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HQ 561692




January 30, 2001

CLA-2 RR:CR:SM 561692 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 5810.92.1000

Ms. Celeste Hernandez
Joy S.A., Inc.
C/O Fast Transportation Services, Inc.
P.O. Box 4430
Carolina, PR 00984-4430

RE: Eligibility of sheets of embroidered letters, numbers and symbols for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, HTSUS

Dear Ms. Hernandez:

This is in reference to your letter dated March 27, 2000, requesting a ruling that certain embroidered letter designs imported from the Dominican Republic will be eligible for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States ("Note 2(b)"). Samples are enclosed with your submission. We regret the delay in responding.

FACTS:

Joy S.A., Inc. (“Joy”) intends to export from Puerto Rico to the Dominican Republic embroidered letters, numbers and symbols and other materials. In the Dominican Republic, the letters, numbers and symbols will be glued onto cardboard sheets or cards. A pressure sensitive bar code will also be glued onto the back of each sheet and card. The completed sheets and cards will then be returned to Puerto Rico.

The materials to be exported to the Dominican Republic will consist of the following:

Preprinted cardboard sheets of various sizes.

Rolls of pressure sensitive preprinted bar code labels.

Bulk gallon bottles of Elmer’s glue.

Embroidered letters, numbers and symbols.

5. Return cartons.

The following operations will be performed in the Dominican Republic:

Pressure-sensitive bar code label is applied to the back of cardboard sheet.

An embroidered letter, number or symbol is affixed by gluing to the front side of the cardboard sheet. This is repeated over and over until all positions of the sheet are covered.

Completed sheets are stacked in shipping cartons and returned to Puerto Rico for final assembly.

In Puerto Rico, final packaging is completed by means of automated skin pack, blister pack, and die cutting machinery. The finished packages are banded together in packs of 3, 6 or 12 and are ready for final shipment in banded packs, or hung onto hooks of wire displays in retail stores.

The embroidered letters, numbers and symbols of U.S. origin consist of:

Stitching threads, front, 100% rayon.

Bobbin threads, back, 100% rayon.

Backin cloth carrying the threads:

Cloth front, 100% rayon fiber
Cloth back, 50% polyester, 50% cotton

4. Heat seal coatings, nylon and polyester.

All of the materials used in the Dominican Republic to produce the imported articles including the packing materials and glue are of U.S. origin.

ISSUE:

Whether the imported articles are eligible for duty-free treatment under Note 2(b) upon importation into 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 ("Note 2(b)"), to provide for duty-free treatment of articles other than certain specified products, which are assembled or processed in a Caribbean Basis Initiative beneficiary country (BC) wholly of fabricated components or ingredients (except water) of U.S. origin. Specifically, Note 2(b) provides as follows:

(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 into 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 a designated BC under General Note 7(a).

Although Note 2(b)(i)(A) and (B) are separated by the word "or", it is our opinion that Congress did not intend to preclude duty-free treatment under this provision to an article which is created in a BC both by assembling and processing U.S. fabricated components and by processing U.S. ingredients. To qualify for Note 2(b) duty-free treatment, an eligible article must be assembled or processed in a BC entirely of components or ingredients that are a "product of the U.S." In this regard, you state that all of the materials exported to the Dominican Republic and used in the production of the imported sheets are of U.S. origin.

As noted, above, Note 2(b) enumerates categories of products which are excluded from duty-free treatment under this provision: textile articles; apparel articles; petroleum; and certain products derived from petroleum. In our opinion, the articles involved here are properly classifiable in subheading 5810.92.1000, HTSUS. Articles classifiable in this subheading are not considered textile materials nor do the sheets fall within any of the other excluded categories. Therefore, the imported articles are eligible for duty-free treatment under this provision, provided that all of the other requirements of the statute are satisfied.

With regard to the processing performed in the Dominican Republic, we believe that the operations, which involves affixing the letters, numbers and symbols to the cardboard sheets by gluing, are encompassed by the operations enumerated in Note 2(b).

Therefore, provided that neither the materials after exportation from the U.S., nor the final article, after production in the Dominican Republic, enters the commerce of any foreign country other than a BC, and the applicable documentation requirements are satisfied, the imported articles will be entitled to duty-free treatment under this provision.

HOLDING:

Based on the information provided, the imported articles produced entirely of U.S.-origin materials will be entitled to duty-free treatment under Note 2(b), upon compliance with the direct shipment and applicable documentation requirements.

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,

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