CLA-2 CO:R:C:V 555583 DSN
Mr. Paul Kenney
President
W.J. Young Fastener & Machinery Co., Inc.
181 Elliot Street
Beverly, MA 01915
RE: CBERA treatment of certain nails
Dear Mr. Kenney:
This is in response to your letters of January 31, 1990, and
March 27, 1990, on behalf of Caribbean Metal Products Inc., in
which you request a ruling that certain nails produced in the
Netherlands Antilles are entitled to duty-free treatment under
the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C.
2701-2706).
FACTS:
According to your submissions, wire rod manufactured in
Trinidad and Tobago from pig iron and scrap is imported into the
Netherlands Antilles in 2500 pound coils with a diameter of .210
inch. In the Netherlands Antilles, the wire rod is fed into a
wire drawing machine utilizing a cold system of air, water and
lubricants, which de-scales the rod and passes it through four
reducing dies. Each of these dies reduces the diameter of the
rod by a pre-determined amount. This process converts the rod
into nail wire with a finished diameter of .105 inch, or smaller,
depending on the hole size used on the wire drawing machine.
The finished wire is then fed into a high speed open die
nail press which first cuts the point on the wire and then forms
the head of the nail.
The next stage involves the tumbling of the nails in a
closed barrel and cleaning them with sawdust and water. After
this process, the nails are passed through sets of parallel rolls
and the heads are sorted.
The non-hardened plain nails are then packed into corrugated
boxes. The nails requiring threading are put through a rotary
die threading machine, which consists of one rotary and one shoe
die. This operation deforms the shank and implants the annular
thread configuration.
The nails that require hardening are inserted into a
furnace and heated after which they are quenched in an oil tank.
Both the nails that need re-threading and hardening are re-
tumbled for cleaning purposes before being packaged.
The cost figures submitted have been broken down in the
following manner:
Wire Rod .19 cents/lb.
Direct Labor .14 cents/lb.
wire drawing
nail making
tumbling and polishing
threading
heat treating
packaging
Manufacturing .18 cents/lb.
depreciation
machine repairs and
maintenance
purchase, rework, heat
treated dies
rent
water, light and power
shipping supplies
vacation pay
Shipping .04 cents/lb.
Selling price .64 cents/lb.
Gross profit .09 cents/lb.
ISSUE:
Whether the described nails produced in the Netherlands
Antilles are entitled to duty-free treatment under the CBERA when
imported into the U.S.
LAW AND ANALYSIS:
Under the CBERA, eligible articles the growth, product or
manufacture of a designated beneficiary country (BC) may receive
duty-free treatment if such articles are imported directly to the
U.S. from a BC, and if the sum of 1) the cost or value of the
materials produced in a BC or BC's, plus 2) the direct cost of
processing operations performed in a BC or BC's, is not less than
35% of the appraised value of the article at the time it is
entered into the U.S. See 19 U.S.C. 2703(a). The cost or value
of materials imported into a BC from a non-BC may be counted
toward the 35% requirement only if these materials are first
substantially transformed into a new or different intermediate
article of commerce which is then used in the production of a new
or different article which is imported into the U.S. See section
10.196(a), Customs Regulations (19 CFR 10.196(a)).
The Netherlands Antilles is a BC. See General Note
3(c)(v)(A), Harmonized Tariff Schedule of the United States
Annotated (HTSUSA). Based on your description, it appears that
the nails would be classified under subheading 7317.00.55,
HTSUSA, which provides for nails, tacks, drawing pins, corrugated
nails, staples (other than those of heading 8305) and similar
articles, of iron or steel, whether or not with heads of other
material, but exluding such articles with heads of copper, other,
which is a CBERA eligible provision. Therefore, if the nails are
imported directly to the U.S. from the Netherlands Antilles, and
they satisfy the "product of" and 35% value-content requirements,
the nails will receive duty-free treatment under the CBERA.
The processing performed in Trinidad and Tobago (also a BC)
clearly results in the substantial transformation of pig iron and
scrap into a new and different article of commerce -- wire rod.
Moreover, the subsequent processing performed in the Netherlands
Antilles substantially transforms the wire rod into another new
and different article of commerce -- nails. Therefore, the nails
are considered to be a "product of" a BC, and the cost or value
of the wire rod may be counted toward the 35% value-content
requirement. Based on your cost figures, the sum of the cost or
value of the wire rod and the direct processing costs incurred in
the Netherland Antilles will exceed 35% of the estimated
appraised value of the imported nails.
For your information, we are enclosing a copy of the Customs
Regulations relating to the CBERA (sections 10.191-10.198,
Customs Regulations (19 CFR 10.191-10.198)).
HOLDING:
Assuming that the nails manufactured in the Netherlands
Antilles will be imported directly to the U.S., they will be
entitled to duty-free treatment under the CBERA.
Sincerely,
John Durant, Director
Commercial Rulings Division
Enclosure