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HQ 557843




April 25, 1994

CLA-2 CO:R:C:S 557843 WAS

CATEGORY: CLASSIFICATION

Mr. Miguel Ruiz
Sig M. Glukstad, Inc.
P.O. Box 523730
Miami, FL 33152-3730

RE: Eligibility of clew knots from Guatemala for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS

Dear Mr. Ruiz:

This is in reference to your letter date March 12, 1994, on behalf of Ecotab, Inc., regarding the tariff classification and eligibility of "clew knot assemblies" from Guatemala for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States (HTSUS) ("Note 2(b)"). In Headquarters Ruling Letter (HRL) 557665 dated February 23, 1994, which was issued to you, we held that the clew knot assembled in Guatemala did not qualify for the partial duty exemption under subheading 9802.00.80, HTSUS. In response to HRL 557665, you now ask whether, under the same facts as in HRL 557665, the production of the clew knot assemblies qualify for duty-free treatment under Note 2(b).

FACTS:

The facts as reported in HRL 557665 are as follows:

The "clew knot assembly" ("clew knot") is a component of a hammock. Ecotab Inc. plans to ship the components of the clew knot, a roll of rope made of 100 percent cotton or 100 percent polyester and a ring/chain assembly to Guatemala.

A sheet of plywood arranged with pegs at the bottom, a hook at the top, and a clamp at the bottom left side (referred to as a "clew knot board") is used as a form to make the clew knot. The ring and chain assembly are hung on the hook, and the free end of the roll of rope is placed in the clamp. The rope is then pulled from the roll and pulled through the ring and wrapped around two pegs forming loops. This process is repeated, working from left to right until all of the pegs are used. The ropes are then clamped with a coat hanger near the ring to keep them from sliding when they are removed from the clew knot board. Each loop is taken off of the pegs, bound together with a rubber band, and immersed in hot wax to keep the ends from fraying when they are cut. After the wax dries, the loop ends are cut, the ring is hung on a hook (possibly the hook on the clew knot board), and the coat hanger and rubber band are removed from the ropes.

Next, each cord that is closest to the clew knot board (i.e., behind the ring) is brought through the corresponding spaces between the cords in front of the ring. The cord at each side is then passed in front of the cords nearest the clew knot board and the cords in front, tightening the knot (i.e., the cords are alternatively crossed forward and backward and pulled through the last one on each side). This process is repeated until there only are two remaining cords. These two cords are tied together in an overhand knot at the bottom of the clew knot.

You state in your March 12, 1994, letter that all of the materials used in the production of the clew knot are of U.S.-origin and that all of the manufacturing operations will be performed in Guatemala.

ISSUES:

(1) What is the proper tariff classification of the "clew knot assembly."

(2) Whether the "clew knot assembly" will qualify for duty-free treatment under Note 2(b).

LAW AND ANALYSIS:

I. Tariff Classification of the Cotton "Clew Knot Assembly"

The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUS, states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes. . . "

The cotton clew knot is classified under subheading 5609.00.1000, HTSUS, which provides for "articles of yarn strip or the like of heading 5404 or 5405, twine, cordage, rope or cables, not elsewhere specified or included: of cotton." The polyester knot is classified under subheading 5609.00.3000, HTSUS.

II. Eligibility of the "clew knot assembly" for duty-free treatment under Note 2(b)

Section 222 of the Customs and Trade Act of 1990 (Public Law 101-382) amended U.S. Note 2, subchapter II, Chapter 98, HTSUS, 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 3(c)(v)(A)[now General Note 7(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 7(a), HTSUS, the Dominican Republic has been designated as a 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. Customs has ruled that textile and apparel articles which are exempt from duty-free treatment under this provision include only those articles which are subject to textile agreeements. T.D. 91-88, 25 Cust. Bull. 45 (1991) (citing Customs' position and rulings on this issue). The articles which are the subject of this ruling request do not have a textile category number next to the applicable tariff provision and, therefore, are eligible for duty-free treatment under Note 2(b), provided that all of the other requirements are satisfied.

In regard to the operations performed in Guatemala, we believe that the assembly and processing of the U.S. materials and ingredients, which consist of pulling rope through a ring, wrapping the rope around pegs to create loops which are later cut so that the cords may be crossed together to form the clew knot, are encompassed by the operations specified in Note 2(b). Accordingly the clew knot assembly will be eligible for duty-free treatment under Note 2(b), provided that the merchandise is made from 100 percent U.S.-origin materials, and is imported directly into the U.S. without entering into the commerce of any foreign country other than a BC, and the applicable documentation requirements are satisfied.

HOLDING:

On the basis of the information submitted, the cotton clew knot is properly classified under subheading 5609.00.1000, HTSUS, and the polyester clew knot is classified under subheading 5609.00.3000, HTSUS.

It is our position that the clew knot assemblies made in Guatemala 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 Headquarters telex 9264071 dated September 28, 1990 (copy enclosed).

Sincerely,


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