OT:RR:CTF:VS H301769 RMC

Marilyn-Joy Cerny
Sandler, Travis & Rosenberg, P.A.
24 Smith Street, Building 2, Suite 102
Pawling, NY 12564

Re: Section 301 Measures; Toolsets

Dear Ms. Cerny:

This is in response to your letter dated October 4, 2018, on behalf of Apex Tool Group, LLC (“Apex”). In your letter, you requested a binding ruling pursuant to 19 C.F.R. Part 177 on the rate of duty applicable to toolsets that will be imported from China.

FACTS:

The product at issue is described as a “170 Piece Mechanic’s Tool Set (Model No. CTK170MPN).” A picture submitted with the ruling request shows that the tools will be imported packaged together inside a plastic blow-molded case. According to the information provided, the toolset will contain the following components:

Quantity Component Classification 2018 Column 1 Duty Rate  3 Ratchets 8466.10.0175 3.9%  4 Extensions 8466.10.0175 3.9%  1 Adapter 8466.10.0175 3.9%  1 Universal Joint 8466.10.0175 3.9%  72 Sockets 8204.20.0000 9%  3 Screwdrivers 8205.40.0000 6.2%  12 Combination Wrenches 8204.11.0030 9%  1 Bit Driver 8466.10.0175 3.9%  45 Bits 8207.90.6000 3.7%  24 Hex Keys 8204.11.0060 9%  1 Needle Nose Pliers 8203.20.6030 $0.12/doz + 5.5%  1 Adjustable Wrench 8204.12.0000 9%  1 Slip-Joint Pliers 8203.20.4000 12%   It is stated that the toolset is classified, pursuant to General Rule of Interpretation (“GRI”) 1, in subheading 8206.00.00, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “Tools of two or more headings of 8202-8205, put up in sets for retail sale.”

ISSUE:

What is the rate of duty applicable to the 170-piece mechanic’s toolset from China?

LAW AND ANALYSIS:

Under the terms of subheading 8206.00.00, HTSUS, the general rate of duty is “[t]he rate of duty applicable to the article in the set subject to the highest rate of duty.” However, beginning on July 6, 2018, the United States Trade Representative (“USTR”) has imposed additional ad valorem duties on certain Chinese imports pursuant to its authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). As of the date of this ruling, USTR has published three lists of Chinese-origin products covered by the Section 301 measures.

On July 6, 2018, USTR implemented Section 301 measures on products of China listed in U.S. Note 20(b) of Subchapter III, Chapter 99, HTSUS (“List 1”). Products of China on List 1 are subject to an additional 25% ad valorem rate of duty. On August 23, 2018, USTR implemented Section 301 measures on products of China listed in U.S. Note 20(d) of Subchapter III, Chapter 99, HTSUS (“List 2”). Products of China on List 2 are subject to an additional 25% ad valorem rate of duty. On September 24, 2018, USTR implemented Section 301 measures on products of China listed in U.S. Note 20(f) of Subchapter III, Chapter 99, HTSUS (“List 3”). Products of China on List 3 are subject to an additional 10% ad valorem rate of duty, rising to 25% on January 1, 2019. See 83 Fed. Reg. 47974.

Each tool in the toolsets at issue is covered by the Section 301 measures. The applicable rates of duty and Section 301 duties for each tool are listed below:

Component Classification Column 1 Duty Rate Section 301 Duty Rate  Ratchets 8466.10.0175 3.9% 25%  Extensions 8466.10.0175 3.9% 25%  Adapter 8466.10.0175 3.9% 25%  Universal Joint 8466.10.0175 3.9% 25%  Sockets 8204.20.0000 9% 10%  Screwdrivers 8205.40.0000 6.2% 10%  Combination Wrenches 8204.11.0030 9% 10%  Bit Driver 8466.10.0175 3.9% 10%  Bits 8207.90.6000 3.7% 10%  Hex Keys 8204.11.0060 9% 10%  Needle Nose Pliers 8203.20.6030 $0.12/doz + 5.5% 10%  Adjustable Wrench 8204.12.0000 9% 10%  Slip-Joint Pliers 8203.20.4000 12% 10%   In HQ H299857, dated September 6, 2018, we explained that, for purposes of determining which article in the set is subject to the highest rate of duty, any applicable Section 301 measures must be taken into account. That case concerned a 129-piece toolset imported by Apex and classified pursuant to GRI 1 in the same provision as the merchandise here (8206.00.00, HTSUS). The set contained ten components that were subject to Column 1 duty rates of 3.9% to 9%; however, only four of those components were subject to an additional 25% ad valorem rate of duty under List 1 of the Section 301 measures. In identifying which of the four components was subject to the highest rate of duty, the Column 1 duty rate and any applicable Section 301 measures were considered. As a result, the entire set was subject to a 28.9% rate of duty based on the 3.9% ad valorem rate of some components plus the 25% ad valorem Section 301 measures applicable to those components.

Since HQ H299857 was decided, USTR published List 3, which includes additional products subject to Section 301 measures of 10% ad valorem, which was scheduled to increase to 25% on January 1, 2019. That increase was subsequently postponed and then put off until further notice. See 84 FR 7966. List 3 includes goods of subheading 8206.00.00, HTSUS, which is the classification of the set itself. The issue in this case is the interplay between the applicable rate of duty determined according to “the article in the set subject to the highest rate of duty” consistent with the terms of 8206.00.00, HTSUS and our decision in H299857, and the additional 10% ad valorem Section 301 measure that List 3 imposes on the set itself.

Apex argues that the 28.9% duty calculated in accordance with HQ H299857 is the sole rate of duty applicable to the merchandise. Apex further asserts that adding the 10% ad valorem duty from List 3 to the 28.9% duty calculated in accordance with HQ H299857 would result in an “anomalous result” of a 38.9% duty rate for the merchandise that USTR did not intend.

As in HQ H299857, our analysis here focuses on the language of the provision. The provision in which the set is classified, subheading 8206.00.00, HTSUS, provides that the rate of duty should be“[t]he rate of duty applicable to the article in the set subject to the highest rate of duty.” As explained above, that rate of duty is currently 28.9%. The Section 301 measures applicable to the set itself, however, state that “[a]ll products of China that are classified in the subheadings enumerated in U.S. note 20(f) to subchapter III are subject to the additional 10 percent ad valorem rate of duty imposed by heading 9903.88.03.”

The inclusion of “additional” in the text of this provision indicates that the 10% Section 301 measures are added to any other duties owed on the merchandise. Because the language of these provisions is clear, we find Apex’s argument that USTR did not intend for such a high rate of duty to apply to the product unpersuasive. Therefore, in this case, the text directs us to apply a 38.9% rate of duty to the set (28.9% + 10%).

HOLDING:

The rate of duty applicable to the 170-piece mechanic’s toolset from China is currently 38.9%.

Sincerely,

Monika R. Brenner, Chief
Valuation & Special Programs Branch