Importer's Generator Parts Are Water Gas Generators, Not Multifunctional Machines, CIT Says
Importer HyAxiom prevailed in the Court of International Trade on Aug. 26 in its case regarding the classification of its PC50 supermodules. CIT Judge Timothy Stanceu held that the products are water gas generators, not electric generators or multifunctional machines.
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Stanceu dismissed the government’s cross-motion for judgment, which had argued that the supermodules should have been classified under Harmonized Tariff Schedule heading 8479 as electrical machines that perform multiple functions (see 2506100001). The government previously argued for CBP’s original classification of the products under heading 8503, for electric generators, but CIT disagreed in 2024 (see 2408290019).
The judge said that the supermodules were properly classified under heading 8405.
A PC50 supermodule, he said, was “an assembly of various components” that would be further processed into “a complete, stationary hydrogen fuel cell generator, the ‘PureCell Model 400 hydrogen fuel-cell powerplant.’”
Stanceu first dispensed with the government’s push for heading 8479, saying that the “agreed-upon, controlling fact” was that HyAxiom’s product was intended as a part of an electric generator. That “alone” meant it couldn’t be classified as a “machine … having individual functions, not specified or included elsewhere” in chapter 84, he said.
Further, Note 2 of that chapter specifically directs that machines that serve as parts of larger machinery are classified as parts and don’t fit under heading 8479, he said. And while the government argued that the classification was proper under General Rule of Interpretation 3, the court only needed to go so far as GRI 1 to categorize the supermodules in HTS heading 8503, he said.
On the other hand, he said, the supermodules were properly classified in heading 8405. Again, he looked to note 2, which he described as “controlling.” He said the note, by default, assumes parts of machines are classified under heading 8503 unless they are specifically “included in” one of the other headings in chapters 84 or 85.
Then, notes 3 and 5 show that the PC50 supermodules were included in heading 8405, he said. Note 3 requires a principal use analysis, while note 5 defines “machines.”
The U.S., in opposition to the classification, argued that the Explanatory Note for heading 84.05 explained the heading covers “self-contained apparatus and plant for generating any kind of gas.” That excluded HyAxiom’s products, which weren’t “stand-alone” because they had to be processed into the PureCell Model 400 before being able to generate gas, it claimed.
Stanceu determined that the Explanatory Note didn’t “state unambiguously that a ‘self-contained apparatus’ or ‘plant’ must be a stand-alone device.” He also said a broad interpretation of the phrase “self-contained” in the note would conflict with GRI 2(A), which classifies incomplete products with their completed counterparts. The note itself, he observed, instructed that it was “[s]ubject to the general provisions regarding the classification of parts.”
And he found that the principal purpose of the products is gas generation because almost all of the supermodules' operations fell within that scope.
He described the government’s argument that the supermodules didn’t have a principal function because “every component or system” contained in them was essential as a “non sequitur.”
“Because without necessarily performing the principal function, defendant’s proffered analysis renders the concept of ‘principal function’ meaningless,” he said.
(HyAxiom Inc. v. United States, Slip Op. 25-114, CIT # 21-00057, dated 08/26/24; Judge: Timothy Stanceu; Attorneys: Christopher Loveland of Sheppard Mullin for plaintiff HyAxiom; Alexander Vanderweide for defendant U.S. government)