Classification of Dual Mass Flywheel under Customs Tariff Act, 1975

In re Schaeffler India Limited (CAAR Mumbai)

In the case of Schaeffler India Limited, the Customs Authority for Advance Rulings (CAAR) Mumbai reviewed the classification of the “Dual Mass Flywheel” (DMF) under the Customs Tariff Act, 1975. Schaeffler India sought an advance ruling to determine the appropriate classification of the DMF, a component used in vehicle driveline systems, particularly in manual transmission cars. The DMF’s primary function is to store and provide continuous energy to the driveline, with an additional benefit of reducing engine vibrations. Schaeffler India argued that the DMF should be classified under Customs Tariff Heading 8483 50 90, which covers flywheels and pulleys. The CAAR considered the functional characteristics of the DMF and relevant legal provisions, including the General Rules of Interpretation (GRI) and Harmonized System Nomenclature (HSN) Explanatory Notes. The ruling ultimately supported the classification of the DMF under Heading 8483 50 90, agreeing with the applicant’s contention and the jurisdictional customs authority’s assessment. The decision underscores the importance of accurately classifying components based on their function and role within the broader mechanical system.

FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI

Ruling

M/s Schaeffler India Limited (having IEC No. 0888007507) and hereinafter referred to as ‘the applicant’, in short) filed an application (CAA.R-1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application was received in the secretariat of the CAAR, Mumbai on 26.03.2024 along with its enclosures in terms of Section 28H. (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’). The applicant is seeking advance ruling on the classification of “Dual Mass Flywheel” Under the Customs Tariff Act, 1975.

2. Applicant submitted that:

2.1 One of the products imported by the Applicant is “Dual Mass Flywheel” (hereinafter also referred to as “DMF”). The Applicant is continuously intending to import the WI’ from its various foreign supplier into India, clearing the goods from Chennai Sea Port (INMAA1).

Product Details

2.2 The DMF is a component of a vehicle’s driveling system, used particularly in cars with manual transmission. It is a rotating mechanical device that transmits torque- a rotational force from the engine to the transmission, while simultaneously reducing the amount of vibration felt in the vehicle

2,3 The DMF is composed of two individual flywheel masses which are connected via a damping system. This system typically incorporates springs and a damper to absorb any vibration. The first of the two-flywheel mass is linked directly to the engine’s crankshaft, while the second is connected to the transmission input shaft.

2.4 Notably, Dly1Fs are uniquely designed to ensure and sustain, contact between the engine and the clutch assembly. This design allows for independent movement between the engine and the transmission. In addition to facilitating continuous energy to the driveline, it also reduces the vibrations using the internal dampening springs

2.5 While the function of DMF is to provide continuous energy along with the dampening of the torsional vibrations generated by the engine. The conventional flywheel on the other hand is directly bolted to the engine crankshaft and provides continuous power to the vehicle driveline, however, it doesn’t have the vibration dampening property as available in DMF.

2,6 Moreover, the use of a dual mass flywheel leads to smoother gear shifts, improves the lifespan of other drivetrain components, reduces noise, and increases driver comfort by eliminating judder and vibration, especially during start-up and at low speeds.

2.7 Thus, the prime function of the Dual Mass Flywheel is to serve as .a storehouse for mechanical energy. It’s here where, the energy, is kept for transmission, ensuring a smooth and uninterrupted power output from the engine to the transmission. This transfer of power plays a critical role in maintaining the vehicles’ momentum, making it a central function of the DMF’s operations.

2.8 The DMF’s vibration dampening function, though impactful, comes in a secondary function. This feature primarily works to enhance your driving experience, reducing engine vibrations to make for smoother rides, lower noise levels and decreased wear and tear on the drive train.

2.9 In essence, the DMF’s core functioning lies in its ability to store and seamlessly transmit power to the driveline, bolstering vehicles performance and contributing significantly to elevated driving experiences.

2.10 Images of DMF is as under:

2.11 Basis the description of DMF mentioned above, understanding of its functionality and use in motor vehicle, the Applicant is currently importing DMF and classifying the same under customs tariff heading(`CTE1′) 8483 50 90 — ‘Other’ of ‘Flywheels and Pulleys, including pulley blocks’ of the Customs Tariff Act, 1975

3. Classification of “Dual Mass Flywheel (DMF)” under the Customs Tariff Act, 1975

3.1 The goods imported into India are to be classified under the applicable Heading of the First Schedule to the Customs Tariff Act, 1975 (`Customs Tariff’)

3.2 The classification of goods under the Customs Tariff is governed by the principles as enumerated in the General Rules of Interpretation (`GRI’) set out in the First Schedule to the Customs Tariff Act, 1975 (`Tariff’).

3.3 As per Rule 1 of the GRI, classification of the imported products 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 Rules of the GRI.

3.4 Further, as per General Explanatory Notes of The General Rules of Interpretation (GRI) , in the First Schedule to the Customs Tariff, when the description of a product under a heading is preceded by “-“, the said product would be a sub-classification of the description of products covered by the said heading, when the description of a product is preceded the said product would be a sub-classification of the immediately preceding description of product under “-“, when the description of a product is preceded by “—” or “—-“, the said product shall be taken to be .a sub-classification of the immediately preceding description of or “–

3.5 In case of the Applicant, the product under consideration is DMI? which is a component of a vehicles’ driveline system. It consists of two separate flywheel masses connected by a damping system, usually springs and a damper. The conventional flywheel provides continuous power to the vehicle’s driveline, however•, does not have the vibration damping property. While the function of DMF is predominantly to provide the continuous energy to the driveline, however it also supports with the reduction of the vibration using the internal dampening spring.

3.6 Based on the aforementioned fact and by applying the General Explanatory Notes of The GRI to Import Tariff as stated above, the possible classification of “Dual Mass Flywheel (`DMF’)” could be under the Customs Tariff Heading 8483 50 90. The Heading, 8483 in Chapter 84 of Section XVI of the First Schedule to the CTA is as under:

3.7 The Applicant would like to draw attention as to why the said product is to be classified under the customs tariff heading 84835090 by the relevant Section Notes and Chapter Notes followed by the relevant explanatory notes as mentioned below.

3.8 With reference to facts of the DMF summarised in Annexure 1 by the Applicant, it is important to note that the DMF is principally used in the drivetrain of the motor vehicle. It is a critical component that interacts directly with the engine and plays a significant role in a vehicle’s drivetrain system. The function of the flywheel is to store and provide continuous energy. When the engine piston goes from the Bottom Dead Centre to the Top Dead Centre of the engine, technically there is no power being generated. At this moment, to compensate this power loss, flywheel will provide the stored power to the gearbox and crankshaft to rotate. Therefore, for smoother functioning of engine, flywheel is considered as the critical component of the engine.

3.9 At this juncture, it would be relevant to refer to the IISN Explanatory Notes (EN) of chapter 8483 which includes “8483 50 – Flywheels and pulleys, including pulley blocks”. The EN of 8483, defines flywheel as “These are relatively large, heavy wheels, usually constructed so that the weight is concentrated near the rim. The inertia of the wheels as it turns tends to resist any change in speed of the motor and so keep the speed constant. Flywheels may in some cases have a grooved or clogged rim, or be fitted with connecting – rods, so that in certain circumstances they can act for the transmission of power (e.g., as a driving pulley or cog wheel)”

Upon review and analysis of the explanatory note attached to Chapter 8483, it becomes immediately apparent through preliminary observation that flywheels are encompassed within this provided classification. This initial understanding, prima facie suggests that flywheels arc included in the outlined item list for this specific chapter heading.

3.10 However, it is also important to note that HSN Explanatory Notes (EN) of Chapter 8483 excludes “transmission equipment of the, kinds described above (gear boxes, transmission shafts, clutches, differentials, etc.), but which are designed for use solely or principally with vehicle or aircraft (Section XVII); it should,. however, be noted that this exclusion does not apply to internal parts of vehicle or aircraft engines- these parts remain classified in this heading.”.

Given that the fundamental role of DMF is to store energy and transfer it to the driveline, the component might be viewed as a transmission device specifically engineered for use with the vehicle. However, examination of the description and function of the flywheel provided in point 2.8 above clearly positions it as.an integral part of engine system, rather than a separate transmission device. Consequently, it would be appropriate to consider the dual mass flywheel as internal parts of the vehicle’s engine. Reference could also be taken from the US Customs and Board Protection (CBP) Ruling No. N270318 dated 23 November 2015, wherein CBP has recognized items such as damper flywheels as an internal part of an engine and classified the damper flywheel under the Heading 8483 (Exhibit 3). Hence, it ought to remain classified under the heading 8483.

Section XVI Note 2 (a) specifically includes chapter 84 items in Section XVI.

3.11 Further, as per Note 2(a) of Section XVI, “Parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 84.09, 84.31, 84.48, 84.66, 84.73, 84.87, 85.03, 85.22, 85.29, 85:38 and 85.48) are in all cases to be classified in their respective headings;”

3.12 It would be pertinent here to also refer the Explanatory Note 2 of Section XVI which covers chapter 84 of CTA

…….

(II) Parts

In general, parts which are suitable for use solely or principally with particular machines or apparatus (including those of heading 84.79 or heading 85.43), or with a group of machines or apparatus falling in the same heading, are classified in the same heading as those machines or apparatus subject, of course, to the exclusions mentioned in Part (I) …. Separate headings are, however, provided for:

… …. …..

… …. …..

The above rules do not apply to parts which in themselves constitute an article covered by heading of this Section (other than 84.87 and 85.48); these are in all cases classified in their own appropriate heading even if specifically designed to work as part of a specific machine. This applies in particular to:

… …. …..

… …. …..

(6) Transmission shafts, cranks, bearing housings, plain shaft bearings, gears and gearing (including friction gears and gear-boxes and other speed changers), flywheels, pulleys and pulley blocks, clutches and shaft couplings (heading 84.83)

Considering that the Dual Mass Flywheel (DMF) is attached to the engine and plays a vital role in the engine’s efficient operation, it could be inferred from Section XVI Note 2(a) and the aforementioned explanatory notes, that a flywheel should still fall under heading 8483, even if it is designed to function as a component of the engine.

Additional understanding can also be sourced from Section XVII notes, chapter notes and its relevant explanatory notes

3.13 Reference could also be made to Note 2 of Section XVII which covers chapter 87 of

“The expressions “parts” and “parts and accessories” do not apply to the following articles, whether or not they are identifiable as for the goods of this Section:

(e) machines and apparatus of headings 8401 to 8479, or parts thereof other than the radiators for the articles of this Section, articles of heading 8481 or 8482 or, provided they constitute integral parts of engines and motors, articles of heading 8483; “

3.14 Additionally, the explanatory note of Section XVII, which specifically addresses Parts and Accessories, provides the following:

(III) PARTS AND ACCESSORIES

….. The other Chapters of this Section each provide for the classification of parts and accessories of the vehicles, aircraft or equipment concerned.

It should, however, be noted that these headings apply only to those parts or accessories which comply with all three of the following conditions:

(a) They must not be excluded by the terms of Note 2 to this section (see paragraph (A) below), and

(b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88, and

(c) They must not be more specifically included elsewhere in the Nomenclature.

(A) Parts and accessories excluded by Note 2 to Section XVII

This Note excludes the following parts and accessories, whether or not they are identifiable as for the articles of this Section:

……..

(6) Certain other goods of Chapter 84, e.g:

(a) Taps, cocks, valves and similar appliances (e.g., radiator drainage taps, inner-tube valves) (heading 84.81)

(b) Ball or roller bearings (heading 84.82)

(c) Internal parts of engines or motors (crank shafts, camshafts, flywheels, etc.) falling in heading 84.83″.

3.15 Moreover, we can gain additional understanding from the explanatory note of Chapter 87.08, which states –

” Parts and accessories of this heading include:

…. …. ……

…. …. ……

(F) Other transmission parts and components (for example, propeller shafts, halt-shafts; gears, gearing; plain shaft bearings; reduction gear assemblies; universal joints). But the heading excludes internal parts of engines, such as connecting-rods, push-rods and valvelifters of heading 84.09 and crank shaft, cam shafts and flywheels of heading 84.83.

3.16 From a conjoint reading of tariff heading, section notes along with WCO explanatory notes, it could be inferred that parts which can be classified under the head 8483, would not be classified under the head 8708 as “parts and accessories” of motor vehicles, only if they form integral part of engines and motors.

3.17 As the Dual Mass Flywheel (DMF) is already identified as an integral part of engine above, it will be excluded according to the terms of the Notes and the relevant explanatory note of Section XVII, as well as the explanatory note of Chapter 8708.

3.18 Moreover, a part to be classified under 8708 must satisfy all the three conditions for “Parts and Accessories” discussed above. However, the subject part “Dual Mass Flywheel” doesn’t satisfy the first condition for Parts and Accessories: “(a) They must not be excluded by the terms of Note 2 to this section”. Therefore, we cannot classify the product Dual Mass Flywheel under the Parts provision of 8708.

3.19 Taking into account the aforementioned factors, the classification of the Dual Mass Flywheel (DMF) under Heading 84835090 as ‘Flywheels’ can be vindicated due to its harmonized functionality and design. Additionally, it is also distinctly excluded from being classified as ‘parts and accessories’ of motor vehicles as stated in Note 2 (e) of Section XVII as well as the relevant explanatory notes of the Customs Tariff Act.

Considering the comprehensive reasoning provided above, the applicant believes that the Dual Mass Flywheel could be classified under heading 8483.50.90 of the Customs Tariff Act, 1975.

4. The applicant in their CAAR-1 indicated that they intend to import the subject goods under the jurisdiction of Office of the Commissioner of Customs, Chennai-II, Custom House, 60, Rajaji Salai, Chennai- 600 001 (hereinafter referred to as the ‘Jurisdictional Commissioner of Customs’). The application was forwarded to the ‘Jurisdictional commissioner of Customs’ in terms of the Section 28 (I)(1) of the Customs Act, 1962 for their comments on classification of subject goods i.e. “Dual Mass Flywheel” and call upon them to furnish relevant records.

4.1 Further, the ‘Jurisdictional Commissioner of Customs’ sent the comments to CAAR, Mumbai vide letter dated 03.05.2024. They submitted that the ‘item Dual Mass Flywheel’ appears to be rightly classifiable under Tariff item 8483 5090 as determined by the applicant.

5. A Personal hearing in the matter was held on 26.06.2024 in which Ms. Ruchi Bhat (CA), Ms. Ayushi Tamboli (CA), Mr. Anant Narayan Joshi (Sr. Manager) and Ms. Shreya Anant Joshi (Trainee) appeared for personal hearing in the matter as representatives of applicant. They reiterated the contention made in the application regarding the classification of the subject goods i.e. “Dual Mass Flywheel” a component of Vehicle’s Driveline System. They contended that the subject goods merit classification under CT1- 84835090. They explained the functioning of the subject goods and relied upon the Custom Tarif heading, Section and Chapter notes and FISN Explanatory notes. In support of their contention, they also relied upon an advance ruling no. N270318 dated 23.11.2015 issued by US Customs and Board Protection (CBP). They also submitted that the department has also accepted the said classification, in their office letter dated 03/05/2024. Nobody appeared from department side to attend the personal hearing.

6. I have taken into consideration all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearing. I have also gone through the response received from the department. I therefore proceed to decide the present application regarding classification of ‘Dual Mass Flywheel” on the basis of the information on record as well as the existing legal framework having bearing on the classification of the subject goods under the first schedule of the Customs Tariff Act, 1975.

6.! It is observed through the various open-sources of information that-

A dual-mass flywheel (DMF or DMFW) is a rotating mechanical device that is used to provide continuous energy (rotational energy) in systems where the energy source is not continuous, the same way as a conventional flywheel acts, but damping any violent variation of torque or revolutions that could cause an unwanted vibration. The vibration reduction is achieved by accumulating stored energy in the two flywheel half masses over a period of time but damped by arc springs, doing that at a rate that is compatible with the energy source, and then releasing that energy at a much higher rate over a relatively short time. A compact dual-mass flywheel often includes the whole clutch, including the pressure plate and the friction disc.

The DMF is composed of two individual flywheel masses which arc connected via a damping system. This system typically incorporates springs and a damper to absorb any vibration. The first of the two-flywheel mass is linked directly to the engine’s crankshaft, while the second is connected to the transmission input shaft.

6.2 On going through the tariff arrangement, it can be seen that there are two competing chapters i.e. chapter 8483 and chapter 8708 of the Customs Tariff Act, 1975 for the classification of “Dual Mass Flywheel’.

Chapter 84(83) deals with Transmission shafts (including cam shafts and crank shafts) and cranks; bearing housings and plain shaft bearings; gears and gearing; ball or roller screws; gear boxes and other speed changers, including torque converters; flywheels and pulleys, including pulley blocks; clutches and shaft couplings (including universal joints)

Further, subheadings under CTH 8483 are:

6.3 It is important to note that the DMF is principally used in the drivetrain of the motor vehicle. It is a critical component that interacts directly with the engine and plays a significant role in a vehicle’s drivetrain system. The function of the flywheel is to store and provide continuous energy. When the engine piston goes from the Bottom Dead Centre to the Top Dead Centre of the engine, technically there is no power being generated. At this moment, to compensate this power loss, flywheel will provide the stored power to the gearbox and crankshaft to rotate. Therefore, for smoother functioning of engine, flywheel is considered as the critical component of the engine.

6.4 It is relevant to refer to the HSN Explanatory Notes (EN) of chapter 8483 which includes “8483 50 – Flywheels and pulleys, including pulley blocks” . The EN of 8483, defines flywheel as “These are relatively large, heavy wheels, usually constructed so that the weight is concentrated near the rim. The inertia of the wheels as it turns tends to resist any change in speed of the motor and so keep the speed constant. Flywheels may in some cases have a grooved or clogged rim, or be fitted with connecting – rods, so that in certain circumstances they can act for the transmission of power (e.g., as a driving pulley or cog wheel)”

6.5 HSN Explanatory Notes (EN) of Chapter 8483 excludes “transmission equipment of the kinds described above (gear boxes, transmission shafts, clutches, differentials, etc.), but which are designed for use solely or principally with vehicle or aircraft (Section XVII); it should, however, be noted that this exclusion does not apply to internal parts of vehicle or aircraft engines- these parts remain classified in this heading.”

It can be seen that the fundamental role of DMF is to store energy and transfer it to the driveline, the component might be viewed as a transmission device specifically engineered for use with the vehicle. However, examination of the description and function of the flywheel provided in para 4.8 above clearly positions it as an integral part of engine system, rather than a separate transmission device. Consequently, it would be appropriate to consider the dual mass flywheel as internal parts of the vehicle’s engine. Reference could also be taken from the US Customs and Board Protection (CBP) Ruling No. N270318 dated 23 November 2015, wherein CBP has recognized items such as damper flywheels as an internal part of an engine and classified the damper flywheel under the Heading 8483

6.6 Further, as per Note 2(a) of Section XVI, “Parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 84.09, 84.31, 84.48, 84.66, 84.73, 84.87, 85.03, 85.22, 85.29, 85.38 and 85.48) are in all cases to be classified in their respective headings; “

6.7 It would be pertinent here to also refer the Explanatory Note 2 of Section XVI which covers chapter 84 of CTA

…………….

(II) Parts

In general, parts which are suitable for use solely or principally with particular machines or apparatus (including those of heading 84.79 or heading 85.43), or with a group of machines or apparatus falling in the same heading, are classified in the same heading as those machines or apparatus subject, of course, to the exclusions mentioned in Part (I)…. Separate headings are, however, provided for:

…..

The above rules do not apply to parts which in themselves constitute an article covered by heading of this Section (other than 84.87 and 85.48); these are in all cases classified in their own appropriate heading even if specifically designed to work as part of a specific machine. This applies in particular to:

…..

…..

(6) Transmission shafts, cranks, bearing housings, plain shaft bearings, gears and gearing (including friction gears and gear-boxes and other speed changers), flywheels, pulleys and pulley blocks, clutches and shaft couplings (heading 84.83)

…..

…..

Considering that the Dual Mass Flywheel (DMF) is attached to the engine and plays a vital role in the engine’s efficient operation, it could be inferred from Section XVI Note 2(a) and the aforementioned explanatory notes, that a flywheel should still fall under heading 8483, even if it is designed to function as a component of the engine.

6.8 As per Note 2 of Section XVII which covers chapter 87 of Customs Tariff Act:

“The expressions “parts” and “parts and accessories” do not apply to the following articles, whether or not they are identifiable as for the goods of this Section:

…..

(e) machines and apparatus of headings 8401 to 8479, or parts thereof other than the radiators for the articles of this Section, articles of heading 8481 or 8482 or, provided they constitute integral parts of engines and motors, articles of heading 8483; “

6.9 Additionally, the explanatory note III of Section XVII, which specifically addresses Parts and Accessories, provides the following:

(III) PARTS AND ACCESSORIES

… …The other Chapters of this Section each provide for the classification of parts and accessories of the vehicles, aircraft or equipment concerned.

It should, however, be noted that these headings apply only to those parts or accessories which comply with all three of the following conditions:

(a) They must not be excluded by the terms of Note 2 to this section (see paragraph (A) below), and

(b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88, and

(c) They must not he more specifically included elsewhere in the Nomenclature.

(B) Parts and accessories excluded by Note 2 to Section XVII

This Note excludes the following parts and accessories, whether or not they are identifiable as for the articles of this Section:

(6) Certain other goods of Chapter 84, e.g:

(a) Taps, cocks, valves and similar appliances (e.g., radiator drainage taps, inner-tube valves) (heading 84.81)

(b) Ball or roller bearings (heading 84.82)

(c) Internal parts of engines or motors (crank shafts, camshafts, flywheels, etc.) falling in heading 84.83 “.

6.10 Besides, it can also be seen that the explanatory note of Chapter 87.08 states:-“Parts and accessories of this heading include:

… … ……..

… … ……..

(F) Other transmission parts and components (for example, propeller shafts, hall-shafts; gears, gearing; plain shaft bearings; reduction gear assemblies; universal joints). But the heading excludes internal parts of engines, such as connecting-rods, push-rods and valvelifters of heading 84.09 and crank shaft, cam shafts and flywheels of heading 84.83.

6.11 From collective reading of tariff heading, section notes along with WCO explanatory notes, it could be inferred that parts which can be classified under the head 8483, would not be classified under the head 8708 as “parts and accessories” of motor vehicles, only if they form integral part of engines and motors.

6.12 As the Dual Mass Flywheel (DMF) is already identified as an integral part of engine above, it will be excluded according to the terms of the Notes and the relevant explanatory note of Section XVII, as well as the explanatory note of Chapter 8708.

6.13 Further, a part to be classified under 8708 must satisfy all the three conditions for “Parts and Accessories” discussed above. However, the subject part “Dual Mass Flywheel” doesn’t satisfy the first condition for Parts and Accessories: “(a) They must not be excluded by the terms of Note 2 to this section”. Therefore, the product “Dual Mass Flywheel’ cannot be classified under CTH 8708.

6.14 Considering the extensive reasoning provided above, it appears that the Dual Mass Flywheel could be classified under heading 8483.50.90 of the Customs Tariff Act, 1975. Further, the ‘Jurisdictional Commissioner of Customs’ in their comments have also submitted that the ‘item Dual Mass Flywheel’ appears to be rightly classifiable under Tariff item 8483 5090. I concur the same.

7. On the basis of foregoing discussions and findings, I reach to the conclusion that the subject goods i.e. ‘Dual Mass Flywheel’ merit classification under Custom Tariff Heading 8483. more specifically under CTI 84835090 of the First Schedule of the Customs Tariff Act, 1975 and I rule accordingly.