CLA-2 CO:R:C:S 555876 WAW
Mr. Edwin C. Faber, Jr.
South American Development Corp.
29 Noxon Rd.
Poughkeepsie, N.Y. 12603
RE: Eligibility for duty-free treatment under U.S. Note 2(b),
subchapter II, Chapter 98, HTSUSA, of magnetic electronic
components manufactured in St. Vincent, St. Lucia and Costa
Rica; 555742; 555656; 555809
Dear Mr. Faber:
This is in reference to your letter of February 4, 1991, in
which you request a ruling on the applicability of duty-free
treatment for magnetic electronic components to be imported from
St. Vincent, St. Lucia and Costa Rica, all of which are in the
Caribbean Basin area, pursuant to section 222 of the Customs and
Trade Act of 1990 (Public Law 101-382), which amended U.S. Note
2, subchapter II, Chapter 98, Harmonized Tariff Schedule of the
United States Annotated (HTSUSA).
FACTS:
Based on your submission, the magnetic electronic components
will be manufactured in St. Vincent, St. Lucia and Costa Rica
entirely of U.S. materials. You state that the following
manufacturing operations will be performed in plants in these
Caribean Basin countries: (1) winding copper wire on a coil
form, mandrel or bobbin; (2) applying requisite insulation
systems; (3) terminating or soldering the copper wire to
appropriate connectors or pins; (4) installing magnetic core
material made of powdered iron, ferrite or metal laminations; (5)
performing electrical tests to assure that the unit has been
correctly manufactured; and (6) varnishing, labeling and packing.
Upon completion of the manufacturing operations, the magnetic
electronic components will be returned to the U.S.
ISSUE:
Are the electronic components eligible for duty-free
treatment under U.S. Note 2(b), subchapter II, Chapter 98,
Harmonized Tariff Schedule of the United States Annotated
(HTSUSA)?
LAW AND ANALYSIS:
Section 222 of the Customs and Trade Act of 1990 (Public Law
101-382) amended U.S. Note 2, subchapter II, Chapter 98, HTSUSA,
to provide for the duty-free treatment of articles (other than
textile and apparel articles, petroleum and petroleum products)
which are assembled or processed in a Caribbean Basin Economic
Recovery Act (CBERA) beneficiary country (BC) 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.
U.S. Note 2(b) of subchapter II, Chapter 98, HTSUSA, ("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 stated in General Note 3(c)(v)(A), HTSUSA, St. Vincent,
St. Lucia and Costa Rica, have been designated as BC's for CBERA
purposes.
The issue in this case centers on the determination of
whether the processing operations performed in St. Vincent, St.
Lucia and Costa Rica to create the finished electronic components
are encompassed by the operations included in Note 2(b)(i). The
processing in the BC's consists of winding copper wire on a coil
form, mandrel or bobbin; applying requisite insulations systems;
terminating or soldering the copper wire to appropriate
connectors or pins; installing magnetic core material made of
powdered iron, ferrite or metal laminations; performing
electrical tests to assure that the unit has been correctly
manufactured; and varnishing, labeling and packing.
Note 2(b)(i) specifies that an eligible article will be
entitled to duty-free treatment if it is "(A) assembled or
processed in whole of [U.S.] fabricated components . . ., or (B)
processed in whole of [U.S.] ingredients (other than water). . ."
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
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.
It is the determination of this office that the magnetic
electronic components which are assembled in a CBERA BC may enter
the U.S. duty-free pursuant to Note 2(b). The magnetic
electronic components are fabricated entirely of U.S. components.
Furthermore, with regard to the operations performed in the BC's,
the assembly and processing of the copper wire, the installation
of the magnetic core material, as well as the varnishing,
labeling and packing clearly are encompassed by the type of
operations included in Note 2(b). See Headquarters Ruling Letter
(HRL) 555742 dated November 5, 1990; HRL 555656 dated December
24, 1990; HRL 555809 dated January 8, 1991.
Enclosed is a copy of Headquarters telex 9264071 dated
September 28, 1990, to Customs field offices, setting forth
procedures for the entry of articles under Note 2(b).
HOLDING:
Based on the specific facts presented in this case, we
conclude, for the reasons set forth above, that the subject
electronic components made in St. Vincent, St. Lucia and Costa
Rica fabricated entirely of U.S. materials is entitled to duty-
free treatment under Note 2(b), provided the documentation
requirements set forth in the attached telex 9264071 are
satisfied.
Sincerely,
John Durant, Director
Commercial Rulings Division
Attachment