Tariff Classification of the Turbo Liquid Solar Blanket; AFR of Protest No. 0712-07-100196

HQ H016035 July 24, 2008 CLA-2 OT: RR: CTF: TCM: H016035 RM CATEGORY: Classification; NAFTA Preference TARIFF NO.: 9506.99.55 Port Director Champlain Service Port United States Customs and Border Protection 237 West Service Road Trade Compliance Division Champlain, NY 12919 RE: Tariff Classification of the Turbo Liquid Solar Blanket; AFR of Protest No. 0712-07-100196 Dear Port Director: The following is our decision regarding the Application for Further Review (“AFR”) of Protest No. 0712-07-100196, timely filed by counsel on behalf of Sunsolar Energy Technologies, concerning the classification of The Turbo Liquid Solar Blanket under the Harmonized Tariff Schedule of the United States (“HTSUS”). In reaching our decision, this office also considered information provided by counsel during a teleconference on June 17, 2008, and in written submissions, dated June 18, 2008, and June 19, 2008. FACTS This protest concerns The Turbo Liquid Solar Blanket (hereinafter “Turbo”), an automatic dispenser controlled by a computerized pump that disperses “Liquidheat™,” a chemical solution, when dropped in a swimming pool. The Liquidheat™, which consists of isopropyl alcohol, hot water, and stearyl alcohol flakes, floats to the surface and acts to inhibit water evaporation, thus maintaining the temperature of the pool water. The Turbo is a sealed, fish-shaped “skin” made of flexible plastic sheeting, which is fitted with a computerized peristaltic pump and ballast and filled with Liquidheat™. The pump, the skin, and the ballast (hereinafter “pump, skin & ballast assembly”) are imported from China into Canada in an assembled condition. In Canada, the product is filled with the Liquidheat™, heat sealed, and packaged in blister packs for shipment into the U.S. The dispenser is not re-fillable. The goods were entered on various dates ranging from March 28 to August 19, 2006, and classified under heading 9506, specifically in subheading 9506.99.5500, HTSUS, as swimming pool accessories. On March 2, 2007, CBP liquidated the entries under that subheading. This protest and AFR were timely filed on July 12, 2007. ISSUES: What is the proper tariff classification of the completed Turbo under the HTSUS? Does the Turbo qualify for preferential treatment under The North American Free Trade Agreement (“NAFTA”)? LAW AND ANALYSIS: Initially, we note that the matter is protestable under 19 U.S.C. § 1514(a)(2) as a decision on classification. The protest was timely filed, within 180 days of liquidation for all involved entries (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)). Further Review of Protest No. 0712-07-100196 was properly accorded to protestant pursuant to 19 C.F.R. § 174.24(a) because the decision against which the protest was filed is alleged to be inconsistent with a ruling of the Commissioner of Customs or his designee, or with a decision made at any port with respect to substantially similar merchandise. 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: 8424 Mechanical appliances (whether or not hand operated) for projecting, dispersing or spraying liquids or powders; fire extinguishers, whether or not charged; spray guns and similar appliances; steam or sand blasting machines and similar jet projecting machines; parts thereof: * * * Other: * * * 8424.89.70 Other … * * * 9506 Articles and equipment for general physical exercise, gymnastics, athletics, other sports (including table-tennis) or outdoor games, not specified or included elsewhere in this chapter; swimming pools and wading pools; parts and accessories thereof: * * * Other: * * * 9506.99.55 Swimming pools and wading pools and parts and accessories thereof … The Port classified the Turbo under heading 9506, HTSUS, specifically subheading 9506.99.5500, HTSUS, as a swimming pool accessory. Protestant does not dispute this classification, and we agree with the Port’s determination. At issue, rather, is whether the good qualifies for NAFTA preferential treatment. To qualify, the imported article must satisfy the “tariff shift” requirements described in General Note 12(b)(ii) of the HTSUS, which states, in pertinent part, that: [f]or purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if – they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or they have been transformed in the territory of Canada, Mexico, and/or the United States so that – . . . . (A)  except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivision (r), (s) and (t) of this note or the rules set forth therein. . . . General Note 12(t)/95.09, HTSUS, states that to qualify as NAFTA “originating,” the non-originating inputs used in the production of a good classifiable under subheading 9506.99, HTSUS, must be classifiable under headings outside of Chapter 95, HTSUS. The Note requires “a change to subheading 9506.99, HTSUS, from any other Chapter.” The Port submits that the non-originating pump, skin & ballast assembly is an unfinished article with the essential character of a swimming pool accessory of heading 9506, HTSUS. GRI 2(a) states, in part: [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 failing to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled. (Emphasis added) The term "essential character," in the context of applying GRI 2(a), means the attribute that serves to distinguish what an article is; that which is indispensable to the structure, core or condition of the good; the aggregate of distinctive component parts that establishes the identity of an article as what it is, its very essence. See HQ 967975, dated March 24, 2006. We find that the essential character of the Turbo is imparted by the Liquidheat™, i.e., the chemical solution that acts to keep a pool warm. Without it, the article is simply a non-reusable dispenser, capable of housing and dispersing any liquid for a variety of purposes, e.g., to dispense fish food or a liquid cleaning solution. See New York Ruling Letter (“NY”) N021672, dated January 16, 2008 and NY N019913, dated March 12, 2008, respectively. We conclude, therefore, that GRI 2(a) does not apply. Protestant argues that the Turbo’s non-originating components are properly classified under heading 8424, HTSUS, as mechanical appliances for dispensing liquids. Protestant likens the pump, skin & ballast assembly to an empty dispenser, and submits that the good is not a pool accessory until it has been filled with the chemical solution. In support of this position, protestant cites NY L86837, dated August 11, 2005, where CBP classified an empty dual soap and lotion reservoir as a dispenser under heading 8424, HTSUS. We agree. As discussed supra, before the article is filled with Liquidheat™ and sealed, the pump, skin & ballast assembly is a general purpose dispenser. Our conclusion is in keeping with NY N021672, dated January 16, 2008, where CBP treated a non-originating pump, skin & ballast assembly of a substantially similar product used to disperse fish food as a “retail container.” HOLDING: By application of GRI 1, the Turbo is properly classified under heading 9506, specifically subheading 9506.99.55, HTSUS, which provides for: “[a]rticles and equipment for general physical exercise, gymnastics, athletics, other sports (including table-tennis) or outdoor games, not specified or included elsewhere in this chapter; swimming pools and wading pools; parts and accessories thereof: [o]ther: [s]wimming pools and wading pools and parts and accessories thereof.” The 2006 column one, general rate of duty is 5.3 percent ad valorem. By application of the tariff shift rule for heading 9506, General Note 12, HTSUS, the Turbo is eligible for preferential treatment under NAFTA because its non-originating parts are classified under heading 8424, specifically 8424.89.70, HTSUS, as “[m]echanical appliances (whether or not hand operated) for projecting dispersing or spraying liquids or powders; fire extinguishers, whether or not charged; spray guns and similar appliances; steam or sand blasting machines and similar jet projecting machines; parts thereof: [o]ther: [o]ther” when imported into Canada. The protest should be GRANTED. In accordance with the Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP 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 Regulations and Rulings of the Office of International Trade 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, Myles B. Harmon, Director Commercial and Trade Facilitation Division