CLA-2 OT:RR:CTF:EMAIN H304598 NVF
Port Director
U.S. Customs and Border Protection
5600 Pearl Street
Rosemont, IL 60018
Attn: Jeffrey Kiekenbush, International Trade Analyst
RE: Application for Further Review of Protest No. 3901-16-100894; Classification of Engine Assembly System.
Dear Port Director:
This letter is in response to the Application for Further Review (“AFR”) of Protest No. 3901-16-100894, timely filed by Neville Peterson, LLP on behalf of protestant, Sanyo Machine America, Inc. (“Sanyo”). The protest contests the classification and liquidation by Customs and Border Protection of an engine assembly and conveyor system under heading 8479 of the Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
The machine at issue in this case is an extensive, multi-workstation plus conveyor system that produces internal combustion engines. It consists of multiple gantry-style conveyors and over 20 robotic workstations, each of which performs a different part of the engine assembly process. While the conveyors all perform the same function, that of conveying the engine through the various assembly workstations, the specific functions of the assembly workstations vary. Some of the functions performed by the workstations include tightening, quality checking, measuring, loosening, and sealing.
The subject merchandise was imported unassembled from Japan on September 14, 2015 under heading 8428, HTSUS as other lifting, handling, loading or unloading machinery. CBP reclassified the system under heading 8479, HTSUS as machines and mechanical appliances have individual functions not specified elsewhere, and liquidated the entry on September 9, 2016. Sanyo filed a protest and Application for Further Review (“AFR”) on November 23, 2016.
In its protest, Sanyo asserts that the subject merchandise is a composite machine that should be classified under subheading 8428.39.00 as other continuous-action conveyors for goods or materials. Alternately, Sanyo argues that the machine should be classified under subheading 8428.90.0220, HTSUS Annotated, as industrial robots.
ISSUES:
Whether the machine is classified under heading 8428, HTSUS as other lifting, handling, loading or unloading machinery, or under heading 8479, HTSUS as machines and mechanical appliances having individual functions not specified or included elsewhere.
LAW AND ANALYSIS:
We observe as an initial matter that the matters protested are protestable under 19 U.S.C. § 1514(a)(2) as decisions on classification and amount of duties chargeable. The subject merchandise was entered by Sanyo on September 14, 2015. On September 9, 2016, CBP liquidated the entry. On November 23, 2016, Sanyo timely filed a protest and AFR, 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 to protestant pursuant to 19 C.F.R. § 174.24(b) because the decision against which the protest was filed is alleged to involve matters not previously ruled upon by CBP or by the Customs courts. Specifically, Sanyo states because the principal function of the subject machine is to convey items, it is properly classified as other lifting, handling, loading, or unloading machinery of heading 8428, HTSUS.
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 classification purposes.
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. 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.
GRI 2(a) states as follows:
Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or failing to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.
The 2015 HTSUS headings under consideration are as follows:
8428 Other lifting, handling, loading or unloading machinery.
8479 Machines and mechanical appliances, having individual functions, not specified or included elsewhere in this chapter; parts thereof.
We note that because the instant merchandise consists of all necessary components to assemble the complete conveyor belt plus workstation system, there is no dispute that the unassembled merchandise is classified, in accordance with GRI 2(a), according to the terms of the headings of the tariff schedule and any relative section or chapter notes.
Note 3 to Section XVI of the HTSUS states that:
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.
In this case, we have a machinery system that consists of multiple machines that fit together and perform two alternate, complementary functions: conveying engines and assembling them. Therefore, in accordance with Note 3 to Section XVI, HTSUS, the subject machine is classified as if consisting only of that component or as being that machine which performs the device’s principal function.
CBP has found the analysis developed and utilized by the courts in relation to “principal use” (the “Carborundum factors”) to be a useful aid in determining the principal function of such machines. Generally, the courts have provided several factors, which are indicative but not conclusive, to apply when determining whether merchandise falls within a particular class or kind. They include: (1) general physical characteristics; (2) expectation of the ultimate purchaser; (3) channels of trade, environment of sale (accompanying accessories, manner of advertisement and display); (4) use in the same manner as merchandise that defines the class; (5) economic practicality of so using the import; and (6) recognition in the trade of this use. See United States v. Carborundum Co., 63 C.C.P.A. 98, 102, 536 F.2d 373, 377 (1976); Lennox Collections v. United States, 20 Ct. Int’l Trade 194, 196 (1996); Kraft, Inc. v. United States, 16 Ct. Int’l Trade 483, 489 (1992); and G. Heileman Brewing Co. v. United States, 14 Ct. Int’l Trade 614, 620 (1990). See also HQ W968223 (Jan. 12, 2007) and HQ 966270 (June 3, 2003).
In prior rulings, CBP has distinguished between machines that perform functions falling within the examples provided by the text of heading 8428, HTSUS, and other devices that perform additional functions, like those that would be provided for under heading 8479, HTSUS. Specifically, when the lifting/handing functions are subsidiary to a machine’s main function, then CBP has determined that the machine cannot be classified in heading 8428. See HQ W968282 (July 27, 2009) and HQ H273338 (Sep. 30, 2019).
Sanyo contends that the subject machine’s conveyor modules perform its most critical or principal function in achieving the purpose of manufacturing an engine. It argues that the principal value of the subject machine lies in its conveyor system and dismisses the robotic workstations as performing simple tasks such as tightening and loosening, which only take a few seconds. Sanyo contends that the workstation functions are merely complementary to that of the conveyor system and that end users purchase the machine to eliminate the high cost and inefficiencies of manual transportation of engine components within a factory.
In arguing that the subject machine is classified under subheading 8428.39.00 as a continuous action conveyor, Sanyo relies on Mitsubishi Int’l Corp. v. United States, 5 F. Supp. 2d 991(CIT 1998). It asserts that the machine it imports functions similarly to the continuous steel casting machine in Mitsubishi to advance, discharge, convey, lift, orient and transfer materials. Sanyo contends that its machine is similar to the conveyor and distribution system in HQ H234005 (Nov. 4, 2014) which was used to sort and move inventory within distribution centers and warehouses. It argues that as in HQ H234005, any assembly functions its machine performs are complementary to the principle function of conveying. Finally, Sanyo asserts that its machine is like the gantry conveyor system in NY K82447 (Feb. 17, 2004) and therefore should be classified under heading 8428.
We are not persuaded by Sanyo’s arguments. While the physical characteristics of the subject machine include conveyors, the machine also includes multiple workstations, each of which performs a function unique to the engine assembly process, such as tightening, loosening, sealing, and performing quality checks. Moreover, Sanyo states in its submission that the “continuous conveyor system performs a multitude of functions that together manufacture a finished automobile engine,” (emphasis added). Indeed, without the robotic workstations, no engine can be produced and what remains is a conveyor system that moves bulk engine parts around a factory with no clear purpose. In other words, the system performs the principal function of assembling or manufacturing an automobile engine (i.e. it does not merely convey the engine components).
Sanyo’s reliance on Mitsubishi is misguided. The machines at issue in Mitsubishi include various approach tables, roller tables, a ladle turret, transfer car, and lifting beams. Notably, they do not include any machinery that is used to cast steel or perform any manufacturing functions. Rather, the machines in Mitsubishi all perform the function of holding, conveying, or lifting raw material and the court observed that the “immediate primary function design, construction, or function is not making steel slabs. Rather, it is lifting and handling materials.” Mitsubishi, 5 F. Supp. 2d at 1006. This is in stark contrast to the subject machine, which has both conveying and manufacturing components and where the conveying function is subsidiary to its multiple manufacturing functions. Similarly, in HQ H234005 and NY K82447, the imports at issue consisted solely of conveying machinery and did not include any components that performed assembly or manufacturing functions. See also NY N206598 (March 5, 2012) (where CBP classified multi-lane divider and converging conveyors capable of high-speed, continuous motion under heading 8428, HTSUS) and NY N256557 (Sep. 23, 2014) (where CBP classified a machine that feeds metal alloys into molten steel in heading 8428, HTSUS).
We are also not convinced that the ultimate purchaser of the machine purchases it with the expectation of eliminating the cost of manually conveying the engine through the assembly process. Sanyo argues that the “purchaser of the subject machine pays the premium for this product because of the continuous conveyor system.” However, evidence on the record indicates otherwise. Pricing data provided by Sanyo indicate that the purchase price of the workstation components is one and a half times higher than the purchase price of the conveyor components. It is not reasonable for a rational purchaser to spend an additional one and half times the value of the conveyor system for mere assembly “features.” Rather, it is reasonable to conclude that a purchaser pays the premium for the machines robotic workstations and that the conveyor components, which cost less, are subsidiary to the assembly functions of the machine. Despite the presence of conveyor components, the principal function of the subject import is not to lift, handle, or convey and therefore it cannot be classified under heading 8428, HTSUS as lifting, handling, loading or unloading machinery.
Pursuant to Note 3 to Section XVI, HTSUS, we find that the principal function of the imported machine is performed by the robotic assembly workstations. Sanyo states that the operations of the workstations vary in substance and complexity and lists examples such as fastening engine components, measuring valve clearances, tightening or loosening parts, positioning and sealing rocker covers, and using electro-optics to perform quality control checks. These various workstations contribute to the principal function of manufacturing and assembling a car engine. There is no HTSUS heading that specifically provides for car engine assembly. Accordingly, we classify the subject machine under heading 8479, HTSUS as machines and mechanical appliances having individual functions not specified or included elsewhere.
In light of the foregoing, we conclude that the subject machine is classified under heading 8479, HTSUS as machines and mechanical appliances having individual functions not specified or included elsewhere.
HOLDING:
By application of GRIs 1 (Note 3 to Section XVI), 2(a), and 6, the subject machine is classified in heading 8479, specifically subheading 8479.89.98 of the 2015 HTSUS, which provides for: Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and mechanical appliances: Other: Other. The 2015 general column one rate of duty is 2.5% ad valorum.
You are instructed to DENY 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 Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/, which can be found on the CBP website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
Craig T. Clark, Director
Commercial and Trade Facilitation Division