CLA-2-84:OT:RR:NC:N1:104
Lawrence M. Friedman
Barnes, Richardson & Colburn
303 East Wacker Drive Suite 305
Chicago, IL 60601
RE: The country of origin of a torque wrench
Dear Mr. Friedman:
In your letter dated November 11, 2019, you requested a country of origin ruling on behalf of your client, Apex Tool Group (Apex).
The subject torque wrench, model number H2DTWA, is a specialized form of a socket wrench used in applications where it is critical to apply the proper amount of force to a bolt head, nut, or other fastener. It is made of alloy steel and has a torque range of 50 to 250 Foot Pounds.
The applicable subheading for the torque wrench, model number H2DTWA, will be 8466.10.0175, Harmonized Tariff Schedule of the United States (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.
You indicate that the raw steel material originates in Mexico and the torque wrench head is produced by hot forging from a 24mm steel bar (SAE 6140 grade). After forging, the head is shaped and machined to remove imperfections from the forging process. Once the forging is properly shaped to specification, it is sandblasted to produce the required surface smoothness. Next, the torque wrench head is plated with chrome to prevent corrosion. The second phase consists of components from China such as the handle, grip, springs, etc. to be assembled with the head in Mexico. The manufacturing process in Mexico includes: (1) assemble head with components; (2) assemble spring tube with components; (3) assemble sleeve and handle; (4) install adjusting screw and preset; (5) assemble handle to spring tube; (6) assemble head to spring tube; (7) install in cycling machine; (8) remove from cycling machine; (9) pre-set and test various torque readings; (10) final test and certification; and (11) install in blow mold case.
NAFTA
General Note (GN) 12(b), HTSUS, sets forth the criteria for determining whether a good which includes content from both a NAFTA country (Mexico) and a non-NAFTA country (China), is an “originating good” under the NAFTA, and thereby qualifies for preferential tariff treatment. The NAFTA rules of origin are based on a tariff-shift method and/or the regional content method. In this case, to be an “originating good” the torque wrench must be transformed in the territory of Mexico pursuant to General Note 12 (b)(ii)(A), HTSUS, which states:
Except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such good undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein.
Chapter 84, Note 182: A change to subheading 8466 from any other heading.
The components from China, which are classified outside of heading 8466, HTSUS, are imported to Mexico where they are assembled to the Mexico-origin torque wrench head to complete the final torque wrench tool. As these assembly operations satisfy the tariff shift rule, the completed torque wrench is eligible for NAFTA preferential duty treatment.
Country of Origin
The country of origin of the torque wrench will be determined in accordance with the rules set forth in 19 C.F.R. § 102.11 (goods other than textile and apparel products covered by Section 102.21). Section 102.11(a) provides that the country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.
As the subject merchandise is not wholly obtained or produced in a single country, Rule (1) of Section 102.11(a)(1) is inapplicable.
As the subject merchandise is not produced exclusively from domestic materials, Rule (2) of Section 102.11(a)(2) is inapplicable. Accordingly, Rule (3) applies.
Section 102.20 sets forth specific rules by tariff classification. The pertinent tariff shift rule for subheading 8466.10, states:
A change to subheading 8466.10 through 8466.94, other than a change to parts of water- jet cutting machines of subheading 8466.93, from any other heading outside that group, except from heading 8501 when resulting from simple assembly[.]
As each of the components (which fall outside of Chapter 84) assembled with the torque wrench head will undergo a change in tariff classification as specified in 102.11(a)(3), the country of origin of the imported finished article will be Mexico.
Trade Remedy
In your letter, you also request a determination on the applicability of Section 301 trade remedies for the torque wrench.
As stated in HQ 735009 dated July 30, 1993, “The country of origin is the country where the article last underwent a “substantial transformation”, that is, processing which results in a change in the article's name, character, or use”. In addition, the court has held that “A substantial transformation occurs when an article emerges from a manufacturing process with a name, character, and use that differs from the original material subjected to the processing.” However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred.
In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, all factors such as the components used to create the product and manufacturing processes that these components undergo are considered in order to determine whether a product with a new name, character and use has been produced. No one factor is decisive. Assembly operations that are minimal will generally not result in a substantial transformation.
Therefore, based upon the facts presented, it is the opinion of this office that the torque wrench head manufacturing operations performed in Mexico result in a substantial transformation of the raw steel into a new and different article of commerce with a new name, character, and use. As such, the subject torque wrench would be considered a product of Mexico for origin purposes and it is not subject to the Section 301 trade remedies.
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 Denise Hopkins at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division