United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1997 HQ Rulings > HQ 559235 - HQ 559740 > HQ 559580

Previous Ruling Next Ruling
HQ 559580




July 10, 1996

CLA-2 RR:TC:SM 559580 KKV

CATEGORY: CLASSIFICATION

Port Director
U.S. Customs Service
Charlotte, NC 28217

RE: Application for Further Review of Protest No. 1512-95-100216; applicability of duty exemption under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS, to cotton hammock mattresses produced in Costa Rica; CBERA; HRL 556919; 9802.00.8040; assembly charges not dutiable

Dear Sir:

The above-referenced protest, filed by Waters Shipping Company on behalf of Amigos Del Sur, concerns the eligibility of cotton hammock mattresses for duty-free treatment under U.S. Note 2(b), Subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States (HTSUS). Protestant claims that the articles at issue are eligible for a complete duty exemption under this provision and seeks a refund of duties paid. No sample has been submitted for our consideration.

FACTS:

The importer, Amigos Del Sur, exports U.S. origin cotton cord on spools to Costa Rica, where it is cut to length and woven together to form the mattress portion of a hammock. The ends of the mattress are knotted to prevent unraveling, and the article is packed into a plastic bag for return shipment to the U.S.

The subject protest was filed in connection with an entry of 510 cotton hammock mattresses imported from Costa Rica. The entry was made under subheading 9802.00.8040, HTSUS (Harmonized Tariff Schedule of the United States) as "Articles for which duty free treatment is claimed under U.S. note 2(b) to this subchapter" and subheading 5609.00.10, HTSUS, as "articles of yarn, strip or the like of heading 5404 or 5405, twine, cordage, rope or cables, not elsewhere specified or included: of cotton." On September 1, 1995, Customs liquidated the entry, granting a duty allowance for the value of the U.S. components sent to Costa Rica, but assessed duty upon the remainder of the appraised value. The subject protest, timely filed on October 6, 1995, contests the liquidations and seeks a refund of duties paid.

ISSUE:

Whether the hammock mattresses assembled in Costa Rica from U.S. origin cotton cord are entitled to duty-free treatment pursuant U.S. Note 2, subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States (HTSUS), when returned to the United States.

LAW AND ANALYSIS:

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, Costa Rica 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. In T.D. 91-88, 25 Cust. Bull. 45 (1991), Customs addressed the question of what constitutes a "textile and apparel" article for purposes of Note 2(b). In T.D. 91-88, Customs held that the controlling factor in determining whether articles are eligible for duty-free treatment under Note 2(b), is whether such articles (other than footwear and parts of footwear) are subject to textile agreements. Customs cited with approval its decision in Headquarters Ruling Letter (HRL) 555950, dated August 3, 1991, which held that, because cotton hammock mattresses are classifiable in a HTSUS provision which does not include a textile category number, the hammock mattresses are eligible articles for purposes of Note 2(b).

Regarding the operations performed in Costa Rica, we believe that the assembly and processing of the U.S. materials that consist of cutting materials to length and weaving together to form a hammock mattress constitute the type of operations contemplated by Note 2(b). Previously, we issued a binding ruling letter to the Protestant, HRL 556919, dated January 8, 1993, which held that the subject mattresses were eligible for duty-free treatment under U.S. Note 2(b), HTSUS.

Pursuant to Statistical Note 2, subchapter II, Chapter 98, HTSUS, articles assembled or processed in a BC, and which otherwise comply with Note 2(b), shall be reported, for statistical purposes, under subheading 9802.00.8040 (articles assembled in a BC), or 9802.00.5010 (articles processed other than by an assembly in a BC), including the value of the U.S. components. Specifically, Statistical Note 2 requires the reporting of the value of the U.S. fabricated components or materials as well as the dutiable value, i.e., the total value of the articles less the value of the U.S. fabricated components. While subheading 9802.00.80, HTSUS, provides a partial duty exemption for the value of qualifying U.S. components upon their return to the U.S., the classification of articles eligible for entry under U.S. Note 2(b) under 9802.00.8040, HTSUS, for statistical purposes, does not render dutiable the value of foreign assembly charges incurred in the production of such articles, contrary to the position expressed in the Customs Protest and Summons Information Report. Accordingly, the protest should be granted in full.

HOLDING:

Hammock mattresses assembled in Costa Rica from U.S. origin cotton cord are entitled to a complete duty exemption pursuant U.S. Note 2, subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States (HTSUS).

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, should be mailed by your office to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act, and other public access channels.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling

See also: