HQ 0556404 - Applicability of duty exemption under U.S. Note 2(b), subchapter II, Chapter 98, HTSUSA, to small leather goods produced in the Dominican Republic; CSD 89-27(4), - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1992 HQ Rulings > HQ 0556320 - HQ 0734154 > HQ 0556404

HQ 556404

February 10, 1992

CLA-2 CO:R:C:S 556404 WAW

CATEGORY: CLASSIFICATION

Mr. Ronald Jablonski
St. Thomas, Inc.
St. Thomas Place
P.O. Box 913
Gloversville, N.Y. 12078-0913

RE: Applicability of duty exemption under U.S. Note 2(b), subchapter II, Chapter 98, HTSUSA, to small leather goods produced in the Dominican Republic; CSD 89-27(4),

Dear Mr. Jablonski:

This is in reference to your letter of November 13, 1991, requesting a ruling on the eligibility for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), of small leather goods, i.e., men's billfolds, ladies' french purses, checkbook clutches, cosmetic cases, etc., from the Dominican Republic. You also ask whether the leather goods are subject to country of origin marking requirements.

FACTS:

You state that St. Thomas, Inc. assembles small leather goods in the Dominican Republic from materials exported to the Dominican Republic from the U.S. Based on the information you have submitted, the leather goods will be assembled in the Dominican Republic from U.S.-origin cowhide, pigskin, taffeta linings, paper stiffeners, and zippers.

ISSUE:

(1) Whether the leather goods are eligible for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, HTSUSA.

(2) What are the country of origin marking requirements for articles which are eligible for duty-free treatment under U.S. Note 2(b).

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 ("Note 2(b)"), 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) specifically 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 3(c)(v)(A).

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, the Dominican Republic is a designated BC for CBERA purposes. Note 2(b) specifies four categories of products which are excluded from duty-free treatment under this provision: textile articles; apparel articles; petroleum; and certain products derived from petroleum. The leather goods are not apparel or textile articles as contemplated by Note 2(b) and, therefore, are eligible for duty-free treatment under this provision provided that all of the other requirements are satisfied. See Headquarters Ruling Letter (HRL) 555742 dated November 5, 1990.

You state that the assembly operations to be performed in the Dominican Republic in the production of the billfolds, purses, etc. consist of cementing and stitching together leather and lining components.

In regard to the operations performed in the Dominican Republic, we believe that the stitching and cementing together of the U.S. materials into the finished leather goods are encompassed by the operations specified in Note 2(b). See HRL 555742 dated November 5, 1990. Therefore, if, in fact, all materials are of 100 percent U.S.-origin and the leather goods are shipped directly to the U.S. without entering into the commerce of any foreign country other than a BC, and the applicable documentation requirements are satisfied, the leather goods will be entitled to duty-free treatment under this provision.

With regard to the country of origin marking requirements for articles which are eligible for duty-free treatment under Note 2(b), the Director of the Office of Trade Operations, Headquarters, issued instructions to Customs field offices in Headquarters telex 9264071 dated September 28, 1990. The following paragraph on marking appears in the telex:

Since the language of this provision [section 222] prohibits us from treating these articles as foreign, there appears to be no basis for requiring that the article be marked with the Caribbean country of processing or assembly. If so desired, however, they may be marked "assembled in (name of CBI country) of U.S. components" or other similar wording. Whether or not the articles can be marked as products of the United States must be decided by the Federal Trade Commission (FTC). Until further instructions are issued, marking requirements should be limited to these guidelines.

The conclusion set forth above that "there appears to be no basis for requiring that the article be marked with the Caribbean country of processing or assembly" is currently under review. If, after the review process is completed, it is determined that country of origin marking is required for some or all articles entitled to duty-free treatment under Note 2(b), public notice will be provided. In the meantime, the instructions set forth in the telex 9264071 remain in effect.

We have enclosed a copy of Headquarters telex 9264071 which sets forth procedures for the entry of articles under Note HOLDING:

On the basis of the information submitted, we conclude that the leather goods made in the Dominican Republic wholly from materials of U.S. origin are entitled to duty-free treatment under Note 2(b), upon compliance with the documentation requirements set forth in the enclosed telex. Moreover, at the present time, regarding country of origin marking requirements, the instructions set forth in the telex remain in effect.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling