HQ 0950121 - Clad Plate Steel; Unfinished Parts of Pressure Vessels; Reconsideration of NY 863800; 8419.90.90; 7326.90.90; GRI 2(a); Avins Industrial Products Co. v. United States; J.B. Henriques, Inc. v. United States; HQ 087047; Additional U.S. Rule of Interpretation 1(c) - United States International Trade Commision Rulings

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HQ 950121
March 11, 1992

CLA-2 CO:R:C:M 950121 DWS

CATEGORY: CLASSIFICATION

TARIFF NO.: 7210.90.10; 7212.60.00

Mr. Kenneth G. Weigel
Baker & Hostetler
Washington Square, Suite 1100
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036

RE: Clad Plate Steel; Unfinished Parts of Pressure Vessels; Reconsideration of NY 863800; 8419.90.90; 7326.90.90; GRI 2(a); Avins Industrial Products Co. v. United States; J.B. Henriques, Inc. v. United States; HQ 087047; Additional U.S. Rule of Interpretation 1(c)

Dear Mr. Weigel:

This is in response to your letter of August 8, 1991, requesting the reconsideration of NY 863800, dated June 26, 1991, concerning the classification of clad plate steel under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

FACTS:

The merchandise consists of clad plate steel that, it is claimed, prior to importation, has been specifically cut to the size and shape of parts of pressure vessels.

Pressure vessels are installed at refineries and chemical plants, and are used to heat and pressurize liquids for chemical reactions. A pressure vessel is a cylindrical article that is closed on each end. The sides of a pressure vessel may be parallel or tapered depending on its function. They may be tapered for the different reactions which occur in certain places within the vessel, depending on the vessel's end use.

You advise that the chemicals are preheated before introduction into the pressure vessels. However, the chemical reactions which occur within the pressure vessel do produce some change in temperature. Also, you have stated that between 10 to 20 percent of the pressure vessels incorporate mechanical stirrers.

Pressure vessels can be produced from forged rings or plate, depending on their intended use. The base material of the clad steel plate is carbon or alloy steel. The cladding material is austenitic, ferritic stainless or nickel alloy steel. You point out that clad steel plate is used to make pressure vessels because the cladding provides corrosion resistance while the carbon steel backing provides strength and reduces material cost.

After the clad plates are produced, they are cut to a specific size and shape based upon the engineering drawings for a particular fabricator's requirements concerning a specific pressure vessel. The cutting is done by a computer controlled gas or plasma torch at pressure vessel fabrication facilities. You claim that once the plate is cut, it cannot be used for any application other than as a part of a specific pressure vessel.

Once the plates have been cut, one side of the cut-to size plate is chosen as the reference dimension and then is machined to exact size as required by drawings. The other edges of the plate are then machined to size based upon the reference side. You claim that very tight tolerances are required because the finished product cannot have gaps in the cladding.

Next, by milling to shape, the edges are prepared for joining. This operation is done by a special machine created by the manufacturer. You claim that this operation is significantly more complex and costly than torch beveling of plate.

After the edge treatment, the cladding is then peeled back from the edges of the plate. This process involves cutting away the cladding and part of the backing. All the cladding must be removed to permit proper welding of the carbon steel backing and stainless steel cladding of the adjoining parts of a pressure vessel. You claim that the peeling is extremely important because it prevents corrosion by minimizing the dilution of the cladding material at the weld joint.

Once the merchandise is imported into the United States, the plate is put through a bending process, which involves the plate passing through a roller. Except for the welding of the plate to other parts, the bending is the last step in the process of manufacturing a pressure vessel.

ISSUE:

Whether, under the HTSUS, the merchandise is classifiable as clad plate steel material or as unfinished pressure vessel parts?

LAW AND ANALYSIS:

Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRI's), taken in order. GRI 1 provides that classification is determined according to the terms of the headings and any relative section or chapter notes.

NY 863800, dated June 26, 1991, classified the subject merchandise under subheading 7210.90.10, HTSUS, which provides for: "[f]lat-rolled products of iron or nonalloy steel, of a width of 600mm or more, clad, plated or coated: [o]ther: [c]lad", and under subheading 7212.60.00, HTSUS, which provides for: "[f]lat-rolled products of iron or nonalloy steel, of a width of less than 600mm, clad, plated or coated: [c]lad." One reason for such a classification is the belief that the merchandise could be used in the construction of other structures, such as storage tanks and boilers.

You argue that NY 863800 is incorrect, and that the merchandise is classifiable either under subheading 8419.90.90, HTSUS, which provides for: "[m]achinery, plant or laboratory equipment, whether or not electrically heated, 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: [p]arts: [o]ther", or under subheading 7326.90.90, HTSUS, which provides for: "[o]ther articles of iron or steel: [o]ther: [o]ther: [o]ther: [o]ther."

In claiming that the merchandise constitutes unfinished pressure vessel parts, your principal arguments are that the merchandise "cannot be classified under Chapter 72 because the pre-importation processing substantially advances them to the point where it is no longer simply material, . . . , but has been transformed into pressure vessel parts", and that "[t]o use the pressure vessel parts as clad plate would be economically impracticable."

GRI 2(a) provides that:

[a]ny 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 falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.

Avins Industrial Products Co. v. United States, 72 Cust. Ct. 43 (1974) aff'd, 515 F.2d 782 (CCPA 1975), dealt with the importation of antenna wire under the Tariff Schedules of the United States (TSUS). The issue was whether the merchandise was classifiable as wire material or whether it was so far advanced in construction that it was classified as an unfinished part of a radio antenna. The court held that the wire was not classifiable as an unfinished part, but as wire material.

The court in Avins stated that "[t]he general rule is that a thing may be classed as an unfinished article if in its imported condition it has been so far advanced beyond the stage of materials as to be dedicated to and commercially fit for use as that article and is incapable of being made into more than one article or class of articles." The court also provided that "since as imported the merchandise had not been physically deformed by having been bent, . . . , or otherwise committed to shape, it would have been possible, by the modification of the material requirements and type and extent of fabrication inhering in other uses of Type 302 stainless steel wire, to make use in some of those applications of wire of the same diameter and lengths as the imported articles." (emphasis supplied). The court finished by ruling, "[t]hus, the fact that the instant merchandise has been cut to length and is in certain dimensions making it particularly adaptable for use in producing radio antennas does not take it out of the category wire and into that of an unfinished part."

By adopting the court's reasoning in Avins, it is our position that the clad steel plate has not been advanced beyond the stage of materials and, consequently, is not an unfinished part of a pressure vessel. Even though the plate has been cut, shaped, bevelled, and peeled back, we find that it is not "incapable of being made into more than one article or class of articles." Even though you claim that it would be uneconomical for the plate to be used as parts of furnaces or storage tanks, we do not believe it to be unrealistic for such a use to occur. As the court in Avins implies, because the plate has not been bent, it would be possible, by the modification of material requirements, for the plate to be used in other applications. Just because the plate has been cut to certain dimensions making it particularly adaptable for use in producing pressure vessels does not make it an unfinished part.

You argue that the bending operation in the United States after importation is a relatively simple one. We disagree. Once the plate has been imported, it is placed into a rolling machine where it can be bent to any number of degrees. You seem to base the argument of its simplicity on the fact that its operation can take place in the field. Simplicity of the operation depends on the operation itself, not where it takes place. Before the bending takes place, the merchandise is in the shape of steel sheet. During the bending process, the plate can be bent to 120 degrees or to 360 degrees. It is our position that this operation is rather substantial. When the plate is imported into the United States, we find that it is in the middle of a complex process to create pressure vessel parts. However, before the bending process, the merchandise is simply clad plate steel.

In your February 21, 1992, submission, you cite a portion of Avins which discusses the court's opinion in J.B. Henriques, Inc. v. United States, 46 CCPA 54 (1958). The court stated in Avins that "[i]n the Henriques case, rectangular pieces of acrylic resin cut to specific sizes for use in making transparent lids for ice cream dispensers were held to be partly finished articles rather than sheets on the ground that they were not adapted for any purpose other than making lids." You also note that the Henriques court stated that "the imported pieces have no other commercial use than in the making of lids, although it would be possible to use them in making signs or other articles of relatively small size." The court went on by stating that "[w]hile it would be possible to use them in making small articles, there would be no object in using them for that purpose, since they are more expensive, per unit of area, than standard sheets and are no better adapted than such sheets for the making of small articles."

It is our position that the merchandise involved in Henriques is distinguishable from the subject clad plate steel. Unlike the transparent lids in Henriques, the clad plate steel can be adapted for other commercial purposes. It has already been noted that before the bending operation takes place, the subject plate can be used in the construction of furnaces, boilers, and storage tanks. You claim that these uses may be more expensive and the plate may be thicker than required for such uses.

Additional U.S. Rule of Interpretation 1(c), HTSUS, states that:
a provision for parts of an article covers products solely or principally used as a part of such articles but a provision for "parts" or "parts and accessories" shall not prevail over a specific provision for such part or accessory.

Even though you argue that the subject plate is ill-suited for any use other than as pressure vessel parts, under Additional U.S Rule of Interpretation 1(c), HTSUS, the clad plate steel is specifically classifiable under subheadings 7210.90.10 and 7212.60.00, HTSUS, and, consequently, cannot be classifiable as "parts".

HQ 087047, dated May 14, 1990, dealt with the classification of circular steel blanks, which, after importation, were to be processed into torque converter covers. In that ruling, it was held that, even though the blanks were cut and shaped to precise diameter requirements, they did not possess the essential character of torque converter covers. It was stated that "[t]he fact that these steel circles may, in all instances, be used only to make torque converter covers is not legally dispositive as to their essential character. There is no evidence that the circles in issue here are incapable of being made into other articles requiring the same grade of steel. Despite taking less than a minute to complete, the post-importation processing necessary to make finished torque converter covers, involving multiple draws through different dies, is substantial."

As with the torque converter covers in HQ 087047, the fact that the clad plate steel may be used to make pressure vessel parts is not legally dispositive as to their essential character. Similar to the wire in Avins, the clad plate steel is not "incapable of being made into more than one article or class of articles." Again, it is our position that the bending operation which takes place after importation is substantial.

Because it is your argument that the subject merchandise constitutes unfinished parts of pressure vessels, you cite the Harmonized Commodity Description and Coding System Explanatory Notes in favor of excluding the merchandise from chapter 72, HTSUS. The Explanatory Notes, although not dispositive, are to be used to determine the proper interpretation of the HTSUS. 54 Fed. Reg. 35127, 35128 (August 23, 1989). In part, Explanatory Note (C) to Section XV (p. 973), HTSUS, provides that "[i]n general, identifiable parts of articles are classified as such parts in their appropriate headings in the Nomenclature."

We find that the clad plate steel is not excluded from chapter 72, HTSUS, because it is our position that the merchandise does not constitute identifiable, unfinished parts of pressure vessels.

HOLDING:

The subject clad plate steel is classifiable under subheadings 7210.90.10 or 7212.60.00, HTSUS, depending on size. NY 863800 is affirmed in full.

Sincerely,

John Durant, Director
Commercial Rulings Division

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