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HQ 563322




October 26, 2005

CLA-2 RR:CTF:VS 563322 KSG

CATEGORY: CLASSIFICATION

Melvin S. Schwechter, Esq.
Brad Brooks-Rubin, Esq.
Leboeuf, Lamb, Greene & MacRae, LLP
125 West 55th Street
New York, NY 10019-5389

RE: Eligibility for UAFTA Preference for fastener repair kits

Dear Mr. Schwechter and Mr. Brooks-Rubin:

This is in response to your letters dated July 28, 2005, and September 22, 2005, requesting a binding ruling on behalf of Alcoa Global Fasteners, Inc. (“Alcoa”), as to the classification of certain imported fastener repair kits and whether they would qualify for preferential tariff treatment under the United States-Australia Free Trade Agreement (“UAFTA”). Samples were submitted with your request.

FACTS:

This case includes four (4) fastener repair kits that Alcoa plans to import into the U.S. The kits include a varying number of steel wire inserts, installation tools, and recoil STI taps.

INSERTS

The wire inserts are used in the repair of stripped or damaged internal threads. They are also used to create a stronger thread assembly in original equipment, especially in lighter alloys. The inserts are made of stainless steel and are helically wound, appearing as wound wire coils.

Typically, the inserts are wound by means of a special tool (such as threaded mandrel or collar-type tool) into a specially tapped hole, which is smaller than the outside diameter of the insert. The wire insert is elongated during the installation process and its outside diameter is compressed so that it anchors into the parent material. A fastener, such as a screw, is inserted into the hole. The wire insert serves to secure the screw more tightly and to prevent its thread from stripping.

The inserts are of Australian origin and their value relative to the total value of the kits ranges from 1.7% to 12%. The inserts are stated to be classified in subheading 7318.29 of the Harmonized Tariff Schedule of the United States (“HTSUS”).

INSTALLATION TOOL

The tool is used to install the wire inserts. The tool is manufactured from low carbon steel and generally, will work for multiple thread forms and sizes. The tools are of Australian origin and their value relative to the total value of the kits range from 6.8% to 40.3%. The tools are stated to be classified in subheading 8205.59.5560, HTSUS.

TAP

The taps are special taps used to prepare holes for the installation of steel wire inserts. The recoil screw thread insert (STI) taps is manufactured from high speed steel and its general range is 2-56 through 1 ½” diameter and equivalent metric sizes. The taps used in the four kits are either from South Korea or the United Kingdom. Their value relative to the total value of the kits ranges from 19.6% to 55.5%. The taps are stated to be classified in subheading 8207.40.3000, HTSUS.

Kit style no. 25606 contains three inserts, one tap from South Korea, and an installation tool.

Kit style no. 33004 contains 40 inserts, 5 installation tools and 5 taps from the U.K.

Kit style no. 33046 contains 36 inserts, one tap from South Korea and one installation tool.

Kit style no. 33060 contains 10 inserts, one tap from the U.K. and one installation tool.

ISSUES:

What is the proper tariff classification of the fastener repair kits?

Whether the imported fastener kits described above are eligible for preferential tariff treatment under the U.S.- Australia FTA.

LAW AND ANALYSIS:

I. Tariff Classification of the Fastener Repair Kits

Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRI). GRI provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI are then applied taken in order. The Explanatory Notes (EN) to the Harmonized Commodity Description and Coding System, which represent the official interpretation of the tariff at the international level, facilitate classification under the HTSUS by offering guidance in understanding the scope of the headings and GRI.

In considering the headings eligible for classification of these goods, we note that the components which permit the kits to perform their function fall into three different headings of the HTSUS. For purposes of classification, the packaging is not considered. There is no specific heading that refers to all the components of the kits. Since each of the headings refer to only a part of the article, reference is made to GRI 3 which, pursuant to GRI 2, provides that goods classifiable under two or more headings shall be classified according to the provisions of GRI 3. Although GRI 3(a) provides that the heading with the most specific description shall be preferred to other headings, when two or more headings refer to only a part of the materials or substances contained in mixed or composite goods, the headings are to be considered as equally specific. We find that to be the case with this article so it could not be classified under GRI 3(a).

Next, reference is made to GRI 3(b) which covers mixtures, composite goods consisting of different materials or made up of different components and goods put up in sets for retail sale which cannot be classified by reference to GRI 3(a). GRI 3(b) states that such groupings are to be classified as if they consisted of the material or component that gives them their essential character. Explana- tory Note (EN) Rule 3(b)(VII) lists as factors to help determine the essential character of such goods the nature of the materials or components, their bulk, quantity, weight or value, and the role of the constituent materials or components in relation to the use of the good.

In this case, counsel argues that the steel inserts give the kits their essential character. Counsel contends that the reason a consumer would purchase the kit is for the steel wire inserts that will be used to strengthen and maintain a fastener hole. Counsel contends that although the inserts do not predominate in bulk, weight or value, they perform the kit’s indispensable function of repairing fastener holes and predominate in total quantity. Counsel cites to Headquarters Ruling Letter (“HRL”) 962307, dated April 9, 2001, and a line of rulings involving pumpkin carving kits which includes HRL 966981, dated March 7, 2005.

HRL 962307 involved an imported setting tool packaged with 100 anchors. Customs noted that recent cases have looked primarily to the role of the constituent materials or components in relation to the use of the goods to determine essential character. Customs concluded in that case that the drop-in anchors performed the “indispensable function” and therefore, imparted the essential character of the set. The anchors in HRL 962307 were solid pieces with an internally threaded chamber. They could be set without the tool provided, although not as easily. The tool was offered more as a marketing incentive to purchase that set of anchors rather than anchors without a tool.

In HRL 966981, the knife was determined to be indispensable to the pumpkin carving set because the knife alone could be used to carry out the purpose of the kit, carving a design into a pumpkin.

However, in this case, the inserts cannot be set without the assistance of the tools although inserts are sold independently of the tools. The taps are needed to prepare the hole in which the inserts will be used. Based on the above, Customs concludes that in this case, the kits have no essential character. The tool, taps and inserts are equally important. Hence, they merit equal consideration. Therefore, reference is made to GRI 3(c).

GRI 3(c) provides that if the set cannot be classified pursuant to GRI 3(a) or (b), it will be classified in the heading that occurs last in numerical order among those that merit equal consideration. Accordingly, in this case, the kit would be classified in subheading 8207.40, HTSUS, which provides for tools for tapping or threading, and parts thereof: with cutting part containing by weight over 0.2 percent of chromium, molybdenum, or tungsten or over 0.1 percent of vanadium.

II. U.S.- Australia Free Trade Agreement

The U.S.-Australia Free Trade Agreement was signed on May 18, 2004, and entered into force on January 1, 2005, as approved and implemented by the UAFTA Implementation Act, Pub. L. 108-286, 118 Stat. 919 (August 3, 2004), and set forth in General Note 28, HTSUS.

General Note 28(b), HTSUS, provides, in pertinent part:

For purposes of this note, subject to the provisions of (c), (d), (m) and (n) thereof, a good imported into the customs territory of the United States is eligible for treatment as an originating good of a UAFTA country under the terms of this note only if -
the good is a good wholly obtained or produced entirely in the territory of Australia or of the United States, or both;

(ii) the good was produced entirely in the territory of Australia or of the United States, or both, and--

(A) each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in subdivision (n) of this note;.

Therefore, we must determine whether the fastener repair kits would satisfy the applicable change in tariff classification. The fastener repair kits are classified in subheading 8207.40, HTSUS. The rule set forth in GN 28(n) is:

A change to subheadings 8207.19 through 8207.90 from any other chapter.

In this case, the taps are claimed to be the only nonoriginating materials in the kits. The taps are classified in subheading 8207.40.30, HTSUS, and do not undergo the requisite chapter change required in GN 28(n). Accordingly, the imported fastener repair kits are not eligible for preferential treatment under the U.S.-Australia FTA.

Counsel also argues that the taps should be treated as accessories or tools under GN 28(h). GN 28(h)(i) provides that accessories, spare parts or tools delivered with a good that form part of the good’s standard accessories, spare parts or tools shall-- (A) be treated as originating goods if the good is an originating good; and (B) be disregarded in determining whether all the nonoriginating materials used in the production of the good undergo the applicable change in tariff classification set out in subdivision (n) of this note. This provision only applies if the accessories, spare parts or tools are not invoiced separately from the good. GN 28(ii)(A).

CBP stated in Headquarters Ruling Letter (“HRL”) 966441, dated June 12, 2003, that:

The term ‘accessory’ is not defined in either the tariff schedule or the Explanatory Notes. An accessory is generally an article which is not necessary to enable the goods with which it is used to fulfill their intended function. An accessory must be identified as being intended solely or principally for use with a specific article. Accessories are of secondary or subordinate importance, not essential in and of themselves. They must, however, somehow contribute to the effectiveness of the principal article (e.g. facilitate the use or handling of the principal article, widen the range of its uses or improve its operation).

As stated above, the taps are necessary to prepare the holes in which the inserts will be used. Therefore, the taps are not of secondary or subordinate importance. Accordingly, we find that the provisions of GN 28(h) are not applicable to the imported taps.

Furthermore, based on the information presented, the taps represent more than 10% of the adjusted value of the kits so they would not satisfy the de minimis exception set forth in GN 28(e).

HOLDING:

The imported fastener repair kits described above are classified in subheading 8207.40.30 pursuant to GRI 3(c). The fastener repair kits are not eligible for preferential tariff treatment under the U.S.-Australia FTA.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs official handling the transaction.

Sincerely,

Monika R. Brenner
Chief, Valuation & Special Programs Branch

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