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HQ 088304


February 15, 1991

CLA-2 CO:R:C:M 088304 JMH

CATEGORY: CLASSIFICATION

TARIFF NO.: 8207.90.60

Mr. Joseph L. Giumentaro
Ameri-Can Customhouse Brokers, Inc.
Peace Bridge Plaza Warehouse
Buffalo, New York 14213

RE: Power tool kit; magazine screwdriver, screw gun, adaptors, wrenches, bits, hand screwdriver, fitted steel carrying case; set; United States-Canada Free Trade Agreement; country of origin; marking; T.D. 91-7

Dear Mr. Giumentaro:

Your October 31, 1990, request for a classification ruling on behalf of Quik Driving Fastening Systems of Port Sydney, Ontario, for certain magazine screwdrivers and screw guns and their accessories was referred to this office for a reply.

FACTS:

The article in question is a power tool kit, model QD 2000, imported from Canada. This kit includes the following items with their country of origin and selling price:

1. A magazine screwdriver, Germany, $199. 2. A 5 amp screw gun, model 2057, United States, $80. 3. Adaptors and wrenches for attaching the magazine to the screw gun, Canada, $6.65.
4. BS 2 bits, Canada, $4.30.
5. A non-power hand screwdriver, Canada, $3. 6. A fitted steel carrying case, United States, $32.05.

All of the above articles are packaged together without further processing in Canada. This kit allows for the electrical driving of various sizes and types of screws. The magazine is inserted into the screw gun thereby allowing rapid fire insertion of screws into the workpiece. The rapid fire magazine screwdrivers is designed for use in applications such as drywall, subfloor, decks, sheet metal and panel assemblies.

ISSUE:

Issue 1: What is the appropriate classification for the power tool kit, model QD 2000?

Issue 2: Is the power tool kit eligible for treatment under the United States-Canada Free Trade Agreement ("CFTA")?

Issue 3: What country of origin markings are required?

LAW AND ANALYSIS:

Issue 1: What is the appropriate classification for the power tool kit, model QD 2000?

The classification of merchandise under the HTSUSA is governed by the General Rules of Interpretation ("GRIs"). GRI 1, HTSUSA, states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and...according ..to the following provisions." Since there are six different items in the power tool kit, there are likely to be six possible headings to be considered. When an article is classifiable in two or more headings it must be classified in accordance with GRI 3, one of the "following provisions" mentioned in GRI 1.

GRI 3(a), HTSUSA, provides that the heading which most specifically describes the article in question is preferred and headings for goods in a set are to be considered equally specific. GRI 3(b) states that:
goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, as far as this criterion is applicable.

The Explanatory Notes to the HTSUSA must be studied in order to determine what is a "set" so to implement these rules. The Explanatory Notes, although not dispositive, are to be looked to for the proper interpretation of the HTSUSA. 54 Fed. Reg. 35127, 35128 (August 23, 1989). The Explanatory Note for Rule 3(b) gives a three part test for "goods put up in sets for retail sale." Harmonized Commodity Description and Coding System (HCDCS), Vol. 1, p. 4. The three step definition states:

For the purposes of this Rule, the term 'goods put up in sets for retail sale' shall be taken to mean goods which:

(a) consist of at least two different articles which are prima facie, classifiable in different headings.
(b) consist of products or articles put up together to meet a particular need or carry out a specific activity; and
(c) are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards). (emphasis added)

Since these three steps are listed in the conjunctive, all three must be met. First, the power tool kit contains six items which are prima facie classifiable in different headings. Secondly, the six items are packaged together to carry out the specific activity of driving screws, either slowly or rapidly. Finally, the articles are packaged together when imported in a condition suitable for direct sale to the users without the need for further repacking. Thus, the power tool kit is a set within the meaning of GRI 3.

As a set, the headings which describe each article in the set are equally specific. Therefore, the set cannot be classified according to GRI 3(a) and GRI 3(b) must be utilized. GRI 3(b) requires that the set is classified by the product which gives the set its essential character. The factors which determine essential character will vary between different products.

It is the opinion of this office that the essential character of the power tool kit is imparted by the magazine screwdriver. The magazine confers the rapid fire screwdriving ability to the gun. This ability creates a unique tool that transforms the screwdriver from a quality home workshop tool into an industrial capacity tool. Furthermore, the value of the magazine screwdriver is more than twice the value of any other component. Thus, the essential character of the QD 2000 power tool kit is imparted by the magazine screwdriver.

The magazine screwdriver is an interchangeable tool. Interchangeable tools are described, in accordance with GRI 1, by heading 8207, HTSUSA. The proper classification for the magazine screwdriver is subheading 8207.90.60, HTSUSA, as "Interchangeable tools for handtools, whether or not power-operated, or for machine-tools...Other... Other...Not suitable for cutting metal, and parts thereof...For handtools, and parts thereof..." Since the magazine screwdriver imparts the essential character of the power tool set, subheading 8207.90.60 is also the classification for the entire set, in accordance with GRI 3(b).

Issue 2: Is the power tool kit eligible for treatment under the United States-Canada Free Trade Agreement ("CFTA")?

To be eligible for tariff preferences under the CFTA, goods must be "originating goods" within the rule of origin in General Note 3(c)(vii)(B), HTSUSA. There are two primary means in General Note 3(c)(vii)(B) by which articles imported into the United States may be "goods originating in the territory of Canada." The first method is if the goods are "wholly obtained or produced in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(1). The second method is if the goods are "transformed in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(2).

A product which is "wholly obtained or produced in the territory of Canada and/or United States" is one which is grown, mined, harvested, born and raised in Canada and/or the United States, or otherwise intimately connected to the two countries and their land, air and sea territories as defined in General Note 3(c)(vii)(L), HTSUSA. The power tool set contains a magazine screwdriver that is manufactured in a third country. Since the set contains a foreign article, the QD 2000 is not "wholly obtained or produced in the territory of Canada and/or the United States."

The second method to become an originating good for CFTA purposes is for an article made of foreign materials to be transformed in Canada and/or the United States in accordance with General Note 3(c)(vii)(B)(2). A transformation is evident when a change in tariff classification occurs that is authorized by General Note 3(c)(vii)(R), HTSUSA. In this instance, the magazine screwdriver is classified in subheading 8207.90.60 when it enters Canada. Upon importation to the United States the same magazine screwdriver, now packaged with the other items in the set, remains classified in subheading 8207.90.60 since it imparts the essential character of the set. No change in tariff classification occurs. The magazine screwdriver is not transformed in Canada. Therefore, the magazine screwdriver is not considered to be an originating good. Since the set is classified according to the German magazine screwdriver, the set is not an article originating in the territory of the Canada or the United States. The QD 2000 power tool set is not eligible for tariff treatment under the CFTA.

Issue 3: What country of origin markings are required?

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires that every article (or its container), subject to specified exceptions, imported into the United States shall be
marked to indicate the country of origin to the ultimate purchaser in the United States. The marking must be in English and must legible, indelible, and as permanent as the nature of the article will permit.

The country of origin is generally determined on the basis of substantial transformation. In this regard, 19 CFR 134.1(b) defines country of origin as "the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the 'country of origin' within the meaning of this part." The classification of an article is not necessarily determinative of the country of origin for marking purposes.

The power tool set in question contains six separately identifiable articles imported from three different countries-- Canada, the United States and Germany. In this instance, no further work or material is added to any of the articles while in Canada. The articles are merely packaged together to form the set that is imported into the United States. Mere packaging does not constitute substantial transformation. Since the articles are not substantially transformed in Canada for marking purposes, each article must be separately marked, unless subject to any of the exceptions to marking listed in Part 134 Customs Regulations (19 CFR Part 134). Articles which are products of the United States and are exported and then returned without any advancement in value or improvement in condition need not be marked. See 19 CFR. 134.31. For further information on the country of origin and marking requirements of sets please see T.D. 91-7, 25 Cust. B. & Dec. 6 (January 16, 1991).

HOLDING:

The QD 2000 power tool kit is considered a set for classification purposes under GRI 3. In accord with GRI 3(b), the essential character of the set is imparted by the magazine screwdriver. The magazine screwdriver is described, in accordance with GRI 1, by heading 8207. The proper classifications for the magazine screwdriver, and subsequently the set, is subheading 8207.90.60, HTSUSA, as "Interchangeable tools for handtools, whether or not power-operated, or for machine-tools...Other... Other...Not suitable for cutting metal, and parts thereof...For handtools, and parts thereof..." Since the magazine screwdriver imparts the essential character of the power tool set, subheading 8207.90.60 is also the classification for the entire set, in accordance with GRI 3(b).

The QD 2000 power tool kit is not eligible for tariff treatment under the CFTA.

The articles in the QD 2000 power tool kit which are not manufactured in the United States must be individually marked with their country of origin. The items within the set which are manufactured in the United States need not be marked if they are not substantially transformed while in Canada.

Sincerely,

John Durant, Director
Commercial Rulings Division

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