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HQ 560584




May 7, 1998

CLA-02 RR:CR:SM 560584 KKV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.8040

Peter Jay Baskin
Sharretts, Paley, Carter & Blauvelt
67 Broad Street
New York, NY 10004

RE: Applicability of U.S. Note 2(b), subchapter II, Chapter 98 to certain footwear assembled in the Dominican Republic from U.S. materials; foreign-origin packing material; disposable outer cardboard shipping cartons; subheading
9802.00.8040, HTSUS

Dear Mr. Baskin:

This is in response to your letter dated July 28, 1997, on behalf of Wolverine World Wide, Inc., which requests a binding ruling regarding the eligibility of certain footwear for preferential duty treatment pursuant to U.S. Note 2(b), subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States (HTSUS)("Note 2(b)") when packaged in shipping material which is the product of the Dominican Republic. We regret the delay in processing.

FACTS:

We are informed that Wolverine World Wide, Inc. (Wolverine) currently imports into the U.S. footwear which has been assembled, processed and packed in the Dominican Republic from fabricated components and other materials all of which are the product of the United States. As imported, the footwear is packed in individual shoe boxes which hold one pair of footwear, and those boxes are, in turn, packed together in cartons for shipment. You state that, as currently imported, the individual shoe boxes and larger cartons are of U.S. origin and the footwear is receiving duty-free treatment under Note 2(b), but you indicate that Wolverine is contemplating sourcing the large, outermost shipping cartons from local Dominican suppliers. You are advised by the local supplier
that the cost of the cartons would represent approximately two percent of the value of the completed articles. You inquire whether the use of Dominican shipping cartons would render the footwear ineligible for duty-free treatment under Note 2(b). For purposes of this ruling, we presume the footwear has been correctly entered duty-free under Note

ISSUE:

Whether the use of packing material, the product of a CBERA beneficiary country, will disqualify otherwise eligible footwear for preferential duty treatment under Note 2(b) when used to ship the merchandise to the U.S.

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, 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.

The Dominican Republic is one of those countries designated as a "beneficiary country" (BC) for CBERA purposes in General Note 7(a).

You assert that foreign-origin packing materials should not disqualify otherwise eligible footwear for duty-free treatment under Note 2(b), HTSUS. In support of your position you cite the statutory language itself, noting that it focuses on the "article itself," in the words of subparagraph (ii) of Note 2(b), and not upon extraneous materials merely used to facilitate the transportation of that article from the beneficiary country to the United States.

Additionally, you cite the legislative history of Note 2(b), which explains the purpose of that provision as follows:

The purpose of this limited exception to the general rules of origin is to encourage small-scale investments in assembly and processing facilities in areas of the Caribbean that are not able to support full-fledged manufacturing or processing operations. In turn, the amendment encourages greater sales of
U.S. products and further integration of production between the United States and the Caribbean.

S. Rep. No. 252, 101st Cong., 2nd Sess. 43, reprinted in [1990] U.S. Code Cong. & Ad. News 928, 970. You contend that requiring all the packing materials for otherwise eligible articles to be of U.S. origin would undermine, not promote, Congressional intent to extend those operations by which an article is either manufactured or processed to areas that cannot support full-scale production facilities as forbidding the use of inexpensive, locally-sourced packing materials would add undue cost that, in some cases, could render an otherwise feasible operation impractical. Packing an article after it has been completed, you maintain, is simply not part of the production process. We agree.

General Rule of Interpretation (GRI) 5(b), HTSUS, provides, in pertinent part:

[P]acking 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.

Customs has previously applied GRI 5(b) to packaging materials used for articles which are entitled to duty-free treatment under Chapter 98, HTSUS. For example, 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).

In HRL 557544, dated October 28, 1993, Customs was asked to consider whether the presence of foreign-origin packing materials used to import slippers, which would otherwise qualify for duty-free treatment pursuant to Note 2(b), would defeat the eligibility of the slippers for preferential duty treatment. Customs determined that foreign-origin header cards and outer cardboard containers were packaging materials of a type typically used in association with slippers and were not intended for repetitive use and held that the packaging materials were also entitled to duty-free treatment under Note 2(b) pursuant to GRI 15(b). Likewise, in HRL 556072, dated July 1, 1991, Customs held that foreign-origin disposable cardboard shoe boxes and paper, which were used to pack footwear eligible for preferential duty treatment under Note 2(b), were also entitled to duty-free treatment upon importation into the U.S.

With regard to the subject packing material, the disposable outer cardboard shipping cartons, and the individual shoe boxes, which contain footwear otherwise eligible for preferential duty treatment under Note 2(b), are both of a kind typically used in association with footwear and are clearly not intended for repeated use. Therefore, pursuant to GRI 5(b), they are classifiable with the footwear they are used to package. Accordingly, the use of foreign-origin packing material will not defeat the eligibility of imported footwear for preferential duty treatment, but will also be entitled to duty-free
treatment provided that the footwear contained within satisfies all the requirements under Note 2(b).

HOLDING:

Foreign-origin packaging materials, such as outer cardboard shipping containers and cardboard shoe boxes, that are of a type typically used in association with footwear and not intended for repetitive use, are classified with the footwear they are used to package pursuant to GRI 5(b). 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. Accordingly, the use of foreign-origin packing material will not defeat the eligibility of imported footwear for preferential duty treatment, but will also be entitled to duty-free treatment provided that the footwear contained within satisfies all the requirements under Note

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

Sincerely,

John Durant
Director
Commercial Rulings Division


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