CLA-2-90:OT:RR:NC:N4:405
Michael E. Murphy
Richard Mojica
Baker & McKenzie LLP
815 Connecticut Avenue, NW
Washington, DC 20006-4078
RE: The tariff classification of a machined housing for a mud pulse telemetry system from China.
Dear Mr. Murphy and Mr. Mojica:
In your letters dated May 22 and August 22, 2012, on behalf of Halliburton Energy Services, Inc., you requested a tariff classification ruling. No samples were provided.
Your importation will be used with the TM System (Mud Pulse Telemetry System) as the Pulser Housing, which you describe: “The TM System’s Pulser operates inside a stainless steel housing that protects it from harsh downhole conditions. The housing is machined to very precise dimensions with very tight tolerances, per a proprietary design. The interior diameter has multiple shoulders and profiles to accommodate the Pulser (which is installed in the housing following importation) and an internal wear band (or ‘pin ring’), which protects the housing from erosion. The housing’s exterior in mostly smooth. Machining the housing to specifications takes approximately 150 hours.”
Regarding the Mud Pulse Telemetry System, you describe it: “Halliburton’s Mud Pulse Telemetry System (the ‘TM System’) is used to transmit the data collected downhole by the other tools on the string to the surface via pressure pulses that travel through the well’s mud column. The TM System has two main components: (1) the Positive Pulse Telemetry Assembly (the ‘Pulser’); and (2) The Telemetry Module Sonde Assembly (the ‘Sonde’)….
“The Pulser is the electromechanical part of the TM System. It supplies power to the various MWD tools on the string and generates the pressure pulses used to transmit the measurements to the surface. The Sonde surveys the MWD tools to gather downhole data and it energizes the pulser (i.e., it tells the Pulser when to pulsate). The Pulser and Sonde are not separate or stand-alone tools; instead, they are each complimentary parts of a TM System that cannot function unless both components are present.
“The specific data that will be transmitted to the surface by the TM system is determined after importation, when it is programmed for the specific job. It can only transmit the output from the MWD tools to which it is connected. For example, under one possible configuration, the TM System is connected to MWD tools that measure the inclination, neutron porosity, and azimuthal resistivity of the drilled formation, as well as the compass direction of the toolface.
“The TM System and corresponding MWD tools are assembled together and sent downhole as a single unit (referred to as the ‘TOP Assembly’). Once downhole, the Pulser’s internal generator transforms flow energy from the downhole drilling mud into electrical and mechanical energy to power the MWD tools contained in the top assembly. The Sonde will sample the various MWD tools to gather data, and will then utilize a series of analog switches and transistors to activate an electromechanical valve (or solenoid) located within the Pulser. In turn, the solenoid will cause an internal poppet shaft to extend and cover an orifice in the surrounding flow tube assembly. This effectively creates a choke, which momentarily restricts the flow of the drilling mud and generates a positive pressure wave. These pulses are the basis of a communication system that uses high and low pressure states to carry information to the surface.
“The pressure pulses are detected on the surface by pressure transducers and decoded by a surface computer system. The measurements acquired downhole help the technicians understand what is happening downhole so they can, for example, surface steer the drill toward the oil or gas reserve.”
You first propose classification under HTSUS 9015.90.0060, which provides for parts and accessories of “other” geophysical instruments and appliances.
We agree that the Pulser Housing is a Part or Accessory for the purposes of Chapter 90, and we do not find that it is excluded from Chapter 90 via its Note 2(a) or by HTSUS Add. US Rule of Interpretation 1-c (see HRLs 965968, 12-16-02, and 967233, 2-18-05) or by its Note 1.
You proposed an alternative classification subheading 8517.70.0000. However, Harmonized System Explanatory Note 85.17 states that it covers apparatus for the transmission or reception of speech or other sounds, images or other data between two points by variations of an electric current or optical wave flowing in a wired network or by electro-magnetic waves in a wireless network. Apparatus of heading 8517 prepares speech, other sounds, images, or other data for transmission, or receives such. The TM System that the pulser is used in, and must be used with the telemetry module sonde assembly in order to function, gathers/collects downhole data from MWD tools to which it is connected. Apparatus of heading 8517 does not outwardly gather or collect data. Rather, it passes (transmits) data, and at time prepares the data for further transmission, that it receives along to another device within a network. The function of the pulser does not fall within that description. As such, it would not be classified within that heading and its housing would not be classified within subheading 8517.70.0000.
As indicated by New York Ruling Letter N219405 – 405, mailed to your office on June 26, 2012, the data that will be transmitted to the surface via a Mud Pulse Telemetry System will be procured by instruments and appliance classified in several different headings. Since you state that it will not be know which specific types of data will be transmitted by any given Mud Pulse Telemetry System until it is programmed after importation, we do not believe that any housing will be, a fortiori, identifiable as being suitable for use solely or principally with the machines, instruments or apparatus of a single heading of Chapter 90 including 9015. Therefore, per Note 2-b to Chapter 90, its classification is controlled by Note 2-c to Chapter 90.
The applicable subheading for the machined housing for a mud pulse telemetry system will be 9033.00.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Parts and accessories (not specified or included elsewhere in this chapter) for machines, appliances, instruments or apparatus of chapter 90. The rate of duty will be 4.4%.
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 World Wide Web at http://www.usitc.gov/tata/hts/.
This ruling is being issued under the provisions of Part 177 of the Customs 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, contact National Import Specialist J. Sheridan at (646) 733-3012.
Sincerely,
Thomas J. Russo
Director
National Commodity Specialist Division