CLA-2 OT:RR:CTF:EMAIN H293671 ALS
Mr. Raymond S. Polley
Port Director
2350 North Sam Houston Parkway E, Suite 1000
Houston, Texas 77032
RE: Application for Further Review Protest No. 5501-17-100504; Tariff classification of Certain Steel Parts
Dear Mr. Polley:
This letter is in reply to an Application for Further Review (“AFR”) of Protest number 5501-17-100504, filed on behalf of GE Oil and Gas Pressure Control Group (also referred to herein as “Protestant”) on July 20, 2017. The Protest is against U.S. Customs and Border Protection’s (“CBP’s”) tariff classification of the above-referenced certain steel parts under subheading 7326.90.85 of the Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
The steel parts at issue are distinct parts of Wellhead and “Christmas Tree” assemblies for an oil rig. They consist of a tubing head adapter body, tee body and cross body, a casing head/casing spool, a housing and a packoff body. The casing head/casing spool holds pressure in the Wellhead. The tubing head adapter body is an attachment between the Wellhead and the Christmas Tree that serves as a fluid conduit. The housing is an attachment between the Wellhead and Christmas Tree. The packoff body is used between the Wellhead and a string of tubing. The packoff body is started by the protestant to be necessary to contain high and potentially dangerous gas pressure that may be present in the Wellhead or Christmas Tree, but it is not part of the Christmas Tree. The Wellhead is installed on the oil well “during the initial drilling process” and is a suspension point and pressure seal at the top of the well.
The Christmas Tree is installed on top of the Wellhead. It consists of valves, spools, and fittings. The Christmas Tree controls the flow of oil or natural gas out of the well and serves as a valve when the well is closed. A diagram of the Wellhead/Christmas Tree is directly below:
A diagram of a Christmas Tree and its specific components and parts is directly below:
The Protestant entered the subject merchandise under headings 7307, 7326, 8479, and 8481, HTSUS. The Protestant now contends that the subject parts are properly classified under heading 8481, or alternatively heading 8431, HTSUS.
ISSUE:
Are the tubing head adapter body, tee body and cross body, casing head/casing spool, housing, and packoff body, as described above, properly classified under heading 7326, HTSUS, which provides for “Other articles of iron or steel”, or under heading 8481, HTSUS, as parts of valves, or, alternatively, heading 8431, HTSUS, as parts of boring machinery?
LAW AND ANALYSIS:
Initially, we note that the Protest was timely filed on June 20, 2017, which is within 180 days of the earliest date of the liquidation of the subject entries, January 6, 2017. 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. 5501-17-100504 is properly accorded to the Protestant pursuant to 19 CFR 174.24(b).
Classification under the HTSUS is determined in accordance with the General Rules of Interpretation (“GRI”) and, in the absence of special language or context which otherwise requires, by the Additional U.S. Rules of Interpretation (“ARI”). GRI 1 provides that the classification of goods shall be “determined according to the terms of the headings 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, GRIs 2 through 6 may be applied in order.
The following headings and subheadings of the HTSUS are under consideration in this case:
7326 Other articles of iron or steel:
7326.90 Other:
7326.90.86 Other...
* * *
8431 Parts suitable for use solely or principally with the machinery of headings 8425 to 8430:
8431.43 Parts for boring or sinking machinery of subheading 8430.41 or 8430.49:
8431.43.40 Of offshore oil and natural gas drilling and production platforms...
* * *
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:
8481.90 Parts:
8481.90.90 Other…
Note 1(f) to Section XV, under which heading 7326 is covered, provides the following:
This section does not cover:
(f) Articles of section XVI (machinery, mechanical appliances and electrical goods)….
Note 2 to Section XVI, HTSUS, provides, in pertinent part, the following:
2. 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:
(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. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517;
Thus, parts of valves of heading 8481 or parts of boring machinery classified under heading 8431 would be excluded from classification under heading 7326.
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 Protestant contends that the subject articles are classifiable under heading 8481, HTSUS, as parts of valves because they are suitable for use principally with Wellheads and Christmas Trees in accordance with Note 2(b) to Section XVI. The Protestant alternatively contends that the subject articles are classifiable under heading 8431, HTSUS, as parts of boring or sinking machinery. Boring or sinking machinery is generally classifiable under heading 8430, HTSUS.
It is well-settled that goods must be classified in their condition as imported. See Mita Copystar Am. v. United States, 21 F.3d 1079, 1082 (Fed. Cir. 1994); see also CBP Ruling HQ H292799 (September 16, 2019). In its condition as imported, the tubing head adapter body is a steel article that is to be used as an attachment between the Wellhead and the Christmas Tree and is a fluid conduit between them. However, both the Wellhead and the Christmas Tree are complete apparatus before the tubing head adapter body is used to attach them together. Thus, the tubing head adapter body is not a part of either the Wellhead or the Christmas Tree.
In their condition as imported, the tee body and cross body are steel articles that are to be used as a transition conduit for the flow of production fluid from the “main run” or vertical main body of the Christmas Tree to the horizontal valves of the Christmas Tree. The ENs to heading 8481 state the following:
This heading covers taps, cocks, valves and similar appliances, used on or in pipes, tanks, vats or the like to regulate the flow (for supply, discharge, etc.), of fluids (liquid, viscous or gaseous), or, in certain cases, of solids (e.g., sand). The heading includes such devices designed to regulate the pressure or the flow velocity of a liquid or a gas.
The appliances regulate the flow by opening or closing an aperture (e.g., gate, disc, ball, plug, needle or diaphragm). They may be operated by hand (by means of a key, wheel, press button, etc.), or by a motor, solenoid, clock movement, etc., or by an automatic device such as a spring, counterweight, float lever, thermostatic element or pressure capsule.
The tee body and cross body do not perform the function of opening or closing an aperture. In fact, they do not have any moving parts at all. As such, they do not meet the description above. The tee body and cross body also do not function as a part of valve. They are only attached to valves to serve collectively as a conduit. Thus, the tee body and cross body are not parts of a Christmas Tree to which they are fitted, nor are they parts of a Wellhead.
In its condition as imported, the casing head/casing spool is a steel article that is to be used as an adapter that is fitted between the first casing string and either the blow out preventer (BOP) stack during drilling or the Wellhead after drilling. As such, the casing head/casing spool is not integral to the function of opening or closing an aperture (i.e., the function of a valve) and is therefore not a part of a valve. It is only attached to a Wellhead to serve as an adapter between parts of the Wellhead that are unrelated to the aperture opening and closing functions.
In its condition as imported, the housing is a steel article that is to be connected to the BOP via an adapter during drilling operations. After drilling, a tubing head, a double studded adapter, or the Christmas Tree will be attached to the adapter. The Protestant states that the housing is “functionally equivalent to a casing head, casing spool, or tubing head, depending on its location in the customer’s wellhead.” With that being the case, the housing does not perform the function of opening or closing an aperture and does not function as a part of valve. It is only attached to Wellhead and/or Christmas Tree to serve collectively as an adapter between parts of the Wellhead or Christmas Tree that do not perform aperture opening and closing functions.
In its condition as imported, the packoff body is a steel article that is to be connected to a suspended string of casing or tubing during drilling and is meant to seal off annular pressure between the inside diameter of the Wellhead and the suspended casing or tubing. It is well-settled that the meaning of a term may be ascertained by reference to “dictionaries, scientific authorities, other reliable information sources,” “lexicographic and other materials” and to the pertinent ENs. See, e.g., C.J. Tower & Sons v. United States, 69 C.C.P.A. 128, 673 F.2d 1268, 1271 (1982); Simod America Corp. v. United States, 872 F.2d 1572, 1576 (Fed. Cir. 1989); GRK Can., Ltd. v. United States, 761 F.3d 1354, 1357 (Fed. Cir. 2014). The online Schlumberger Oilfield Glossary defines packoff as “to plug the wellbore around a drillstring”, or as a noun as “a flexible, usually elastomeric sealing element and housing used to seal an irregular surface such as a wireline.” Thus, we understand a packoff body is used to plug a wellbore and/or seal an irregular surface such as a wireline. As such, the packoff body does not perform the function of opening or closing an aperture and does not function as a part of a valve.
The courts have considered the nature of “parts” under the HTSUS and two distinct, though not inconsistent, tests have resulted. See Bauerhin Techs. Ltd. P’ship. v. United States (Bauerhin), 110 F. 3d 774 (Fed. Cir. 1997). The first, articulated in United States v. Willoughby Camera Stores, Inc. (Willoughby), 21 C.C.P.A. 322, 324 (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, 21 C.C.P.A. 322 at 324). The second, set forth in United States v. Pompeo (Pompeo), 43 C.C.P.A. 9, 14 (1955), states that an “imported item dedicated solely for use with another article is a ‘part’ of that article within the meaning of the HTSUS.” Id. at 779 (citing Pompeo, 43 C.C.P.A. 9 at 13). Under either line of cases, an imported item is not a part if it is “a separate and distinct commercial entity.” Bauherin, 110 F. 3d at 779.
In summation, the tubing head adapter body, tee body and cross body, casing head/casing spool, housing, and packoff body, in their condition as imported, do not perform, nor are they integral to, the function of opening or closing an aperture and therefore are not parts of valves classifiable under heading 8481, HTSUS. Similarly, despite their stated intended use in conjunction with various components that are themselves associated with boring or sinking, these articles do not perform, nor are they integral to, the function of boring or sinking. Thus, none of these articles are classifiable as parts of boring or sinking machinery of heading 8431, HTSUS. Rather, they generally serve secondary functions as conduits or adapters between components or equipment that do perform the functions integral to boring or sinking. Accordingly, the subject articles, being made of steel and not specified elsewhere in the HTSUS, are to be classified under heading 7326, HTSUS. Specifically, they are properly classified under subheading 7326.90.86, HTSUS, which provides for “Other articles of iron or steel: Other: Other...”
HOLDING:
By application of GRI 1, the tubing head adapter body, tee body and cross body, casing head/casing spool, housing, and packoff body are properly classified under heading 7326, HTSUS. Specifically, by application of GRI 6, the tubing head adapter body, tee body and cross body, casing head/casing spool, housing, and packoff body are properly classified under subheading 7326.90.86, HTSUS. The general column one rate of duty, for merchandise classified in this subheading is 2.9%.
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 on the World Wide Web at www.usitc.gov.
The Protest should be DENIED 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.
Pursuant to U.S. Note 20(f) to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 7326.90.86, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, an importer must report the Chapter 99 subheading, i.e., 9903.88.03, in addition to subheading 7326.90.86, HTSUS, noted above, for products of China.
The HTSUS is subject to periodic amendment so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading. For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/ trade/remedies/301-certain-products-china respectively.
Sixty days from the date of the decision the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division