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HQ 544195

February 27, 1990

CLA-2 CO:R:CV:V 544195 BJO

CATEGORY: CLASSIFICATION

Mr. Mike Julien
High Impact Agricultural Marketing and Production
Palms Arcade on the Circus
Basseterre, St. Kitts, West Indies

RE: Duty-Free Treatment of Gelled-Ethanol under the CBI

Dear Mr. Julien:

This is in response to your firm's letter of April 15, 1988, on behalf of Southern Agronomics Ltd. ("processor"), requesting a ruling that gelled-ethanol imported from St. Kitts is entitled to duty-free treatment under the Caribbean Basin Economic Recovery Act (CBERA)(19 U.S.C. 2701-2706). We regret the delay in responding to your firm's request.

FACTS:

Based on the information contained in your firm's letter and our conversations with a representative of the processor, it appears that the processor will manufacture ethanol in St. Kitts from 100% molasses, which will be produced in St. Kitts from sugar cane grown on St. Kitts. The processor will add a U.S.- manufactured gelling agent to the ethanol to produce the gelled- ethanol. The gelled-ethanol will be either packaged in 13.1 ounce tin cans for use in fireplaces, cooking units, and campfires, or will be packaged for use as charcoal lighter fluid. The charcoal lighter fluid will consist by volume of .75% gelling agent and 99.25% ethanol. The canned heating fuel will be 3.5% by volume gelling agent; the balance will consist of ethanol. The processor has estimated that 40% of the value of the products will be attributable to the cost of the ethanol, 40% to packing materials, and 20% to other costs, including transportation and the cost of the U.S.-produced gelling agent.

ISSUE:

Whether canned heating fuel and charcoal lighter fluid, composed of gelled-ethanol that is produced in St. Kitts from ethanol processed locally, and from a gelling agent manufactured in the U.S., is entitled to duty-free treatment under the CBERA.

LAW AND ANALYSIS:

Under the CBERA, eligible articles the growth, product, or manufacture of a beneficiary country ("BC") which are imported directly to the U.S. from a BC qualify for duty-free treatment, provided the sum of (1) the cost or value of materials produced in a BC or two or more BC's, plus (2) the direct costs of processing operations performed in a BC or countries is not less than 35% of the appraised value of the article at the time it is entered. See 19 U.S.C. 2703(a)(1).

An article is the growth, product, or manufacture of a BC if it is produced exclusively from materials which are wholly the growth, product, or manufacture of a BC or beneficiary countries, or, if the article consists of materials which are of non-BC origin, those materials are substantially transformed in the BC in the production of the article. See 19 CFR 10.195.

Similarly, the cost or value of materials which are used in the production of the article may be counted toward the 35% value-content requirement if they are either wholly the growth, product, or manufacture of a BC or BC's, or have been substantially transformed in a BC or BC's into a new and different article, which is itself substantially transformed in the production of the final article. See 19 CFR 10.196.

All requirements for duty-free entry under the CBERA are met here. First, the information provided indicates that the articles will be imported directly from St. Kitts, which is a beneficiary country under the CBERA. See General Note 3(c)(v)(A), Harmonized Tariff Schedule of the United States (HTSUS).

Second, canned heating fuel and charcoal lighter fluid made from the gelled-ethanol appear to be properly classifiable for tariff purposes under subheading 3606.90.60, HTSUS, a CBERA- eligible provision. ("Ferrocerium and other pyrophoric alloys in all forms; articles of combustible materials as specified in note 2 to this chapter [the referenced note states, in pertinent part, "articles of combustible materials in heading 3606 applies only to fuels with a basis of alcohol, and similar prepared fuels, in solid or semi-solid form...and resin torches, firelighters, and the like."]: Other: Other.").

Third, the articles are products of St. Kitts. In general, the mere mixing of two substances in a BC, not involving a chemical reaction and without additional processing, does not result in a product of that BC. See HQ 071357, dated July 18, 1983; see also 19 CFR 10.195(a)(2)(i)(articles which have undergone only a simple combining or packaging operation in a BC, such as the addition of anti-caking agents, preservatives, wetting agents, etc., are precluded from duty-free treatment under the CBERA). In HQ 071357, however, we ruled that such a mixture was a product of the Virgin Islands for purposes of duty- free treatment under General Headnote 3(a), Tariff Schedules of the U.S., because one of the two substances in the mixture was produced in the BC as a result of a substantial manufacturing operation, and the ratio of the BC-produced constituent to the non-BC constituent by volume and value was 9 to 1 and 9 to 2, respectively. We believe that this principle applies here as well. Although the addition of the non-BC gelling agent to the ethanol in St. Kitts may not constitute a substantial transformation, the ethanol, which constitutes over 95% of the content of the products and the largest percentage of its value, is the result of a substantial manufacturing operation in St. Kitts from cane grown in St. Kitts. In these circumstances, we find that the de minimis amounts of non-BC material included in the products should not preclude their duty-free treatment under the CBERA.

Finally, it appears that the articles will meet the CBERA 35% value-content requirement. The cost or value of the ethanol, which is wholly the product of the BC, may be counted toward the 35% minimum. Because that cost or value is stated to exceed 35% of the product's value, the canned heating fuel and charcoal lighter fluid will meet the value-content minimum.

CONCLUSION:

Canned heating fuel and charcoal lighter fluid produced by the combination of St. Kitts's produced ethanol, which is
processed entirely in St. Kitts from St. Kitts' grown cane, and a U.S.-produced gelling agent, as described above, is eligible for duty-free treatment under the CBERA.

Sincerely,

John Durant, Director

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