HQ 0556013 - Eligibility for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, HTSUSA, of enema tip assemblies manufactured in Haiti - United States International Trade Commision Rulings

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HQ 556013

June 17, 1991

CLA-2 CO:R:C:S 556013 WAW

CATEGORY: CLASSIFICATION

Edward B. Ackerman, Esq.
Siegel, Mandell & Davidson, P.C.
655 Fifteenth Street, N.W.
Suite 300
Washington, D.C. 20005

RE: Eligibility for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, HTSUSA, of enema tip assemblies manufactured in Haiti

Dear Mr. Ackerman:

This is in reference to your letter of April 23, 1991, on behalf of your client, E-Z-EM Company, Inc., in which you request a ruling on the applicability of duty-free treatment for enema tip assemblies to be imported from Haiti, pursuant to section 222 of the Customs and Trade Act of 1990 (Public Law 101-382), which amended U.S. Note 2, subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

FACTS:

Your client produces enema tip assemblies in Haiti for use in medical diagnostic imaging procedures. The various components which comprise the finished product include the following: clear intravenous tubing, an elastomer retention cuff, the enema tip [which contains either one or two airways (cuff inflation and patient-air), and a larger middle canal], a plastic one-way valve, an adaptor, blue tubing, packaging and labels.

The operations performed in Haiti to produce the completed enema tip assembles are as follows:

(1) The enema tip's drainage holes and cuff inflation passage are opened;

(2) the clear intravenous tubing is bonded to the enema tip's inflation airway;

(3) the elastomer retention cuff is positioned over the enema tip;

(4) the two ends of the retention cuff, after proper alignment and positioning are permanently secured to the tip in one of two ways:

(a) bonding with adhesive
(b) fastening with multifilament thread which is secured with a drop of adhesive

(5) the cuffed tips are subject to quality control inspections for leakage and other defects;

(6) the one-way valve is inserted into the patient-air airway of the enema tip;

(7) the adaptor is bonded to the patient-air blue tubing;

(8) the blue tubing with adaptor is bonded to the patient-air airway of the enema tip;

(9) when required, a connector is bonded to the larger middle canal of the enema tip;

(10) the complete tip assembly is subject to quality control testing for clogging;

(11) labels are applied to the blue and clear tubing and the product is packaged for shipment to the U.S.

You ask whether the enema tip assemblies produced in Haiti as described above are entitled to duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, HTSUSA ("Note 2(b)"), when 100% of the components and ingredients used to make the article are of U.S. origin. You further ask whether the assemblies would be eligible for such treatment where all of the components and ingredients are of U.S.-origin, except for the adhesive used to secure the string ends and cuff (step 4), which will be of German origin.

ISSUE:

Whether the enema tip assemblies produced in Haiti as described above are eligible for duty-free treatment under Note

LAW AND ANALYSIS:

Section 222 of the Customs and Trade Act of 1990 (Public Law 101-382) amended U.S. Note 2, subchapter II, Chapter 98, HTSUSA, to provide 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 Caribbean Basin Economic Recovery Act (CBERA) beneficiary country (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.

Note 2(b) provides as follows:

(b) No article (except a textile article, apparel article, or petroleum, or any product derived from petroleum, provided for in heading 2709 or 2710) may be treated as a foreign article, or as subject to duty, if--

(i) the article is--

(A) assembled or processed in whole of fabricated components that are a product of the United States, or

(B) processed in whole of ingredients (other than water) that are a product of the United States, in a beneficiary country; and

(ii) neither the fabricated components, materials or ingredients, after exportation from the United States, nor the article itself, before importation into the United States, enters the commerce of any foreign country other than a beneficiary country.

As stated in this paragraph, the term "beneficiary country" means a country listed in General Note

Although Note 2(b)(i)(A) and (B) are separated by the word "or", it is our opinion that Congress did not intend to preclude free treatment under this provision to an article which is created in a BC both by assembling and processing U.S. fabricated components and by processing U.S. ingredients.

Pursuant to General Note 3(c)(V)(A), HTSUSA, Haiti has been designated as a BC for CBERA purposes. In regard to the first assembly process you describe, 100% U.S.-origin components and ingredients are used during the foreign production operation, which involves the bonding of fabricated U.S. component parts, quality control inspections and the assembly of the finished article. Therefore, the enema tip assemblies made entirely from U.S. component materials will be entitled to duty-free treatment under Note 2(b), assuming the applicable documentation requirements are satisfied.

We further find that the assemblies made with all U.S. materials except adhesive of German origin, which is used to secure the string ends and cuff of the enema tip assemblies, are eligible for duty-free treatment under Note 2(b). Based on the information you submitted, the cost of the adhesive represents approximately one percent of the total cost of the completed article. General Note 7(e)(i), HTSUSA, states that, for purposes of the tariff schedule, the term "'wholly of' means that the goods are, except for negligible or insignificant quantities of some other material or materials, composed completely of the named material." It is our determination that although the enema tip assemblies are not made of 100% U.S. components and ingredients, the adhesive constitutes merely an insignificant portion of the entire article and, therefore, the presence of the foreign adhesive would not preclude application of duty-free treatment under Note 2(b).

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

HOLDING:

The enema tip assemblies manufactured in Haiti as described above 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. This decision is limited to the specific facts of this case.

Sincerely,

John Durant, Director

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