Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2) (B) (ii), (iii) (codified as amended at 19 U.S.C. § 1514(c) (3) (2006).
Further Review of the protest is properly accorded pursuant to 19 C.F.R. 174.24(a) because Protestant has alleged that the decision against which the protest was filed is inconsistent with a ruling of the Commissioner of Customs or his designee with respect to the same or substantially similar merchandise. Specifically, Protestant argues that CBP has classified substantially similar merchandise in subheading 8705.90.00, HTSUS. Protestant also alternatively argues that the CT Unit is classifiable in subheading 8428.90.02, HTSUS, as other lifting, handling, loading or unloading machinery, other machinery.
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. Additionally, the Explanatory Notes (ENs) to the Harmonized Commodity Description and Coding System, which represent the official interpretation of the tariff at the international level, facilitate classification under the HTSUS by offering guidance in understanding the scope of the headings and the General Rules of Interpretation (GRIs).
GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in their appropriate order. The HTSUS provisions under consideration are as follows:
8428 Other lifting, handling, loading or unloading machinery (for example, elevators, escalators, conveyors, teleferics):
8428.90.02 Other machinery.
* * *
8479 Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof:
8479.89 Other machines and mechanical appliances:
8479.89.98 Other.
* * *
8705 Special purpose motor vehicles, other than those principally designed for the transport of persons or goods (for example, wreckers, mobile cranes, fire fighting vehicles, concrete mixers, road sweepers, spraying vehicles, mobile workshops, mobile radiological units):
8705.90.00 Other.
* * * *
Note 1 to Section XVI, HTSUS, to which Chapter 84, HTSUS, belongs, states, in pertinent part, that Section XVI does not cover of articles of Section XVII. Section XVII contains heading 8705, HTSUS, therefore, goods that can be classified in heading 8705 are excluded from consideration as goods of Chapter 84, HTSUS. Additionally, Note 3 to Section XVI provides, in pertinent part, the following:
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.
Protestant first proposes that the instant CT Unit is classified in subheading 8705.90.00, HTSUS, which provides for special purpose motor vehicles, other than those principally designed for the transport of persons or goods, and turns to New York Ruling Letter (“NY”) N241365 (May 23, 2013). Protestant alternatively proposes that the CT Unit is classified in subheading 8428.90.02, HTSUS, which provides for other lifting, handling, loading or unloading machinery, other machinery. In NY241365, CBP classified a mast-type coiled tubing unit in 8705.90.00, HTSUS, but NY N241365 is inapposite because the unit considered in that ruling is dissimilar to the instant CT Unit. The tubing unit of NY N241365 is comprised of a trailer frame, mast, reel with coiled tubing and injector hauled by a tractor equipped with a wet kit and control cabin. In operation, the unit initiates drilling by “attacking the Earth’s crust.” Once positioned, the unit performs multiple tasks, including cleanouts, stimulations, drilling, fishing and cementing, by pumping fluids though the coiled tubing down the drilled hole to the required depth. CBP determined that although the unit lifts and moves the tubing from the coil through the injector, that movement is in conjunction with its primary drilling function. CBP further noted that EN 87.05 states that heading 8705 covers a range of motor vehicles, specially constructed or adapted, equipped with various devices that enable them to perform certain non-transport functions, including mobile drilling derricks. Thus, the unit of NY N241365 was fittingly classified in subheading 8705.20.00, HTSUS, which provides for “Special purpose motor vehicles…: Mobile drilling derricks.”
The instant CT Unit does not function in a manner similar to the unit of NY N241365, i.e., it does not drill. Instead, the instant CT Unit is primarily designed to extract oil and gas by running coiled tubing in and out of a hole in the ground. That functionality is similar to the combined functionality of the articles considered in NY N241589 (May 30, 2013) and classified in subheading 8428.90.02, HTSUS, as other lifting, handling, loading or unloading machinery. One article of NY N241589, described as a Coil Tubing Injector, is designed to lift, inject and move tubing from the coil through the injector into the wellbore through the injector head. The unit’s components include a drive and traction system that provide power to the chair assembly to grip the coiled tubing string in order to run and retrieve the coiled tubing string, the frame, gooseneck and load cell. The injector can be mounted on a base or supported by a crane over the wellbore. In order to operate, that Coiled Tubing Injector must be attached to the second article considered in NY N241589 and referred to as a Coiled Tubing Unit. The Coiled Tubing Unit is a trailer-mounted well servicing unit, which is designed to inject coiled tubing into the well head. It provides the tractive effort for running and retrieving the coiled tubing string from the well head. The basic components of this unit are the trailer, control cabin, diesel engine and generator, work reel, drive and traction system, chain systems, frame and gooseneck, load cell, and electrical and hydraulic systems. In operation, the mast positions the injector head into the air to align the blowout preventer and lubrication string underneath the injector. Once positioned, the Coiled Tubing Unit performs multiple tasks, including cleanouts, stimulations, drilling, fishing and cementing. To achieve this, fluids are pumped though the coiled tubing down hole to the required depth. The Coiled Tubing Unit of NY N241589 is not capable of drilling or “attacking the Earth’s crust.”
In classifying both articles in subheading 8428.90.02, HTSUS, CBP noted in NY N241589 that the ENs to Chapter 84, HTSUS, state that heading 8428 is “not limited to lifting or handling equipment for solid materials, but also includes machinery for liquids or gases.” We find that the same analysis and result are appropriate here. The instant CT Unit is primarily designed to lift oil and gas and does not perform a drilling function. We therefore find that the instant CT Unit is classified in subheading 8428.90.02, HTSUS, which provides for “Other lifting, handling, loading or unloading machinery …: Other machinery.”
Finally, heading 8479, HTSUS, provides for, in relevant part, “Machines and mechanical appliances having individual functions, not specified or included elsewhere in [Chapter 84, HTSUS] …” Heading 8479, HTSUS does not encompass machines which are more specifically provided for in any other heading of chapter 84 or any other chapter of the Nomenclature. As the instant CT Unit in question is specifically provided for elsewhere in the Nomenclature, classification in heading 8479, HTSUS, is precluded.
HOLDING:
By application of GRI 1, and Note 3 to Section XVI, HTSUS, the subject CT Unit is classified in 8428, HTSUS. It is specifically provided for in subheading 8428.90.02, HTSUS, which provides for “Other lifting, handling, loading or unloading machinery …: Other machinery.” The rate of duty is “Free.”
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov.
You are instructed to GRANT the protest. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
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 CBP website at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division