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HQ 557544




October 28, 1993

CLA-2 CO:R:C:S 557544 WAS

CATEGORY: CLASSIFICATION

John M. Peterson, Esq.
Neville, Peterson & Williams
39 Broadway
New York, N.Y. 10006

RE: Eligibility of foreign-origin packaging materials for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS; Section 222 of the Customs and Trade Act; packaging materials; footwear

Dear Mr. Peterson:

This is in response to your letter dated August 17, 1993, concerning the dutiable status of foreign-origin packaging materials used to package imported merchandise which is otherwise eligible for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States

FACTS:

You state that Aris-Isotoner, Inc. proposes to produce certain footwear (rubber-soled slippers) in the Dominican Republic entirely from materials or ingredients of U.S.-origin, Aris-Isotoner will ship to a Dominican factory all of the materials used in the manufacture of the footwear, including nylon-spandex, and man-made fiber fabrics in piece goods form, knitted wool "sherpa" footwear linings (these linings will be cut in the U.S. from woven wool fabric imported in piece goods form, from Taiwan), molded rubber outsoles, lining fabrics in piece goods form, foam plastic in roll form, thread, trimmings and findings. In the Dominican Republic, the piece goods will be cut into footwear parts, which will subsequently be joined together with the other materials by means of sewing. The finished slippers will then be inspected, tacked to a cardboard "header" card which contains printed advertising information, packed into corrugated cardboard outer containers, and shipped directly from the Dominican Republic to the U.S.

Aris plans to send to the Dominican Republic printed cardboard "header cards" and corrugated cardboard outer boxes which are manufactured in the U.S. These non-reusable U.S. origin packing materials will be used to package the slippers. In the future, Aris-Isotoner anticipates that it may be necessary to source some or all of these packaging materials from foreign
sources.

ISSUE:

Whether packaging materials of foreign origin qualify for duty-free treatment when imported as the packing for articles eligible for duty-free entry under Note 2(b).

LAW AND ANALYSIS:

Section 222 of the Customs and Trade Act of 1990 (Public Law 101-382) amended Note 2, subchapter II, Chapter 98, HTSUS, to provide for the duty-free treatment of articles (other than certain specified products) which are assembled or processed in a 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.

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, 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), HTSUS, 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. We have previously held that footwear and footwear parts, including footwear and parts made of textile materials do not constitute 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 Letters (HRLs) 555742 dated November 5, 199; 555788 dated September 9, 1991; T.D. 9188, dated November 6, 1991.

You state that the assembly operations to be performed in the Dominican Republic in the production of the slippers consists of stitching together all of the components. In regard to the operations performed in the Dominican Republic, we believe that stitching together the U.S. materials into the finished slippers is encompassed by the operations specified in Note 2(b). See HRL 555742. Therefore, if, in fact, all materials are of 100 percent U.S.-origin and the slippers 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 footwear will be entitled to duty-free treatment under this provision.

The issue that we are asked to address is whether the presence of foreign-origin packaging materials used to import the slippers, which otherwise qualify for duty-free treatment pursuant to Note 2(b), will defeat eligibility of the slippers from receiving duty-free treatment.

General Rule of Interpretation 5(b), HTSUS, provides, in pertinent part:
packing materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for pecking such goods... [T]his provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use.

We have also applied GRI 5(b) to packaging materials used for articles which are entitled to duty-free treatment under subheading 9801.00.10, HTSUS. Customs has consistently held that when articles which qualify for duty-free treatment under subheading 9801.00.10, HTSUS, and its predecessors, are imported in foreign-origin packaging materials, the packaging materials are subject to the duty rate applicable to their contents (i.e., duty-free). In Border Brokerage Company, Inc. v. United States, 65 Cust. Ct. 50 (1970), the court held that, for purposes of duty-free entry under item 800.00, Tariff Schedules of the United States, (TSUS) (the precursor to subheading 9801.00.10, HTSUS), goods which satisfy the requirements for duty-free entry, as well as their foreign packaging, would enter duty-free. See also HRL 071449 dated October 17, 1983 (imported articles of U.S.-origin and their disposable, foreign-made packaging are eligible for duty-free treatment under item 800.00, TSUS); HRL 556072 dated July 1, 1991 (foreign-origin packaging materials consisting of disposable cardboard shoe boxes and paper, are entitled to duty-free treatment when they are included with footwear which qualifies for duty-free treatment under Note 2(b)).

Consistent with the foregoing case and rulings, we are of the opinion that the foreign-origin packaging materials (header cards and outer cardboard containers), which are of a type typically used in association with slippers and clearly not intended for repetitive use, are classified with the footwear they are used to package under GRI 5(b). Therefore, provided that the slippers satisfy all of the requirements under Note 2(b), the packaging materials are also entitled to duty-free treatment under this provision.

HOLDING:

We are of the opinion that the foreign-origin packaging materials (header cards and outer cardboard containers), that are of a type typically used in association with footwear and not intended for repetitive use, are classified with the slippers they are used to package. Therefore, provided that the slippers satisfy all of the requirements for duty-free treatment under Note 2(b), the packaging materials also are entitled to duty-free treatment.

Sincerely,

John Durant, Director
Commercial Rulings Division


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