HQ 0951873 - Protest No. 3801-92-100517; 19 CFR Part 177; skids; powertrains; GRI 2(a); 8427.20.00; unfinished forklift truck; EN VII to GRI 3(b); essential character; HRL 086555; HRL 088524; 8431.20.00; part of forklift truck; Note 2 to Section XVI; EN 84.08; engine - United States International Trade Commision Rulings

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HQ 951873

February 5, 1993

CLA-2 CO:R:C:M 951873 KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 8408.90.90

District Director
U.S. Customs Service
Patrick V. McNamara Building
477 Michigan Avenue
Detroit, Michigan 48266

RE: Protest No. 3801-92-100517; 19 CFR Part 177; skids; powertrains; GRI 2(a); 8427.20.00; unfinished forklift truck; EN VII to GRI 3(b); essential character; HRL 086555; HRL 088524; 8431.20.00; part of forklift truck; Note 2 to Section XVI; EN 84.08; engine

Dear Sir:

This is in response to the Application for Further Review of Protest No. 3801-92-100517 dated February 13, 1992, which pertains to the tariff classification of skids for fork-lift trucks under the Harmonized Tariff Schedule of the United States (HTSUS). Arguments made in a meeting on September 18, 1992, and additional submissions dated June 30, and November 17, 1992, were also taken into consideration in rendering this decision.

FACTS:

The articles under consideration are four identical "skids." After importation into the U.S., the protestant, Ford New Holland, stated that the skids were incorporated into forklift trucks. The skids are comprised of 6 component groups, an engine, transmission, drive and steer axles, hydraulics, steering, and miscellaneous. The cost of each skid is approximately 59.6% of the cost of the completed forklift truck. A description of the materials contained within each component group and the cost percentage of each group which is compared to the cost of the imported skid are as follows:

1) a diesel engine which consists of the following additional components:
- alternator
- radiator and fan
- battery
- starter motor, switch and cables
- flywheel and housing
- fuel tank
- thermostat
- vertical muffler
- front harness
- cold start
- 26.081% of the cost of the skid,
2) a 4x4 transmission consisting of:
- electric transmission shift control
- torque converter shift lever
- transmission attaching hardware
- transmission control valve lever and shift - transmission assembly less PTO
- 12.546% of the cost of the skid,
3) drive and steer axles consisting of:
- rear wheel nuts
- differential lock linkage
- PTO cover, gaskets, plate and hardware
- rear axle oil level indicator
- axle RR INDS
- differential
- brakes
- front wheel nuts
- front axle center drive
- drive shaft coupling and hardware
- transfer case - FRT CTR DRV
- 49.668% of the cost of the skid,
4) hydraulics consisting of:
-hydraulic rear axle
- hydraulic final line
- hydraulic oil cooler
- 2.603% of the cost of the skid,
5) power steering tubing, pump, clamps and reserve (less steering column)
- 1.657% of the cost of the skid, and
6) miscellaneous sheet metal and decals
- 7.444% of the cost of the skid.

Upon importation, the entry was liquidated under subheading 8408.90.90, HTSUS, which provides for "Compression-ignition internal combustion piston engines (diesel or semi-diesel engines)...Other engines...Other."

The protestant contends that the skids are properly classified under subheading 8427.20.00, HTSUS, which provides for "Fork-lift trucks; other works trucks fitted with lifting or handling equipment...Other self-propelled trucks", or alternatively, under subheading 8431.20.00, HTSUS, which provides for "Parts suitable for use solely or principally with the machinery of headings 8425 to 8430...Of machinery of heading 8427."

In addition to the proper tariff classification of the skids in this protest, the protestant has requested guidance from Customs Headquarters concerning the classification of skids in general. The protestant states that its skids always consist of an engine, a transmission and a drive axle. However, the skids may enter the U.S. with various other add-on features depending upon each customer's order.

An Application for Further Review of a Protest is designed to address questions arising in connection with an entry of merchandise which has been liquidated, or in connection with any other completed Customs transaction and it is not the proper format to address general classification issues.

Moreover, for prospective transactions Customs will consider written requests for rulings and information with respect to specifically described transactions. Section 177.1, Customs Regulations (19 CFR 177.1). Specifically, "the Customs transaction to which the ruling request relates must be described in sufficient detail to permit the proper application of relevant Customs and related laws." 19 CFR 177.2(b)(2). Customs cannot address the tariff classification of skids generally where there are many possible variations of the composition of a skid depending on which of the options are chosen.

ISSUE:

Are the skids properly classified under subheading 8408.90.90, HTSUS, as engines, under subheading 8427.20.00, HTSUS, as fork-lift trucks, or under subheading 8431.20.00, HTSUS, as parts for fork-lift trucks?

LAW AND ANALYSIS:

The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUS, 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...."

The protestant contends that pursuant to GRI 2(a), HTSUS, the skids are unfinished forklift trucks classifiable under subheading 8427.20.00, HTSUS. GRI 2(a), HTSUS, states that:

Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article...

According to GRI 2(a), HTSUS, if an incomplete article has the essential character of the complete or finished article of a heading, it is classified as the complete or finished article. In general, essential character has been construed to mean the attribute which strongly marks or serves to distinguish what an article is; that which is indispensable to the structure, core or condition of the article. In addition, Explanatory Note (EN) VIII to GRI 3(b) of the Harmonized Commodity Description and Coding System (HCDCS) provides further factors which determine the essential character of goods. Factors such as bulk, quantity, weight or value, or the role of a constituent material in relation to the use of the goods are to be utilized, though the importance of certain factors will vary between different kinds of goods. HCDCS, Vol. 1, p. 4. The Explanatory Notes, although not dispositive, are to be examined for the proper interpretation of the HTSUS. 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).

For machinery, the nature of the item is generally determinative. In the instant case, it is reasonable to say that in order to have the essential character of a forklift truck, the skid must be advanced to the point that it is recognizable as a forklift truck, i.e., having the essential features of a forklift truck.

Customs has examined the essential character of similar vehicles, i.e., excavators. In Headquarters Ruling Letter (HRL) 086555 dated April 16, 1992, we held that excavators which were missing the link-bucket, arm, boom, counterweight and cab assembly were classified pursuant to GRI 2(a), HTSUS, as unfinished excavators in heading 8429, HTSUS. It was determined that the propelling base of the excavator imparted the essential character of the excavator. HRL 086555 found that the propelling base was substantial enough so that it had the essential character of a unfinished excavator within the meaning of GRI 2(a), HTSUS.

However, in HRL 088524 dated August 27, 1991, we held that excavators missing the link-buckets, arms, booms, arm and boom cylinders, lower frames and upper frames did not have the essential character of an excavator. The components missing from the merchandise in HRL 088524 had a substantially greater value and more integral function than the components missing from the merchandise in HRL 086555. Without the missing components, the merchandise in HRL 088524 did not even consist of a base which can be self-propelled. The components were classified as parts of the machinery of heading 8429, HTSUS, under heading 8431, HTSUS.

In this case, we have an engine, a transmission, a drive and steer axle with wheels and brakes, approximately 50% of the electrical system, a lubrication system, a steering system without the steering wheel, hydraulics and some miscellaneous sheet metal. The protestant states that the engine can be used in a variety of vehicles, whereas the transmission and drive axle are specially designed for the end use of the skid as a forklift truck. Specifically, the axle is heavy duty and designed to bear a vertical load. The transmission has a shuttling capability; it is designed to move the vehicle quickly from forward to reverse without clutching and numerous gear changes. The protestant contends that the design features of the transmission and drive axle make the skids particularly suited for forklifts. Customs personnel are of the opinion that the skids are powertrains which can be used for various applications other than as forklift trucks. The foreign manufacturer uses the same unmodified powertrains to make their "tractor-loader-backhoe" product line. Moreover, Customs has determined that the skids represent only one third of the finished forklift truck's total weight and approximately 59.6% of its total cost.

Based on the information gathered by Customs and provided by the protestant, we are of the opinion that the skids are powertrains which can be used in various vehicles that require the ability to handle vertical weight loads and move back and forth comparatively easily without major shifting of gears. This type of powertrain can be used in any type of construction or moving vehicle, such as tractor, loader, backhoe, excavator or forklift truck. Additionally, approximately two-thirds of the weight and 41% of the material cost are attributable to the components which will be added in the U.S. We cannot conclude that the powertrains at issue have the essential character of a forklift truck. Therefore, the skids are not classified as unfinished forklift trucks under subheading 8427.20.00, HTSUS.

As classification under subheading 8427.20.00, HTSUS, is inapplicable, the protestant alternatively contends that the skids are classifiable under subheading 8431.20.00, HTSUS, as parts suitable for use solely or principally with the machinery of heading 8427, HTSUS (forklift trucks). Chapter 84, HTSUS, falls within Section XVI, making the Section XVI notes applicable to the tariff classification of the skids.

Note 2 to Section XVI states that "Subject to note 1 to this section, note 1 to chapter 84 and to note 1 to chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules:

(a) Parts which are goods included in any of the headings of chapters 84 and 85 (other than heading 8485 and 8548) are in all cases to be classified in their respective headings;

(b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517;

(c) All other parts are to be classified in heading 8485 or 8548.

According to Note 2(a) to Section XVI, articles which are specifically provided for by name in the headings of chapters 84 and 85 are to classified therein. Therefore, the first determination to be made is whether the skids are classifiable under subheading 8408.90.90, HTSUS, as engines. EN 84.08 states that:

The engines of this heading may be equipped with fuel injection pumps, ignition parts, fuel or oil reservoirs, water radiators, oil coolers, water or oil pumps, blowers, air or oil filters, clutches or power drives, or starting devices (electric or other). Change speed gears may also be fitted. The engines may also be equipped with a flexible shaft.

It also covers mobile motors consisting of engines mounted on a wheeled chassis or on runners, including those with driving mechanisms permitting their self-propulsion to a certain extent (but not constituting vehicles of Chapter 87).

HCDCS, Vol. 3, p. 1151.

The protestant states that EN 84.08 lists common accessories to engines, but not the sophisticated systems that comprise the imported skids. The protestant maintains that EN 84.08 does not list the miscellaneous items, braking, steering, hydraulics, transmission and the drive and steer axles found on the skids as components which are classified with an engine. The protestant contends that the skids are much more than an engine with associated accessories as contemplated by heading 8408, HTSUS. However, although the skids are not mobile motors as described in EN 84.08, we consider them to be sufficiently akin so that EN 84.08 may be used as guidance in the classification of the skids.

HOLDING:

The skids are properly classified under subheading 8408.90.90, HTSUS, which provides for "Compression-ignition internal combustion piston engines (diesel or semi-diesel engines)...Other engines...Other."

This protest should be denied. A copy of this decision should be attached to the Customs Form 19 and provided to the protestant as part of the notice of action on the protest.

Sincerely,

John Durant, Director

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