The microstructure-level finite element machining model developed in Part I of this paper is used to perform a detailed analysis of the failure mechanisms that occur while machining the carbon nanotube (CNT) reinforced polycarbonate composites. The chip formation in plain polycarbonate (PC) is seen to be influenced by the ductile failure mode. For the composite containing 1.75% by weight of CNTs (Composite A), the polymer fails in the ductile mode. The presence of CNTs is seen to result in CNTs protruding from the machined surface and subsurface damage. The low thermal conductivity of the polymer phase is seen to result in the formation of adiabatic shear bands in plain PC and Composite A. As the CNT loading is increased to 5% by weight, the failure in the polymer phase is seen to be predominantly brittle in nature. The presence of the larger percentage of CNTs is also seen to offset the formation of adiabatic shear bands. The machining model has also been used to successfully predict the machining behavior of CNT composites with tailored microstructures. Simulation experiments with varying CNT alignment, aspect ratio, percentage loading, and cutting velocity were conducted to study the effects of these factors on cutting forces. The results show that the machining model in combination with the material model is an effective tool to design CNT composites with emphasis both on the mechanical properties and machinability.