OT:RR:CTF:VS H299857 RMC
Marilyn-Joy Cerny
Sandler, Travis & Rosenberg, P.A.
24 Smith Street, Building 2, Suite 102
Pawling, NY 12564
Re: Reconsideration of NY N298532, dated July 26, 2018; Section 301 Measures; Toolsets
Dear Ms. Cerny:
This is in response to your correspondence, dated August 7, 2018, and subsequent submission of August 20, 2018, in which you request reconsideration of New York Ruling (“NY”) N298532, dated July 26, 2018. In response, we are providing the following information letter.
The merchandise at issue is a Chinese-origin “129-piece Mechanic’s toolset.” You provided the following information on the tools in the set:
QUANTITY
COMPONENT
HTSUS
COL. 1 DUTY RATE
1
60-tooth quick-release ratchet drive
8466.10.1075
3.9%
2
Extensions
8466.10.0175
3.9%
1
3/8-inch to 1/4-inch adapter
8466.10.0175
3.9%
2
Spark plug sockets
8204
9%
24
Twelve-point sockets (SAE and metric)
8204
9%
1
Disk screwdriver
8205
6.2%
14
SAE and metric long-pattern combination wrenches
8204
9%
1
Magnetic bit driver
8466.10.0175
3.9%
58
Bits
8207
3.7%
26
SAE and metric hex keys
8204
9%
The issue presented in NY N298532 was the tariff classification of the toolset. NY N298532 concluded that the toolset is properly classified in 8206.00.00, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “[t]ools of two or more headings 8202 to 8205, put up in sets for retail sale.” The general rate of duty applicable to products of subheading 8206.00.00, HTSUS, is “[t]he rate of duty applicable to the article in the set subject to the highest rate of duty.”
Your request for reconsideration does not dispute the tariff classification of the product. Instead, you argue that the applicable rate of duty was calculated incorrectly.
The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25% on certain Chinese imports pursuant to its authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(b), HTSUS. Among the subheadings listed in U.S. Note 20(b) of Subchapter III, Chapter 99, HTSUS, is 8466.10.0175, HTSUS. The toolset at issue in NY N298532 contains five items classified in subheading 8466.10.0175, HTSUS: one 60-tooth quick-release ratchet drive, two extensions, one 3/8-inch to 1/4-inch adapter, and one magnetic bit driver. Thus, although the toolset itself is not classified in a provision listed in U.S. Note 20(b), the toolset contains items that are listed in U.S. Note 20(b) to Subchapter III of Chapter 99, HTSUS.
In accordance with the application of the duty rate in subheading 8206.00.00, HTSUS to “[t]he rate of duty applicable to the article in the set subject to the highest rate of duty,” NY N298532 considered the duty rate of each article in the set. With respect to the items classified in subheading 8466.10.0175, HTSUS, NY N298532 considered the column one rate of 3.9% duty plus the additional 25% Section 301 tariff. Accordingly, NY N298532 concluded that the rate of duty applicable to the entire set was 28.9%.
Your submissions present several arguments in support of your contention that NY N298532 improperly extended the Section 301 measures to sets classified in subheading 8206.00.00, HTSUS. You argue that the approach articulated in NY N298532 violates the statutory procedures for imposing Section 301 measures, that U.S. Customs and Border Protection (“CBP”) lacks authority to impose Section 301 measures on products not specifically identified by USTR, and that CBP’s imposition of Section 301 measures contravenes its own policies and past treatment of sets. In your supplemental submission, you also note that USTR rejected the importer’s request to exclude the tool sets from Section 301 measures noting that subheading 8206.00.00 HTSUS was not listed in the Federal Register among the provisions subject to additional duties.
The approach in NY N298532 is consistent with CBP’s policies and past practices. In your submissions, you cite to the CBP Informed Compliance Publication entitled “Hand Tool Sets Classified Within Subheadings 8205.90.00 and 8206.00.00,” CBP Section 301 Trade Remedies Frequently Asked Questions, and Treasury Decision (“T.D.”) 91-7.
The Informed Compliance Publication addresses both the classification of such sets as well as the determination of the applicable rate of duty. The Informed Compliance Publication states that:
In order to determine the rate of duty for the items classified under subheadings 8205.90 and 8206.00, the rate of duty for all the items within that specific set must be determined. The rate of duty for the entire set is the rate of duty that is applicable to that article in the set subject to the highest rate of duty.
The approach in NY N298532 follows this guidance. This guidance is also repeated on the CBP website in “CBP Section 301 Trade Remedies Frequently Asked Questions,” available at https://www.cbp.gov/trade/programs-administration/entry-summary/section-301-trade-remedies/faqs (last visited August 27, 2018). Under the question “How are the Section 301 duties assessed in respect to sets packaged for retail sale, which contain components covered by the Section 301 remedy,” you quote the second sentence of CBP’s response, which states:
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.
The first sentence of the response, however, makes clear that the second sentence applies to sets classified in accordance with General Rule of Interpretation (“GRI”) 3:
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.
Here, in contrast, the set is classified by reference to GRI 1. See Informed Compliance Publication “Hand Tool Sets Classified Within Subheadings 8205.90.00 and 8206.00.00” (“Subheading 8206.00.00, HTSUS, allows for tools that are put up in sets suitable for retail sale to be classified under this one subheading based on GRI 1 . . .”). This guidance therefore does not address the situation presented. Furthermore, the above reasoning is inapplicable to this set since it is unlike other sets where the duty rate used is that of the component that imparts the essential character, here the duty rate is determined based on the article with the highest duty rate and the entire set must be taken into account. In Uniden Corp. v. United States, 120 F. Supp. 2d 1091 (CIT 2000), in determining the applicability of preferential tariff treatment to a set under the Generalized System of Preferences, the court stated that “the aim of the ‘product of’ test is not to determine . . . whether a fraction or a part of an eligible article is a product of the [Beneficiary Developing Country], but rather to see if the entire ‘eligible article’ is a product of the [Beneficiary Developing Country].” Here, no duty rate could be determined if we were to ignore the component with the highest duty rate. This duty rate is imposed by Chapter 99, HTSUS. As set forth in U.S. Note 1 and 2, Chapter 99, HTSUS:
1. The provisions of this chapter relate to legislation and to executive and administrative actions pursuant to duly constituted authority, under which:
a. One or more of the provisions in chapters 1 through 98 are temporarily amended or modified; or.
b. Additional duties or other import restrictions are imposed by, or pursuant to, collateral legislation.
2. Unless the context requires otherwise, the general notes and rules of interpretation, the section notes, and the notes in chapters 1 through 98 apply to the provisions of this chapter.
Accordingly, CBP cannot ignore the additional duty imposed by Chapter 99 in determining what is the highest duty rate, by examining what the duty rate would have been absent the additional duty imposed by Chapter 99, and then determining if that component is subject to the 301 provisions.
You also cite to T.D. 91-7, which is inapplicable to this case. Specifically, you cite the following language:
Thus, as is true in regard to all imported articles, the first step in determining whether sets or mixed or composite goods are entitled to special duty treatment under one or more of the tariff preference programs is to ascertain the proper classification of the article pursuant to the GRI’s. If, for example, a particular set is classified by reference to GRI 3(b), the item of the set which imparts its essential character determines the classification of the entire set. If the “Special” subcolumn opposite the subheading under which the set is classified contains a special duty rate, then the entire set would be entitled to that special rate, assuming compliance with the program's legal requirements. In this regard, see HRL 084709 dated August 24, 1989, involving composite goods and GSP eligibility. However, where no such duty rate is indicated for that subheading, the entire set would be ineligible for the tariff preference program, even though items in the set (not imparting the set’s essential character) would be eligible if classified separately.
This language is contained in a section addressing “the manner in which eligibility for the special tariff treatment programs (e.g., Generalized System of Preferences (GSP) and Caribbean Basin Initiative (CBI)) is determined for sets, mixtures and composite goods.” This case does not involve a “special tariff program” as that term is used in T.D. 91-7. Furthermore, as noted above, this case involves a set classified by reference to GRI 1. See also Uniden, 120 F. Supp. at 1110 (stating that applying T.D. 91.7 to GRI 1 articles “would violate the plain language of T.D. 91-7, which by its terms is limited in application to GRI 3 articles.”).
Finally, we disagree with your assertion that CBP is improperly extending the Section 301 measures. We do not dispute that, if entered separately, and as mentioned in T.D. 91-7, each item would be subject to the column one rate of duty associated with its tariff classification, with only the items specifically listed in U.S. Note 20(b) of Subchapter III, Chapter 99, HTSUS, subject to the 301 measures. Here, however, the items are entered under 8206.00.00, HTSUS, as part of a set. The entire set is subject to “[t]he rate of duty applicable to the article in the set subject to the highest rate of duty.” Here, that article is subject to a 28.9% rate of duty. Therefore, under the plain terms of the provision, the entire set is subject to a 28.9% rate of duty.
For all of the aforementioned reasons, we find that the calculated duty rate for the mechanic’s toolset was correct. We therefore affirm NY N298532, dated July 26, 2018.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division