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HQ 966862




March 31, 2005

RR:CR:GC 966862 RSD

CATEGORY: CLASSIFICATION

TARIFF NO. 7308.90.9590

Sean Murray, Esq.
Miller & Company P.C.
4929 Main Street
Kansas City, Mo. 64112

RE: Tariff Classification of Building Modules that are Used for Building a Pharmaceutical Production Factory in Puerto Rico

Dear Mr. Murray:

This is in response to your letter dated November 14, 2003, submitted on behalf of Lilly del Caribe Inc. (Lilly), concerning the tariff classification of building modules imported for the installation and integration into a pharmaceutical production facility under the Harmonized Tariff Schedule of the United States (HTSUS). Specifically, you request reconsideration of NYJ86693 dated August 6, 2003. On August 18, 2004, a meeting was held with you and an employee of Lilly del Caribe, Inc. at the Office of Regulations and Rulings in Washington, D.C. to discuss this matter. Subsequently, you made a supplemental submission dated August 18, 2004, which contained pictures, design drawings, charts and other information regarding the modules.

FACTS

Lilly is a pharmaceutical company that has production facilities in Carolina, Puerto Rico. At this Puerto Rican production site, Lilly is in the process of adding an additional production facility. This additional production facility will consist of several linked buildings and it will contain new production and related areas for the manufacture of insulin. The new factory will be built through integration of the imported building modules, which are primarily made of steel, with new building areas of traditional construction. Companies in Sweden and the United Kingdom manufacture the building modules to unique and precise standards. After the modules are tested and preliminarily validated in the countries of manufacture, they are partially disassembled as necessary for shipment, installation and integration into the Lilly facility in Puerto Rico. Each module is a separate steel frame structure that is “filled in” with other different materials. The steel frame structure is made of hollow structural sections of steel, known as tubular structural steel. Most of the steel frames are complete four-post rectangular frames, but some are not. For example, some of the modules only have two vertical posts on one side, while other modules have no vertical posts at all. The “different materials” added to the steel frames varies depending upon the specific use of each individual module. Some of the added materials include metal sandwich panel walls, sheet metal walls and ceiling sections, concrete floors, vinyl floor coverings, and external walls of either metal sandwich paneling or corrugated steel. In addition, lighting fixtures and wiring, electrical poser cables and outlets, steel piping for water and sprinklers, ventilation ducting (for heating, ventilation, and air conditioning, i.e. HVAC systems), framing structures, doors, windows, fireproofing, architectural finishes (e.g., trim, wall coverings) and various equipment and process piping may be added depending upon the specific module. Some of the modules have doors and windows, but other modules are not equipped with such framing items. In some cases, the windows and doors are procured domestically, but in other cases the modules have doors and windows shipped with them for later installation.

You claim that the modules should not be considered stand-alone buildings or fully enclosed spaces because they are not designed nor equipped to be weatherproof at the time of their importation. At the time of their shipping, the modules have “placeholder” walls, flooring, and ceilings in many areas, which helps protect the actual module contents. These “placeholder” components consist of nothing more than plywood and/or plastic coverings, and they require additional protection from the weather. These plastic coverings and tarpaulin are necessary to protect the modules from the environment.

About 300 imported modules are involved in the Lilly project in Puerto Rico. 96 of the imported modules are designated as perimeter modules. The perimeter modules have three walls. More than 200 other modules only have 2 walls. In addition, you indicate that there are 48 modules that have no walls or ceilings. These 48 modules consist solely of steel framing and sheeting and serve as either the base of a modular area or as both a floor and a ceiling in a modular area.

The different individual modules constitute different parts of the new facility, such as corridors, stairwells, productions areas, control areas and employee areas (e.g. restrooms, break rooms and locker rooms). Each module is different because it is designed and built to the unique specifications required by its part in the completed facility. After installation and assembly, a conventional roof is added to cover all of the modules. The roof for the facility is built by traditional construction methods (steel frame structures covered by steel sheeting with roof pebbles, tar and felt). The modules are also not designed to rest on the ground because the module bottoms are not constructed to resist environmental factors, such as ground water. Consequently, the modules are stored on supports until they are installed. After the modules are installed into the production facility, there are gaps between the modules that must be filled. These gaps between the modules range between 2 to 5 feet. These gaps are filled in with additional steel sheeting (sandwich panels and/or corrugated panels) and jointing and sealing compound materials. Some of this sheeting is shipped along with the modules and some is separately procured.

Most of the modules are 14’ X 14’ in height and width (depending on whether they have four or less vertical posts), and their lengths range from 12’ to 56’. The modules are not designed or equipped to function on their own. They must rely on power and other utilities that are supplied through piping and wiring specifically designed to transit these items from other modules in other areas of the facility. The equipment that supplies these functions will often fill more than one module. The integration process includes the stringing of wiring and cables between and through the modules, painting, installation of millions of dollars worth of production equipment, installation of HVAC equipment and the architectural finishing activities. After all of the installation, integration, and finishing activities are completed, the modules will become a pharmaceutical production facility that meets FDA and International Standard Organization (ISO) clean room standards.

Over 300 modules are being imported as part of the project. Thirty-eight imported modules are being used along with 152 domestically manufactured modules in the construction of the fermentation building. Two hundred ninety-two imported modules are being used in the construction of the purification building. You indicate that the imported modules will constitute less than 17 percent of the total project costs. The number of modules in each shipment varies, depending on the number of completed modules that are ready for shipment and the construction and shipping schedule. Generally, between 10 and 36 modules are shipped at one time.

In NY J86693, the National Commodity Specialist Division determined that the imported modules are classified in heading 9406, HTSUS, as prefabricated buildings. In your submission, you maintain that NY J86693 did not accurately describe the modules because it contained incorrect information such as the modules are “fully enclosed spaces” resembling ” large cargo containers” that are capable of serving as stand alone buildings. As stated above, you indicate that the modules are not designed to be stand alone buildings. We note that in NY J86693, it was stated that the ruling was being issued under the assumption that the subject goods, in their condition as imported into the United States, conform to the facts and the description that was set forth both in the ruling request and in the ruling. In the event that the facts regarding the merchandise were different in any way from those set forth in the ruling, you were advised to bring it to the attention of Customs and Border Protection (CBP) and request a new ruling. Because the description of the modules presented in your November 14, 2003, submission varies so significantly from the description of the modules set forth in the NY J86693, it appears that NY J86693 is not applicable to merchandise that you claim that Lilly is actually importing. Thus, we believe that it is not unnecessary to reconsider NY J86693 at this time. Consequently, we have concluded that we will issue a new ruling based solely on the description of merchandise that you presented in your submission dated November 14, 2003 and the subsequent submissions.

ISSUE:

Whether the imported steel modules that are used in building a pharmaceutical production facility in Carolina, Puerto Rico are classified in heading 9406, HTSUS, as prefabricated buildings or in heading 7308, HTSUS, as structures of iron or steel.

LAW AND ANALYSIS:

Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). 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. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied.

The HTSUS provisions under consideration are as follows:

7308 Structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge sections, lock gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns) of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel:

7308.90 Other:

Other:

7308.90.95 Other.

9406.00 Prefabricated buildings:

9406.00.80 Other.

When interpreting and implementing the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, while neither legally binding nor dispositive, provide a guiding commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. CBP believes the ENs should always be consulted. See, T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

The first of the alternative headings, 7308, HTSUS provides for structures and parts of structures of iron and steel. EN 73.08 indicates:

This heading covers complete or incomplete metal structures, as well as parts of structures. For the purpose of this heading, these structures are characterised by the fact that once they are put in position, they generally remain in that position. They are usually made up from bars, rods, tubes, angles, shapes, sections, sheets, plates, wide flats including so-called universal plates, hoop, strip, forgings or castings, by riveting, bolting, welding, etc. Such structures sometimes incorporate products of other headings such as panels of woven wire, or expanded metal of heading 73.14. Parts of structures include clamps and other devices specially designed for assembling metal structural elements of round cross-section (tubular or other). These devices usually have protuberances with tapped holes in which screws are inserted, at the time of assembly, to fix the clamps to the tubing.

The modules serve as parts of a structure, the pharmaceutical manufacturing facility, and they are primarily made of steel. Once the modules are assembled together, they will help create the structure. After the construction of the pharmaceutical facility, the modules will remain in place. It is our understanding that the module frames consist of tubular structural steel. Once in place the modules are bolted together and will be finished through joining operations that fills in the gaps between the walls, ceilings, and floors. Based on these facts, the modules would appear to fit within the description of EN 73.08, but to determine whether the modules are in fact classified in heading 7308, HTSUS, we must still consider whether the modules are classifiable as prefabricated buildings of heading 9406, HTSUS.

Heading 9406 covers "prefabricated buildings." The term "prefabricated buildings" is defined by Chapter Note 4 to mean "buildings which are finished in the factory or put up as elements, entered together, to be assembled on site, such as housing or worksite accommodation, offices, schools, shops, sheds, garages or similar buildings." EN 94.06 indicates:

This heading covers prefabricated buildings, also “industrialised buildings”, of all materials.

These buildings, which can be designed for a variety of uses, such as housing, worksite accommodation, office, schools, shops, sheds, garages and greenhouses, are generally presented in the form of:

- complete buildings, fully assembly ready for use; - complete buildings, unassembled;
- incomplete buildings, whether or not assembled, having the essential character of prefabricated buildings.

In the case of buildings presented unassembled, the necessary element may be presented partially assembled (for example, walls, trusses) or cut to size (beams, joists, in particulars) or, in some cases, in indeterminate or random lengths for cutting on the site (sills, insulation, etc.).

The buildings of this heading may or may not be equipped.

Presented separately, parts of buildings and equipment, whether or not identifiable as intended for these buildings, are excluded from the heading and are in all cases classified in their own appropriate headings.

Although heading 9406, HTSUS, is a broad eo nomine provision encompassing a variety of prefabricated structures, the terms of the heading and accompanying EN do stipulate that certain criteria must be satisfied in order for a product to fit within the parameters of the term "prefabricated building." One of these critical factors is that the unassembled building displays the core features or essential character of structures built in a factory. It is clear that the EN 94.06, indicates that merchandise is to be classified as "prefabricated buildings" in the case where it is imported complete and fully assembled, ready to use; complete but unassembled; or having the essential character of prefabricated buildings. The modules are neither fully complete buildings nor unassembled complete buildings, thus, the question that must be resolved is whether the individual imported modules have the essential character of a prefabricated building.

In HQ 953562, dated October 7, 1993, CBP considered the classification of manufactured prefabricated lavatory modules that were installed in airplanes for use of an individual’s sanitary needs on an airplane. The complete unit had a floor, ceiling, walls, and entrance door that were phenolic resin honeycomb sandwich panels. CBP stated that the lavatory modules were not described by terms of Heading 9406, HTSUS. Although the lavatory modules were prefabricated, they were not the class or kind of building that would be classifiable in heading 9406, HTSUS. They were not designed to function as a building because they had to be attached to a vehicle structure, which in that case was an airplane. Since the lavatory modules were parts of an airplane, they were not classifiable in heading 9406 HTSUS.

In HQ 955113, dated November 16, 1993, CBP considered the classification of unfinished greenhouses, which were constructed of walls made of steel glazing bars in which glass was fitted, and covered with PVC profiles to secure the glass panes. All of the materials (except for the glass panes), along with the roof, the ventilation system and the structural aluminum tubes were imported unassembled from Holland. The glass was obtained in the United States. The issue that had to be determined was whether the unassembled greenhouse as imported, without the glass panes, had the essential character of a completed, assembled greenhouse. We ruled that the glass panes provided the essential character of the greenhouse. The glass panes were the components that create the controlled environment and protect the plants being cultivated and, therefore, were the components that mark or serve to distinguish a completed greenhouse. Because the subject merchandise without the glass panes did not have the essential character of a completed greenhouse, it could not be classified as an unfinished greenhouse under heading 9406, HTSUS.

In this case although some of the modules are more complex structures than other modules, you maintain that none of the modules can be considered a complete building at the time of their importation. The modules are not fully enclosed. None of the modules have four walls, a roof and a floor that would allows them to be set on the ground. Thus, the modules are not designed or built to withstand the elements nor do they provide shelter against inclement weather. In addition, they must rely on power and utilities supplied from other areas of the facility through piping and wiring specifically designed to transit such utilities to the modules. The equipment that supports such functions will often fill more than one module. The integration process in which the modules are assembled together to construct the pharmaceutical factory includes the stringing of wiring and cables between and through the modules, painting, the installation of millions of dollars worth of production equipment, the installation of HVAC equipment, and architectural finishing activities. In addition, a substantial amount of other materials such as roofing, steel sheeting (sandwich panels and/or corrugated sheets) and jointing and sealing compound materials must be combined with the modules in order to complete the pharmaceutical production facility. In other words, without substantial modifications, the modules cannot be used individually in any stand-alone operation. Instead, when they are imported, the modules are meant to be attached together to construct a pharmaceutical production facility. As more than 300 modules will be used to produce the pharmaceutical facility, each individual module constitutes only a tiny part of the completed pharmaceutical production facility and none of the modules can function independently.

It is well settled that classification is based upon the condition of an article at the time of importation. United States v. Citroen, 223 U.S. 407 (1911). Therefore, classification of the subject merchandise is based on the condition of the modules at the time they are imported. All the modules that are necessary to complete the facility are not imported together. Instead, the modules are imported in-groups over the course of one year. Consequently, the modules cannot be considered unassembled, yet complete building at the time of their importation. Because the modules do not have the essential character of a completed prefabricated building, we find that they cannot be classified in heading 9406, HTSUS.

Since the modules fit within the description provided by EN 73.08 for products that are classified in heading 7308, HTSUS, in that they are parts of structures made of steel that are excluded from classification in heading 9406, HTSUS, we find that the modules are classified in heading 7308, HTSUS, as parts of a structure of iron or steel.

HOLDING:

The steel modules that are used in constructing a pharmaceutical production plant in Carolina, Puerto Rico are classified in heading 7308, HTSUS. They are specifically provided for in subheading 7308.90.9590, HTSUSA, as: “structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge sections, lock gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns) of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel: Other: Other: Other: Other: Other: Other” at a general column one rate of duty which is free.

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 the World Wide Web at www.usitc.gov.

Sincerely,

Myles B. Harmon, Director

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