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HQ 544010


September 19, 1988

CLA-2 CO:R:C:V 544010 CW

CATEGORY: CLASSIFICATION VALUATION

TARIFF NO.: 4911.91.40, HTSUS (274.70, TSUS); 724.40, TSUS

Thomas E. Johnson, Esq.
Baker & McKenzie
Prudential Plaza
Chicago, Illinois 60601

RE: Ruling request concerning the tariff classification of certain exposed film, magnetic media and optical media from Barbados, and the eligiblity of these products for CBI treatment.

Dear Mr. Johnson:

This is in response to your letter of September 2, 1987, in which you request a ruling on behalf of
("importer") that certain exposed film and encoded magnetic and optical storage media to be imported from Barbados will qualify for duty-free treatment under the Caribbean Basin Initiative (CBI). You also request advice concerning the proper tariff classification of these articles.

FACTS:

You state that your client, a U.S. commercial printing company, plans to ship to its wholly-owned subsidiary in Barbados, , preliminary production equipment, office supplies and shipping material, as well as customer-supplied artwork, unexposed film transparencies and blank data storage media. The blank data storage media includes magnetic media, such as tapes and cartridges, and optical media, such as high density, "write-once-read-many" ("WORM") disks. We assume that the materials to be shipped to Barbados will be of U.S. origin.

You advise that in Barbados the unexposed film will be exposed and the blank media processed, after which they will be labeled, packed, and shipped back to the U.S. We understand that the processing to be performed in Barbados consists of several steps necessary to the transformation of the text and artwork supplied by a customer to image carriers (e.g., plates or
cylinders) that are used on printing presses. In the first step of the processing performed in Barbados, the artwork supplied by the customer is photographed with a camera or scanned with an electronic image scanner. This is typically done to scale the artwork to the proper size and generate the proper screen angles for printing. This step also may be necessary to change reflective copy to a transparent film form or to break up certain types of artwork into a series of very small dots to facilitate the printing process. In full color printing, color separations also are made during this phase of the processing.

The result of the first step is either a set of one or more halftone positives or negatives on transparent film, or a computer file containing graphics arts data. Following this step, corrections are made to the film or data to emphasize detail, adjust or change the images and, in the case of full color printing, to improve color fidelity. The pieces of artwork then are combined, either mechanically or electronically, with the text into complete pages that match the customer's layout. The completed pages then are either combined onto a large piece of film in the order in which they are to be printed or are communicated electronically to a computer. The exposed film or encoded storage media imported into the U.S. is used to make image carriers, such as lithographic plates or rotogravure cylinders.

You estimate that the direct processing costs to be incurred in Barbados per page of film will be $2.88, and the appraised value of each page of the exposed film will be between $3.62 and $5.40. The estimated direct processing costs per page of information encoded on any magnetic media will be $2.88, and the appraised value per page is expected to be between $3.68 and $5.46.

In your opinion, the exposed film and optical media, such as "WORM" disks, are classifiable in item 274.70, Tariff Schedules of the United States (TSUS), while the magnetic media, such as magnetic tapes and cartridges, are classifiable in item 724.40, TSUS.

ISSUE:

1. Whether the described film and optical and magnetic storage media to be imported into the U.S. will be eligible for duty-free treatment under the CBI.

2. Whether the exposed film and optical media are properly classifiable in item 274.70, TSUS, and the magnetic media are properly classifiable in item 724.40, TSUS.

LAW AND ANALYSIS:

With respect to the first issue, an eligible article imported directly from a CBI beneficiary country may qualify for duty-free entry under the CBI only if it meets the country of origin criteria set forth in section 10.195(a) of the Customs Regulations (19 CFR 10.195(a)). The first of these criteria provides that an article must either be wholly the growth, product, or manufacture of a beneficiary country, or be substantially transformed in a beneficiary country into a new and different article of commerce. The second of the country of origin criteria provides that the sum of the cost or value of the materials produced in the beneficiary country or countries, plus the direct costs of processing operations performed in the beneficiary country or countries, must not be less than 35 percent of the appraised value of the imported article.

In regard to the first country of origin criterion, it is clear that the exposed film and the encoded storage media will not be "wholly the growth, product, or manufacture of a beneficiary country." Therefore, to be considered products of a beneficiary country, the film and storage media to be imported into the U.S. must have been substantially transformed in Barbados into new and different articles of commerce.

Based on the information you have provided, it is our opinion that the processing to be performed in Barbados will substantially transform the unexposed film transparencies and blank data storage media into new and different articles of commerce (the exposed film and encoded storage media). This conclusion is consistent with previous rulings issued by this office involving similar fact situations. See ruling letters dated September 24, 1986 (HQ 554230), May 26, 1986 (HQ 554016), and August 17, 1981 (HQ 067445).

Concerning the second country of origin requirement, the estimated cost information you have provided indicates that the direct costs of processing operations to be performed in Barbados clearly will exceed 35 percent of the appraised value of the imported products.

Concerning the classification of the articles in question, we regret to advise that we have misplaced the samples that you apparently furnished to us. However, based on the descriptive information provided, we agree that the exposed film and optical media are classifiable under the provision for photographs, engravings, etchings, lithographs, and wood cuts, and pictorial matter produced by relief or stencil printing process, all the foregoing, whether bound or not bound, and not specially provided for, other, in item 274.70, TSUS, with a duty rate of 3.1 percent
ad valorem. The exposed film and optical media are classifiable under the Harmonized Tariff Schedule of the United States (HTSUS), which will replace the TSUS effective January 1, 1989, under the provision for other printed matter, including printed pictures and photographs, other, other, other, in subheading 4911.91.40, with duty at the rate of 3.1 percent.

We also agree that the magnetic media is classifiable under the provision for sound recordings and magnetic records recorded on magnetic tape or on any medium other than wire, in item 724.40, TSUS, with duty at the rate of .9 cents per square foot of recording surface. Although there is insufficient descriptive information concerning the magnetic media to enable us to determine the applicable HTSUS subheading, we have enclosed a copy of the applicable HTSUS heading (8524), which relates to records, tapes and other recorded media for sound or other similarly recorded phenomena.

HOLDING:

On the basis of the information presented, it is our opinion that the described exposed film and encoded magnetic and optical storage media would qualify for duty-free entry under the CBI upon importation into the U.S. from Barbados.

The exposed film and encoded optical storage media is classifiable in item 274.70, TSUS (subheading 4911.91.40, HTSUS). The encoded magnetic storage media is classifiable in item 724.40, TSUS.

Sincerely,

John Durant

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