CLA-2 OT:RR:CTF:TCM W968458 JER
U.S. Customs and Border Protection
2350 N. Sam Houston Pkwy E. # 1000
Houston, TX 77032-3100
RE: Request for Internal Advice 06/031; Schlumberger Oil Field Services Inc., Dipole Shear Sonic Imager Tool and its Component Parts
Dear Port Director:
This is in response to the request for internal advice initiated on behalf of Schlumberger Oilfield Services, Inc., dated September 15, 2006. The request was made in accordance with Customs and Border Protection (CBP) Regulations Part 177 (19 CFR 177). Specifically, the request for internal advice was made pursuant to 19 CFR §177.11(b)(2) and concerns the classification of the Dipole Shear Sonic Imager Tool under subheading 9031.80.80 of the Harmonized Tariff Schedule of the United States (HTSUS).
Schlumberger Oilfield Services, Inc., (Schlumberger) imports the Dipole Shear Sonic Imager Tool (DSST) which is said to be used to determine the properties of subsurface rock in oil and gas exploration and production activity. Components of the DSST are described as follows: 1) the Sonic Monopole and Dipole Transmitter (SMDX) which generates the acoustic waves, 2) the Sonic Monopole and Dipole Receiver (SMDR) which receives the acoustic waves, 3) the Sonic Parallel Acquisition Cartridge (SPAC) which controls the pulse emitted by the SMDX and processes the waves received by the SMDR, 4) the Electric Cartridge Housing (ECH) which houses the SPAC and 5) the Sonic Sonde Isolation Joint (SSIJ) which acts as a shock absorber to attenuate the signals traveling from the SMDX. The DSST is said to operate in a borehole by emitting and receiving acoustic waves through subsurface rock formations to determine how oil or natural gas can be extracted from the geological formation.
Schlumberger, has previously classified the DSST under heading 9031 HTSUS. Schlumberger now contends that previous classifications in heading 9031 HTSUS, were in error and resulted in an overpayment of duties.
Whether the DSST is properly classified in heading 9015 HTSUS, as a geophysical instrument, heading 9027 HTSUS, as an apparatus for measuring or checking viscosity or porosity, or in heading 9031 HTSUS, as other measuring or checking instrument.
LAW & 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 GRIs 2 through 6 may then be applied in order.
In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The HTSUS provisions under consideration are as follows:
8537 Boards, panels, consoles … and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517:
8537.20.00 For a voltage exceeding 1,000 V
8537.20.0020 Switchgear assemblies and switchboard
9015 Surveying (including photogrammetrical surveying), hydrographic, oceanographic, hydrological, meterological or geophysical instruments and appliances, excluding compasses; rangefinders; parts and accessories thereof:
* * * *
9015.80 Other instruments and appliances:
* * * *
* * * *
9015.80.8040 Geophysical instruments and appliances
* * * *
9015.90.00 Parts and accessories
* * * *
9015.90.0060 Of other geophysical instruments and appliances
9027 Instruments and apparatus for physical or chemical analysis…; instruments and apparatus for measuring or checking viscosity or porosity, expansion, surface tension or the like…; parts and accessories thereof:
9031 Measuring or checking instruments, appliances and machines, not specified or included elsewhere in this chapter; profile projectors; parts and accessories thereof:
* * * *
9031.80 Other instruments, appliances and machines:
* * * *
At issue is the classification of merchandise described as the Dipole Shear Sonic Imager Tool (DSST) imported by Schlumberger. Presently, you aver that the DSST as a complete unit is more accurately and specifically provided for in heading 9015 HTSUS, rather than heading 9031, HTSUS. Secondly, you contend that separate importation of DSST components are properly classified as parts and accessories of heading 9015, HTSUS, because individually imported components of the DSST are solely and principally used as parts of the DSST.
Classification of the subject merchandise is resolved by an analysis of the merchandise viewed in light of three competing headings, 9015, 9027 and 9031, HTSUS. The DSST is described as a geophysical surveying instrument used to determine three key properties of subsurface geological formations during the exploration and production of fossil fuels. Essentially, these geological formations are composed of layers of impermeable rock overlaying porous sedimentary rock which combine to trap oil or natural gas in subsurface reservoirs. The DSST determines the strength, porosity and permeability of the subsurface rock formation by receiving and transmitting sonic waveforms from the borehole.
Given its industrial use the DSST is a geophysical instrument used in subsurface analysis. Geophysical instruments are specifically provided for in heading 9015, HTSUS, but are not referenced in either heading 9027, HTSUS, or 9031, HTSUS. For example, heading 9015 HTSUS, provides for, “Surveying … or geophysical instruments and appliances….” The DSST as a geophysical instrument, examines the condition of subsurface geological formations to determine outcomes and methods of oil and gas production (i.e. conducts a geoseismic survey for purposes of oil extraction). The ENs to heading 9015 HTSUS, provide in pertinent part for:
(VI) Geophysical Instruments … (4) Circumferential acoustic scanning tools which create a “picture” of a borehole by measuring the acoustic travel time of an ultrasonic signal emitted from a rotating transducer in the head of the tool.
Similar to the description set forth above, one of the applications of the DSST is sonic imaging with borehole acoustic reflection survey. See DSI, Dipole Shear Sonic Imager Applications, Schlumberger at www.slb.com/pdf. Likewise, the ENs to heading 9015, HTSUS, also provide for, (5) [a]pparatus for measuring the inclination of a borehole. Essentially, evaluating the tendencies of a given borehole is one of the primary functions of the DSST. According to the literature provided, the DSST receives and transmits sonic waveforms to evaluate and analyze the strength, porosity and permeability of subsurface rock formations.
In Headquarters Ruling Letter (HQ) 085988, dated December 5, 1989, we classified a Light Log and Gyro-Log Survey System (Log Survey System) in heading 9015, HTSUS, primarily because it performed a surveying function. The Log Survey System was primarily used by diamond exploration and mining companies to determine the location, drill point and measurements of a drilled hole. It was described as providing a photographic survey of a drilled hole in the diamond exploration and mining process. The subject merchandise performs a substantially similar function in a substantially similar industry. The DSST conducts a geophysical survey utilizing sonic imaging and sonic waveforms of a borehole for purposes of oil exploration and production.
By contrast, heading 9027, HTSUS, covers, in relevant part, “[i]nstruments and apparatus … for measuring or checking viscosity, porosity expansion, surface tension or the like.…” With the capacity to conduct shear seismic interpretation, fracture evaluation and sand strength analysis, the many applications of the DSST are not fully described by the terms of heading 9027, HTSUS.
Heading 9031, HTSUS, provides for “[m]easuring or checking instruments, appliances and machines, not specified or included elsewhere in this chapter...” Because heading 9015, HTSUS, provides for geophysical instruments including acoustic scanning tools which create a picture of a borehole, we find that the DSST is in fact an instrument specified and included in Chapter 90, HTSUS, specifically heading 9015, HTSUS. Hence, the basket provision of heading 9031, HTSUS, is precluded as the article is elsewhere specified or included in heading 9015, HTSUS.
Regarding the classification of the individual components of the DSST, you contend that because specific provision for each individual component part of the DSST that Additional U.S. Rule 1 (c) does not apply to preclude classification of the instant components as parts. You further contend that each individual component of the DSST is solely and principally used as a part of the DSST and therefore classified as parts when imported separately. According to your submission, components of the subject merchandise are said to be inoperable except when assembled as a whole and serve no other purpose other than as parts and accessories of a completed DSST. Once assembled the SMDX, SMDR, SPAC, ECH and SSIJ form one single instrument (the DSST) and work in conjunction to perform the functions outlined herein.
While we agree that Additional U.S. Rule of Interpretation 1 (c) does not apply, we find that Note 2 to Chapter 90, HTSUS, is applicable. Hence, we consider the classification of the individual components of the DSST separately.
Note 2 to Chapter 90, HTSUS, provides for:
Parts and accessories which are goods included in any of the headings of this chapter or of chapter 84, 85 or 91 (other than heading 8485, 8548 or 9033) are in all cases to be classified in their respective headings;
Other parts and accessories, if suitable for use solely or principally with a particular kind of machine, instrument or apparatus, or with a number of machines, instruments or apparatus of the same heading (including a machine, instrument or apparatus of heading 9010, 9013, or 9031) are to be classified with the machines, instruments or apparatus of that kind.
The SPAC which controls the electrical pulses emitted by the SMDX and also processes the sound waves received by the SMDR, does have features which distinguish this article as a part classifiable in its own specific provision according to Note 2(a) to Chapter 90, HTSUS. Heading 8537, HTSUS, for example, provides in relevant part for: “Boards, panels, consoles … and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electrical control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus …”
In HQ 952778, dated December 1, 1992, we stated that the ultimate purpose of a control panel or other controller is to control output devices. Basically, these device convert input signals into output signals, based on the user’s program logic, and sends them to output devices. The subject SPAC controls electrical pulses at sonic frequencies which are emitted by an output device (the SMDX) and has the capacity to analyze and process sound waves received from the SMDR. Additionally, the SPAC control unit meets the definitions described in the exemplars provided in EN 85.37.
EN 85.37 provides, in pertinent part, that:
The heading also covers:
(1) Numerical control panels with builtin automatic data processing machine, which are generally used to control machinetools.
(2) Programmed switchboards to control apparatus; these permit variations in the choice of operations to be followed. They are normally used in domestic electrical appliances, such as washing machines and dish washers.
(3) "Programmable controllers " which are digital apparatus using a programmable memory for the storage of instructions for implementing specific functions such as logic, sequencing, timing, counting and arithmetic, to control, through digital or analog input/output modules, various types of machines
Similarly, in your submission, you state that the SPAC is the “acquisition brain of the system” which “determines, via digital commands … which of the three transmitters will fire.” Likewise, inside the SPAC controller is a microprocessor based computer, which you refer to as the “downhole controller” and which sends commands and accepts data. Accordingly, the SPAC control unit meets the terms of heading 8537, HTSUS, and meets the description of a programmable controller as explained in EN 85.37.
When viewed in light of the terms of heading(s) 8543 and 8479, HTSUS, for example, both the SMDR (receiver) and the SMDX (transmitter) fail to meet the criteria for classification in either heading. Heading 8543, HTSUS, provides for: “Electrical machines and apparatus, having individual functions, not elsewhere specified or included in this chapter…” According to EN 85.43, “electrical appliances and apparatus of this heading must have individual functions.” The SMDX and the SMDR are not functional absent the DSST as a whole. EN 85.43, further states that the introductory provisions of EN 84.79 apply mutatis mutandis to heading 8543, HTSUS.
EN 84.79, regarding individual functions state, in relevant part that:
The machinery of this heading is distinguished from the parts of machinery, etc., that fall to be classified in accordance with the general provisions concerning parts, by the fact that it has individual functions.
For this purpose the following are to be regarded as having "individual functions":
(A) Mechanical devices, with or without motors or other driving force, whose function can be performed distinctly from and independently of any other machine or appliance.
* * *
(B) Mechanical devices which cannot perform their function unless they are mounted on another machine or appliance, or are incorporated in a more complex entity, provided that this function:
(i) is distinct from that which is performed by the machine or appliance whereon they are to be mounted, or by the entity wherein they are to be incorporated, and
(ii) does not play an integral and inseparable part in the operation of such machine, appliance or entity.
Under the instant facts, neither the SMDX nor the SMDR can perform their functions independent of the DSST as a whole and therefore do not meet the definition set forth in (A) of EN 84.79. Furthermore, even where the SMDX and SMDR are considered to be incorporated into a “more complex entity” as described in (B) of EN 84.79 both articles play an integral and inseparable part in the operation of the DSST. Thus, neither the SMDR nor the SMDX meet the criteria set forth in (B)(ii) to EN 84.79.
We find that under Note 2 (b) to Chapter 90, HTSUS, with the exception of the SPAC control unit, that each component of the DSST are suitable for use solely or principally with the DSST and are integral constituent components of the DSST as a whole, which are necessary to the completion of the DSST and which enable the DSST to function in the manner in which it was designed. As such, we find that the remaining component parts of the DSST, specifically, the SMDX, SMDR, ECH and SSIJ are classifiable as parts in heading 9015, HTSUS.
By application of GRI 1, the DSST is classified under heading 9015, HTSUS. Specifically, the complete DSST is classified in subheading 9015.80.8040, HTSUS, which provides for: “Surveying (including photogrammetrical surveying), hydrographic, oceanographic, hydrological, meterological or geophysical instruments and appliances, excluding compasses; rangefinders; parts and accessories thereof: Other: Other, Geophysical instruments and appliances.” The 2006 column one, general rate of duty is free.
By application of GRI 1 and Note 2 (a) to Chapter 90, HTSUS, the SPAC control unit is classified in heading 8537, HTSUS. Specifically, this product is classified in subheading 8537.20.0040, which provides for: “Boards, panels, consoles … and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517: For a voltage exceeding 1, 000 V, Switchgear assemblies and switchboards, Other.” The 2006 column one, general rate of duty is 2.7% ad valorem.
By application of GRI 1 and Note 2 (b), four of the five components (the SMDR, SSIJ,SMDX and the ECH) when/if imported separately are classifiable in subheading 9015.90.0060 HTSUS, which provides for: “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 2006 column one, general rate of duty is free.
Please advise the Internal Advice Applicant of this decision. This decision should be mailed to the internal advice applicant no later than 60 days from the date of this letter. On that date, Regulations and Rulings of the Office of International Trade, will take steps to make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Myles B. Harmon, Director
Commercial and Trade Facilitation Division