CLA-2 OT: RR: CTF: TCM: H267349ERB
Mr. James Prince
Senior Legal Counsel, Trade and Customs Compliance
Schlumberger
5599 San Felipe Street
Houston, TX 77056
RE: Modification of HQ H164415; Tariff Classification of antenna shields
Dear Mr. Prince:
U.S. Customs and Border Protection (CBP) issued Schlumberger Technology Corporation (STC or Protestant) Headquarters Ruling Letter (HQ) H164415 on June 1, 2015. HQ H164415 pertains to the tariff classification under the Harmonized Tariff Schedule of the United States, (HTSUS) of three models of antenna shields, the Impulse, arcVISION 312, and Ecoscope. HQ H164415 is correct as regards the legal analysis, however there was an error in the Holding regarding the tariff classification at the six-digit subheading level. It is corrected herein.
As an initial matter we note that under San Francisco Newspaper Printing. Co. v. United States, 620 F. Supp. 738 (Ct. Int’l Trade 1985), the decision on the merchandise which was the subject of Protest Number 5309-11-100212 was final on both the Protestant and CBP. Therefore, while we may review the law and analysis of HQ H164415, any decision taken herein would not impact the entries subject to that ruling.
Pursuant to section 615(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 to modify the aforementioned ruling was published in the Customs Bulletin, Vol. 50, No. 10, on March 9, 2016. No comments were received in response to the proposed notice of action.
FACTS:
A drill string is a term loosely applied to the assembled collection of the drill pipe, drill collar, drill bit, and other bottom hole assemblies (BHA) used to make the drill bit turn at the bottom of a wellbore. A drill collar is a heavy pipe above the drill bit in a drill string. It is “dumb” metal, in that it is a heavy piece of metal that provides weight on the bit to assist gravity in the drilling. The bit and the collar are integral parts of a drill string because the bit breaks the earth’s crust, and the collar allows the drilling mud to flow through it and not clog the bit.
BHA refers to other components of the lower portion of the drill string, such as the directional drilling and measuring platform, referred to as Logging-While-Drilling (LWD), and Measurement-While-Drilling (MWDs) tools. MWD tools evaluate the physical properties of the borehole in three-dimensional space. MWDs that also measure formation parameters (resistivity, porosity, sonic velocity, acoustic waveform, hole direction, and weight on the bit) are referred to as LWD tools. The antenna and antenna shields are part of the LWD and MWD measuring platform. Antenna shields provide physical protection for antenna components. Neither the antenna, nor the antenna shield are used to physically break the earth’s crust, but without it an operator would essentially be drilling blind. S/he would not know where to position the drill or whether or not to slow down.
The subject merchandise has dual functions, as it is a specially configured antenna shield which incorporates characteristics of the drill collar. First, it performs the function of a drill collar in that it serves as a weight which assists gravity by driving the bit downwards into the borehole, and allows the drilling mud to flow through specially configured slots. Second, it serves as an antenna shield by providing sufficient mechanical protection for the antenna, while at the same time being substantially transparent to both z-mode and x-mode electromagnetic waves. Put another way, given the harsh conditions in which the drill must operate, the antenna shields are constructed to physically protect the antenna without distorting or over-attenuating the transmitted and/or received electromagnetic waves which are responsible for communicating the data to the drill operator at the surface.
ISSUE:
Whether the subject antenna shields are classified as an article of iron or steel under subheading 7326.90.85, HTSUS, or as a part of machinery under subheading 8431.43.40, HTSUS, or as a part of geophysical instruments under subheading 9015.90.00, HTSUS.
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 GRI may then be applied in order.
The HTSUS headings and subheadings under consideration are the following:
7326 Other articles of iron or steel:
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8431 Parts suitable for use solely or principally with the machinery of headings 8425 to 8430:
8431.43 Of machinery of heading 8426, 8429 or 8430: Parts for boring or sinking machinery of subheading 8430.41 or 8430.49:
8431.43.80 Other
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9015 Surveying (including photogrammetrical surveying), hydrographic, oceanographic, hydrological, meteorological or geophysical instruments and appliances, excluding compasses; rangefinders; parts and accessories thereof:
9015.90 Parts and Accessories:
Section XV (Base metals), which covers Chapter 73, Note 1(h) states the following:
This section does not cover:
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(h) Instruments or apparatus of Section XVIII, including clock or watch springs;
Section XVIII covers Chapter 90. Therefore, if the subject merchandise is classified in Chapter 90, it is excluded from classification in Chapter 73.
Section XVI, Note 1(m) states:
This section does not cover:
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(m) Articles of chapter 90;
Therefore, again, if the subject merchandise is classified in Chapter 90, it is excluded from classification in Section XVI, which includes Chapter 84.
Note 2(b) to Chapter 90 provides the following:
Subject to note 1 above, parts and accessories for machines, apparatus, instruments or articles of this chapter are to be classified according to the following rules:
(b) Other parts and accessories, if suitable for use solely or principally with a particular kind of machine, instrument or apparatus … are to be classified with the machines, instruments or apparatus of that kind.
In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System, which constitute the official interpretation of the HTSUS at the international level, may be utilized. The ENs although not dispositive or legally binding, provides a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The EN 84.30 provides, in relevant part, the following:
This heading covers machinery…, 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).
This heading includes:
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(III) EXTRACTING, CUTTING OR DRILLING MACHINERY
This is mainly used in mining, well-drilling, tunneling, quarrying, clay cutting, etc.
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(D) Well sinking or boring machines for the extraction of petroleum, natural gases, …
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The EN 84.30 continues:
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 84.31.
Given the above, the EN 84.31 provides, in relevant part:
This heading includes:
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(4) Rotary tables, swivels, kellies, kelly drive bushings, tool-joints, drill collars, …
The EN 90.15 provides, in relevant part:
(VI) GEOPHYSICAL INSTRUMENTS
(2) Magnetic or gravimetric geophysical instruments used in prospecting for ores, oil, etc. These highly sensitive instruments include magnetic balances, magnetometers, magnetic theodolites and gravimeters, torsion balances.
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(5) Apparatus for measuring the inclination of a borehole.
EN 90.15 continues:
PARTS AND ACCESSORIES
Subject to the provisions of Notes 1 and 2 to this Chapter (see the General Explanatory Note) this heading also covers parts and accessories of the goods of this heading. Such parts and accessories include: tripods specially designed for instruments used in geodesy, topography, etc.; supporting rods for optical squares; tripods for staves; arrows for land chains.
If the subject merchandise is classified in Chapter 90, then it is excluded from classification in Chapter 73, by operation of Note 1(h) to Section XV, and it is excluded from classification in Chapter 84, by operation of Note 1(m) to Section XVI. Thus, the first issue is whether or not the merchandise qualifies as a part of machinery of Section XVIII, which includes Chapter 90.
In Bauerhin Technologies Limited v. United States, 19 CIT 1441, 914 F. Supp. 554 (1995), aff’d 110 F.3d 774 (Fed. Cir. 1997), the Court pointed out that there are two distinct lines of cases defining the word “part” in the tariff. Starting with U.S. v. Willoughby Camera Stores, Inc. 21 CCPA 322, 324 (1933), T.D. 46075 (1933), cert. denied, 292 U.S. 640 (1934), this line of cases holds that a part of an article “is something necessary to the completion of that article without which the article to which ti is to be joined, could not function as such article.” Another line of cases evolved from United States v. Pompeo, 43 CCPA 9, C.D. 1669 (2955), which held that a device may be a part of an article even though its use is optional and the article will function without it, if the device is dedicated for use upon the article, and, once installed the article will not operate without it.
The definition of “parts” was also discussed more recently, in Rollerblade, Inc. v. United States, 116 F. Supp. 2d 1247 (CIT 2000), aff’d 282 F.3d 1349 (CAFC 2002). In that case, the United States Court of Appeals for the Federal Circuit defined parts as “an essential element or constituent; integral portion which can be separated, replaced, etc.” Id at 1353 (citing Webster’s New World Dictionary 984 (3d College Ed. 1988)). The Court also noted that a “part” must also bear a direct relationship to the primary article.
Drill collars are classified as “parts of machinery of headings 8425 to 8430”, in subheading 8431.43.40, HTSUS. See New York Ruling Letter (NY) N025539, dated April 4, 2008; NY R01962, dated June 3, 2005. If this merchandise were part of the drill collar, which is itself a part of the drill string, it would not be considered a part of boring or sinking machinery of heading 8431, HTSUS. See Mitsubishi Elecs. Am. v. United States, 19 C.I.T. 378, 383 n.3 (Ct. Int’l Trade 1995), “This is because a subpart of a particular part of an article is more specifically provided for as a part of that part than as a part of the whole.” Citing C.F. Liebert v. United States, 60 Cust. Ct. 677, 686-87, 287 F. Supp. 1008, 1014 (1968) (holding that parts of clutches which are parts of winches are more specifically provided for as parts of clutches than as parts of winches). As such, in that it adds weight to the bit and allows mud to flower through its apertures, it is not a drill collar per se. Rather, its function is described by the text of heading 9015, HTSUS, as a geophysical instrument which is integral, necessary, and solely used with the LWD/MWD.
The subject antenna shields satisfy the Court’s requirements as a “part” under heading 9015, HTSUS, because the shields are necessary for the geophysical measuring equipment to operate as it is intended. They are an essential component, one which is integral, though it can be separated and replaced as a component of the LWD/MWD platform of directional resistivity tools. Heading 9015, HTSUS, provides for “Geophysical instruments.” The term “geophysical” is not defined in the HTSUS. In determining the proper meaning of a tariff provision, the Courts have held that where the HTSUS does not expressly define a term, “the correct meaning of the term is its common commercial meaning.” Arko Foods Int’l, Inc. v. United States, 654 F.3d 1361, 1364 (Fed. Cir. 2011). To determine the common commercial meaning, the Courts have directed that CBP may rely upon its own understanding of terms, and may consult lexicographic and scientific authorities. See Airflow Tech., Inc. v. United States, 524 F.3d 1287, 1291 (Fed. Cir. 2008).
In HQ H024751, dated August 24, 2010, this office sought to define this same tariff term at issue here. There, in citing to Schlumberger’s Oilfield Glossary, the term “geophysics” is defined as the, “[s]tudy of the physics of the earth, especially its electrical, gravitational and magnetic fields and propagation of elastic (seismic) waves within it.” The subject antenna shields are an integral part of the integrated LWD/MWD platform which provides continuous direction and inclination data while drilling. Insofar as this is a series of interconnected machines which work together to transmit all necessary data between the operator at the surface and the drill string, the subject antenna shields are parts of “geophysical” instruments. Pursuant to Note 2(b) to Chapter 90, parts suitable for use solely or principally with an instrument of that chapter is to be classified with that instrument. Our conclusion is also in keeping with the EN 90.15(IV) which indicates that “apparatus for measuring the inclination of a borehole” and “magnetic geophysical instruments used in prospecting for oil” are classified under heading 9015, HTSUS, as geophysical instruments. See EN 90.15(IV)(2), (5). See also HQ W968458, dated May 8, 2009 (sonic imaging tool used to examine the condition of subsurface geological formations for purposes of oil exploration classified under heading 9015, HTSUS, as a geophysical instrument).
Thus, as the subject merchandise is described by the tariff terms of Chapter 90, they are excluded from Chapter 73 by operation of Note 1(h) to Section XV, and excluded from Chapter 84, by operation of Note 1(m) to Section XVI. Pursuant to Note 2(b) to Chapter 90, the subject antenna shields are parts of geophysical instruments of heading 9015, HTSUS.
The merchandise in question may be subject to antidumping or countervailing duties (AD/CVD). Written decisions regarding the scope of AD/CVD orders are issued by the Enforcement and Compliance office in the International Trade Administration of the U.S. Department of Commerce, and are separate from tariff classification and original rulings issued by U.S. Customs and Border Protection. You can contact them at http://trade.gov/enforcement (click on “Contact Us”). For your information, you can view a list of current AD/CVD cases at the United States International Trade Commission website at http://www.usitc.gov (click on “Antidumping and Countervailing Duty” under “Popular Topics” at the top of the screen), and you can search AD/CVD deposit and liquidation messages using CBP’s AD/CVD Search tool at http://addcvd.cbp.gov
HOLDING:
For the reasons set forth above, by application of GRI 1, the subject Impulse, arcVISION, and Ecoscope antenna shields are all classified under heading 9015, HTSUS. They are specifically provided for in subheading 9015.90.0060, HTSUSA (Annotated) as “Surveying (including photogrammetrical surveying), hydrographic, oceanographic, hydrological, meteorological or geophysical instruments and appliances, excluding compasses; rangefinders; parts and accessories thereof: Parts and accessories: Of other geophysical instruments and appliances.” The column one rate of duty is applicable to the article of which it is a part or accessory. In this case, that is as a part of geophysical instruments and appliances, and the rate of duty there is free.
Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided at www.usitc.gov
EFFECT ON OTHER RULINGS:
HQ H164415, dated June 1, 2015 is hereby MODIFIED, however, the liquidation of which was the subject of protest 5309-11-100212 was final on CBP and the Protestant. 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