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HQ 556716


January 15, 1993

CLA-2 CO:R:C:S 556716 BLS

CATEGORY: CLASSIFICATION

Lynn S. Baker, Esq.
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693

RE: Eligibility of Catheters and Catheter Sets for duty-free treatment under U.S. Note 2(b), subchapter ll, Chapter 98, HTSUSA

Dear Ms. Baker:

This is in reference to your letters dated May 6, 1992, and November 24, 1992, concerning the eligibility for duty-free entry into the U.S. under U.S. Note 2(b), subchapter ll, Chapter 98, HTSUSA ("Note 2(b)"), of certain catheters and catheter sets imported from Costa Rica.

FACTS:

Your client, Baxter Healthcare Corporation, ("Baxter"), intends tro import catheter sets from Costa Rica comprised of surgical gloves of latex, paper basins, and catheters. The catheters are manufactured in Costa Rica from U.S. materials, while the paper basins are assembled in that country, also from U.S. origin materials. The gloves are similarly of U.S. origin, and are packaged without further processing with the other items to complete the set. Baxter will also import the catheters separately in bulk. The sets are marketed to hospitals for use as catheters. The operations performed in Costa Rica are as follows:

The production starts with the tubing extrusion process. Resin pellets are sucked from the shipping containers into a hopper where the raw material is heated and drawn through a die which determines the diameter of the tubing. The puller then draws the tube through a long water bath to cool. The extrusion process is a continuos closed system controlled by a main computer which runs the extrusion process. A laser is hooked up to separate computer, which also feeds into the main computer, and gauges the diameter of the tubing after it emerges from the water bath. The puller is also adjusted through this secondary computer.

After extrusion, the tubing is wound into spools. These spools are then fed into a machine which cuts the tubing at an angle into predetermined lengths. The next operation is called tip forming. The precut lengths of tubing have been bundled and placed on a conveyor belt. Each individual piece of tubing is placed onto a mold which heats and smooths out the tip, then cools. A hole is punched into the tip, which is also a precise process as the tip must be positioned exactly so that the hole is punched into the longer side of the tip. Otherwise, there will be no suction from the finished catheter. A connector is then fixed to the other end of the catheter. Each step of the process also involves extensive inspection and quality control measures.

The catheter is then coiled and put into a paper sleeve. The packaging process for the paper sets is elaborate, with multiple steps. First, a long roll of paper type material on which individual package outlines is printed is run along a conveyor. A catheter is placed over one side of each printed package, followed by a paper basin. On the other side of the conveyor, a glove, a paper insert and then another glove is placed on the other side of each individual printed package. They are then flattened through rollers on the conveyor, the roll of paper is cut into individual packages and the packages folded in half by a machine. Each package is then heat sealed, bagged in bundles and packaged into a shipping carton, which is then labeled and palletized. There is consistent quality control and inspection throughout the entire process, which is performed under "clean room" conditions.

ISSUE:

Wheter the catheter and catheter sets are eligible for duty- free treatment under Note 2(b).

LAW AND ANALYSIS:

Section 22 of the Customs amnd Trade ACT of 1990 (P.L. 101- 382) amended U.S. Note 2, subchapter ll, Chapter 98, HTSUS, to provide for duty-free treatment of articles, other than specified products, which are assembled or processed in a Caribbean Basin Initiative (CBI) beneficiary country (BC) wholly of fabricated components or ingredidents (except water) of U.S. origin. This amendment was effective with respect to goods entered on or after October 1, 1990.

Specifically, 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, 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.

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, Costa Rica has been designated as a BC for CBI purposes.

Based on the information provided, it appears that the catheters and catheter sets are classifiable in subheading 9018.39.00, HTSUS, and therefore are eligible for duty-free treatment under this Note, assuming all other conditions are satisfied.

In regard to the processing done in Costa Rica, we believe that these operations, which include tubing extrusion, winding onto spools, cutting, and assembly of the U.S. components, are encompassed by the operations specified in Note 2(b). Therefore, assuming the finished articles are shipped directly to the U.S. without entering the commerce of any foreign country other than a BC, and the appropriate documentary requirements are satisfied, the catheters and catheter sets will be entitled to duty-free treatment under this provision.

HOLDING:

The catheters and catheter sets, made in Costa Rica wholly from materials of U.S. origin, are entitled to duty-free treatment under Note 2(b), upon compliance with the direct importation requirements and the documentation requirements set forth in Headquarters telex 9264071 dated September 28, 1990 (copy enclosed).

Sincerely,

John Durant, Director
Commercial Rulings Division

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