CLA-2 RR:TC:SM 559737 KBR
Area Director
U.S. Customs Service
J.F.K. Airport
Building 178
Jamaica, New York 11430
RE: Protest 1001-96-100147; Eligibility of hair adornments
imported from the Dominican Republic for duty-free treatment
under the Caribbean Basin Economic Recovery Act ("CBERA").
Dear Port Director:
This is in response to Protest 1001-96-100147, filed January
4, 1996, concerning Riviera Trading Company ("Riviera"),
regarding the eligibility for duty-free treatment of hair
adornments imported from the Dominican Republic, pursuant to the
Caribbean Basin Economic Recovery Act ("CBERA"); or, in the
alternative, for treatment pursuant to subheading 9802.00.80,
HTSUS.
FACTS:
Riviera imported various hair adornments from the Dominican
Republic. The Assist Value Breakdown Sheets included with the
entry lists the various values of the components of the four
different hair adornments imported. These sheets also list the
country of origin of the components. The four types of hair
adornments are: pony trios, long pony twisters, skinny trios
HBs, and trios mini bows. The sheets indicate that the origin of
all of the components is the U.S. However, your office has
determined that although Riviera may have purchased the
components from a U.S. company such as High Fashion - New York,
the country of origin of the components was actually Japan or
Korea. Information included with the entry indicate the costs
incurred in the Dominican Republic comprise between 22% to 25% of
the appraised value of the articles. You office classified these
articles under subheading 9615.19.6010, Harmonized Tariff
Schedule of the United States ("HTSUS"), at the General subcolumn
rate of 11% ad valorum.
ISSUES:
1. Whether the hair adornments assembled in the Dominican
Republic are eligible for duty-free treatment under CBERA.
2. Whether the components imported to the Dominican
Republic from the U.S. qualify for treatment pursuant to
subheading 9802.00.80, HTSUS.
LAW AND ANALYSIS:
1. CBERA
Under the CBERA, eligible articles the growth, product, or
manufacture of a designated beneficiary country (BC), which are
imported directly to the U.S. from a BC, qualify for duty-free
treatment, provided the sum of (1) the cost or value of materials
produced in a BC or two or more BCs, plus (2) the direct costs of
processing operations performed in a BC or BCs is not less than
35 percent of the appraised value of the article at the time it
is entered into the U.S. 19 U.S.C. 2703(a)(1). In addition,
the cost or value of materials produced in the U.S. may be
applied toward the 35 percent value-content minimum in an amount
not to exceed 15 percent of the imported article's appraised
value. See 19 CFR 10.195(c). As stated in General Note 7(a),
Harmonized Tariff Schedule of the United States (HTSUS), the
Dominican Republic is a designated BC under the CBERA.
To determine whether an article will be eligible to receive
duty-free treatment under the CBERA, it must first be classified
under a tariff provision for which a rate of duty of "Free"
appears in the "Special" subcolumn followed by the symbol "E" or
"E*." The hair adornments appear to be classifiable under
subheading 9615.19.6010, HTSUS, which is a CBERA-eligible
provision. Therefore, the hair adornments will receive duty-free
treatment if they are considered to be a "product of" the
Dominican Republic, the 35 percent value-content requirement is
met, and it is "imported directly" into the U.S. from the
Dominican Republic.
In this situation, the hair adornments do not meet the 35
percent value-content requirement. The "Assist Value-Breakdown
Sheets" show that the costs incurred in the Dominican Republic
total only between 22 percent to 25 percent of the articles'
appraised value. Further, the value of the components imported
into the Dominican Republic imported from the U.S. and used in
the assembly of these articles may not be included in the 35%
calculation as U.S. materials because these components are of
Japanese or Korean origin.
Where an article is produced from materials imported into a
BC from non-BC's, as in this case, the cost or value of the
materials from non-BC's may be counted toward satisfying the 35%
value-content requirement only if there is a finding that the
materials have been subjected to a double substantial
transformation in the BC. See section 10.196(a), Customs
Regulations (19 CFR 10.196(a).) That is, the cost or value of
the imported materials used to produce the hair adornments may be
included in the 35% value-content requirement only if such
materials are first substantially transformed into a new and
different intermediate article of commerce, which is itself
substantially transformed into the hair adornments.
A substantial transformation occurs when an article emerges
from a process with a new name, character, or use different from
that possessed by the article prior to the processing. See Texas
Instruments, Inc. v. United States, 69 CCPA 152, 681 F.2d 778
(1982). In the current situation, there is no evidence that the
non-BC components undergo the required double substantial
transformation. Therefore, the value of the components imported
into the Dominican Republic from the U.S. may not be included
towards meeting the 35 percent value-content requirement.
Therefore, because the evidence does not show that the hair
adornments meet the 35 percent value-content requirement, the
hair adornments do not qualify for duty-free treatment under
CBERA.
2. Subheading 9802.00.80
Subheading 9802.00.80, HTSUS, provides for a partial duty
allowance for:
[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 subheading 9802.00.80, HTSUS, is subject to
duty upon the full value of the imported assembled article less
the cost or value of the U.S. components, upon compliance with
the documentary requirements of section 10.24, Customs
Regulations (19 CFR 10.24).
As discussed above, the components imported to the Dominican
Republic from the U.S. are not of U.S. origin. Customs has
determined that these components were imported from Japan or
Korea. Therefore, the components will not qualify for a duty
allowance pursuant to subheading 9802.00.80, HTSUS.
HOLDING:
Based on the information submitted, the hair adornments
manufactured in the Dominican Republic and imported into the U.S.
do not meet the 35 percent value-content requirement and,
therefore, do not qualify for duty-free treatment under the
CBERA. The components imported from the U.S. are not of U.S.
origin and, therefore, do not qualify for a duty allowance
pursuant to subheading 9802.00.80, HTSUS, when returned as part
of the hair adornments. Therefore, the protest should be denied
in full.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065 dated August 4, 1993, Subject: Revised Protest
Directive, this decision should be attached to Customs Form 19,
Notice of Action, and 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, Lexis, Freedom of
Information Act and other public access channels.
Sincerely,
John Durant, Director
Tariff Classification Appeals
Division