OT:RR:CTF:EMAIN H322641 PF
H. Michael Leightman
Partner, Global Trade Practice
Ernst & Young LLP
5 Houston Center, Suite 2400
1401 McKinney Street
Houston, TX 77010
RE: Tariff classification of a plastic recycling plant
Dear Mr. Leightman:
This is in reply to your letter of May 27, 2021, submitted on behalf of Eastman Chemical Company, requesting a prospective ruling as to the classification of a plastic recycling plant (“the Plant”) under the Harmonized Tariff Schedule of the United States (HTSUS). Your request was forwarded by the National Commodity Specialist Division (“NCSD”) to this office for a response. Our decision takes into account your May 27, 2021 letter, your responses to questions posed by the NCSD dated September 24, 2021, your responses to questions posed by Headquarters dated August 26, 2022 and March 30, 2023, a meeting held on July 31, 2023 and supplemental information dated August 1, 2023.
FACTS:
The subject merchandise consists of a plastics recycling plant assembled in a foreign trade zone, which will be entered into the U.S. upon completion of the assembly process. Once assembled and operational, the Plant will recycle post-consumer and post-industrial plastics with high levels of polyethylene terephthalate (“PET”) by refining and reclaiming chemical products such as polymer-grade ethylene glycol (“EG”) and dimethyl terephthalate (“DMT”). The Plant will be constructed using certain domestically sourced and imported components. The facility will subject plastics to a specified series of steps as part of an integrated process to achieve the reclamation of the desired products.
The Plant is an integrated combination of twelve units consisting of individual components connected by piping, wiring and structural steel and operate in a continuous flow. You state that the Plant would not function if any of the units were to be disconnected from the whole and that each individual unit is unable to operate independently. The twelve units are a Mixed Plastics Feed Unit, Dissolver Unit, Methanolysis Unit, Spray Tower Unit, Crystallization Unit, Filtration Unit, DMT Refining Unit, Methanol Refining Unit, Low Boiler Column Unit, EG Refining Unit, Methanol Storage Unit and Heavy Co-Product Handling System.
The entire plant operation and flow was outlined by Eastman as follows:
Trucks from Eastman’s preprocessing facility carry pellets, flakes, and shredded chunks of plastic (the “Raw Materials”) to the Plant, where those Raw Materials are dumped onto a conveyor belt feeding into the Mixed Plastics Feed Unit’s metering device. The metering device regulates the flow of Raw Materials into the Dissolver and provides holdup for a truck’s inventory, allowing the next truck time to unload its Raw Materials onto the conveyor. This allows the Plant to have a continuous feed of Raw Materials flowing through the Plant.
The Mixed Plastics Feed Unit feeds Raw Materials into the Dissolver Unit via an airvey system, which consists of a blower and series of rotary airlocks that moves the materials with high pressure ambient air and filters out organic materials and other impurities.
In the Dissolver Unit, the Raw Materials melt into a molten liquid that is drained from the bottom of the agitation vessel and pumped via piping into the Dissolver Decanter.
As the feed is pumped into the decanter, the lighter polyolefins float to the top and rest on the heavier PET. The olefins are removed by suctioning off the top layer while allowing the heavier layer to drain into piping that pumps the feed to the Methanolysis Unit.
In addition to the PET feed from the Dissolver, recycled methanol (in liquid form) is pumped from the Methanol Storage Unit through a preheater and into the Methanolysis Unit, where the methanol is mixed with the molten PET and a catalyst.
At this point, the PET breaks down to mostly DMT and EG vapors, which flow out the top of the reactor into the Methanolysis rectifier. The rectifier is used to remove oligomers from the composite stream and does not perform any additional separation. The chemical reaction uses an endothermic reaction in which heat is absorbed during mixing to cause the PET to break down. A sludge of heavy co-products is pumped out of the bottom of the reactor and sent to the Heavy Co-Product Handling System and solidified.
The feed, composed now of vapors of EG, DMT, methanol, and byproducts, enters the Spray Tower Unit and cools as it rises through the tower. The Spray Tower Unit removes a concentrated stream of components with a boiling point less than Methanol feeding the stream to the Methanol Refining unit. The Spray Tower further refines the stream to control the Crystallizer feed composition by removing refined Methanol to the Methanol Storage Unit as the vapor overhead of the distillation tower. The DMT and EG leave the tower as liquid (still containing some methanol and byproducts) and flow into the Crystallization Unit, while a portion of the methanol remains vapor and is sent back to the Methanolysis Unit.
In the Crystallization Unit, the liquids are cooled before being drained into the Filtration Unit as a crude slurry of DMT crystals, liquid EG and methanol, and other byproducts. This process is accomplished by changes in temperature and pressure, which cause DMT crystals to form. The pressure is rapidly reduce using vacuum pumps, causing accelerated crystallization of much of the remaining liquid DMT. The vapor methanol is condensed in a condenser and routed back to the Methanolysis Unit. The remaining liquids from the spray tower, along with the crystallized DMT, are drained from the crystallizer and fed into the filtration unit where the DMT is separated from the liquid.
The molten crude DMT then is pumped into the DMT Refining Unit, where it is distilled into polymer-grade DMT.
The DMT is sent to the distillation tower, a melter agitates and heats the slurry which causes the remaining methanol and other lower boiling point contaminants to evaporate. The vapors emitted from the liquid rise through the tower where a reboiler heats the liquid causing it to evaporate. The vapors condense on a series of trays as they cool. The vapor overhead is routed to a scrubber system to distill any remaining useful products. The liquid condensing on the tower trays is liquid, polymer-grade DMT. It is sent to storage vessels to await polymerization. The liquid bottoms are pumped to the Heavy Co-Product Handing System and solidified. The purified recycled DMT content is sent to the DMT storage tanks to be used to create recycle content polymers at a separate facility.
The liquid discharge from the Filtration Unit flows into the Methanol Refining Unit, which is a distillation column where methanol is separated from the EG as vapor and is fed back to the Methanol Storage Unit. The liquid from the Methanol Refining Unit continues to the Low Boiler Column and is further distilled, producing concentrated, crude EG as the liquid bottoms and “low boilers” as the vapor overhead.
The liquid bottoms flow into the EG Refining Unit, which is another distillation column with multiple trays. The crude EG enters the column and is heated with a reboiler. The portion that condenses at a certain tray is the polymer-grade EG product, which is passed through Adsorption sieves for additional purification. The remaining liquid bottoms is pumped to the Heavy Co-Product Handling System. The refined EG product is sent to an additional distillation column to create refined grade EG product. An additional adsorption step creates the polymer grade EG product to be solidified and disposed. The purified EG is pumped to Storage tank for future use in the creation of recycled content polymers at a separate facility.
ISSUE:
Whether the Plant is classifiable as a “Distilling or rectifying plant” in subheading 8419.40, HTSUS, or as “Other” machinery, plant or equipment for the treatment of materials by a process involving a change of temperature in subheading 8419.89, HTSUS.
LAW AND ANALYSIS:
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. 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 6 provides that classification of goods at the subheading level will be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the preceding GRIs on the understanding that only subheadings at the same level are comparable.
The HTSUS provisions under consideration are as follows:
8419 Machinery, plant or laboratory equipment, whether or not electrically heated (excluding furnaces, ovens and other equipment of heading 8514), for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, nonelectric; parts thereof:
8419.40 Distilling or rectifying plant
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Other machinery, plant or equipment:
8419.89 Other
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 84.19 provides, in relevant part:
[T]the heading covers machinery and plant designed to submit materials (solid, liquid or gaseous) to a heating or cooling process in order to cause a simple change of temperature, or to cause a transformation of the materials resulting principally from the temperature change (e.g., heating, cooking, roasting, distilling, rectifying, sterilising, pasteurising, steaming, drying, evaporating, vaporising, condensing or cooling processes). But the heading excludes machinery and plant in which the heating or cooling, even if essential, is merely a secondary function designed to facilitate the main mechanical function of the machine or plant, e.g., machines for coating biscuits, etc., with chocolate, and conches (heading 84.38), washing machines (heading 84.50 or 84.51), machines for spreading and tamping bituminous road-surfacing materials (heading 84.79).
The machinery and plant classified in this heading may or may not incorporate mechanical equipment.
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As an initial matter, we agree that the plant is wholly described by heading 8419, HTSUS. The instant matter is governed by GRI 6, which states that:
For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section, chapter and subchapter notes also apply, unless the context otherwise requires.
Note 4 to Section XVI of the HTSUS states that:
Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function.
You state that the Plant will be constructed of interconnected units and subunits permanently attached to each other, and that if any particular unit were disconnected from the whole, the plant would cease to function as designed. In addition, you have argued that the plant should be classified in subheading 8419.40, as a “Distilling or rectifying plant.” In order for the Plant to be classified in subheading 8419.40, HTSUS, the units and subunits must contribute together to the clearly defined function of distillation. In this case, the Plant satisfies the first portion of Note 4 to Section XVI, as it is a plant consisting of individual components interconnected by piping. Moreover, in order for the Plant to be classified in subheading 8419.40, HTSUS, the units and subunits must contribute together to the clearly defined function of distilling or rectifying.
The HTSUS does not define “distilling” or “rectifying.” Therefore, we construe these terms in accordance with their common meanings, ascertained by reference to “dictionaries, scientific authorities, other reliable information sources,” “lexicographic and other materials” and to the pertinent ENs. 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 Oxford English Dictionary provides the following definitions for “distill” and “rectify:”
Distill: 4.a. To subject to the process of distillation; to vaporize a substance by means of heat, and then condense the vapour by exposing it to cold, so as to obtain the substance or one of its constituents in a state of concentration or purity. Primarily said of a liquid, the vapour of which when condensed is again deposited in minute drops of pure liquid; but extended also to the volatilizing of solids, the products of which may be gaseous.
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Rectify: 3.a. transitive. Chemistry. To purify or refine (a substance) by distillation (esp. repeated or continuous distillation) or other chemical treatment; to raise (spirit) to a required strength in this way (obsolete). Occasionally also intransitive.
"distil | distill, v." OED Online, Oxford University Press, March 2020, www.oed.com/view/Entry/55653. Accessed 11 March 2020; "rectify, v." OED Online, Oxford University Press, March 2020, www.oed.com/view/Entry/160025. Accessed 11 March 2020.
The Explanatory Notes for heading 8419, HTSUS, offer additional clarity, describing “[f]ractionating or rectifying plant[s]” as:
…more complicated continuous installations incorporating vertical fractionating columns which enable complex mixtures to be separated in one operation. The most usual type of column is divided into interconnecting sections by plates fitted with bubbling caps and down-flow tubes. Vapour rising from one section is thus brought into intimate contact with a condensed portion of the vapour in the section above and, since the temperature decreases as the vapours rise in the column, they can be separated at different levels corresponding to their boiling points.
The function of the subject Plant is to recycle plastics and separate EG and DMT from PET plastic. This separation is not accomplished primarily through distillation, but through a series of processes and steps that involve chemical reactions, crystallization, and refining. The units and subunits of the Plant work together toward the function of chemically breaking down the raw material and extracting compounds, which is a distinct process from distillation. In particular, the Methanolysis unit, and the chemical reactions that occur within this unit, are integral to the functioning of the subject Plant. The purpose of the Methanolysis Unit within the Plant is to depolymerize the PET into EG and DMT vapors. The Methanolysis Reactor breaks down the PET into EG and DMT vapors using a chemical reaction that involves mixing vaporized methanol, molten PET, and a catalyst. The vapors flow out of the top of the reactor into the Methanolysis rectifier to separate by-products from the desired stream of EG, DMT, and methanol vapors. The rectifier is used to remove oligomers from the composite stream and does not perform any additional separation. The chemical reaction uses an endothermic reaction in which heat is absorbed during mixing to cause the PET to break down.
The reactor within the Methanolysis Unit performs the initial separation of PET into EG vapors, DMT vapors, and methanol vapors. Without the mixing of catalysts, methanol, and PET, the vapors would not separate. The rectifier is used to remove oligomers from the composite stream and does not perform any additional separation. Its function is subsidiary to the main function of the reactor. Unlike distillation, which relies primarily on heating and condensation, methanolysis uses a chemical reaction to break down the PET.
Eastman asserts that every unit and subunit contributes to the function of distillation. We disagree. While certain units perform a distillation function, they are contributing to the primary function of chemically breaking down the raw material and extracting compounds that occur within the Methanolysis Unit. Any distillation that occurs is secondary in importance to the chemical process that occurs by the Methanolysis Unit.
You rely on Headquarters Ruling (“HQ”) H267791, dated January 3, 2017 and HQ H062209, dated August 10, 2009 and claim that the plants in these cases used similar processes to the subject Plant. In HQ H267791, the Plant at issue was an ethane processing plant that produced ethylene and other products from an ethane feedstock. The plant completed an initial separation process and then subjected an ethane stream to a purification process involving distillation, evaporation and condensation. CBP determined that the ethane processing plant had a clearly defined function of fractionation and distillation of gases through changes in temperature. In HQ H062209, the merchandise was a rare gases purification plant. CBP discussed that the plant was comprised of various pieces of equipment and machinery. One of the machines performed a gas liquification function and another machine was a dryer that removed water. CBP held that the plant performed a clearly defined function of fractionation of gases.
The cited cases are distinguishable because the plants in HQ H062209 and HQ H062209 used different raw materials, produced different end products, and used different processes than the subject Plant. Therefore, since the units and subunits of the subject Plant do not work together to contribute to the clearly defined function of distillation, they cannot be classified under subheading 8419.40, HTSUS, and are classified under subheading 8419.89.95, HTSUS.
HOLDING:
By application of GRIs 1 and 6 (Note 4 to Section XVI) of the HTSUS, the subject plastic recycling plant is classified in heading 8419, specifically subheading 8419.89.95, HTSUS, which provides for: Machinery, plant or laboratory equipment, whether or not electrically heated (excluding furnaces, ovens and other equipment of heading 8514), for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, nonelectric; parts thereof: Other machinery, plant or equipment: Other: Other: Other. The general column one, rate of duty is 4.2% ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov/tata/hts/. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Gregory Connor, Chief
Electronics, Machinery, Automotive, and International Nomenclature Branch