CLA-2 OT:RR:CTF:TCM H218081 LWF
Port Director
Service Port – Houston Airport
U.S. Customs and Border Protection
2350 N. Sam Houston Pkwy. E.
Suite 1000
Houston, TX 77032
Attn: Import Specialist Connie Reimar
RE: Application for Further Review of Protest No. 5309-12-100053; Classification of a Spacer Sleeve Assembly for Modular Ring used in the OnTrak™ system for monitoring drilling conditions
Dear Port Director:
This is in reference to the Application for Further Review (“AFR”) of Protest No. 5309-12-100053, timely filed on January 16, 2012, by Baker Hughes, Inc. (“Baker Hughes”). The AFR concerns the classification of a Spacer Sleeve Assembly for Modular Ring (the “Spacer Sleeve”) used in the OnTrak™ system for monitoring borehole conditions during oil drilling operations (the “OnTrak™”) under the Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
The merchandise is described as a Spacer Sleeve Assembly for Modular Ring, a component used in the OnTrak™ integrated MWD and LWD system. The Spacer Sleeve consists of a hollow metal tube, machined at one end to accept a rubber centralizer, and is designed to assist in positioning the BCPM within the OnTrak™ device.
The protest at issue involves the entry of the Spacer Sleeve, imported separately as parts for the OnTrak™, at the Service Port of the Houston Airport under subheading 8543.90.88, HTSUS, which provides for “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: Parts: Other: Other: Other.” Baker Hughes filed its protest on January 16, 2012, claiming that the correct classification for the Spacer Sleeve is under subheading 9015.90.00, HTSUS, which provides for “Surveying (including photogrammetrical surveying), hydropgraphic, oceanographic, hydrological, meteorological or geophysical instruments and appliances, excluding compasses; rangefinders; parts and accessories thereof: Parts and accessories.”
ISSUE:
Whether the OnTrak™ Spacer Sleeve is classified under heading 8543, HTSUS, as a part of an electrical machine or apparatus, having individual functions, not specified or included elsewhere in chapter 85, or heading 9015, HTSUS, as a part of a geophysical instrument.
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 for entries made on or after December 18, 2004. (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. 5309-12-100053 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(a) because the decision against which the protest was filed is alleged to be inconsistent with a ruling of the Commissioner of CBP or his designee with respect to the same or substantially similar merchandise. Specifically, Baker Hughes asserts that the Spacer Sleeve should be classified in a manner consistent with HQ H024750, dated August 24, 2010, in which CBP classified the OnTrak™ in heading 9015, 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 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 GRIs 1 through 5.
The 2011 HTSUS headings under consideration are the following:
8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof:
8543.90 Parts:
Other:
Other:
8543.90.88 Other.
* * * * *
9015 Surveying (including photogrammetrical surveying), hydrographic, oceanographic, hydrological, meteorological or geophysical instruments and appliances, excluding compasses; rangefinders; parts and accessories thereof:
9015.90.00 Parts and accessories.
* * * * *
Note 1(m) to section XVI, HTSUS, states:
This section does not cover:
…
(m) Articles of chapter 90;
* * * * *
Note 2 to chapter 90, HTSUS, states, in pertinent part, 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:
(a) 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 8487, 8548 or 9033) are in all cases to be classified in their respective headings;
(b) 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 o 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 Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While not legally binding or 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 (August 23, 1989).
The General Explanatory Note to Section XVI explains, in pertinent part:
SECTION XVI
MACHINERY AND MECHANICAL APPLIANCES; ELECTRICAL EQUIPMENT; PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PARTS AND ACCESSORIES OF SUCH ARTICLES
Notes.
This Section does not cover:
…
(m) Articles of Chapter 90 ;
* * * * *
EN 85.43 explains, in pertinent part:
PARTS
Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI), parts of the goods of this heading are also classified here.
* * * * *
EN 90.15 explains, in pertinent part:
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.
* * * * *
Because Note 1(m) to Section XVI (chapter 85), HTSUS, specifically excludes articles of chapter 90 from classification in that Section, our analysis of the instant merchandise begins with heading 9015, HTSUS. If the Baker Hughes Spacer Sleeve is classified in heading 9015, HTSUS, it is excluded from Section XVI and chapter 85, HTSUS.
Heading 90.15, HTSUS, provides in pertinent part for “Surveying (including photogrammetrical surveying), hydrographic, oceanographic, hydrological, meteorological or geophysical instruments and appliances, excluding compasses; rangefinders; parts and accessories thereof.” Although the term “geophysical” is not defined by the HTSUS or its legislative history, in HQ H024750, CBP determined that the common and commercial meaning of the term “geophysical” accurately describes the functions and features of the OnTrak™ device. See Mita Copystar Am. V. United States, 21 F.3d 1079, 1082 (Fed. Cir. 1994). There, CBP ruled that the OnTrak™ is more specifically described by heading 9015, HTSUS, than in heading 8543, HTSUS, where it had previously been classified by HQ 966618. Consequently, CBP revoked HQ 966618 and ruled that the complete OnTrak™ system is properly classified in subheading 9015.80.80, HTSUS, as a geophysical instrument.
Similarly, in HQ W968458, dated May 8, 2009, CBP classified the Dipole Shear Sonic Imaginer Tool (“DSST”), used to determine the properties of subsurface rock in oil and gas exploration activities, in heading 9015, HTSUS, because the use of sonic imaging and sonic waveform information to measure the inclination of a borehole was determined to constitute a geophysical surveying function. See also HQ 085988, dated December 5, 1989, (classifying a Light Log and Gyro-Log Survey System for diamond exploration and mining in heading 9015, HTSUS). However, in the same ruling, CBP also classified several component pieces of the DSST in heading 9015, HTSUS, as parts and accessories of a geophysical instrument. Specifically, CBP concluded that the DSST’s Electric Cartridge Housing, which protects one of the device’s sensing instruments, was classified in subheading 9015.90.00, HTSUS, because it was suitable for use solely or principally with the DSST, pursuant to Note 2(b) to chapter 90, and was found to be an “integral constituent component of the DSST as a whole, which [is] is necessary to the completion of the DSST and which enable[s] the DSST to function in the manner in which it was designed.”
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.
More recently, the Court of International Trade (CIT) applied the Willoughby and Pompeo tests when it addressed the issue of whether two vase-shaped glass structures were classifiable as glassware in heading 7013, HTSUS, or as parts of lamps in heading 9405, HTSUS. Pomeroy Collection, Ltd., v. United States, 783 F. Supp. 2d 1257, No. 11-78 (Ct. Int’l Trade 2011). In applying Willoughby to the first article, the CIT ruled that “[w]hen imported, the claimed article is dedicated solely for use in such article, and, when applied to that use, the claimed part meets the Willoughby test.” Ibid, at 1261-1262. In Pomeroy, the court found that first article satisfied the Willoughby test because the hurricane lamp “clearly could not function without the first article in question” since the lamp relied upon the glass structure to hang upon. Id. at 1262. The court found that the second glass structure satisfied Pompeo because the evidence showed that the glass structure contained the flame and enabled the candles to remain lit and to prevent open flames. Thus, the court also found that the second article at issue also satisfied the Willoughby precedent, because “when applied to that use,” the lamp could not function without the glass structures. Id. In other words, to satisfy the Pompeo test, two prongs must be satisfied: (1) the article must be solely dedicated for use with the product it claimed to be a part of and, (2) when applied to that use, the article cannot function without the article at issue.
With respect to the instant merchandise, we note that the technical specifications provided by Baker Hughes indicate that the Spacer Sleeve is specially designed and fabricated so that the interior of the tube tapers at one end to accept a rubber centralizer. As such, the precise specifications of the Spacer Sleeve’s taper, in addition to exterior grooves around the end of article, indicate that the merchandise is designed for use solely or principally with the OnTrak™ device. Moreover, when the Spacer Sleeve is assembled with other component pieces of the OnTrak™, it forms part of the Bi-directional Communication and Power Module (“BCPM”) subassembly, which functions to communicate the data gathered by the Sensor Sub subassembly to the surface operator. Without the Spacer Sleeve, the BCPM subassembly and OnTrak™ device as a whole cannot function. Consequently, because the Spacer Sleeve is dedicated for use solely with the OnTrak™ and, when applied to that use, the OnTrak™ cannot function without the Spacer Sleeve, CBP finds that the Spacer Sleeve is properly described as a “part” of the OnTrak™ under the Willoughby and Pompeo tests.
In describing the Spacer Sleeve as a part of the OnTrak™ machine classified in heading 9015, HTSUS, CBP notes that Note 2(a) to chapter 90, HTSUS, does not apply, because the Spacer Sleeve is not provided for specifically in any of the headings of chapter 90 or of chapter 84, 85 or 91 (other than heading 8487, 8548 or 9033). Therefore, in accord with Note 2(b) to chapter 90, HTSUS, the Spacer Sleeve is suitable for use solely or principally with the OnTrak™ and is classifiable with such machine, as a part provided for by heading 9015, HTSUS.
HOLDING:
By application of GRIs 1 and 6, the Barker Hughes Spacer Sleeve Assembly for Modular Ring is classified in heading 9015, HTSUS, and specifically, in subheading 9015.90.00, 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.” The column one, general rate of duty is free. You are instructed to GRANT 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 re-liquidation 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 http://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