CLA-2-84:OT:RR:NC:N1:104
Ms. Marilyn-Joy Cerny
Sandler, Travis & Rosenberg, P.A.
24 Smith St. Building 2, Suite 102
Pawling, NY 12564
RE: The tariff classification of Mechanics Handtool Sets and Tools from multiple countries
Dear Ms. Cerny:
In your letter dated November 15, 2018 on behalf of Apex Tool Group, LLC, you requested a classification, marking and country of origin determination ruling. The submitted sample of the Husky 134-Piece Mechanics Handtool Set (Part No. H134MTS) will be returned to your office.
The Husky 55-Piece Mechanics Handtool Set (Part No. HPT55MTS) consists of 2 ratchets, 12 bits, 36 sockets, 2 extensions and 3 adapters. The Husky 134-Piece Mechanics Handtool Set (Part No. H134MTS) consists of: 3 ratchets, 2 extension bars, 82 sockets, 10 combination wrenches, 1 bit driver, 22 bits and 14 Allen wrenches (aka hex keys). Each tool set will be imported in a plastic fitted blow molded case. You have requested classification on the tool sets packaged and shipped complete to the United States and on the ratchets, extensions and bit drivers packaged and shipped individually to the United States.
General Rule of Interpretation (GRI) 1, Harmonized Tariff Schedule of the United States (HTSUS), states in part that for legal purposes, classification shall be determined according to the terms of the headings, any relative section or chapter notes and, unless otherwise required, according to the remaining GRI’s taken in order. Goods that are, prima facie, classifiable under two or more headings, are classifiable in accordance with GRI 3. GRI 3(a) states that the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings refer to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to the goods, even if one of them gives a more complete or precise description of the good. The headings at issue only refer to part of the items in the set put up for retail sale. As such, they are regarded as equally specific and classification of the set is to be determined by GRI 3(b) or GRI 3(c) taken in the appropriate order in which they are set out in GRI 3. The Husky 55-Piece Mechanics Handtool Set (Part No. HPT55MTS) and the Husky 134-Piece Mechanics Handtool Set (Part No. H134MTS) each consist of at least two dfferent articles that are, prima facie, classifiable in different headings. They consist of articles put together to carry out a specific function (i.e., tightening/fastening), and are put up in a manner suitable for sale directly to the users without repacking. Therefore, these tool sets are within the term “goods put up in sets for retail sale.” GRI 3(b) states in part that goods put up in sets for retail sale, which cannot be classified by reference to GRI 3(a), are to be classified as if they consisted of the component which gives them their essential character. Inasmuch as no essential character can be determined for the imported mechanic’s tool set, GRI 3(b) does not apply. GRI 3(c) states that, if neither GRI 3(a) nor GRI 3(b) applies, the merchandise shall be classified in the heading which occurs last in numerical order among those equally meriting consideration. In this instance, the ratchets are classified in the heading which occurs last in numerical order among those which equally merit consideration, i.e., heading 8466, HTSUS.
In accordance with GRI 3(c), the applicable subheading for the Husky 55-Piece Mechanics Handtool Set (Part No. HPT55MTS) and the Husky 134-Piece Mechanics Handtool Set (Part No. H134MTS) and the individual ratchets, extensions and bit drivers, as described above, will be 8466.10.0175, HTSUS, which provides for “Parts and accessories suitable for use solely or principally with the machines of headings 8456 to 8465, including work or tool holders, self-opening dieheads, dividing heads and other special attachments for the machines; tool holders for any type of tool for working in the hand: Tool holders and self-opening dieheads: Other”. The rate of duty will be 3.9 percent ad valorem.
In your letter, you also request country of origin determinations on the ratchet handles, extensions, bit drivers and complete tool sets. The Husky L8 Ratchet (Part No. H38FPRAT – Husky 3/8” Full Polish Ratchet) undergoes hot forging in Taiwan in order to produce the rough shape of the ratchet. The forged ratchet is exported to China where it undergoes machining, heat treatment, cleaning/polishing, plating, assembly and packaging. The 38EL Extension (Part No. 23112MBAUH2 – Husky 3/8” Drive 6” Ball End Extension) and the Husky Magnetic Bit Driver (Part No. A0402314-H2) are cold forged in Taiwan in order to produce the rough shape of the extension and the bit driver. The two forged articles are exported to China where they undergo machining, heat treatment, surface treatment, assembly and packaging. Regarding the bit driver, two additional steps are performed, i.e., injection molding of the handle and assembly (driver and handle press fit together).
In this instance, the “name, character and use” test must be applied in order to determine whether a substantial transformation had occurred. The court has said that “A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use that differs from the original material subjected to the process”.
The court in National Hand Tool Corp. v. United States determined that imported forgings, in that case, were not substantially transformed as (1) the articles had been forged "into their final shape before importation" into the United States and (2) "the form of the components remained the same" after the processes performed in the United States. The court concluded that no substantial change in name, character or use had occurred as a result of the processing performed in the U.S. Likewise, in this case, the ratchets, extensions and bit drivers are all forged to visible identifiable shapes in Taiwan prior to exportation to China. The articles already have their final shape and their use as ratchets, extensions and bit drivers is predetermined prior to processing in China. The articles have the same name both before and after processing in China. In addition, with regard to the press fit assembly operation, the mating of the Taiwanese driver to the Chinese handle does not result in a substantial transformation. Thus, the country of origin for the ratchets, extensions and bit drivers is Taiwan.
In view of the above analysis, the country of origin breakdowns for the tool kits are as follows:
(1) Husky 55-Piece Mechanics Handtool Set (Part No. HPT55MTS): ratchets/Taiwan; extensions/Taiwan; adapters;Taiwan; sockets/China; bits/China, blow-molded plastic tool case/China, and
(2) Husky 134-Piece Mechanics Handtool Set (Part No. H134MTS): ratchets/Taiwan; bit drivers/Taiwan; extensions/Taiwan; sockets/China; bits/China; combination wrenches /China; Allen wrenches (aka hex keys) /China; blow-molded plastic tool case/China.
Effective July 6, 2018, the Office of the United States Trade Representative (USTR) imposed an additional tariff on certain products of China classified in the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(b), HTSUS. Subsequently, USTR imposed additional tariffs, effective August 23, 2018, on products classified under the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(d), HTSUS. For additional information, please see the relevant Federal Register notices dated June 20, 2018 (83 F.R. 28710) and August 16, 2018 (83 F.R. 40823). Products of China that are provided for in subheading 9903.88.01 or 9903.88.02 and classified in one of the subheadings enumerated in U.S. note 20(b) or U.S. note 20(d) to subchapter III shall continue to be subject to antidumping, countervailing, or other duties, fees and charges that apply to such products, as well as to those imposed by the aforementioned Chapter 99 subheadings.
Guidance in a situation where sets packaged for retail sale are involved is provided on the CBP website in “CBP Section 301 Trade Remedies Frequently Asked Questions”. The answer to “How are the Section 301 duties assessed in respect to sets packaged for retail sale, which contain components covered by the Section 301 remedy,” reads, in pertinent part, as follows:
When importing goods put up in sets for retail sale (in accordance with General Rule of Interpretation 3) that contain articles subject to the Section 301 remedy, if the product that imparts the essential character to the set (i.e. the HTSUS provision under which the entire set is classified) is covered by the Section 301 remedy, then the entire set will be subject to the additional 25% duties.
If the HTSUS provision under which the entire set is classified is not covered by the Section
301 remedies, but the set contains components that are classified in a subheading covered by the 301 list, the 301 duties will not be assessed on the individual components.
Following this guidance, the product, i.e., the ratchet, that (1) imparts the essential character to the tool sets, and (2) by which the HTSUS provision under which the complete sets are to be classified is a product of Taiwan. Thus, the instant tool sets will not be subject to the Section 301 remedy.
The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. As provided in section 134.41(b), Customs Regulations (19 CFR 134.41(b)), the country of origin marking is considered conspicuous if the ultimate purchaser in the U.S. is able to find the marking easily and read it without strain. With regard to the permanency of a marking, section 134.41(a), Customs Regulations (19 CFR 134.41(a)), provides that as a general rule marking requirements are best met by marking worked into the article at the time of manufacture. For example, it is suggested that the country of origin on metal articles be die sunk, molded in, or etched. However, section 134.44, Customs Regulations (19 CFR 134.44), generally provides that any marking that is sufficiently permanent so that it will remain on the article until it reaches the ultimate purchaser unless deliberately removed is acceptable.
As the individual components of the Husky 55-Piece Mechanics Handtool Set (Part No. HPT55MTS) and the Husky 134-Piece Mechanics Handtool Set (Part No. H134MTS) do not lose their identity as a result of being packaged together in the blow-molded plastic cases, the external packaging of the sets should be marked in a conspicuous manner to indicate the country of origin of each individual component contained within the handtool sets. Accordingly, the sets should be marked “Packaged in China with goods from Taiwan and China”.
The separately packaged ratchets, extensions and bit drivers should be marked “Made in Taiwan/Packaged in China”.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at https://hts.usitc.gov/current.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Patricia O’Donnell at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division