HQ 0089469 - Modification of Headquarters Ruling 084704, dated August 17, 1989; irrigation pipe; United States-Canada Free Trade Agreement ("CFTA"); General Note 3(c)(vii)(B); General Note 3(c)(vii)(R)(7)(aa); agricultural or horticultural machinery, equipment and implements; agricultural use - United States International Trade Commision Rulings

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HQ 089469

June 18, 1991

CLA-2 CO:R:C:M 089469 JMH

CATEGORY: CLASSIFICATION

TARIFF NO.: 3917.32.00

Mr. Thomas B. Teubner
Valmont Industries, Inc.
Valley, Nebraska 68084

RE: Modification of Headquarters Ruling 084704, dated August 17, 1989; irrigation pipe; United States-Canada Free Trade Agreement ("CFTA"); General Note 3(c)(vii)(B); General Note 3(c)(vii)(R)(7)(aa); agricultural or horticultural machinery, equipment and implements; agricultural use

Dear Mr. Teubner:

This is a modification of Headquarters Ruling 084704 ("HQ 084704"), dated August, 17, 1989, concerning certain irrigation pipe imported from Canada. The reasoning for this modification follows.

FACTS:

The article in question is irrigation pipe imported from Canada. The pipe is manufactured in Canada from raw resin imported from Austria. Once it is manufactured, the raw resin becomes medium density polyethylene irrigation pipe which is noted for its flexibility and safe operation over a broad temperature range. The pipe is designed for mounting onto reels for use with portable irrigation equipment trailers. The irrigation equipment trailers are primarily used in agricultural applications.

New York Ruling 840315, undated, classified the irrigation pipe in subheading 3917.32.00, Harmonized Tariff Schedule of the United States Annotated ("HTSUSA"), as "Tubes, pipes and hose and fittings therefor) for example, joints, elbows, flanges) of plastics...Other tubes, pipes and hoses...Other, not reinforced or otherwise combined with other materials, without fittings..." We affirm this classification.

ISSUE:

Whether the polyethylene irrigation pipe is entitled to any agricultural use duty exemptions.

LAW AND ANALYSIS:

HQ 084704 stated that the irrigation pipes which are to be placed onto reels on irrigation equipment trailers are entitled to duty free entry under heading 9817.00.50, HTSUSA. Headings 9817.00.50 and 9817.00.60 are actual use provisions. To resolve this issue both classification principles within the HTSUSA and the Customs Regulations must be utilized.

The classification of merchandise under the HTSUSA is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUSA, states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes..."

Headings 9817.00.50 and 9817.00.60 provide duty free treatment to certain articles if the articles are used for agricultural or horticultural purposes. Heading 9817.00.50 describes "Machinery, equipment and implements to be used for agricultural or horticultural purposes..." Heading 9817.00.60 describes the following:

Parts to be used in articles provided for in headings 8432, 8433, 8434 and 8436, whether or not such parts are principally used as parts of such articles and whether or not covered by a specific provision within the meaning of additional U.S. rule of interpretation 1(c)...

Headings 8432, 8433, 8434 and 8436 refer to specific types of agricultural and horticultural machinery.

To fall within either special classification a three part test must be met. First, the articles must not be among the long list of exclusions to headings 9817.00.50 and 9817.00.60, HTSUSA, under Section XXII, Chapter 98, Subchapter XVII, U.S. Note 2, HTSUSA. Secondly, the terms of the headings must be met in accordance with GRI 1. Thirdly, the merchandise must meet the conditions required under 19 C.F.R. 10.133. See Headquarters Ruling Letter 086883 ("HQ 086883"), dated May 1, 1990, and Headquarters Ruling Letter 087076 ("HQ 087076"), dated June 14, 1990.

Heading 9817.00.50

The first heading, heading 9817.00.50 describes "Machinery, equipment and implements to be used for agricultural or horticultural purposes..." This determination focuses upon the specific agricultural or horticultural pursuit in question and what machine, equipment or implement fulfills this pursuit.

The first part of the test is to determine whether the irrigation pipe is excluded from heading 9817.00 50. The irrigation pipe is classified within subheading 3917.32.00. Section XXII, Chapter 98, Subchapter XVII, U.S. Note 2(t), HTSUSA, lists the exclusions to heading 9817.00.50 from Chapter 84, HTSUSA. Subheading 3917.32.00 is not excluded by Subchapter XVII, U.S. Note 2(t). The first prerequisite is met.

Secondly, the irrigation pipe must be included within the terms of the heading. The irrigation pipe must be "machinery," "equipment" or "implements" used for an "agricultural or horticultural purposes." For this step in the test, the initial determination to be made is what agricultural or horticultural pursuit is in question. The irrigation pipe is incorporated into irrigation equipment trailers. Therefore, the agricultural or horticultural pursuits in question is irrigation.

The next determination to be made in order to decide if the terms of the heading are met is what "machinery", "equipment" or "implement" performs the irrigation. The irrigation pipe is used on irrigation equipment trailers. The larger item, the irrigation equipment trailer, is the machine, equipment or implement which is used in irrigation. The irrigation pipe, although a necessary component of the machine, equipment or implement that performs the pursuit, does not itself fulfill the task as HQ 084704 ruled. The irrigation pipe by itself does not accomplish the pursuit of irrigating, but is merely a part of the machine, equipment, or implement which does so. Therefore, the irrigation pipe does not meet the terms of heading 9817.00.50. Whether or not the irrigation is actually used in an agricultural pursuit does not become an issue since the terms of the heading are not met.

The conclusive factor in this interpretation is the intent of Congress. When Congress enacted the HTSUSA and the two provisions that grant special treatment to articles used for agricultural and horticultural purposes, only heading 9817.00.60 specifically provides for parts. This specificity of parts within heading 9817.00.60 establishes that Congress considered the issue of parts of machinery. Since heading 9817.00.50 has no reference to parts it is evident that Congress did not intend that all items used as a part of agricultural or horticultural equipment should receive duty free treatment. See HQ 086883, and HQ 087076.

Heading 9817.00.60

The second heading, heading 9817.00.60, provides duty free treatment to parts of articles of heading 8432, 8433, 8434 and 8436, HTSUSA. These headings describe the following:

8432 Agricultural, horticultural or forestry machinery for soil preparation or cultivation; lawn or sports ground rollers; parts thereof...

8433 Harvesting or threshing machinery, including straw or fodder bales; grass or hay mowers; machines for cleaning, sorting or grading eggs, fruit or other agricultural produce, other than machinery of heading 8437; parts thereof...

8434 Milking machines and dairy machinery, and parts thereof...

8436 Other agricultural, horticultural, forestry, poultry-keeping or bee-keeping machinery, including germination plant fitted with mechanical or thermal equipment; poultry incubators and brooders; parts thereof...

The irrigation pipe in question is not excluded from heading 9817.00.60 by Section XXII, Chapter 98, Subchapter XVII, U.S. Note 2. If the importer can establish that the irrigation equipment which incorporates the irrigation pipe is classified in one the four mentioned headings of heading 9817.00.60, then the terms of the heading are met.

Irrigation systems are classified in heading 8424, HTSUSA, as "Mechanical appliances...for projecting, dispersing or spraying liquids..." See Explanatory Note 84.24(E), Vol. 3 Harmonized Commodity Description and Coding System ("HCDCS"), p. 1189. Heading 8424 is not one of the listed headings within heading 9817.00.60. Therefore, the irrigation pipe does not meet the terms of the heading and is not entitled to duty free entry under heading 9817.00.60.

United States-Canada Free Trade Agreement

However, articles which are imported from Canada may be entitled to certain tariff preferences under the United States- Canada Free Trade Agreement ("CFTA") if the articles are "originating goods" as defined by General Note 3(c)(vii)(B), HTSUSA. There are two primary means in General Note 3(c)(vii)(B) by which articles imported into the United States may be "goods
originating in the territory of Canada." The first method is if the goods are "wholly obtained or produced in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(1). The second method is if the goods are "transformed in the territory of Canada and/or the United States." General Note

A product which is "wholly obtained or produced in the territory of Canada and/or United States" is one which is grown, mined, harvested, born and raised in Canada and/or the United States, or otherwise intimately connected to the two countries and their land, air and sea territories as defined in General Note 3(c)(vii)(L), HTSUSA. Since the irrigation pipe is manufactured from Austrian raw resin, the pipe is not "wholly obtained or produced in the territory of Canada and/or United States."

The second method to become an originating good for CFTA purposes is for an article made of foreign materials to be transformed in Canada and/or the United States in accordance with General Note 3(c)(vii)(B)(2). A transformation is evident when a change in tariff classification occurs that is authorized by General Note 3(c)(vii)(R), HTSUSA.

In this instance, raw resin from Austria is manufactured into irrigation pipe. Polyethylene resin is classified under heading 3901, HTSUSA. The manufactured irrigation pipe is classified under heading 3917, HTSUSA. Thus, a change in classification occurs for the third country goods from heading 3907 to heading 3917. General Note 3(c)(vii)(R)(7)(aa), HTSUSA, states that a change from one heading to another heading within Chapter 39 is an authorized transformation, providing that the value of the materials originating in Canada and/or the United States plus the direct cost of processing performed in the territory of Canada and/or the United States is not less than 50 percent the value of the irrigation pipe when it is exported to the United States. This office does not have sufficient information to make this determination. Should the irrigation pipe meet the requirements of General Note 3(c)(vii)(R)(7)(aa), then the pipe is an originating good under General Note 3(c)(vii)(B) and is entitled to the tariff preferences under the CFTA.

HOLDING:

The polyethylene irrigation pipe is properly classified in subheading 3917.32.00, as "Tubes, pipes and hose and fittings therefor) for example, joints, elbows, flanges) of plastics... Other tubes, pipes and hoses...Other, not reinforced or otherwise combined with other materials, without fittings..."

The irrigation pipe does not meet the terms of heading 9817.00.50, as HQ 084704 determined, nor does it meet the terms of heading 9817.00.60. It is the irrigation equipment trailer, and not the irrigation pipe, which performs an agricultural pursuit as machinery, equipment or implements. Therefore, the irrigation pipe is not entitled to duty free entry because of its agricultural use.

The irrigation pipe in question may be an originating good under General Note 3(c)(vii)(B). The polyethylene raw resin from Austria is classified under heading 3907 and then transformed in the manufacturing process into irrigation pipe which is classified under heading 3917. According to General Note 3(c)(vii)(R)(7)(aa), this is an authorized classification transformation if the value of the materials originating in Canada and/or the United States plus the direct cost of processing performed in the territory of Canada and/or the United States is not less than 50 percent the value of the irrigation pipe when it is exported to the United States. If General Note 3(c)(vii)(R)(7)(aa) is met, then the irrigation pipe is an originating good in Canada and it is entitled to the CFTA tariff preferences.

In order to insure uniformity in Customs classification of merchandise of this type and to eliminate uncertainly, we are modifying HQ 084704 to reflect the above classification effective with the date of this letter. This letter is notice to you of the modification of HQ 084704 under Customs Regulation 177.9(d)(1), 19 C.F.R. 177.9(d)(1). This notice is not to be applied retroactively to HQ 084704 and will not affect past transactions for the importation of your merchandise under that ruling. Customs Regulation 177.9(d)(2), 19 C.F.R. 177.9(d)(2). However, for the purposes of future transactions regarding merchandise of this type HQ 084704 will not be valid precedent. We recognize that pending transactions may be adversely affected by this modification, in that current contracts for importations arriving at a port subsequent to this decision will be classified pursuant to it. If such a situation arises, you may at your discretion notify this office and apply for relief from the binding effects of this decision as warranted by the circumstances.

Sincerely,

John Durant, Director
Commercial Rulings Division

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