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HQ 558814





December 5, 1994

CLA-2 CO:R:C:S 558814 MLR

CATEGORY: CLASSIFICATION

Mrs. Gisele Marfleet
Intersol Limited
P.O. Box 698
Port of Spain
Trinidad

RE: Eligibility of TCB petroleum jelly with aloe vera and lanolin for duty-free treatment under the Caribbean Basin Economic Recovery Act (CBERA); substantial transformation; 555609

Dear Mrs. Marfleet:

This is in response to your letter dated October 4, 1994, requesting a ruling on the eligibility of TCB petroleum jelly with aloe vera and lanolin (hereinafter "petroleum jelly") from Trinidad and Tobago, for duty-free treatment under the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2701-2706).

FACTS:

You state that the petroleum jelly will be produced in Trinidad and Tobago, from components from Trinidad and Tobago, and the U.S. Snow white petrolatum, amber petrolatum, 120-125 F MP wax, drakeol 9 light mineral oil, aloe oil extract #102, lanolin anhydrous, fragrance, and caps are stated to originate from U.S. suppliers. UV colorant is stated to originate from a Puerto Rican supplier; and jars, labels, and corrugated shippers are stated to originate from suppliers from Trinidad and Tobago.

The manufacturing process in Trinidad and Tobago involves a blending operation in a stainless steel jacketed kettle fitted with a lightening mixer. First, snow white petrolatum is added to the kettle and heated to approximately 75-80 degrees Celsius, until it is liquified. Then, amber petrolatum is added, and when this is liquified, 120-125 F MP wax and lanolin anhydrous is added. While stirring constantly, aloe oil extract #102 and drakeol 9 lt. mineral oil is added. The temperature of this mixture is reduced to 55 degrees Celsius, fragrance is added, and the temperature is again reduced to 45-50 degrees Celsius. The mixture is then poured into retail jars, the jars are capped and packed into outers and seal outers. You have also provided cost information concerning the manufacture of the petroleum jelly and the packaging costs. In terms of the percentage of the total cost of the petroleum jelly, the cost of labor in Trinidad and Tobago is stated to be 13.2 percent; the cost of the jars is 18.44 percent; the cost of the labels is 5.11 percent; and the cost of the outers is 2.98 percent.

ISSUE:

Whether the petroleum jelly is entitled to duty-free treatment under the CBERA when imported into the U.S.

LAW AND ANALYSIS:

Under the CBERA, eligible articles the growth, product, or manufacture of a designated beneficiary country (BC), which are imported directly to the U.S. from a BC, qualify for duty-free treatment, provided the sum of (1) the cost or value of materials produced in a BC or two or more BC's, plus (2) the direct costs of processing operations performed in a BC or BC's is not less than 35 percent of the appraised value of the article at the time it is entered into the U.S. 19 U.S.C. 2703(a)(1). The cost or value of materials produced in the U.S. may be applied toward the 35 percent value-content minimum in an amount not to exceed 15 percent of the imported article's appraised value. See 19 CFR 10.195(c).

As stated in General Note 7(a), Harmonized Tariff Schedule of the United States (HTSUS), Trinidad and Tobago is a designated BC under the CBERA. In addition, according to New York Ruling Letter 840760 dated June 2, 1989, white petroleum jelly (scented) is classifiable under subheading 3304.99.00, HTSUS, which provides for beauty or make-up preparations and preparations for the care of the skin (other than medicaments), including sunscreen or sun tan preparation; manicure or pedicure preparations: Other: other, which is a CBERA-eligible provision. Therefore, the petroleum jelly will receive duty-free treatment if it is considered to be the "product of" Trinidad and Tobago, the 35 percent value-content minimum is met, and the petroleum jelly is "imported directly" into the U.S.

Under the Customs Regulations implementing the CBERA, an eligible article may be considered a "product of" a BC if it is either wholly the growth, product, or manufacture of a beneficiary country, or a new or different article of commerce which has been grown, produced, or manufactured in the BC. See 19 CFR 10.195(a). Accordingly, where materials are imported into a BC from a non-BC, as in this case, those materials must be substantially transformed into a new and different article of commerce. The test for determining whether a substantial transformation has occurred is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 CCPA 152, 156, 681 F.2d 778, 782 (1982).

In Headquarters Ruling Letter (HRL) 555609, issued to Intersol Limited on November 5, 1990, we considered the blending of various U.S.-origin materials into petroleum jelly, and held that they were substantially transformed into a new and different article of commerce. The materials considered in HRL 555609 were the same as those used in this case, except that instead of using fragrance, D&C Green #6 was used.

Similarly, in this case, we find that each U.S.-origin material exported to Trinidad and Tobago, loses its separate identity when it is heated, liquified, and combined with the other materials to make TCB petroleum jelly. These operations change the name, character, and use of each of the materials. Consequently, we find that each U.S.-origin material undergoes a substantial transformation into a new and different article of commerce, TCB petroleum jelly, which is, therefore, considered a product of Trinidad and Tobago.

With respect to the 35 percent value-content requirement, the cost information you have provided indicates that the sum of the labor costs incurred in Trinidad and Tobago; the cost of the Trinidad and Tobago labels, jars, and outers; and the cost of the U.S.-origin materials (subject to the 15 percent cap) would represent 54.73 percent of the cost to manufacture the petroleum jelly. However, a final determination regarding whether the value-content requirement is satisfied can only be made once the merchandise is entered into the U.S.

HOLDING:

Based on the information submitted, we find that the petroleum jelly manufactured in Trinidad and Tobago is considered a "product of" a BC for purposes of the CBERA. Therefore, provided that it is imported directly to the U.S., and the 35 percent value-content requirement is satisfied, the petroleum jelly will be entitled to duty-free treatment under the CBERA.

Sincerely,

John Durant, Director

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