Classification as a Set Within a Subheading Not Subject Section 301 Tariffs
Doesn’t Mean that it won’t be subject to the 301 Tariffs!
A toolset that is classifiable under a subheading not covered by the Section 301 tariffs is still subject to those tariffs because one of the components is subject to the tariffs, CBP said in a recent ruling (HQ H299857), issued following a request for reconsideration.
At issue in the ruling was a 129-piece mechanic’s toolset from China, which CBP had initially ruled to be a set classified in 8206.00.00 as “tools of two or more headings 8202 to 8205, put up in sets for retail sale.” CBP further ruled that the duty rate for that subheading is based on the “rate of duty applicable to the article in the set subject to the highest rate of duty”. The filing attorney agreed with the classification but argued “that the applicable rate of duty was calculated incorrectly.”
CBP had calculated the rate of duty based on the rate for 8466.10.0175, HTSUS, which applied to five items in the set. CBP determined that the rate was 28.9 percent, based on the regular 3.9 percent rate plus the Section 301 25 percent tariff.
Even though CBP’s frequently asked questions on Section 301 tariffs state that if a set is classified outside the tariffs, the 301 duties won’t be assessed on individual components, the FAQs also explain that those instructions only apply “to sets classified in accordance with General Rule of Interpretation (‘GRI’) 3.” According to CBP, this set is instead classified by reference to GRI 1: 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.
CBP said it can’t “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.”