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HQ 560942




July 23, 1998

CLA-2 RR:TC:SM 560942 KSG

CATEGORY: CLASSIFICATION

TARIFF NO.: 6404.19.35

Marco Antonio Quiros Speri
General Manager
Shelter de Puntarenas
Zona Franca Puntarenas
P.O. Box 075450
Barranca, Puntarenas
Costa Rica

RE: Eligibility of sports sandals for duty-free treatment under the Caribbean Basin Economic Recovery Act ("CBERA"); U.S. Note 2(b), subchapter II, chapter 98, HTSUS

Dear Mr. Speri:

This is in response to your letter of April 14, 1998, requesting a binding ruling regarding the eligibility of imported sports sandals from Costa Rica for duty-free treatment under the Caribbean Basin Economic Recovery Act

FACTS:

Shelter De Puntarenas S.A. is a factory located in Costa Rica which manufactures "TEVA" sports sandals for a U.S. company. You state that you import most of the raw materials needed from the U.S. and some materials are made locally. You state that you have experienced quality and delivery problems and, therefore, would like to import outsoles from China for use in making the sports sandals.

The outsoles of the sandals are made from rubber and the upper is made of nylon and other materials. You submitted a sample for our consideration. ISSUE:

Whether the imported sports sandals from Costa Rica are eligible for duty-free treatment under the CBERA, set forth at 19 U.S.C. 2701, or under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS.

LAW AND ANALYSIS:

Pursuant to 19 U.S.C. 2701, et seq., unless otherwise excluded from eligibility, any article which is the growth, product, or manufacture of a designated beneficiary country ("BC"), shall be eligible for duty-free treatment under the CBERA if that article is classified under a tariff provision for which a free rate of duty appears in the "Special Column" followed by the symbols "E" or "E*", and if: (1) the article is imported directly from a beneficiary country into the customs territory of the U.S.; and (2) the sum of the cost or value of the materials produced in a beneficiary country or two or more beneficiary countries, plus the direct costs of processing operations performed in a beneficiary country or countries is not less than 35 per centum of the appraised value of such article at the time it is entered. In addition, 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. 19 CFR 10.195(c).

The purpose of the CBERA legislation was to respond to the economic crisis that the Caribbean experienced in the 1980's, to promote long-range economic development to insure political and social stability in the region, and to expand the U.S. export market into this region. H.R. REP. No. 266, 98th Cong., 1st Sess. (1983).

In addition, under U.S. Note 2(b), subchapter II, Chapter 98, of the Harmonized Tariff Schedule of the United States ("HTSUS") ("U.S. Note 2(b)"), an article is not treated as a foreign article or as subject to duty if the article (excluding a textile article, apparel article, or petroleum, or any product derived from petroleum provided for in heading 2709 or 2710), is (A) assembled or processed in a beneficiary country in whole of fabricated components that are a product of the U.S., or (B) processed in whole of ingredients (other than water) that are a product of the U.S. in a beneficiary country; and (ii) neither the fabricated components, materials or ingredients, after exportation from the U.S., nor the article itself, before importation into the U.S., enters the commerce of any foreign country other than a beneficiary country. As used in the note, the term "beneficiary country" means a country listed in General Note 7(a), HTSUS.

U.S. Note 2(b) was created by section 222 of the Customs and Trade Act of 1990 and was effective on October 1, 1990.

I. CBERA Eligibility

You ask if the sports sandals qualify for duty-free treatment under the CBERA.

Costa Rica is listed in 19 U.S.C. 2702(b) and General Note
7(a), HTSUS, as a beneficiary country under the CBERA. It appears that the imported article, sports sandals, are classified at subheading 6404.19.35,
HTSUS, which provides for footwear with outer soles of rubber, plastics, leather or composition leather and uppers of textile material: other. This subheading of the HTSUS is not a CBERA- eligible provision. Therefore, based on the above, we find that the imported articles are not eligible for duty free treatment under the CBERA.

II. U.S. Note 2(b) Eligibility

As stated above, Costa Rica is listed in General Note 7(a), HTSUS, as a designated beneficiary country. Although the footwear has a fabric upper, it is not considered a textile or fabric apparel. See Headquarters Ruling Letter ("HRL") 556191, dated November 26, 1991. However, if you use foreign sources for the outsoles, the sports sandals may not be entered under U.S. Note 2(b) because the components used would not be entirely of U.S. origin.

HOLDING:

Based upon the information provided, the sports sandals are not eligible for duty free treatment under 19 U.S.C. 2701, or under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS.

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 handling the transaction.

Sincerely,

John Durant
Director,
Commercial Rulings Division

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