CCLA-2-84:OT:RR:NC:N1 102
Natasha Albertini
Global Trade Consulting
81-83 Campbell Street Surry Hills 2010
Australia
RE: The tariff classification and USMCA eligibility of a valve module
Dear Ms. Albertini:
This letter is in response to your letter dated February 4, 2024, submitted on behalf of Santos Limited – Oil Search (Alaska). In your letter you request a classification ruling for the Module 129 and inquire whether the module is eligible for duty free treatment under the United States-Mexico-Canada Agreement (USMCA).
The Module 129 is referred to as Temporary Pigging Valve Module. The components of the module are imported unassembled in one shipment and primarily consist of piping, blind flanges, and various steel valves situated on a structural platform. The module is intended to be used for pipeline maintenance. To remove built-up liquids and stagnant debris, the four main ball valves are closed to stop fluid flow in the pipelines. The ball valves are connected to a separately imported pig launcher and then manually opened to introduce liquid. Afterwards, the valves are closed to push the “mechanical” pig through the pipeline. During normal use, the blind flanges seal off the open flange at the end of each line and the designated main valves are opened to achieve the required flow pattern.
Classification under the Harmonized Tariff Schedule of the United States (HTSUS) is governed by the principles set forth in the General Rules of Interpretation (GRIs) taken in order. 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. If the goods cannot be classified solely based on 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.
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 Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level (for the 4-digit headings and the 6 digit subheadings) and facilitate classification under the HTSUS by offering guidance in understanding the scope of the headings and GRIs. While neither legally binding nor dispositive of classification issues, the ENs provide commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the headings. See T.D. 89-90, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
Regarding GRI 2(a), EN V, which concerns “Articles presented unassembled or disassembled,” states the second part of Rule 2(a) provides that complete or finished articles presented unassembled or disassembled are to be classified in the same heading as the assembled article. When goods are so presented, it is usually for reasons such as requirements or convenience of packing, handling, or transport. Here, the unassembled components are imported together and intended to complete the Module 129, a composite good whose purpose is to regulate the flow of fluid.
Because the module is a composite good, GRI 3(b) governs classification. GRI 3(b) states as follows: Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. Explanatory Note VIII to GRI 3(b) provides: “the factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.”
In this instance, the valves impart the essential character, as they complete the flow control function that allows for the module to complete the required maintenance. Further, the value of the valves is substantive when compared to the other components.
The applicable subheading for Module 129 will be 8481.80.3070, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Taps, cocks, valves and similar appliances, for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and thermostatically controlled valves; parts thereof: Other appliances: Hand-operated: Of Iron or steel: Of steel: Ball type. The rate of duty will be 5.6 percent ad valorem.
In your letter, you inquire whether the Module 129 is eligible for preferential treatment under the USMCA. The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11, HTSUS, implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states, in relevant part: For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country…is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if - (i) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries; (ii) the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials; (iii) the good is a good produced entirely in the territory of one or more USMCA countries using non-originating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); …. In the instant case, the module consists of non-originating materials and is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i). Moreover, under GN 11(b)(ii), the module is not a good produced entirely in Mexico exclusively from originating materials. Therefore, we must determine whether the non-originating materials undergo the tariff shift and other requirements provided for in GN 11(b)(iii) and GN 11(o). The applicable tariff shift rule for merchandise classifiable under subheading 8481.80.3070, HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:
244(A) A change to subheadings 8481.40 through 8481.80 from any other heading;
Since one of the components used in the production of the the Module 129, the valves, are also classified within heading 8481, the requisite tariff shift rule set forth in GN 11(o), HTSUS, is not met. As a result, the Module 129 is not considered originating goods under the USMCA and thus, not eligible for preferential treatment upon importation into the United States.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8481.80.3070 HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.03, in addition to subheading 8481.80.3070, HTSUS, listed above. The HTSUS is subject to periodic amendment so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading. For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/trade/remedies/301-certain-products-china, respectively.
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 at https://hts.usitc.gov/current.
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, please contact National Import Specialist Sandra Martinez at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division