CLA-2 CO:R:C:S 557008 WAW
Ryan Trainer, Esq.
Rogers & Wells
607 14th Street, N.W.
Washington, D.C. 20005-2011
RE: Eligibility of dehydrated alcohol for duty-free treatment
under the CBERA; Tax Reform Act of 1986; Steel Trade
Liberalization Act of 1989; motor fuel; ethyl alcohol;
indigenous product
Dear Mr. Trainer:
This is in response to your letter of November 9, 1992,
concerning the eligibility of dehydrated alcohol from Jamaica on
behalf of E.D. & F. Man Jamaica Ltd. ("Man"), 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:
You state that ethyl alcohol will be produced in a third
country which is not a CBERA beneficiary country (BC). MAN will
purchase the alcohol in the third country and import it into
Jamaica. Once in Jamaica, the ethyl alcohol will be rectified and
dehydrated under contract by JEPCO, a Jamaican company related to
MAN.
The alcohol will then be imported into the U.S. by MAN to be
used exclusively for motor fuel purposes. You state that this
dehydrated alcohol will be made exclusively from ethyl alcohol that
is imported into Jamaica from non-BCs.
You claim that the dehydrated alcohol imported into the U.S.
from Jamaica as described above should enter the U.S. duty-free.
This request is premised on the assumption that the dehydrated
alcohol will be within the statutory "base quantity" and will be
shipped directly from Jamaica to the U.S. You have asked us to
assume that, for purposes of this ruling request, the dehydrated
alcohol will be within the local feedstock requirement which is
zero percent with respect to the base quantity of dehydrated
alcohol and mixtures that is entered.
ISSUE:
Whether the dehydrated ethyl alcohol meets the requirements
under the CBERA for duty-free entry into the U.S.
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-
(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 percent 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 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) O 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;
of
(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." 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 into the U.S.
However, it would be incorrect to conclude that since section
423 covers a special and specific origin test for dehydrated
alcohol, the CBERA 35% value-content requirement contained in 19
CFR 10.195(a) does not apply. Pursuant to 19 U.S.C. 2703(a), to
be eligible for duty-free treatment under the CBERA, an eligible
article must satisfy the "product of", 35% value-content and
"imported directly" requirements. Even in circumstances where an
article is determined to be wholly produced in the BC, the 35%
value-content requirement is still statutorily applicable.
However in calculating the value-content percentage where an
article is "wholly the growth, product, or manufacture of a" BC,
the cost or value of all the materials incorporated in the article
may be counted as "materials produced" in the BC. See sections
10.191(b)(3) and 10.196(a), Customs Regulations (19 CFR
10.191(b)(3) and 10.196(a)). Thus, in regard to dehydrated ethyl
alcohol which meets the statutory "indigenous product" requirement
(and, therefore, is considered to be "wholly the growth, product,
or manufacture of a" BC), all of the feedstock included in the
ethyl alcohol, even feedstock imported into a BC from a non-BC, may
be counted toward the 35% requirement as "materials produced" in
a BC.
With respect to your question concerning whether "any
documentation, calculation, or statement" must be submitted to
Customs in support of a claim that the merchandise satisfies the
35% requirement, such information is required when specifically
requested by the district director.
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 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