Request for Reconsideration of Headquarters Ruling Letter (HQ) 967102; Classification of gas turbines; aero-derivative turbines

HQ W968276 April 11, 2012 OT:RR:CTF:VS W968276 CMR CATEGORY: Classification TARIFF NO.: 8411.82.8000 Mr. John Pajek KPMG LLP Suite 3300 Commerce Court West 199 Bay Street Toronto, ON M5L 1B2 Canada RE: Request for Reconsideration of Headquarters Ruling Letter (HQ) 967102; Classification of gas turbines; aero-derivative turbines Dear Mr. Pajek: This is in response to your submission of May 10, 2006, on behalf of your client, Rolls Wood Group (Repair & Overhauls) Limited (“RWG”), requesting this office reconsider its decision in Headquarters Ruling Letter (“HQ”) 967102, dated September 27, 2004. HQ 967102 revoked New York Ruling Letter (“NY”) H81222, dated May 31, 2001, which classified the Rolls-Royce Industrial RB-211 gas generator and the Rolls-Royce Industrial Avon gas generator in subheading 8411.12.8000, Harmonized Tariff Schedule of the United States (“HTSUS”), as turbojets, other than aircraft turbines, of a thrust exceeding 25 kiloNewton (“kN”). In HQ 967102, Customs and Border Protection (“CBP”) reclassified these gas generators in subheading 8411.82.8000, HTSUS, as other gas turbines, other than aircraft turbines, of a power exceeding 5000 kilowatts (“kW”). We note that the revocation of NY H81222 was pursuant to the procedures of 19 U.S.C. § 1625. Although opportunity was provided for submission of public comments, no comments were received. Your client argues the RB-211 and Avon industrial generators are turbojets of subheading 8411.12.8000, HTSUS, and requests we revoke our decision in HQ 967102. We have reviewed HQ 967102 and believe it to be correct. However, we are modifying the analysis in HQ 967102 to expand upon the analysis which relied on a distinction between gas turbines designed to provide propulsion to aircraft and gas turbines designed or adapted for industrial use. In addition, we wish to address your recent arguments regarding the proper classification of this merchandise. It was not clear in HQ 967102 that the merchandise at issue was limited to the RB211 gas generator and the Avon gas generator. This decision clarifies the facts regarding the merchandise at issue, i.e, that it consists of the gas generators without power turbines, and sets forth our reasoning for upholding the classification in HQ 967102. In reaching our decision in this matter, we have taken into consideration your submission of May 10, 2006, your supplemental submission of June 2, 2010, your presentation and the discussion from the teleconference held with CBP personnel on June 29, 2010, and the supplemental information you submitted via email dated July 5, 2010. We regret our delay in responding to your request. Pursuant to section 625, Tariff Act of 1930 (19 U.S.C. 1625), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), notice of the proposed modification of HQ 967102 was published November 2, 2011, in the Customs Bulletin, Volume 45, Number 45. One comment was received and is discussed in the decision below. FACTS: The merchandise at issue consists of the Rolls-Royce Industrial RB-211 gas generator and the Rolls-Royce Industrial Avon gas generator. In NY H81222, these generators were referred to as aero-derivative turbojets, each having a thrust exceeding 25 kN. The description in the ruling indicates that the generators are designed for industrial use. The RB-211 generator is described as differing from the configuration for use in aircraft in that the bypass fan and fan turbines are removed. Thus, the RB-211 is a twin spool gas generator capable of producing thrust levels in the order of 97.8 kN. The Avon generator is described as incorporating a seventeen stage, single spool compressor, eight individual combustion chambers, and a three stage turbine to drive the compressor. The ruling indicated that the typical thrust levels produced by the Avon gas generator are approximately 48.9 kN. As to the operation of the Avon and RB-211 generators, the NY ruling stated: The engine ingests a large volume of air through the front opening. The air is squeezed or compressed to many times atmospheric pressure by the lower pressure compressor. In the combustion chamber, fuel and air are mixed together and ignited. The resulting hot gases are expanded over the high pressure turbine. The high pressure turbine drives the low pressure compressor in the front end which causes more air to be ingested through the front opening. What remains is residual gas energy (thrust) either for expansion through a propulsive nozzle or through a separate free power turbine. While NY H81222 described the goods at issue as turbojets and acknowledged that you identified them as gas generators, in HQ 967102, this office identified the goods at issue as gas turbines, originally designed as turbojets, but adapted for industrial use. In HQ 967102, the RB-211 was described as having had the bypass fan and fan turbines removed, resulting in “a twin spool generator capable of generating power between 25,200 kilowatts and 44,500 kilowatts, depending on what type of use the engine is put to.” The Avon was described as having been reconfigured and matched with the RT48 or RT56 power turbine. It was indicated that, depending upon the use it is put to, the Avon is capable of generating power between 14,672 kilowatts and 21,000 kilowatts. It was further indicated that these goods are used for a variety of power generation and mechanical drive applications and are incapable of providing motive power to aircraft due to their adapted designs. In your request for reconsideration of HQ 967102, you sought to clarify the description of the merchandise at issue. You again identified the Avon and RB-211 as gas generators. While you did refer to them as turbojets and you seek classification of these goods as turbojets, they are most specifically identified as gas generators. You indicate in the submission that: A turbo-jet consists of a compressor, a combustion system, and a turbine to drive the compressor. A gas generator is a turbo-jet engine adapted for some use other than providing motive power for aircraft. There is fundamentally no difference between a turbo-jet and a gas generator. The difference in nomenclature lies in that the term turbo-jet is generally used in the aviation industry, whereas the term gas generator is used in other industries. A turbo-jet/gas generator does not have attached or integrated within it a mechanism to convert the exhaust gas energy into kinetic energy. It simply produces hot exhaust gas, which when expanded through a final nozzle, produces a thrust reaction at the mounting points. * * * [Emphasis added.] You indicate that the imported gas generators are imported without free power turbines. Free power turbines are connected to either electric generators for production of electricity or to compressors for use in pumping oil or gas. The free power turbines used with the RB-211 and Avon gas generators are built separately on base frames designed to mount the gas generators. When the gas generators are shipped to RWG for servicing, the free power turbines are left in place on site. Therefore, the RB-211 and Avon gas generators that are imported by your client, RWG, are basically equipment for generating hot air. In response to the notice of the proposed modification of HQ 967102, one comment was received. The commenter proposed classification of the gas generators in subheading 8405.10.00, HTSUS, as producer gas generators. ISSUE: Were the aeroderivative gas generators at issue, i.e., the RB-211 and Avon gas generators, properly classified as other gas turbines of subheading 8411.82.8000, HTSUS, in HQ 967102; or should they be classified as turbojets of subheading 8411.12.8000, HTSUS; or, as producer gas generators of subheading 8405.10.00, HTSUS? LAW AND ANALYSIS: Classification of goods under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is governed by the General Rules of Interpretation (GRIs). GRI 1 provides that "classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to [the remaining GRIs taken in order]." In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes may be utilized. The Explanatory Notes (ENs), although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). The tariff provisions at issue are subheadings of heading 8411 and provide as follows: 8411 Turbojets, turbopropellers and other gas turbines, and parts thereof: Turbojets: 8411.11 Of a thrust not exceeding 25 kN: * * * 8411.12 Of a thrust exceeding 25 kN: * * * Turbopropellers: 8411.21 Of a power not exceeding 1,100 kW: * * * 8411.22 Of a power exceeding 1,100 kW: * * * Other gas turbines: 8411.81 Of a power not exceeding 5,000 kW: * * * 8411.82 Of a power exceeding 5,000 kW: * * * Heading 8411, HTSUS, covers three types of engines: Turbojets; Turbopropellers; and Other Gas Turbines. EN 84.11 parallels the heading listings for these three engine types and states in pertinent part as follows: This heading covers turbo-jets, turbo-propellers and other gas turbines. The turbines of this heading are, in general, internal combustion engines which do not usually require any external source of heat as does, for example, a steam turbine. TURBO-JETS A turbo-jet consists of a compressor, a combustion system, a turbine and a nozzle, which is a convergent duct placed in the exhaust pipe. The hot pressurized gas exiting from the turbine is converted to a high velocity gas stream by the nozzle. The reaction of this gas stream acting on the engine provides the motive force which may be used to power aircraft. In its simplest form the compressor and turbine are accommodated on a single shaft. In more complex designs the compressor is made in two parts (a two spool compressor) in which the spool of each part is driven by its own turbine through concentric shafting. Another variation is to add a ducted fan usually at the inlet to the compressor and drive this either by a third turbine or connect it to the first compressor spool. The fan acts in the nature of a ducted propeller, most of its output bypassing the compressor and turbine and joining the exhaust jet to provide extra thrust. This version is sometimes called a “bypass fan jet.” * * * TURBO-PROPELLERS Such engines are similar to turbo-jets, but have a further turbine downstream of the compressor turbine, which is coupled to a conventional propeller such as is used on piston engined aircraft. This latter turbine is sometimes referred to as a “free turbine”, meaning that it is not mechanically coupled to the compressor and compressor turbine shaft. Thus most of the hot pressurised gas leaving the compressor turbine is converted into shaft power by the free turbine instead of being expanded in a nozzle as is the case in turbo-jets. In some cases, the gases leaving the free turbine may be expanded in a nozzle to provide auxiliary jet power and assist the propeller. OTHER GAS TURBINES This group includes industrial gas-turbine units which are either specifically designed for industrial use or adapt turbo-jets or turbo-propeller units for uses other than providing motive power for aircraft. There are two types of cycles: The simple cycle, in which air is ingested and compressed by the compressor, heated in the combustion system and passed through the turbine, finally exhausting to the atmosphere. The regenerative cycle, in which air is ingested, compressed and passed through the air pipes of a regenerator. The air is pre-heated by the turbine exhaust and is then passed to the combustion system where it is further heated by the addition of fuel. The air/gas mixture passes through the turbine and is exhausted through the hot gas side of the regenerator and finally to the atmosphere. There are two types of designs: The single-shaft gas turbine unit, in which the compressor and turbine are built on a single shaft, the turbine providing power to rotate the compressor and to drive rotating machinery through a coupling. This type of drive is most effective for constant speed applications such as electrical power generation. The two-shaft gas turbine unit, in which the compressor, combustion system and compressor turbine are accommodated in one unit generally called a gas generator, whilst a second turbine on a separate shaft receives the heated and pressurised gas from the exhaust of the gas generator. This second turbine known as the power turbine is coupled to a driven unit, such as a compressor or pump. Two-shaft gas turbines are normally applied where load demand variations require a range of power and rotational speed from the gas turbine These gas turbines are used for marine craft and locomotives, for electrical power generation, and for mechanical drives in the oil and gas, pipeline and petrochemical industries. This group also includes other gas turbines without a combustion chamber, comprising simply a stator and rotor and which use energy from gases provided by other machines or appliances (e.g., gas generators, diesel engines, free-piston generators) and compressed air or other compressed gas turbines. The alternative classification suggested by the commenter is subheading 8405.10.00, HTSUS, which provides for: 8405 Producer gas or water gas generators, with or without their purifiers; acetylene gas generators and similar water process gas generators, with or without their purifiers; parts thereof: 8405.10.00 00 Producer gas or water gas generators, with or without their purifiers; acetylene gas generators and similar water process gas generators, with or without their purifiers . . . * * * EN 84.05 provides in pertinent part as follows: This heading covers self-contained apparatus and plant for generating any kind of gas (e.g., producer gas, water gas and mixtures thereof, or acetylene) whatever the intended use of the gas produced (lighting, industrial heating, feeding gas engines, welding or cutting metals, chemical synthesis, etc.). * * * PRODUCER GAS GENERATORS These usually consist of a closed cylinder, generally fitted with a refractory lining or a water-cooled double wall enclosing a grate (either of fixed, shaking or revolving type), with provision for passing a current of air (or of air and steam) by suction or blowing. A thick bed of fuel is burned on the grate and the flow of air and steam is regulated so that combustion is incomplete. The decomposition of the water and the incomplete combustion of the fuel yield carbon monoxide and hydrogen. The resultant mixture of carbon monoxide, hydrogen and nitrogen (producer gas) is drawn off at the top of the apparatus. In certain generators of the “reversed combustion” type, the air is blown from the top to the bottom and along the sides of the cylinder and the gas is collected at the bottom of the apparatus, below the grate. This allows for more complete combustion of tars, etc. * * * Both producer gas and water gas generators may be adapted for burning many kinds of solid fuel (e.g., coal, coke, charcoal, wood, vegetable or other waste). * * * Before addressing the arguments regarding classification of the gas generators in heading 8411, HTSUS, we will dispense with the commenter’s suggestion of classification in heading 8405, HTSUS, as producer gas generators. The commenter suggests the gas generators at issue cannot be classified as gas turbines of heading 8411, HTSUS, because the EN for heading 84.11 states that “other gas turbines” includes “gas turbines without a combustion chamber comprising simply a stator and rotor and which use energy from gases provided by other machines or appliances (e.g., gas generators . . . ).” Commenter’s submission at page 5. The commenter infers that as the goods at issue are referred to as gas generators, they must be an other machine or appliance as noted in the EN. However, the commenter is assuming that all goods referred to as gas generators are the same, and, quite simply, they are not. The term “gas generator” may be used to describe a variety of appliances with different constructions and different fuel sources and outputs. For instance, “gas generator” is defined in the McGraw-Hill Dictionary of Scientific & Technical Terms, 6th Edition (2003) as follows: A device used to generate gases in the laboratory. (chemical engineering) A chemical plant for producing gas from coal, for example, water gas. (mechanical engineering) An apparatus that supplies a high-pressure gas flow to drive compressors, airscrews, and other machines. The scope of the term “gas generators” in the EN for heading 84.11 is not clear. We are not convinced that it refers to the goods at issue herein that consist of the elements of a gas turbine as discussed in detail below. With regard to heading 8405, HTSUS, “producer gas” is defined as: A gas composed of carbon monoxide, hydrogen, and nitrogen, obtained by passing air and steam through incandescent coke, used as an industrial fuel, in certain gas engines, and in the manufacture of ammonia. At 1544, Random House Unabridged Dictionary, 2nd Edition (1993). A combustible mixture of nitrogen, carbon monoxide, and hydrogen, generated by passing air with stream over burning coke or coal in a furnace and used as fuel. The American Heritage Dictionary of the English Language, 4th Edition (2000). Gas made in a producer, consisting chiefly of carbon monoxide, hydrogen, and nitrogen, and having an average hearing value of about 150 Btu. At 1810, Webster’s Third New International Dictionary of the English Language Unabridged (1993). Based on the definitions of “producer gas” and the EN for heading 84.05, producer gas generators are designed to produce specific gases to be used as a fuel. The gas generators at issue are designed to blow hot air. The designs and purposes of producer gas generators and the gas generators at issue are clearly different and distinct. The gas generators at issue are not classifiable in heading 8405, HTSUS. See also, HQ 951195, dated June 15, 1992 and HQ 957651, dated March 20, 1995, in which we held that heading 8405, HTSIS, provides only for producer gas generators, water gas generators, acetylene gas generators, and similar water process gas generators. In your submission of May 10, 2006, you argue that the RB-211 and Avon gas generators do not meet the descriptions of the two types of designs of “other gas turbines” set forth in the EN to heading 8411. We agree with you that neither the RB-211 nor Avon fall within the description of a single shaft gas turbine unit as described in the EN. With regard to the two-shaft gas turbine unit description in the EN, you stated: “As turbo-jet/gas generators, neither the RB-211 nor Avon has power turbines as an integral part of their design.” However, we believe that the RB-211 and the Avon gas generators fall within the description provided in the EN of one unit of the two-shaft gas turbin