CLA-2-CO:R:C 555459 CW/KG
TARIFF NOS.: 9503.90.60; 9503.90.70; 9802.00.80
Mr. Sal Blandi
Vice President
Bantam Collections Inc.
2 Highland Street
Port Chester, New York 10573
RE: Applicability of duty exemption under GSP or CBI, and
country of origin marking requirements, to certain baby toys
assembled in Haiti
Dear Mr. Blandi:
This is in response to your letter of May 10, 1989, to the
District Director, Miami, Florida, regarding the eligibility for
duty-free treatment under the Generalized System of Preferences
(GSP) and Caribbean Basin Economic Recovery Act (CBERA) of two
baby toys assembled in Haiti from components made in the United
States. You also inquire concerning the country of origin
marking requirements applicable to these products. Your letter
has been referred to this office for the preparation of a
response. We regret the delay in responding.
FACTS:
The first toy, called "Mobile", is made to hang over a
baby's crib and consists of a plastic frame with a circular
opening at the top for hanging five stuffed lambs by means of
strings. The lambs have an outer shell of terry and are stuffed
with polyester material. The processing in Haiti amounts to
simple assembly by sewing and stuffing. The toy will be finished
in the U.S. by the attachment of a musical movement and crib
stand and packaged in a box.
The second toy, called "Ring Rattle", is a baby's rattle
with an outer shell of terry and stuffed with polyester material.
The assembly operations consistof sewing together pre-cut pieces
of terry cloth and stuffing the handle. The product will be
finished when returned to the U.S. by the insertion of the
rattle, stuffing of the head, and retail packaging.
ISSUES:
1. Will the two toy articles from Haiti be entitled to free
entry under the GSP or CBERA?
2. If GSP and CBERA are inapplicable, are the toys entitled
to the partial duty exemption under subheading 9802.00.80,
Harmonized Tariff Schedule of the United States (HTSUS)?
3. What is the proper country of origin marking of the two
imported toys?
LAW AND ANALYSIS:
1. Applicability of GSP and CBERA
Under the GSP, eligible articles which are imported directly
into the customs territory of the U.S. from a designated
beneficiary developing country (BDC) may received duty-free
treatment if the sum of 1) the cost or value of materials
produced in the BDC, plus 2) the direct costs of the processing
operation in the BDC, is equivalent to at least 35% of the
appraised value of the article at the time of entry. See 19
U.S.C. 2463(b) and section 10.176(a), Customs Regulations (19 CFR
10.176(a)).
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 materials produced in a BC or BC's, plus 2) the direct
costs of the 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) and
section 10.195(a), Customs Regulations (19 CFR 10.195(a)).
Unlike the GSP, the CBERA provides that the cost or value of
materials produced in the customs territory of the U.S. (other
than Puerto Rico) may be applied toward the 35% value-content
minimum in an amount not to exceed 15% of the imported articles'
appraised value.
Haiti is a BDC and a BC. The "Mobile" is classifiable in
subheading 9503.90.70, HTSUS (other toys), while the "Ring
Rattle" is classifiable in subheading 9503.90.60, HTSUS (other
toys (except models), not having a spring mechanism). Articles
from Haiti classifiable under either provision are eligible for
GSP or CBERA tariff treatment.
Regarding the "Mobile", you advise that the direct costs of
processing to be incurred in Haiti will be $4.69 per dozen, the
cost of the U.S. components will be $20.22 per dozen, and the
total value as imported will be $38.97 per dozen. As the direct
processing costs represent only 12% of the full value of the
article, the GSP 35% value-content requirement will not be
satisfied and, therefore, the article will not be entitled to
free treatment under this program. The "Mobile" also may not
receive free entry under the CBERA since the direct processing
costs plus the cost of the U.S. materials (subject to the 15%
cap) will represent only 27% of the article's estimated appraised
value.
The direct processing cost information you have provided
in regard to the "Ring Rattle" ($.8125 per piece or $9.75 per
dozen) appears to have been misstated since the total value of
the finished article as imported is given as $7.30 per dozen.
Based on the direct cost information provided in regard to the
"Mobile", we assume that the $.8125 figure for the "Ring Rattle"
should have been stated as $.08125 per piece, which represents
13.35% of the total value of the article. Under these
circumstances, the article would not satisfy the GSP value-
content requirement and would not qualify for treatment under
this program. Moreover, as the direct processing costs (assuming
$.08125 per piece is correct) plus the cost of U.S. materials
(subject to the 15% cap) represents only 28% of the estimated
appraised value of the "Ring Rattle", the article will not be
entitled to free entry under the CBERA.
For your information, we are enclosing copies of the Customs
Regulations relating to the GSP (19 CFR 10.171-10.178) and the
CBERA (19 CFR 10.191-10.198).
2. Applicability of subheading 9802.00.80, HTSUS
From the information provided, it appears that the two baby
toys are entitled to the partial duty exemption provided for in
subheading 9802.00.80, HTSUS. This tariff provision applies to:
[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 value of the imported assembled article, less the
cost or value of such U.S. components, upon compliance with the
documentary requirements of section 10.24, Customs Regulations
(19 CFR 10.24).
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. See section 10.16(a), Customs
Regulations (19 CFR 10.16(a)). In this case, the operations of
sewing pre-cut pieces of material together and stuffing parts of
the toys are considered acceptable assembly operations. See
Headquarters Ruling Letter 554920 (completely enclosing a metal
weight in the hem of vertical blinds by sewing is an acceptable
assembly operation). Therefore, allowances in duty may be made
under subheading 9802.00.80, HTSUS, for the cost or value of the
U.S. components, upon compliance with the documentation
requirements of 19 CFR 10.24. The duty rate applicable to the
toys under subheadings 9503.90.60 and 9503.90.70, HTSUS, is 6.8 %
ad valorem.
3. Country of origin marking requirements
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), requires that, unless excepted, every article of foreign
origin imported into the U.S. shall be marked in a legible and
conspicuous manner to indicate the country of origin to the
ultimate purchaser in the U.S. Section 10.22, Customs
Regulations (19 CFR 10.22), provides that assembled articles
entitled to the exemption set forth in subheading 9802.00.80,
HTSUS, are considered products of the country of assembly for the
purposes of the country of origin marking requirements. If an
imported assembled article is made entirely of American-made
materials, the U.S. origin of the materials may be disclosed by
using a legend such as "Assembled in ________ from material of
U.S. origin," or a similar phrase.
As the toys in this case are entitled to the partial duty
exemption in subheading 9802.00.80, HTSUS, they would be
considered products of Haiti, the country of assembly. The toys
could be marked with the phrase "Assembled in Haiti from
material of U.S. origin," or a similar phrase.
Your letter states that you plan to package the imported
toys in boxes in the U.S. Since the imported toys are sold in
boxes, it may be possible to mark the boxes instead of the toys.
Pursuant to section 134.32(d), Customs Regulations (19 CFR
134.32(d)), imported articles for which the marking of the
containers will reasonably indicate the origin of the articles
are excepted from individual marking. Section 134.34, Customs
Regulations (19 CFR 134.34), provides that for imported articles
which will be repacked after release from Customs custody, the 19
CFR 134.32(d) exception may be granted in the discretion of the
district director if the containers in which the articles are
repacked will indicate the origin of the articles to the ultimate
purchaser in the U.S. and the importer arranges for supervision
of the marking of the containers by Customs officers at the
importer's expense or secures such verification as may be
necessary, by certification and the submission of a sample or
otherwise, of the marking prior to the liquidation of the entry.
The imported toys themselves may be excepted from marking if the
district director is satisfied that 1) the boxes in which they
are shipped to retailers are sealed; 2) the boxes are the same
boxes in which the ultimate purchaser would receive the imported
toys; 3) the boxes are clearly and conspicuously marked to
indicate the country of origin; and 4) the importer satisfies the
requirements of 19 CFR 134.34.
HOLDING:
Baby toys, known as "Mobile" and "Ring Rattle", assembled in
Haiti from U.S.-made materials are classifiable under subheadings
9503.90.70 and 9503.90.60, HTSUS, respectively, which provide for
a duty rate of 6.8% ad valorem. As the cost information
submitted indicates that the toys will not satisfy the GSP and
CBERA 35% value-content requirements, the articles will not be
entitled to free entry under these programs. However, the
articles are entitled to the partial duty exemption under
subheading 9802.00.80, HTSUS, provided the documentation
requirements of 19 CFR 10.24 are met.
Pursuant to 19 CFR 10.22, the country of origin of the
imported toys for marking purposes will be Haiti. The legend
"Assembled in Haiti from material of U.S. origin" or a similar
phrase is acceptable for country of origin marking purposes. The
toys may be excepted from individual marking if the district
director is satisfied that all the requirements of 19 CFR 134.34
are met.
Sincerely,
John Durant, Director
Commercial Rulings Division
Enclosures