The country of origin of auger bits and power bits

N319456 May 28, 2021 CLA-2-82:OT:RR:NC:N1:118 CATEGORY: Classification; Country of Origin Mr. Robert D. Stang Husch Blackwell, LLP 750 17th Street, N.W. Washington, DC 20006 RE: The country of origin of auger bits and power bits Dear Mr. Stang: In your letter dated May 14, 2021, on behalf of your client, SM Products, LLC dba Spyder Products, you requested a country of origin ruling. The merchandise under consideration consists of alloy steel auger bits and power bits, which are used with hand tools for drilling through wood and similar materials. The production process for the bits begins in China, where a manufacturer purchases alloy steel rod. Flutes and a rough tip are machined into the rods, and they are cut to standardized lengths. These blank rods are then shipped from China to the Czech Republic for further processing and manufacturing. You have stated that when imported into the Czech Republic the blank rods can be used to manufacture a variety of parts (e.g., auger bits, power bits, brad point drill bits or any other part manufactured from a blank fluted rod) for drills and similar tools. The blank rods undergo the following processing and manufacturing operations in the Czech Republic: Milling thread center point (auger bits only) Induction hardening with oil quenching Painting Centerless grinding Turning the shank to final diameter Milling the shank to form the hex Grinding to form cutting edge Laser marking The auger bits and power bits are then grouped for retail sale and sealed in appropriate retail packaging before exportation to the United States. Section 134.1(b), Customs Regulations (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;” A substantial transformation occurs when an article emerges from a process with a new name, character, or use different from that possessed by the article prior to processing. A substantial transformation will not result from a minor manufacturing or combining process that leaves the identity of the article intact. See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940); and National Juice Products Association v. United States, 628 F. Supp. 978 (Ct. Int’l Trade 1986). In our view, the processing and manufacturing operations in the Czech Republic substantially transform the blank rods from China into new and different articles of commerce, i.e., auger bits and power bits. We note that when exported from China, the blank rods can be used to manufacture a variety of parts (e.g., auger bits, power bits, brad point drill bits or any other part manufactured from a blank fluted rod) for drills and similar tools. The Czech Republic processing operations change the profile, shape and dimensions of the blank rods into auger bits and power bits. It is therefore the opinion of this office that, for tariff and duty purposes, the country of origin for the auger bits and power bits is the Czech Republic. 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, National Import Specialist Anthony E. Grossi at anthony.e.grossi@cbp.dhs.gov. Sincerely, Steven A. Mack Director National Commodity Specialist Division