• HQ H140781
• May 19, 2011

• Type : Classification • HTSUS : 8504.31.40
•  Related:   29401; 100256; 966872; 961711; F81470; H82710; F89738; 35127; 951711; 086720   

CLA-2 OT:RR:CTF:TCM H140781 TNA

Port Director, Charleston Service Port
U.S. Customs and Border Protection
200 East Bay StreetCharleston, SC 29401

Attn: Nancy Fischer, Senior Import Specialist

Re: Application for Further Review of Protest No: 1601-10-100256; Tariff Classification of Neon Transformers

Dear Port Director:

The following is our decision regarding the Application for Further Review (“AFR”) of Protest No. 1601-10-100256, timely filed on September 16, 2010, on behalf of Transco, Inc. (“Transco” or “Protestant”). The AFR concerns the classification of neon transformers under the Harmonized Tariff Schedule of the United States (“HTSUS”).

FACTS:

The subject merchandise consists of the TX and UTX models of Transco’s neon transformers. Transformers are devices that magnetically transfer electric energy from one alternating current circuit to another. They consist of two or more multiturn coils of insulated conducting material, arranged so that any magnetic flux linking one coil will also link the others. See, e.g., McGraw-Hill Concise Encyclopedia of Science & Technology (5th ed. 2004).

A neon transformer is rated for its secondary open circuit voltage and secondary short circuit current. See, e.g., www.franceformer.com/products-neon/FAQ/NeonFAQ.html. The subject TX and UTX transformers are each imported with normal power factors of 120 or 277 volts. They also have an electrical current of 30 mA, and a frequency of 60 Hertz.

As imported, the subject merchandise consists of completely functional neon transformers. Once in the United States, the merchandise undergoes testing by Underwriters Laboratory (“UL”). UL testing, which occurs at Protestant’s manufacturing facility, consists of physically connecting the transformer to the neon tubing in order to test the merchandise to verify that it operates in compliance with UL standards. After this testing, the subject transformers are labeled as being UL-compliant. Although this testing is an industry standard, it is not required by law.

The subject merchandise was entered between February 20, 2009 and January 15, 2010 under subheading 8504.31.20, HTSUS, which provides for: “Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: Other transformers: Having a power handling capacity not exceeding 1 kVA: Unrated.” CBP liquidated the entries between March 26, 2010 and April 9, 2010 in subheading 8504.31.40, HTSUS, as “Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: Other transformers: Having a power handling capacity not exceeding 1 kVA: Other: Having a power handling capacity less than 1 kVA.” The importer filed this protest and AFR on September 16, 2010, claiming classification as entered.

ISSUE:

Whether completed neon transformers that are imported as functional units are classified as unrated transformers under subheading 8504.31.20, HTSUS, or as other transformers under subheading 8504.31.40, HTSUS?

LAW AND ANALYSIS:

Initially, we note that the matter protested 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 entries.  (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 Protest No. 1601-10-100256 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(b) and (c) because the decision against which the protest was filed is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of CBP or by the Customs courts, and involve matters previously ruled upon but facts are alleged and legal arguments presented which were not considered at the time of the original ruling. Specifically, the Protestant argues that the subject merchandise is imported in an incomplete form, and that while a number of prior CBP rulings classify similar merchandise, none address neon transformers or the incomplete form in which the subject transformers are imported. See, e.g., HQ 966872, dated February 19, 1992, HQ 961711, dated May 29, 1992, NY F81470, dated January 14, 2000, NY H82710, dated July 3, 2001, and NY F89738, dated August 10, 2000. In addition, Protestant argues that none of the post-1999 rulings address changes in industry requirements, and no ruling exists that directly addresses the industry definition of rated versus unrated for transformers.

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.

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. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and, mutatis mutandis, to the GRIs. The HTSUS headings under consideration are the following:

8504 Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: Other transformers: 8504.31 Having a power handling capacity not exceeding 1 kVA:

8504.31.20 Unrated Other: 8504.31.40 Having a power handling capacity less than 1 kVA 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, provide 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 (August 23, 1989).

The EN to heading 8504, HTSUS, states, in pertinent part, the following:

(I) ELECTRICAL TRANSFORMERS   Electrical transformers are apparatus which, without having any moving parts, transform, by means of induction and using a preset or adjustable system, an alternating current into another alternating current of different voltage, impedance, etc. These usually consist of two or more coils of insulated wire wound on laminated iron cores, although in some cases (e.g., radiofrequency transformers) there may be no magnetic core, or the core may be of agglomerated iron dust, ferrite, etc. An AC in one coil (the primary circuit) induces an AC usually at different values of current and voltage in the others (the secondary circuit). In certain cases (auto transformers) there is only a single coil, part of the winding of which is common to the primary and secondary circuits. In shell type transformers, there is a shell of laminated iron round the transformer.    The heading covers all transformers….

In support of its AFR, Protestant argues that no CBP ruling exists that directly addresses the industry definition of rated versus unrated for transformers. We disagree. First, the Court of Customs and Patent Appeals, in addressing the classification of transformers in United States v. RMS Electronics, Inc., defined what it meant for a transformer to be rated or unrated. United States v. RMS Electronics, Inc., 67 C.C.P.A. 79; 624 F.2d 1081; 1980 CCPA LEXIS 222; C.A.D. 1249. There, the court stated that a rated transformer is one in which “the importer has or should have at least some knowledge of the electrical power capability prior to importation.” RMS Electronics, Inc., 67 C.C.P.A. 79, 82.

CBP has consistently followed this definition. HQ 951711, dated May 29, 1992, for example, to which Protestant cites, also addresses the meaning of rated versus unrated transformers. There, we concluded that transformers may not be regarded as unrated if they are of a class or kind which are rated or are for uses in power circuits where the capacities of the transformers must be known even if they are not included on any labels. We further stated that signal transformers and current transformers, which do not control voltage but instead work as circuit breakers or large power transformers, were the only type of transformers that CBP and the courts had found to be unrated. See HQ 951711. See also HQ 966872, dated February 19, 2004; NY F81470 (defining the instant merchandise as an unrated transformer because, while it had a power-handling capacity of under one kilovolt-ampere, it had no specific power-handling rating).

In the present case, the subject neon transformers are of the class or kind of transformer that is rated. First, they control voltage, and, as such, are neither signal transformers nor current transformers. Furthermore, Transco’s website lists the voltage and electrical capacities of the subject TX and UTX transformers. The capabilities of these transformers are therefore known to any ultimate purchaser even if they are not tested or labeled at the time of importation. As a result, the subject neon transformers are of the class or kind of transformers that are rated.

Protestant further argues that as imported, the subject merchandise is not complete and does not yet have the essential character of a neon transformer. To the contrary, Protestant asserts that the merchandise does not become a complete neon transformer until it undergoes UL testing and labeling at its own facility in the United States. Protestant argues that this testing and labeling is not merely a post-manufacture test, but rather is part of the manufacturing process because neon transformers are not transformers- i.e., no currents are transformed without connection to neon tubing- until they are connected to neon tubing, tested, and labeled. As a result, Protestant argues for classification at GRI 1 in subheading 8504.31.20, HTSUS, as an unrated electrical transformer.

In response, we note that Protestant’s submissions also state that the subject transformers are imported as complete units, and as such are completely functional as neon transformers despite not having been tested for UL-compliance. Furthermore, although this testing is an industry standard, it is not required by law, and the testing does not physically change the product. To the contrary, Protestant voluntarily submits its merchandise for testing and certification to ensure that the merchandise is industry-compliant. The testing does nothing to change the merchandise except to place a label and appropriate installation instructions on it. As such, the merchandise can function as a transformer belonging to the class or kind of rated transformers. Even if the absence of UL testing and labeling upon importation created an incomplete neon transformer, the merchandise contains the essential character of a neon transformer belonging to the class or kind of rated transformers under GRIs 2(a) and 6. Lastly, we note that prior CBP rulings have held that UL standards are not dispositive in determining the classification of merchandise under the tariff schedule. See, e.g., HQ 086720, dated July 30, 1990. As a result, we find that the subject neon transformers are complete as imported that the UL testing does not change the classification of the subject merchandise.

In addition, it is not disputed that the subject transformers have a power handling capacity of less than one kVA. As a result, the subject neon transformers are classified under subheading 8504.31.40, HTSUS, which provides for “Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof (con.): Other transformers: Having a power handling capacity not exceeding 1 kVA: Other: Having a power handling capacity less than 1 kVA.”

HOLDING:

By application of GRI 1, the neon transformers are classified in heading 8504, HTSUS, and specifically in subheading 8504.31.40, HTSUS, which provides for “Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: Other transformers: Having a power handling capacity not exceeding 1 kVA: Other: Having a power handling capacity less than 1 kVA.” The column one, general rate of duty is 6.6% ad valorem.

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 International Trade, Regulations and Rulings, will 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.

Sincerely,


Myles B. Harmon, Director
Commercial and Trade Facilitation Division