CLA-2 CO:R:C:S 556515 SER
R. Sarah Compton, Esq.
Eckert, Seamans, Cherin & Mellot
Suite 600
2100 Pennsylvania Ave., N.W.
Washington, D.C. 20037
RE: Eligibility of fuel grade ethyl alcohol under the CBERA
Dear Ms. Compton:
This is in response to your letter of February 7, 1992, on
behalf of Regent International ("Regent"), concerning the
eligibility of fuel grade ethyl alcohol for duty-free treatment
under the Caribbean Basin Economic Recovery Act (CBERA)(19 U.S.C.
2701-2706), and the Tax Reform Act of 1986 (Pub. L. 99-514), as
amended by the Steel Trade Liberalization Act of 1989 (Pub. L.
101-221 and Pub. L. 101-382).
FACTS:
Regent is contemplating the importation of fuel grade ethyl
alcohol from an undetermined Caribbean Basin beneficiary country
(BC). The fuel grade ethyl alcohol would be produced in the BC
by dehydrating hydrous ethanol feedstocks.
ISSUE:
Whether dehydrated ethyl alcohol, which meets the indigenous
products requirement of section 423 of the Tax Reform Act, as
amended, is subject to the 35% value-content requirement of 19
U.S.C. 2703(a)(1)(B).
LAW AND ANALYSIS:
Under the CBERA, eligible articles from BCs are accorded
duty-free treatment. The requirements for eligibility are
established in 19 U.S.C. section 2703(a), which provides as
follows:
(1) Unless otherwise excluded from eligibility by this
chapter, and subject to section 423 of the Tax Reform
Act of 1986, the duty-free treatment provided under
this chapter shall apply to any article which is the
growth, product, or manufacture of a beneficiary
country if-
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(A) that article is imported directly from a
beneficiary country into the customs territory of the
United States; and
(B) the sum of (i) the cost or value of the materials
produced in a beneficiary country or two or more
beneficiary countries, plus (ii) the direct costs of
processing operations performed in a beneficiary
country or countries is not less than 35 per centum of
the appraised value of such article at the time it is
entered. (Emphasis added).
Section 423 of the Tax Reform Act, as amended by the Steel
Trade Liberalization Act of 1989 (P.L. 101-221, section 7(a) 103
Stat. 1886, 1890 (1989)), states that ethyl alcohol qualifies as
an eligible article if the ethyl alcohol or mixture thereof is an
"indigenous product" of the BC. Specifically, section 423
provides, in pertinent part, as follows:
(a) IN GENERAL. -Except as provided in subsection (b), no
ethyl alcohol or a mixture thereof may be considered-
* * *
(2) for purposes of section 213 [19 U.S.C.
2703] of the Caribbean Basin Economic
Recovery Act, to be-
(A) an article that is wholly the
growth, product, or manufacture of
a beneficiary country,
(B) a new or different article of
commerce which has been grown,
produced, or manufactured in a
beneficiary country,
(C) a material produced in a
beneficiary country, or
(D) otherwise eligible for duty-
free treatment under this Act as
the growth, product, or manufacture
of a beneficiary country;
unless the ethyl alcohol or mixture thereof is an
indigenous product of that insular possession or
beneficiary country.
* * *
(c) DEFINITIONS...
* * *
(3)(A) Ethyl alcohol and mixtures thereof
that are only dehydrated within an insular
possession or beneficiary country ... shall
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be treated as being indigenous products of
that possession or country only if the
alcohol or mixture when entered, meets the
applicable local feedstock requirement.
(B) The local feedstock requirement with
respect to any calendar year is-
(i) 0 percent with respect to the
base quantity of dehydrated alcohol
and mixtures that is entered;
(ii) 30 percent with respect to the
35,000,000 gallons of dehydrated
alcohol and mixtures next entered
after the base quantity; and
(iii) 50 percent with respect to
all dehydrated alcohol and mixtures
entered after the amount specified
in clause (ii) is entered.
(C) For purposes of this paragraph:
(i) The term 'base quantity' means,
with respect to dehydrated alcohol
and mixtures entered during any
calendar year, the greater of-
(I) 60,000,000 gallons;
or
(II) an amount (expressed
in gallons) equal to 7
percent of the United
States domestic market
for ethyl alcohol...
(ii) The term 'local feedstock'
means hydrous ethyl alcohol which
is wholly produced or manufactured
in any insular possession or
beneficiary country.
(iii) The term 'local feedstock
requirement' means the minimum percent,
by volume, of local feedstock that must
be included in dehydrated alcohol and
mixtures. (Emphasis added).
Congress, in amending 19 U.S.C. 2703(a)(1) to be "subject to
section 423 of the Tax Reform Act of 1986," as amended,
prescribed a unified scheme for tariff treatment of ethyl alcohol
under the CBERA. See National Corngrowers Ass'n v. Von Raab,
650 F.Supp. 1007 (CIT 1986), aff'd, 814 F.2d 651 (Fed. Cir.
1987). As indicated in the language of section 423, and
supported by the legislative history of section 423, it is
Customs position that ethyl alcohol which meets the "indigenous
product" requirement would be considered to be "wholly the
growth, product, or manufacture of a beneficiary country."
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Section 10.195(d), Customs regulations (19 CFR 10.195(d)),
states that articles which are wholly the growth, product, or
manufacture of a BC shall normally be presumed to meet the CBERA
origin requirements set forth in 19 CFR 10.195(a) (including the
35% value-content requirement). Therefore, ethyl alcohol which
satisfies the "indigenous product" requirement is normally
presumed to meet the CBERA 35% requirement, and is entitled to
duty-free treatment under this program when imported directly
from the BC to the U.S.
HOLDING:
Ethyl alcohol which is dehydrated in a BC and which meets
the "indigenous product" requirement established in section 423
of the Tax Reform Act of 1986, as amended, is normally presumed
to meet the 35% value-content requirement of the CBERA and will
receive duty-free treatment, assuming it is imported directly
from the BC to the U.S.
Sincerely,
John Durant, Director
Commercial Rulings Division