CLA-2 CO:R:C:V 555801 KCC
Mr. William J. LeClair
Trans-Border Customs Services, Inc.
One Trans-Border Drive
P.O. Box 800
Champlain, New York 12919
RE: Tariff treatment applicable to rings (jewelry) to be
imported from the Dominican Republic.Mounting; casting;
CBERA; substantial transformation; product of; 554448; U.S.
Note 2(b), subchapter II, Chapter 98; eligible article;
precious metal; assembly; 19 CFR 10.16(a)
Dear Mr. LeClair:
This is in response to your letter dated November 27, 1990,
on behalf of IRCA Metal Spinning Inc., requesting a ruling
concerning whether rings (jewelry) will be eligible for a duty
exemption under the Harmonized Tariff Schedule of the United
States (HTSUS) when returned to the U.S. from the Dominican
Republic.
FACTS:
IRCA intends to ship U.S. origin precious metal ring
castings, U.S. origin gem stones, foreign gem stones, and
precious metal alloys (origin unknown) to the Dominican Republic.
In the Dominican Republic, IRCA intends to manufacture rings
using one of the following three options. The first option
involves mounting foreign gem stones onto U.S. origin castings,
producing an unfinished ring. The unfinished ring will be
returned to the U.S. for grinding, buffing and polishing
operations. The second option involves mounting U.S. origin gem
stones onto U.S. origin castings, producing an unfinished ring
which will be returned to the U.S. for grinding, buffing and
polishing operations. The third option involves casting precious
metal alloys into a ring into which a foreign origin gem stone
will be mounted. Thereafter, the ring will be shipped to the
U.S.
ISSUE:
Whether the rings will be eligible for a duty exemption
under the HTSUS when returned to the U.S.
LAW AND ANALYSIS:
All articles imported into the U.S. are subject to duty
unless specifically exempted therefrom under the HTSUS. To
determine the duty applicable to an imported article, it must be
properly classified in a HTSUS tariff provision. Generally,
jewelry is classified under one of the tariff provisions in
Chapter 71 of the HTSUS. However, without samples or a detailed
description of the rings, we are unable to classify the rings at
this time.
Articles imported into the U.S. from the Dominican Republic
may be exempt from duty under the Caribbean Basin Economic
Recovery Act (CBERA) (19 U.S.C. 2701-2706). Under the CBERA,
eligible articles the growth, product or manufacture of
designated beneficiary countries (BC's) 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
produced in the U.S. may be applied toward the 35% value-content
minimum in an amount not to exceed 15% of the imported article's
appraised value. See, section 10.195(c), Customs Regulations (19
CFR 10.195(c)).
All jewelry described in Chapter 71, HTSUS, is eligible for
CBERA treatment. Therefore, in this analysis, we are assuming
IRCA's rings will fall under a CBERA-eligible tariff provision.
Where an article is produced from materials imported into a
BC from non-BC's, as in this case, the article is considered a
"product of" the BC only if those materials are substantially
transformed into a new or different article of commerce. See, 19
CFR 10.195(a). In the present situation, the cost or value of
the U.S. and foreign origin components to be imported into the
Dominican Republic may be counted toward satisfying the 35%
value-content requirement (over and above the 15% cap on U.S.
materials) only if there is a finding that the components were
subjected to a double substantial transformation in the Dominican
Republic. See, section 10.196(a), Customs Regulations (19 CFR
10.196(a)).
The test for determining whether a substantial
transformation occurs 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. Texas Instruments
Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982).
We are of the opinion that the rings manufactured in
accordance with the first two options will not be entitled to
duty free treatment under the CBERA pursuant to 19 CFR
10.195(a)(2)(i)(B). This provision states that no article or
material shall be considered to have been grown, produced, or
manufactured in a BC by virtue of having merely undergone simple
combining or packaging operations, which includes fitting
together a small number of components by bolting, gluing,
soldering, etc. See also, Headquarters Ruling Letter (HRL)
554448 dated August 25, 1987 (setting artificial stones into
jewelry is not considered a substantial transformation of the
jewelry into a "product of" a BC). Since only two components are
fitted together, mounting a gem stone onto a ring casting is
considered a simple combining operation pursuant to 19 CFR
10.195(a)(2)(i)(B) and, therefore, the rings in the first and
second options will not be considered "products of" the Dominican
Republic.
According to 19 CFR 10.195(a)(2)(ii)(D), a simple combining
or packaging operation shall not include a simple combining or
packaging operation coupled with any other type of processing
such as testing or fabrication. Consistent with this
regulation, we are of the opinion that the third option,
involving casting the precious metal alloys into a ring and then
mounting the ring with a gem stone, results in a substantial
transformation of the components into a "product of" the
Dominican Republic. Although mounting the ring with the gem
stone is considered a simple combining operation, because it is
coupled with a fabrication--the casting of the precious metal
alloys into a ring--, the finished article will be considered a
"product of" the Dominican Republic. Accordingly, if the rings
meet the 35% value-content minimum and are imported directly into
the U.S., they will be entitled to duty-free treatment under the
CBERA.
Section 222 of the Customs and Trade Act of 1990 (Public
Law 101-382) amended U.S. Note 2, subchapter II, Chapter 98,
HTSUS, to provide for the duty free treatment of articles (other
than textile and apparel articles and petroleum and petroleum
products) which are assembled or processed in a CBERA beneficiary
country 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.
We are of the opinion that the jewelry produced under the
second option may enter the U.S. duty free pursuant to U.S Note
2(b), subchapter II, Chapter 98, HTSUS. Only U.S. origin
components are used during the foreign operation which merely
involves the assembly of a gem stone with a ring casting.
Enclosed is a copy of a telex dated September 28, 1990, to
Customs field offices setting forth procedures for entry under
U.S. Note 2(b), subchapter II, Chapter 98, HTSUS.
Subheading 9802.00.60, HTSUS, provides a partial duty
exemption for:
[a]ny article of metal (as defined in U.S. note 3(d) of this
subchapter) manufactured in the United States or subjected
to a process of manufacture in the United States, if
exported for further processing, and if the exported article
as processed outside the United States, or the article which
results from the processing outside the United States, is
returned to the United States for further processing.
This tariff provision imposes a dual "further processing"
requirement on eligible articles of metal--one foreign, and when
returned, one domestic. Metal articles satisfying these
statutory requirements may be classified under this tariff
provision with duty only on the value of such processing
performed outside the U.S., provided there is compliance with the
documentary requirements of section 10.9, Customs Regulations (19
CFR 10.9)
Eligible articles of metal are defined in U.S. note 3(d) of
subchapter II which provides that:
[f]or purposes of subheading 9802.00.60, the term "metal"
covers (1) the base metals enumerated in additional U.S.
note 1 to section XV; (2) arsenic, barium, boron, calcium,
mercury, selenium, silicon, strontium, tellurium, thorium,
uranium, and the rare-earth elements; and (3) alloys of any
of the foregoing.
Base metals are further enumerated in additional U.S. note 1 to
section XV which provides:
[f]or the purposes of the tariff schedule, the term "base
metals" embraces aluminum, antimony, beryllium, bismuth,
cadmium, chromium, cobalt, copper, gallium, germanium,
hafnium, indium, iron and steel, lead, magnesium, manganese,
molybdenum, nickel, niobium (columbium), rhenium, tantalum,
thallium, tin, titanium, tungsten, vanadium, zinc and
zirconium.
Since the rings in each option will be made of precious
metal alloys (such as gold and silver), they are not considered
eligible articles of metal within the meaning of this tariff
provision. Therefore, they are not be eligible for the partial
duty exemption available under subheading 9802.00.60, HTSUS.
Another special tariff provision is subheading 9802.00.80,
HTSUS, which provides a partial duty exemption for:
[a]rticles assembled abroad in whole or in part of
fabricated components, the product of the United States,
which (a) were exported in condition ready for assembly
without further fabrication, (b) have not lost their
physical identity in such articles by change in form, shape,
or otherwise, and (c) have not been advanced in value or
improved in condition abroad except by being assembled and
except by operations incidental to the assembly process,
such as cleaning, lubricating, and painting.
All three requirements of subheading 9802.00.80, HTSUS, must be
satisfied before a component may receive a duty allowance. An
article entered under this tariff provision is subject to duty
upon the full cost or value of the imported assembled article,
less the cost or value of the U.S. components assembled therein,
upon compliance with the documentary requirements of section
10.24, Customs Regulations (19 CFR 10.24).
Section 10.16(a), Customs Regulations (19 CFR 10.16(a)),
provides that the assembly operation performed abroad may consist
of any method used to join or fit together solid components, such
as welding, soldering, riveting, force fitting, gluing,
laminating, sewing, or the use of fasteners.
Merely attaching the foreign gem stone with the U.S. origin
ring casting in the first option is considered an acceptable
assembly operation pursuant to 19 CFR 10.16(a). Additionally,
the second option, attaching the U.S. origin gem stone with the
U.S. origin ring casting, is an acceptable assembly operation
within the meaning of this tariff provision. Therefore, a duty
exemption is available for the cost or value of the U.S. origin
components when the rings are returned to the U.S.
HOLDING:
Based on the information presented, the rings merely mounted
with a gem stone (the first and second option) are not
considered "products of" the Dominican Republic, and, therefore,
are not entitled to CBERA treatment. However, the rings
manufactured in the Dominican Republic by casting and mounting
with a gem stone (the third option) are considered "products of"
a BC for purposes of the CBERA. Therefore, assuming that they
are imported directly into the U.S., and the 35% value-content
requirement is satisfied, these rings will be entitled to duty-
free treatment under the CBERA.
The rings which are entirely assembled from U.S. components
(the second option) may enter the U.S. duty free pursuant to U.S.
Note 2(b), subchapter II, Chapter 98, HTSUS, provided the
documentation requirements set forth in the attached telex dated
September 28, 1990, are satisfied.
The rings which are merely assembled from U.S. and foreign
components (the first option) are entitled to the partial duty
exemption available under subheading 9802.00.80, HTSUS.
Therefore, an allowance may be made under this tariff provision
for the cost or value of the U.S. origin ring casting, upon
compliance with the documentary requirements of 19 CFR 10.24.
Sincerely,
John Durant, Director
Commercial Rulings Division