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HQ 968035




JUNE 5, 2006

CLA-2 RR:CTF:TCM 968035 JAS

CATEGORY: CLASSIFICATION

TARIFF NO.: 8402.90.0090

Port Director
U.S. Customs and Border Protection
3002 E. Old Tower Road, Suite 400
Phoenix, AZ 85034

RE: Protest 2605-04-100013; Moisture Separator for Steam Generators

Dear Port Director:

This is our decision on Protest 2605-04-100013, filed by counsel on behalf of the Arizona Public Service Company, against your classification of a steam separator assembly for steam generators under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

The steam separator assembly was entered under a provision of heading 8402, HTSUS, as parts of steam or other vapor generating boilers. The entry was liquidated on November 28, 2003, under this provision. This protest was timely filed on February 24, 2004.

FACTS:

The packing list and bill of lading identify the merchandise in question as moisture separators, while other commercial documents identify only “steam separator ass’y.” The moisture separators are not further described in the protest file. However, they are said to be parts of steam generating boilers used in nuclear power generating stations for producing electricity. Generally speaking, the function of moisture separators in such applications is to remove water droplets and moisture from the steam produced by the boiler. The steam powers the rotors of the turbine sections to produce rotating mechanical energy that in turn drives a series of generators to produce electricity.

The HTSUS provisions under consideration are as follows:

Steam or other vapor generating boilers (other than central heating hot water boilers capable also of producing low pressure steam);; parts thereof:

Steam or other vapor generating boilers:

8402.11.00 Watertube boilers with a steam production exceeding 45 t per hour

8402.90.00 Parts

ISSUE:

Whether the moisture separators are steam generating boilers of heading 8402, imported unassembled or disassembled, or parts of such boilers.

LAW AND ANALYSIS:

Under General Rule of Interpretation (GRI) 1, Harmonized Tariff Schedule of the United States (HTSUS), goods are to be classified according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 through 6. GRI 2(a) provides in relevant part that any reference in a heading to an article shall be taken to include a reference to that article presented unassembled or disassembled.

Subject to certain exceptions that are not relevant here, goods that are identifiable as parts of machines or apparatus of Chapter 84 or Chapter 85 are classifiable in accordance with Section XVI, Note 2, HTSUS. Nidec Corporation v. United States, 861 F. Supp. 136, aff'd. 68 F. 3d 1333 (1995). Parts which are goods included in any of the headings of Chapters 84 and 85 are in all cases to be classified in their respective headings. See Note 2(a). Other parts, if suitable for use solely or principally with a particular machine, or with a number of machines of the same heading, are to be classified with the machines of that kind. See Note 2(b).

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While not legally binding and, therefore not dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are thus useful in ascertaining the classification of merchandise under the Harmonized System. U.S. Customs and Border Protection believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).

Counsel for the protestant maintains that the moisture separators are classifiable in subheading 8402.11.00, HTSUS, as watertube boilers, imported unassembled or disassembled. This classification is based on what counsel indicates is implied Congressional intent, plus his interpretation of GRI 2(a).

To enable operators of nuclear power plants to increase their capacity to produce electricity, the Trade Act of 2002, Section 5202, amended subheading 9902.84.02, HTSUS, to provide a temporary “Free” rate of duty for certain steam or other vapor generating boilers used in nuclear facilities and classifiable in subheading 8402.11.00, HTSUS, entered, or withdrawn from warehouse for consumption, on or after January 1, 2002. Counsel argues that imposing duties on separately imported parts for steam generating boilers would, by implication, frustrate the intent of Congress in exempting steam boilers themselves from duty. Counsel next cites the EN to GRI 2(a) which states, in part, that complete or finished goods presented unassembled or disassembled are to be classified in the same heading as the assembled article. When so presented, it is usually for reasons such as requirements or convenience of packing, handling or transport. The contention is that the moisture separators, imported unassembled, meet this criteria inasmuch as installing them on steam generating boilers prior to importation would have increased the weight of the boilers and could have impacted the cranes that were used to set the new generators in place and increase the already difficult task of transporting and installing the generators. Thus, the moisture separators were shipped separately due to “requirements or convenience of packing, handling or transport.” The conclusion is that the moisture separators, which are parts of generators, should be regarded as an unassembled or disassembled boiler and, under GRI 2(a), classified together with the boiler in subheading 8402.11.00, HTSUS.

Merchandise is to be classified and assessed with duty in its condition as imported, that is, when brought within the jurisdiction of the United States with intent to unlade. Roser Customs Service a/c Continental Ore Corporation et al. v. United States, 64 Cust. Ct. 20, C.D. 3953 (1970), and cases cited. It is the tariff status of the moisture separators, and not steam generating boilers, that is in issue here. Concerning counsel’s first argument, the temporary suspension of duties under subheading

9902.84.02, HTSUS, relates to the steam generating boilers used in nuclear facilities and not to moisture separators which are parts used with these boilers. If Congress had so intended, they could easily have accorded duty-free status to moisture separators and other parts of steam generating boilers. However, they chose not to do so. Therefore, there is no basis under Section 5202 of the Trade Act of 2002 to accord duty-free status to the moisture separators under protest. Counsel’s second argument also fails because it is misplaced. Implicit in the EN to GRI 2(a) cited by counsel is that the moisture separators be imported in the same shipment with the steam generating boilers, in an unassembled or disassembled condition. As the moisture separators were imported separately, they must be classified in their condition as imported.

To qualify as a part under heading 8402, it is not required that the moisture separator itself actually perform the function of a steam generating boiler. General Electric Co. v. United States, 247 F. 3d 1231, aff’d. 273 F. 3d 1070 (Fed Cir. 2001). What is required is that the function of a steam generating boiler, i.e., the production of steam to operate prime movers such as steam turbines, be examined, and a determination made of whether the moisture separator can be said to satisfy a specific and integral need in the boiler’s operation. Mitsubishi Int’l Corp. v. United States, 17 CIT 871, 829 F. Supp. 1387 (1993). The steam produced by the boilers often contains excessive quantities of moisture that must be removed in order that the turbine’s rotors be powered at optimum efficiency. The function of the moisture separators in this case, being to remove water droplets and moisture from the steam, renders the steam usable for the purpose for which it was produced. In our opinion, the moisture separator satisfies a specific and integral need in the boiler’s operation. The size of the steam generating boilers (800 tons each) with which the moisture separators are used, and the fact that the packing list indicates the moisture separators were destined for a particular nuclear facility, is evidence that the moisture separators are principally if not solely for use with such steam generating boilers. In this regard, Section XVI, Note 2(b), HTSUS, states that parts are to be classified with the machine or machines with which they are solely or principally used.

HOLDING:

Under the authority of GRI 1, and Section XVI, Note 2(b), HTSUS, the moisture separators are provided for in heading 8402, as parts of steam or other vapor generating boilers. They are classifiable in subheading 8402.90.0090, HTSUSA.

The protest should be DENIED. In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the
decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Gail A. Hamill

Myles B. Harmon, Director
Commercial and Trade Facilitation Division

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