CLA-2 RR:TC:SM 559580 KKV
Port Director
U.S. Customs Service
Charlotte, NC 28217
RE: Application for Further Review of Protest No. 1512-95-100216; applicability of duty exemption under
U.S. Note 2(b), subchapter II, Chapter 98, HTSUS,
to cotton hammock mattresses produced in Costa
Rica; CBERA; HRL 556919; 9802.00.8040; assembly
charges not dutiable
Dear Sir:
The above-referenced protest, filed by Waters Shipping
Company on behalf of Amigos Del Sur, concerns the
eligibility of cotton hammock mattresses for duty-free
treatment under U.S. Note 2(b), Subchapter II, Chapter 98,
Harmonized Tariff Schedule of the United States (HTSUS).
Protestant claims that the articles at issue are eligible
for a complete duty exemption under this provision and seeks
a refund of duties paid. No sample has been submitted for
our consideration.
FACTS:
The importer, Amigos Del Sur, exports U.S. origin cotton
cord on spools to Costa Rica, where it is cut to length and
woven together to form the mattress portion of a hammock.
The ends of the mattress are knotted to prevent unraveling,
and the article is packed into a plastic bag for return
shipment to the U.S.
The subject protest was filed in connection with an
entry of 510 cotton hammock mattresses imported from Costa
Rica. The entry was made under subheading 9802.00.8040,
HTSUS (Harmonized Tariff Schedule of the United States) as
"Articles for which duty free treatment is claimed under
U.S. note 2(b) to this subchapter" and subheading
5609.00.10, HTSUS, as "articles of yarn, strip or the like
of heading 5404 or 5405, twine, cordage, rope or cables, not
elsewhere specified or included: of cotton." On September
1, 1995, Customs liquidated the entry, granting a duty
allowance for the value of the U.S. components sent to Costa
Rica, but assessed duty upon the remainder of the appraised
value. The subject protest, timely filed on October 6,
1995, contests the liquidations and seeks a refund of duties
paid.
ISSUE:
Whether the hammock mattresses assembled in Costa Rica
from U.S. origin cotton cord are entitled to duty-free
treatment pursuant U.S. Note 2, subchapter II, Chapter 98,
Harmonized Tariff Schedule of the United States (HTSUS),
when returned to the United States.
LAW AND ANALYSIS:
Section 222 of the Customs and Trade Act of 1990 (P.L.
101- 382) amended U.S. Note 2, subchapter II, Chapter 98,
HTSUS, ("Note 2(b)") to provide for duty-free treatment of
articles, other than certain specified 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.
Specifically, Note 2(b) provides that:
(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
in the United States, enters
the commerce of any
foreign country other than a
beneficiary country.
As used in this paragraph, the term "beneficiary
country" means a country listed in General Note 7(a), HTSUS.
Pursuant to General Note 7(a), HTSUS, Costa Rica has been
designated as a BC for CBERA purposes.
As stated above, Note 2(b) specifies four categories of
products that are excluded from duty-free treatment under
this provision: textile articles; apparel articles;
petroleum; and certain petroleum products. In T.D. 91-88,
25 Cust. Bull. 45 (1991), Customs addressed the question of
what constitutes a "textile and apparel" article for
purposes of Note 2(b). In T.D. 91-88, Customs held that the
controlling factor in determining whether articles are
eligible for duty-free treatment under Note 2(b), is whether
such articles (other than footwear and parts of footwear)
are subject to textile agreements. Customs cited with
approval its decision in Headquarters Ruling Letter (HRL)
555950, dated August 3, 1991, which held that, because
cotton hammock mattresses are classifiable in a HTSUS
provision which does not include a textile category number,
the hammock mattresses are eligible articles for purposes of
Note 2(b).
Regarding the operations performed in Costa Rica, we
believe that the assembly and processing of the U.S.
materials that consist of cutting materials to length and
weaving together to form a hammock mattress constitute the
type of operations contemplated by Note 2(b). Previously,
we issued a binding ruling letter to the Protestant, HRL
556919, dated January 8, 1993, which held that the subject
mattresses were eligible for duty-free treatment under U.S.
Note 2(b), HTSUS.
Pursuant to Statistical Note 2, subchapter II, Chapter
98, HTSUS, articles assembled or processed in a BC, and
which otherwise comply with Note 2(b), shall be reported,
for statistical purposes, under subheading 9802.00.8040
(articles assembled in a BC), or 9802.00.5010 (articles
processed other than by an assembly in a BC), including the
value of the U.S. components. Specifically, Statistical
Note 2 requires the reporting of the value of the U.S.
fabricated components or materials as well as the dutiable
value, i.e., the total value of the articles less the value
of the U.S. fabricated components. While subheading
9802.00.80, HTSUS, provides a partial duty exemption for the
value of qualifying U.S. components upon their return to the
U.S., the classification of articles eligible for entry
under U.S. Note 2(b) under 9802.00.8040, HTSUS, for
statistical purposes, does not render dutiable the value of
foreign assembly charges incurred in the production of such
articles, contrary to the position expressed in the Customs
Protest and Summons Information Report. Accordingly, the
protest should be granted in full.
HOLDING:
Hammock mattresses assembled in Costa Rica from U.S.
origin cotton cord are entitled to a complete duty exemption
pursuant U.S. Note 2, subchapter II, Chapter 98,
Harmonized Tariff Schedule of the United States (HTSUS).
In accordance with Section 3A(11)(b) of Customs
Directive 099 3550-065, dated August 4, 1993, Subject:
Revised Protest Directive, this decision, together with the
Customs Form 19, should be mailed by your office to the
Protestant no later than 60 days from the date of this
letter. Any reliquidation of the entry in accordance with
the decision must be accomplished prior to mailing of the
decision. Sixty days from the date of the decision the
Office of Regulations and Rulings will take steps to make
the decision available to Customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette
Subscription Service, Freedom of Information Act, and other
public access channels.
Sincerely,
John Durant, Director
Tariff Classification
Appeals Division.