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NY K87465




July 21, 2004
CLA-2-42:RR:NC:3:353 K87465

CATEGORY: CLASSIFICATION

TARIFF NO.: 4203.30.0000

Mr. Joseph A. Acayan
Givens & Johnston PLLC
950 Echo Lane, Suite 360
Houston, TX 77024-2788

RE: The tariff classification and eligibility for preferential duty treatment under the Caribbean Basin Economic Recovery Act (CBERA) for belts from Guatemala.

Dear Mr. Acayan:

In your letter dated June 23, 2004, on behalf of TATA, S.A., you requested a ruling on the tariff classification and eligibility for preferential duty treatment under the Caribbean Basin Economic Recovery Act (CBERA) for belts. Samples were furnished.

The submitted samples are belts with a metal buckle; some have sewn edges, some do not. The belts are constructed of either 100% leather or of composition leather (leather fibers embedded in resins and pressed into sheets or rolls).

Foreign leather hides or composition leather sheets or rolls are imported into Guatemala. In Guatemala the hides, sheets or rolls are brought up to quality standards and are measured and cut into straps, which are sorted by size and thickness and inventoried. These straps can be further manufactured into a variety of items including belts, gun belts, harnesses, handbag straps, luggage trim, dog collars, leashes and wallets. Selected straps are then made into belts. They are cut to size, the tips are shaped, edges are beveled, holes are punched, edges are stitched (where appropriate), belt loops are added, the buckle is attached and a plastic retail hanger is added.

The applicable subheading for the leather and composition leather belts will be 4203.30.0000, Harmonized Tariff Schedule of the United States (HTS), which provides for “Articles of apparel and clothing accessories, of leather or composition leather: Belts and bandoliers with or without buckles.” The general rate of duty will be 2.7% ad valorem.

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 preferential duty treatment, provided the sum of (1) the cost or value of materials produced in a BC or two or more BCs, plus (2) the direct costs of processing operations performed in a BC or BCs is not less than 35 percent of the appraised value of the article at the time it is entered into the U.S. As stated in General Note 7(a), HTSUS, Guatemala is a designated BC under the CBERA.

To determine whether an article will be eligible to receive preferential duty treatment under the CBERA, it must first be classified under a tariff provision for which a rate of duty of "Free" appears in the "Special" subcolumn followed by the symbol "E" or "E*." The leather and composition leather belts are classifiable under subheading 4203.30.0000, HTSUS, which is a CBERA-eligible provision. Therefore, the belts will receive preferential duty treatment if they are considered to be a "product of" Guatemala, the 35 percent value-content requirement is met, and they are "imported directly" into the U.S. from Guatemala.

Where an article is produced from materials that are imported into the BC, the article is considered "the growth, product or manufacture" of the BC only if the imported materials are substantially transformed there into a new and different article of commerce. Moreover, the cost or value of those imported materials may be included in calculating the 35 percent value-content requirement only if they undergo a "double substantial transformation" in the BC. That is, the foreign leather hides will be considered "materials produced" in Guatemala only if they are substantially transformed in Guatemala into a new and different intermediate article of commerce, which is then used in Guatemala in the production of the final imported article, the leather and composition leather belts. 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.

During the manufacturing process, the hides are turned into a strap, which can be further processed into a number of items. The hides clearly undergo a substantial transformation when they are turned into straps. The straps undergo a second substantial transformation when they are changed into finished belts. The finished belts are considered "products of" Guatemala.

Since there is a double substantial transformation in Guatemala, the full cost or value of the imported hides may be counted towards the 35 percent value content requirement for purposes of qualifying for preferential duty treatment under the CBERA. Accordingly, the leather and composition leather belts will be entitled to preferential duty treatment under the CBERA, if they are classified under 4203.30.0000, a CBERA-eligible tariff provision at the time of entry, the belts are imported directly into the U.S., and the 35 percent value-content requirement is satisfied. A final determination regarding whether the value-content requirement is satisfied can only be made when the articles are imported.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Kenneth Reidlinger at 646-733-3053.

Sincerely,

Robert B. Swierupski
Director,

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