CLA-2:OT:RR:CTF:TCM H050503 JRB
Tariff No.: 8201.40.60
Port Director
Port of San Francisco
555 Battery Street
San Francisco, California 94111
RE: Application for further review of protest number 2809-08-100426; 19 U.S.C. §1481(a)(3); 19 C.F.R. Part 141, Subpart F; Sufficiency of Invoice to determine classification pursuant to the Harmonized Tariff Schedule of the United States
Dear Port Director:
This letter is in reply to your memorandum, dated October 27, 2008, forwarding protest and application for further review number 2809-08-100426, dated July 22, 2008, filed by counsel on behalf of its client, Forrest Tool Company (protestant). In addition to the submission included with the protest, this office also considered additional information that was provided by counsel during a teleconference on Thursday, January 13, 2011. The protest is against U.S. Customs and Border Protection’s (CBP) classification and subsequent liquidation of multi-purpose tool heads under the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
This protest arises from two entries that were made on October 31, 2005 and January 12, 2006 and liquidated on January 25, 2008. The products that are the subject of this protest are alleged to be the tool heads that are used with the Max™ Multi-purpose Tool. The heads with the rest of the items that are sold at retail are in a picture below.
The invoices, packing lists, and bills of lading all describe the merchandise being entered as “The Max Multi Purpose Forestry and Agricultural Tool with interchangeable parts.” The protestant, through counsel, filed the instant protest on July 21, 2008, in conjunction with a prior disclosure, indicating that the merchandise being imported consists of the tool heads only. In addition, the protestant, through counsel, indicated to this office in an email dated November 3, 2010, that it has never imported the completed tool but only the tool heads for completion in the United States.
The protestant alleges that the products being imported are axe heads, shovel heads, pick heads, broad pick heads, mattock heads, and combination rake/hoe heads that are packed in bulk in boxes with each box containing only one type of head. These heads are then packed in the United States with the shaft for retail sale in the United States.
The protestant, through counsel, provided pictures of sample tools from its warehouse in July, 2008, along with an affidavit from the warehouseman that this picture is representative of the merchandise that was the subject of the entries. The protestant also submitted copies of invoices for the tool’s bag, retail box, labels, safety clip, and handle.
ISSUE:
Whether the tool heads are classified in subheading 8201.40, HTSUS, as an axe because the heads are a composite good or separately in the subheadings describing the particular tool head?
LAW AND ANALYSIS:
Initially, we note that this matter is protestable pursuant to 19 U.S.C. §1514. The protest was timely filed on July 22, 2008, within 180 days of the liquidation of the two entries. See 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)). In addition, Further Review of Protest 2809-08-100426 was properly accorded because it involves matters previously ruled upon by CBP but facts are alleged which were not considered at the time of the original ruling. See 19 C.F.R. §174.24(c).
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 2 through 6 may then be applied in order. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and mutatis mutandis, to the GRIs 1 through 5.
The 2005 and 2006 HTSUS provisions under consideration in this case are as follows:
8201 Handtools of the following kinds and base metal parts thereof: spades, shovels, mattocks, picks, hoes, forks and rakes; axes, bill hooks and similar hewing tools; secateurs and pruners of any kind; scythes, sickles, hay knives, hedge shears, timber wedges and other tools of a kind used in agriculture, horticulture or forestry:
8201.10.00 Spades and shovels, and parts thereof…
8201.30.00 Mattocks, picks, hoes and rakes, and parts thereof…
8201.40 Axes, bill hooks and similar hewing tools, and parts thereof:
8201.40.60 Other…
Initially, the protestant contends that the merchandise being imported consists of only the tool heads and not the completed tool. Further, the protestant contends that the merchandise should be classified as separate component parts.
The protestant argues that the affidavit from the warehouseman along with the invoices all indicate that tool heads are being assembled at a separate facility in the United States. However, the protestant is unable to prove that the imported products were tool heads. All of the documents provided by the protestant are circumstantial at best because they all provide for bills for merchandise that is related to the completion of the tool but are unable to demonstrate that the imported merchandise consisted of tool heads only. For example, the sworn affidavit from the warehouseman provides that the warehouseman took pictures of tool heads of tools from the protestant in July, 2008, which is roughly two to three years after the entries in this protest. The warehouseman offers no indication that he opened or viewed any of the merchandise in the subject entries. Instead, the only statement he offers is his opinion that the pictures from 2008 are similar to the merchandise imported since 1992. Unfortunately, the invoices, bill of lading, and other documents related to the protested entries all describe the merchandise that is being bought, sold, shipped, and imported as the complete tool.
The protestant also argues that the invoices from its handle supplier when read in conjunction with invoices from its label, tool bag, sheath, retail box, and safety clip suppliers all indicate that the merchandise imported was in fact the tool heads and not the completed tool. In particular, the protestant argues that they have the tool heads imported separately as part of its larger inventory control and that everything is assembled in the United States. Once again, this evidence is circumstantial at best because it only indicates that the protestant purchased additional handles etc. and that the protestant places its tools in retail boxes in the United States. The additional tool handles could simply be for extra inventory, which is similar to the argument that the protestant makes to CBP claiming that it was importing tool heads for inventory management purposes. Therefore, none of the documents provide conclusive evidence that the imported products were tool heads.
The last argument that the protestant makes is that the invoices for the boxes provide evidence that the merchandise in its imported condition consists of the tool heads only because they must then be placed into a box that is of the appropriate size to handle the completed tool with its handle. However, the protestant has not provided any evidence other than the opinion of the warehouseman that the imported boxes were approximately the same size as the box pictured in the July, 2008, photo. Thus, this evidence is circumstantial because the invoices for the boxes only prove that some of the Max tools are put into boxes in the United States. Based on this, CBP finds that the evidence indicates that the imported merchandise is the completed Max Multi-tool with interchangeable parts and not just the interchangeable parts.
Moreover, the commercial invoices attached to the entry documents contradict these allegations. The commercial invoices provided with the entry documents refer to the product being imported as “the Max Multi Purpose Forestry and Agricultural Tool with Interchangeable Parts” and then indicates the number of products in terms of sets valued at a single dollar amount.
Upon the entry of foreign merchandise into the United States importers must file an entry and other supporting documentation with CBP to support their claimed classification, value, etc. See 19 U.S.C. §1484(a). In particular an importer is required to submit an invoice with their entry documents that offer “[a] detailed description of the merchandise, including the commercial name by which each item is known, the grade or quality, and the marks numbers, or symbols under which sold by the seller or manufacturer in the country of exportation, together with the marks and numbers of the packages in which the merchandise is packed”. See 19 U.S.C. §1481(a)(3). CBP promulgated regulations pursuant to 19 U.S.C. §1481 (19 C.F.R. §141.87) which provide that:
Whenever the classification or appraisement of merchandise depends on the component materials, the invoice shall set forth a breakdown giving the value, weight, or other necessary measurement of each component material in sufficient detail to determine the correct duties.
In this case the protestant’s invoice and other supporting documentation describes the merchandise in a manner that would describe the completed tool as it was described in Headquarters Ruling Letter (HQ) 964935, dated May 21, 2001. This prospective ruling classified the complete Max Multi Tool in subheading 8201.40.60, HTSUS, as an axe by application of GRI 3(b). The invoice description does not indicate that the products being imported are the Max Multi Tool’s parts. In fact the description used would indicate the opposite; that the importer is importing the completed tool, which is a tool that comes with interchangeable parts. Recall that the invoice described the merchandise as the tool with interchangeable parts.
Since the protestant is unable to provide sufficient evidence to support its factual allegations that they were importing only the tool heads, we are left with the product description provided on the invoices. The invoice describes the merchandise as the Max Multi Tool with interchangeable parts. We believe that this description indicates that the merchandise being imported is identical to the merchandise described in HQ 964935, dated May 21, 2001. Therefore, we are adopting the classification analysis of that ruling for purposes of this protest.
In particular, the commercial invoices demonstrate that the good that was imported was an axe with handle, a shovel head, a rake head, a hoe head, a mattock head, a broad pick head and a standard pick head. The axe with handle is described by subheading 8201.40, HTSUS. The shovel head is described by subheading 8201.10, HTSUS. The rake, hoe, pick and mattock heads are described by subheading 8201.30, HTSUS. As indicated in HQ 964935, the various heads can be placed onto the tool by connecting it to a shaft on the top of the axe head.
Since, the good is prima facie classifiable in one or more subheadings of the HTSUS, and those subheadings describe only parts of the composite good, we are to apply GRI 3 in accordance with GRI 6. In particular, classification by application of GRI 3(b) should be examined.
GRI 3(b) provides:
3. When, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
Explanatory Note IX to GRI 3(b) provides that a
composite good made up of different components shall be taken to mean not only those in which the components are attached to each other to form a practically inseparable whole but also those with separable components, provided that these components are adapted one to the other and are mutually complementary and that together they form a whole which would not normally be offered for sale in separate parts.
Since this merchandise consists of two or more different components (the axe head, rake head, etc.) and those heads can all be attached to the top of the axe head due to the special adaptation on those heads and together they form a single tool that is not normally sold as separate parts, the good is considered a composite good and thus must be classified pursuant to GRI 3(b).
EN VIII to GRI 3(b) provides:
The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.
There have been several court decisions on "essential character" for purposes of classification under GRI 3(b). See, Conair Corp. v. United States, 29 C.I.T. 888 (2005); Structural Industries v. United States, 360 F. Supp. 2d 1330, 1337-1338 (Ct. Int’l Trade 2005); and Home Depot USA, Inc. v. United States, 427 F. Supp. 2d 1278, 1295-1356 (Ct. Int’l Trade 2006), aff’d 491 F.3d 1334 (Fed. Cir. 2007). “[E]ssential character is that which is indispensable to the structure, core or condition of the article, i.e., what it is.” Home Depot USA, Inc. v. United States, 427 F. Supp. 2d at 1293 quoting A.N. Deringer, Inc. v. United States, 66 Cust. Ct. 378, 383 (1971). In particular in Home Depot USA, Inc. v. United States, the court stated “[a]n essential character inquiry requires a fact intensive analysis.” 427 F. Supp. 2d 1278, 1284 (Ct. Int’l Trade 2006). Therefore, as the court did in Home Depot, we must look to all of the factors described provided by the EN to determine the essential character of the merchandise.
In this case the factors that we have information on are the value of the components and the role of the components in relation to the use of the good. The first factor that we look to is the value of the various components. The shovel head, rake head, and axe head account are the three most expensive heads and account for the largest percentage of the costs. However, the three heads are all approximately the same value making this factor not determinative in the essential character analysis.
The next factor that we look to is the role of the various components in relation to the use of the good. In this case, the axe head is the most important component of the tool because it is the head that contains the piece on which all of the other tool heads attach to the tool. Without this piece no one would be able to attach a different head to the tool so that the person can use the head as a completed shovel etc. that has a handle attached to it. Therefore, we find that the axe head is the head that imparts the essential character of the completed product. Thus, classification of the entire good is appropriate in subheading 8201.40, HTSUS, which provides for axes.
In addition to protesting the classification of the merchandise, the protestant also protests the assessment of antidumping duties as provided for in the Department of Commerce’s Final Results of the Expedited Sunset Review of the Antidumping Order on Heavy Forged Hand Tools from China. See Heavy Forged Hand Tools (i.e., Axes & Adzes, Bars, & Wedges, Hammers & Sledges, and Picks & Mattocks) from the People’s Republic of China: Final Results of the Expedited Sunset Review of the Antidumping Duty Orders, 70 Fed. Reg. 67541 (November 7, 2005). Generally, the role of Customs in the antidumping process is "... simply to follow Commerce’s instructions in collecting deposits of estimated duties and in assessing antidumping duties, together with interest, at the time of liquidation." See HQ H018936, dated February 11, 2008. As noted by the U.S. Court of Appeals for the Federal Circuit in Mitsubishi Electronic America Inc. v. United States, 44 F.3d 973, 976, 977 (Fed. Cir. 1994):
Section 1514(a) applies exclusively to Customs ‘decisions’ within the enumerated categories [and it] expressly refers to ‘decisions of the Customs service.’ Section 1514(a) does not embrace decisions by other agencies. Customs has a mere ministerial role in liquidating antidumping duties under 19 U.S.C. 1514(a)(5). Customs cannot ‘modify [Commerce’s] determinations, their underlying facts, or their enforcement.’
On August 16, 1993, the Department of Commerce determined that the Max Multipurpose Tool with Interchangeable Parts is within the scope of the Heavy Forged Hand Tools order. See Notice of Scope Rulings and Anticircumvention Inquiries, 58 Fed. Reg. 59991 (November 12, 1993). Since we have determined that the product as imported is the completed Max Multipurpose Tool, CBP must assess the antidumping duty in accordance with the Department of Commerce’s instructions in Message 7310202. See Message 7310202 to the Directors of Field Operations and Port Directors regarding the Liquidation Instructions for Heavy Forged Hand Tools, Finished or Unfinished, with or without Handles (Axes & Adzes) from China, dated November 6, 2007.
Finally, the protestant protested the customs valuation of the entries claiming that the value of each component head should be broken out so that the ad valorem rates for antidumping order as well as the duty rates under the HTSUS are assessed on the costs of each individual head. However, this argument is based on the proposition that the good as imported consists of the individual tool heads only and not the completed tool. As we determined above, the good as imported is the complete Max Multitool because that is what is listed on the commercial invoices. Further, 19 U.S.C. §1401a provides that the transaction value of the merchandise less costs for freight and insurance shall be used in determining the customs value of the merchandise. Since the transaction value of the good is the single value provided on the invoice and the protestant has provided no evidence to indicate that any other value should be used, we find that value as entered is the correct customs value.
HOLDING:
By application of GRIs 6 and 3(b) the Max MultiTool is classified in subheading 8201.40, HTSUS, more specifically in subheading 8201.40.60, HTSUS, which provides for “[h]andtools of the following kinds and base metal parts thereof: spades, shovels, mattocks, picks, hoes, forks and rakes; axes, bill hooks and similar hewing tools; secateurs and pruners of any kind; scythes, sickles, hay knives, hedge shears, timber wedges and other tools of a kind used in agriculture, horticulture or forestry: [a]xes, bill hooks and similar hewing tools, and parts thereof: [o]ther…”. The 2005 and 2006 column one, general rate of duty, is 6.2 percent ad valorem.
Further, the entries that are the subject of this protest were properly liquidated in accordance with the scope determination issued by the Department of Commerce on August 16, 1993.
Finally, since there is no evidence to indicate that any value other than the transaction value of the merchandise should be used to determine the customs value of the merchandise the appropriate customs value is the value provided by the protestant on its entry summary (CBP Form 7501).
You are instructed to DENY the protest in full. In accordance with Sections IV and VI of the CBP 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 or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office International Trade, 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,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division