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HQ 555805

July 10, 1991

CLA-2 CO:R:C:S 555805 KCC

CATEGORY: CLASSIFICATION

Mr. Mike Theryoung
TeMik Corporation
111 Cranbrooke Drive
Seffner, Florida 33584

RE: Eligibility for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS, of earrings and brooches made in Costa Rica from U.S. materials.

Dear Mr. Theryoung:

This is in response to your letter dated November 2, 1990, to the Area Director, New York Seaport, requesting a ruling concerning the tariff treatment and country of origin marking requirements applicable to earrings and brooches imported from Costa Rica. Your letter and samples of the earrings were forwarded to this office for a response. Your request concerning the country of origin marking requirements has been forwarded to the Value and Marking Branch for a separate response. We regret the delay in responding to your request.

FACTS:

TeMik intends to ship glue, cardboard, plastic beads, plastic rhinestones, sequins, thread, foil, and fabric, all of U.S. origin, to Costa Rica. In Costa Rica, the components will be processed into women's fashion jewelry, primarily earrings and brooches. Although the jewelry is made in a wide range of colors and shapes, the same materials and processes are used in the production of each jewelry piece. Upon completion of the foreign operations, the jewelry will be returned to the U.S.

ISSUE:

Whether the earrings and brooches will be entitled to duty- free treatment under one of the tariff preference programs when imported into the U.S.

LAW AND ANALYSIS:

All articles imported into the U.S. are subject to duty unless specifically exempted therefrom under the Harmonized Tariff Schedule of the United States (HTSUS). To determine the duty applicable to an imported article, it must be properly classified in a HTSUS tariff provision. Based on the information and samples provided, the clip-on earrings and brooches would appear to be classified under subheading 7117.90.5000, HTSUS, which provides for imitation jewelry: other: other: valued over 20 cents per dozen pieces or parts, dutiable at the rate of 11 percent ad valorem. A pair of earrings has been held to constitute two pieces under this tariff provision. See, Headquarters Ruling Letter (HRL) 023470 dated October 25, 1972.

Articles entered under subheading 7117.90.5000, HTSUS, are eligible for duty-free treatment under certain tariff preference programs, assuming compliance with the requirements of those programs. These programs are: the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466), the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2701-2706), and U.S. Note 2(b), subchapter II, Chapter 98, HTSUS (Note 2(b)).

Under the GSP, eligible articles the growth, product or manufacture of a designated beneficiary developing country (BDC) which are imported directly into the customs territory of the U.S. from a BDC may receive duty-free treatment if the sum of 1) the cost or value of materials produced in the BDC, plus 2) the direct costs of the processing operation in the BDC, is equivalent to at least 35% of the appraised value of the article at the time of entry. See, 19 U.S.C. 2463(b). Costa Rica is a designated BDC. See, General Note 3(c)(ii)(A), HTSUS.

Under the CBERA, eligible articles the growth, product or manufacture of designated beneficiary countries (BC's) may receive duty-free treatment if such articles are imported directly to the U.S. from a BC, and if the sum of 1) the cost or value of the materials produced in a BC or BC's, plus 2) the direct cost of processing operations performed in a BC or BC's, is not less than 35% of the appraised value of the article at the time it is entered into the U.S. See, 19 U.S.C. 2703(a). The cost or value of materials produced in the U.S. may be applied toward the 35% value-content minimum in an amount not to exceed 15% of the imported article's appraised value. See, section 10.195(c), Customs Regulations (19 CFR 10.195(c)).

Note 2(b) provides for the duty-free treatment of articles (other than textile and apparel articles and petroleum and petroleum products) which are assembled or processed in a CBERA BC wholly of fabricated components or ingredients (except water) of U.S. origin. This amendment was effective with respect to goods entered on or after October 1, 1990.

To qualify for duty-free treatment under Note 2(b), the manufacture of the earrings and brooches must take place in one of the CBERA designated BC'S. Costa Rica is a BC. See, General Note 3(c)(v)(A), HTSUS. Upon review of the applicable duty-free programs, Note 2(b) is clearly more relevant to your proposed transactions than the GSP and CBERA. Therefore, we will limit our discussion to the Note 2(b) program.

We are of the opinion that the earrings and brooches produced in Costa Rica may enter the U.S. duty free pursuant to Note 2(b). Only U.S. origin components or ingredients are used during the foreign processing operation, which involves gluing fabric, beads, rhinestones, thread, sequins and foil onto cardboard backings to produce an earring or brooch. We believe that these processes are encompassed by the operations specified in Note 2(b). See, HRL 555742 dated November 5, 1990, and HRL 555656 dated December 24, 1990.

Enclosed is a copy of Headquarters telex 9264071 dated September 28, 1990, to Customs field offices, setting forth procedures for entry under Note 2(b).

HOLDING:

The earrings and brooches which are produced entirely from U.S. materials in Costa Rica may enter the U.S. duty-free pursuant to Note 2(b), provided the documentation requirements set forth in the attached telex dated September 28, 1990, are satisfied.

Sincerely,

John Durant, Director
Commercial Rulings Division

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