HQ 558658 - Applicability of duty exemption under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS, to footwear uppers and upper parts produced in the Dominican Republic; C.S.D. 91-88; 555788; 555742; Headquarters telex 9264071; Country of origin marking requirements - United States International Trade Commision Rulings

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HQ 558658

June 27, 1995

CLA-2 CO:R:C:S 558658 AT

CATEGORY: CLASSIFICATION

Ms. Tracy Ann Ehme
A.W. Fenton
P.O. Box 360614
Columbus, Ohio 43236-0614

RE: Applicability of duty exemption under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS, to footwear uppers and upper parts produced in the Dominican Republic; C.S.D. 91-88; 555788; 555742; Headquarters telex 9264071; Country of origin marking requirements

Dear Ms. Ehme:

This is in reference to your letters of July 26, 1994 and May 16, 1995, on behalf of Rocky Shoes & Boots Company 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 (HTSUS), and country of origin marking requirments for footwear uppers produced in the Dominican Republic. You submitted a sample of the fully-assembled upper (Style #RB9005) for our review. We regret the delay in responding.

FACTS:

You state that your client, Rocky Shoes & Boots Company, sends all materials used in the production of the upper to the Dominican Republic. You further state the following regarding the production process: (1) all materials are of United States origin; (2) the factory in the Dominican Republic die cuts, assembles, and stitches the materials to form an upper; and (4) the upper is imported into the U.S. where counters, soles and a bottom are added to make the finished boot. According to your submission, the processing time to make the finished upper in the Dominican Republic is 3-4 days with a labor cost of $1.25. The processing time in the U.S. to produce the finished boot is 53 minutes with a cost of $3.85. The sample upper (Style #RB9005) under consideration is an open bottomed non-formed leather and textile upper. The upper covers the ankle and has a Gore-Tex liner attached that completely covers the foot. The liner is intended to provide waterproof protection once the boot is finished. For purposes of this ruling, Rocky Shoes & Boots Company is interested in the country of origin marking requirements of the uppers when imported into the U.S. to be used in the manufacture of finished boots.

ISSUE:

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

2. What is the proper country of origin of the footwear uppers if they are imported into the U.S. to be used in the manufacture of finished boots in the manner described above?

LAW AND ANALYSIS:

1. Eligibility for Note 2(b) treatment

Section 222 of the Customs and Trade Act of 1990 (P.L. 101- 382) amended U.S. Note 2, subchapter II, Chapter 98, HTSUS, ("Note 2(b)") to provide for duty-free treatment of articles, other than certain specified 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.

Specifically, Note 2(b) provides that:

(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 in the United States, enters the commerce of any foreign country other than a beneficiary country.

As used in this paragraph, the term "beneficiary country" means a country listed in General Note 7(a), HTSUS. Pursuant to General Note 7(a), HTSUS, the Dominican Republic has been designated as a BC for CBERA purposes.

As stated above, Note 2(b) specifies four categories of products that are excluded from duty-free treatment under this provision: textile articles; apparel articles; petroleum; and certain petroleum products. The issue presented in the instant case concerns whether the footwear uppers are included in the "textile and apparel article" exclusion for purposes of Note 2(b) and, therefore, precluded from receiving duty-free treatment under this provision.

In T.D. 91-88, 25 Cust. Bull. 45 (1991), Customs addressed the question of what is a "textile and apparel" article for purposes of Note 2(b). In T.D. 9l-88, we held that footwear and parts of footwear are not textile and apparel articles for purposes of Note 2(b), regardless of whether they are subject to textile agreements. Customs has followed this position on footwear and parts of footwear in Headquarters Ruling Letter (HRL) 555742, dated November 5, 1990, and HRL 555788, dated September 9, 1991. These rulings allowed duty-free treatment under Note 2(b) to footwear and footwear uppers made, at least in part, of textile materials.

Regarding the operations performed in the Dominican Republic, we believe that the assembly and processing of the U.S. materials that consist of cutting materials to shape and stitching the cut pieces together to form an upper constitute the type of operations contemplated by Note 2(b). See HRL 555788 and HRL 555742. Therefore, if all of the materials shipped directly from the U.S. to the BC are of U.S.-origin and the completed footwear uppers are shipped directly to the U.S. without entering into the commerce of any foreign country other than a BC, these articles will be entitled to duty-free treatment under Note 2(b), assuming all documentation requirements are met.

2. Applicable marking requirements

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the name of the country of origin of the article. Part 134 of the Customs Regulations implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

Regarding the country of origin marking requirements for articles that 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.

HOLDING:

1. The footwear uppers, which are assembled from entirely U.S. materials in the Dominican Republic and imported into the U.S. to be used in the manufacture of finished boots may enter the U.S. duty-free pursuant to Note 2(b), provided the direct shipment requirements and the documentation requirements set forth in Headquarters telex 9264071 dated September 28, 1990, are satisfied.

2. The imported uppers that qualify for Note 2(b) treatment are excepted from the country of origin marking requirements.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer.

Sincerely,

John Durant
Director, Commercial Rulings Division

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