CBP Says Tool Sets Avoid Section 301 Tariff Due to Origin of Ratchets

Two hand tool sets that undergo some work in China are not subject to the Section 301 tariffs because the sets are classifiable based on the ratchets, which are of Taiwan origin, CBP said in a Feb. 14 ruling N301954. Apex Tool, through Sandler Travis lawyer Marilyn-Joy Cerny, sought CBP's advice on classification, marking and the country of origin. Unlike another recent ruling involving Cerny and Apex Tool that found the Section 301 tariffs do apply (see 1810100040), CBP said the set can be classified through General Rule of Interpretation (GRI) 3.

Using GRI 3, the tool sets can be classified as the component that gives the essential character, CBP said. Both sets are therefore classifiable in Harmonized Tariff Schedule of the United States subheading 8466.10.0175, 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 duty rate is 3.9 percent. Subheading 8466.10.01 was included on the first list of Section 301 tariffs on goods from China.

While the components undergo some work in China, it isn't enough to change the essential character, CBP ruled. "In this case, the ratchets, extensions and bit drivers are all forged to visible identifiable shapes in Taiwan prior to exportation to China," it said. "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."

CBP has provided guidance as to Section 301 tariffs on sets classified using GRI 3 in a list of frequently asked questions (see 1807240024). "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," CBP said. "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."