CLA-2 RR:TC:SM 560331 MLR
John S. Rode, Esq.
Rode & Qualey
295 Madison Avenue
New York, NY 10017
RE: Eligibility of jewelry for duty-free treatment under
the Caribbean Basin Economic Recovery Act (CBERA); U.S.
Note 2(b), Subchapter II, Chapter 98, HTSUS; Subheading
9802.00.80; double substantial transformation;
alloying; casting; setting
Dear Mr. Rode:
This is in response to your letter of February 20,
1997, requesting a ruling on behalf of Progressive Entities
Dominicana, S.A. ("Progressive"), regarding whether certain
jewelry from the Dominican Republic is eligible for duty-free treatment under the Caribbean Basin Economic Recovery
Act (CBERA). A meeting was held at the Office of
Regulations & Rulings on October 9, 1997, and additional
information was submitted by letter dated October 27, 1997,
wherein you requested a ruling regarding the applicability
of duty-free treatment for the subject jewelry pursuant to
Section 222 of the Customs 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 (HTSUS),
{hereinafter "Note 2(b)"}.
FACTS:
The articles at issue are finished jewelry pieces. In
order to produce the jewelry in the Dominican Republic, it
is stated that Progressive will either alloy gold in the
Dominican Republic using metals which do not originate in a
beneficiary country (BC) and then produce castings from such
alloys of gold, or use raw castings which are products of
the U.S. Whether the alloying and casting is performed in
the Dominican Republic or the U.S., it is stated that the
first step involves alloying gold bars with silver, copper,
zinc, nickel, or brass to the desired specification. The
molten alloy is then poured into a modeled mold to form a
number of parts connected by one or more casting sprues.
Each individual part is then removed from its sprues,
usually by cutting.
Next, the castings, either produced in the Dominican
Republic or the U.S., undergo the following processes in the
Dominican Republic. The individual parts removed from the
sprues are mechanically tumbled with a mild abrasive to
remove any mold residue and to preliminarily smooth and
compress the casting's surfaces. At this stage, it is
stated that the casting has a relatively rough surface, with
protruding sprue fragments, casting "flash", pits,
scratches, and parting lines. In order to remove casting
sprues, mold lines, and other gross excrescences, grinding
wheels are used to return the casting to the shape of the
original wax model. Grinding is followed by successively
finer abrasives, using rubber and emery wheels to eliminate
scratches and minor dents or bulges. The casting is then
shaped, often by bending or stretching to conform to the
desired configuration and size. It is stated that
particular effort is required to reshape those portions of
the casting which are designed to mate with other castings,
such as adjoining links in a bracelet or a necklace. The
finishing is performed by hand using hand-held gravers,
hand-directed and controlled motor-driven grinders with
grinding, rubber, and emery wheels on flexible shafts, plus
buffing and grinding machines. When the castings are in
final form for assembly, they are pre-polished by hand,
machine-washed, and then ultrasonically cleaned to remove
residual abrasives and polishing compounds.
The requisite number of component parts are then
matched and assembled into bracelets, necklaces, earrings,
etc. Depending on the design, the number of components will
range between 5 and 40 and the assembly will involve rivets,
wire, hammering, cutting, shaping, or soldering, or any
combination of these to result in a permanent assembly.
Additionally, it is stated that since the exact dimensions
and configuration of any precious or semi-precious stones to
be set is not known, the designs, wax models, and raw
castings must all be prepared to accommodate a range of
stones, and to that end sufficient excess metal will be
incorporated so that the setter can shape, mold, cut and
conform each individual stone mounting on the raw casting to
receive the particular stones provided by a customer.
In order to set a stone, it is stated that each piece
is set in shellac for support. The stones and gem sites on
the castings are measured, and each mounting site on the
casting is then adjusted to receive a particular stone,
cutting away portions of the prongs or beads to proper size,
and using a motor with a flex shaft and drills to open a
hole in the casting to accommodate the base of the stone.
When prongs are employed in the mounting, the surfaces from
which portions have been cut or ground are then reshaped and
polished to finished tolerances. If a bezel or beads are
used instead of prongs, appropriate techniques are used to
form the bezel or raise and shape the beads to support and
retain each stone in the mounting.
Last, each piece is transferred to a polisher who
"brushes" all of the surfaces using a variety of brushes of
varying sizes driven by a horizontally mounted motorized
tool and a mildly abrasive compound. Then, a lapper, using
a vertically mounted driven abrasive disk and compound, laps
all of the flat surfaces on the jewelry article to a smooth
finish free of visible discontinuities. Each article is
then washed and steamed to remove residual compound and
alloy particles from the brushing and lapping operations.
The final stage is done by a polisher, who employs power
driven felt, muslin, and cotton wheels, and a polishing
compound to make all surfaces of the piece perfectly smooth
and flawless.
The finished jewelry piece is then imported into the
U.S. For purposes of this ruling request, you ask Customs
to assume that the direct costs of processing operations
performed by Progressive in the Dominican Republic equal or
exceed the 35 percent value-content requirement.
ISSUES:
I.a. Whether articles of jewelry alloyed, cast, and
finished in the Dominican Republic from imported
metals and precious and semi-precious stones from
a country other than a BC or the U.S. will be
eligible for duty-free treatment under the CBERA.
I.b. Whether articles of jewelry alloyed and cast in
the U.S. will be eligible for duty-free treatment
under the CBERA.
II. Whether articles of jewelry finished in the Dominican
Republic from U.S.-origin castings and precious and
semi-precious stones will be eligible for duty-free
treatment under Note 2(b).
III. Whether articles of jewelry finished in the
Dominican Republic from U.S.-origin castings and
precious and semi-precious stones of U.S. or non-U.S. origin will be eligible for the partial duty
exemption under subheading 9802.00.80, HTSUS.
LAW AND ANALYSIS:
I. CBERA
Under the CBERA, eligible articles the growth, product,
or manufacture of a designated 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". It is stated that gold jewelry of the
types imported by Progressive is classifiable in Chapter 71,
HTSUS, all tariff provisions of which are CBERA-eligible
provisions. Therefore, the jewelry will receive duty-free
treatment if it is 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.
Where an article is produced from materials that are
imported into the BC, the article is considered "the growth,
product or manufacture" of the BC only if the imported
materials are substantially transformed there into a new and
different article of commerce. See 19 CFR 10.195(a).
Moreover, the cost or value of the U.S.- and foreign- origin
materials to be imported into the Dominican Republic may be
counted toward satisfying the 35 percent value-content
requirement (over and above the 15 percent cap on U.S.
materials) only if there is a finding that those materials
were subjected to a "double substantial transformation" in
the Dominican Republic. That is, the imported materials
will be considered "materials produced" in the Dominican
Republic only if they are substantially transformed in the
Dominican Republic into a new and different intermediate
article of commerce, which is then used in the Dominican
Republic in the production of the final imported article,
the finished jewelry. See 19 CFR 10.196(a). The test for
determining whether a substantial transformation has
occurred is whether an article emerges from a process with a
new name, character or use, different from that possessed by
the article prior to processing. See Texas Instruments Inc.
v. United States, 69 CCPA 152, 156, 681 F.2d 778, 782
(1982).
A. Castings produced in the Dominican Republic
Under the first scenario, the alloying and casting is
performed in the Dominican Republic. In Headquarter Ruling
Letter (HRL) 555801 dated January 2, 1991, Customs held that
casting non-beneficiary sourced precious metal alloys into
the form of an article of jewelry, and setting foreign gem
stones, resulted in a substantial transformation into a
product of the Dominican Republic. Therefore, consistent
with HRL 555801, we find that the jewelry in the instant
case which is cast into various types of jewelry and then
set with stones in the Dominican Republic will be considered
"products of" the Dominican Republic.
The next issue relates to whether the materials
imported into the Dominican Republic are subjected to a
double substantial transformation in the production of the
jewelry so as to permit the cost or value of the imported
materials to be counted toward the value-content requirement
(over and above the 15 percent cap on U.S. materials). In
HRL 555546 dated January 30, 1990, Customs held that 24
karat gold imported into Mexico and converted into 14 karat
gold shot by an alloying process, and cast into jewelry
items resulted in a double substantial transformation for
purposes of the Generalized Systems of Preferences (GSP).
Therefore, in this case we also find that the cost or value
of the gold bars, silver, copper, zinc, nickel, or brass
which are alloyed to the desired specification and
subsequently cast into the jewelry pieces in the Dominican
Republic may be included in the 35 percent calculation.
However, as Customs determined in HRL 556457 dated March 5,
1992, the finished precious and semiprecious stones which
are imported into the Dominican Republic and set into the
castings are not subjected to a double substantial
transformation. Therefore, the stones' cost or value may
not be included in the 35 percent calculation. Accordingly,
in the first scenario, the jewelry articles will be entitled
to duty-free treatment under the CBERA, provided they are
imported directly into the U.S., they are classifiable in a
CBERA-eligible tariff provision and the 35 percent
value-content requirement is satisfied at the time of entry.
B. Castings produced in the United States
The second scenario involves casting the jewelry in the
U.S. and shipping the castings to the Dominican Republic,
that is, where the sprues are removed from the tree, and the
grinding and polishing operations are performed to make
finished pieces of jewelry. It is alleged that the
operations performed in the Dominican Republic are not
simple combining operations as defined in 19 CFR
10.195(a)(2)(i), as on average, between 20 and 40 discrete
components are assembled into finished jewelry pieces. It
is, however, noted that some jewelry pieces are only
assembled from as few as five component pieces. Once in the
Dominican Republic, the rough surfaces are removed from the
castings or fine details are added which cannot be produced
during the casting process.
Customs has held that cutting or bending materials into
defined shapes or patterns suitable for use in making
finished articles, as opposed to mere cutting to length or
width which does not render the article suitable for a
particular use, constitutes a substantial transformation.
See HRL 055726 dated September 18, 1979 (a substantial
transformation results from cutting, bending, and crimping
wire into identifiable trigger pins for spring rings); HRL
071788 dated April 17, 1984 (forming 18 karat gold wire into
circles, ovals, and other specially designed links for
bracelets results in a substantial transformation); and HRL
556060 dated August 27, 1991 (gold and silver strip bent
into a ring or bracelet shape and soldered into one piece,
gold sheet cut to the desired size of a jewelry piece and
soldering a bail onto the cut piece, or taking preformed
ring blanks and cutting them in half and soldering a pin or
a clip onto the cut ring blank to form an earring were
considered substantial transformations).
However, in HRL 556060 Customs also found that U.S.-origin jewelry blanks already possessing the essential
character of rings or bracelets did not undergo a
substantial transformation into products of a beneficiary
country for purposes of the GSP by further engraving,
decorative cutting, polishing and cleaning. See also HRL
731963 dated July 26, 1989 (hand-faceting jewelry using a
diamond tipped high-speed rotating wheel to cut away small
pieces of silver did not result in a substantial
transformation); and HRL 071314 dated May 10, 1983
(polishing, assembly of labels and catches, and packaging do
not substantially transform jewelry).
In HRL 556457 dated March 5, 1992, Customs determined
that base metal of U.S. origin, cast into ring forms in its
condition as imported into Costa Rica, did not undergo a
double substantial transformation when finished precious and
semiprecious stones, imported into Costa Rica, were set into
the castings. Therefore, the cost or value of the base
metal used in the production of base metal jewelry could
only be applied toward the 35 percent minimum in an amount
not to exceed 15 percent of the jewelry's appraised value as
the base metal casting was of U.S. origin.
In HRL 555801 dated January 2, 1991, Customs considered
foreign gem stones mounted onto U.S. origin castings in the
Dominican Republic, which produced unfinished rings. The
unfinished rings were returned to the U.S. for grinding,
buffing and polishing operations. It was held that the
rings would not be entitled to duty free treatment under the
CBERA pursuant to 19 CFR 10.195(a)(2)(i)(B) which provides
that no article or material shall be considered to have been
grown, produced, or manufactured in a BC by virtue of having
merely undergone simple combining or packaging operations,
including the fitting together a small number of components
by bolting, gluing, soldering, etc. Customs found that
since only two components were fitted together, the mounting
of a gem stone onto a ring casting was considered a simple
combining operation and, therefore, the rings were not
considered "products of" the Dominican Republic. See also
HRL 554448 dated August 25, 1987 (setting artificial stones
into jewelry was not considered a substantial transformation
of the jewelry into a "product of" a BC).
In HRL 558635 dated June 20, 1995, Customs considered
imported gold tube made into hollow hoops used to make
various items of jewelry, such as earrings, bracelets,
chains, and bangles. In producing bracelets, the hoops were
further processed by bending or winding to achieve oval
shapes or smaller overall diameters. The shapes were also
cut and soldered into links, buffed, cleaned, dried, and
hand polished.
A hoop was also made into a necklace by combining, by hand,
different links with different overall diameters of tubing,
soldering them together, buffing, cleaning, polishing,
soldering a clasp, hand polishing, quality control
inspection, and packaging.
In producing earrings and other articles of jewelry, such as
bangles, the hollow hoops were assembled without further
change in shape or diameter with clasps, yokes, posts, jump
rings, and other findings to produce the finished articles
of jewelry. For purposes of the GSP, Customs found that the
hollow hoops were a new and different article of commerce in
comparison to imported gold tubes and were "products of"
Bolivia. Furthermore, Customs found a second substantial
transformation when hoops were further processed into
bracelets or necklaces, as the operations involved bending
or winding the tubing to achieve oval shapes or smaller
diameters, cutting and soldering the resulting shapes into
links, and combining the links by soldering and attachment
of a clasp and the completed necklace or bracelet had an
essential character different from the hoop from which it
was derived. However, it was found that where an operation
consisted merely of soldering the completed hoops together
to form earrings, bangles or similarly produced articles of
jewelry, and a clasp or other type closure was added, the
essential character of the hoops was not changed and the
hoops did not undergo a second substantial transformation
when used to produce these items of jewelry.
In HRL 560333 dated July 24, 1997, published in the
"Customs Bulletin", Volume 31, No. 33, August 13, 1997,
Customs revoked HRL 556892 dated December 23, 1992, and HRL
556624 dated July 31, 1992, which held that weaving gold
links in a beneficiary developing country into chain
substantially transformed the links into a new and different
article for purposes of the GSP. In HRL 560333, Customs
ruled that the simple assembly or weaving of gold links into
chain, even when coupled with a soldering operation, does
not effect a substantial transformation of the gold links,
as supported by National Hand Tool v. United States, 16 CIT
308 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993).
Accordingly, based upon the rulings above, it is our
opinion that the U.S. origin castings imported into the
Dominican Republic do not undergo a substantial
transformation when they are made into finished jewelry
pieces. It is clear that when ring forms are combined with
stones, or earring forms are only combined with findings and
other decorative operations occur, that there is no
substantial transformation as the ring or earring forms
already possess the essential character of the finished
jewelry piece. Furthermore, while the rulings recognize
that cutting sheet or bending wire is a substantial
transformation, based upon the information presented in this
case, the jewelry components are not created by cutting or
bending but emerge ready for assembly from their cast molds
in conjunction with refining operations.
In regard to bracelets or necklaces which are assembled
together from cast components, in HRL 560333 Customs stated
that assembling gold links does not constitute a substantial
transformation. Accordingly, while bracelets or necklaces
may be assembled together using numerous pieces, these
pieces are already in their final form absent some minor
shaping, grinding, or polishing operations which refine
their shape. We recognize that various different components
may be combined to create a certain style of jewelry;
however, it is our opinion that the pieces already possess
the essential character of a finished jewelry piece.
Therefore, we find that in the second scenario, the
operations do not result in a substantial transformation,
and, therefore, the jewelry pieces may not be considered
"products of" the Dominican Republic and eligible for duty-free treatment under the CBERA.
II. Note 2(b)
Section 222 of the Customs and Trade Act of 1990
(Public Law 101-382) amended U.S. Note 2, Subchapter II,
Chapter 98, HTSUS, to provide for the duty-free treatment of
articles (other than textile and apparel articles, and
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.
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.
To qualify for Note 2(b) duty-free treatment, an
eligible article must be assembled or processed in a BC
entirely of components or ingredients that are a "product
of" the U.S. As used in this paragraph, the term
"beneficiary country" means a country listed in General note
7(a), HTSUS, which includes the Dominican Republic.
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.
In one scenario, it is stated that alloying and casting
will be performed in the U.S. The castings are then shipped
to the Dominican Republic where they are mechanically
tumbled, ground to remove excess material, reshaped,
polished and assembled together to form bracelets,
necklaces, earrings, etc. In certain instances, it is
stated that U.S.-origin stones will be set into the jewelry
pieces. It is our opinion that the assembly, setting, and
finishing operations performed in the Dominican Republic are
encompassed by the operations specified in Note 2(b).
Therefore, provided the castings and stones are of U.S.-origin, the castings and stones are shipped directly from
the U.S. to the Dominican Republic, and the finished jewelry
pieces are shipped directly to the U.S. without entering
into the commerce of any foreign country other than a BC,
the finished jewelry pieces will be entitled to duty-free
treatment under Note 2(b), assuming all documentation
requirements of Headquarters telex 9264071 dated September
28, 1990, are satisfied. See also HRL 555801, where it was
held that U.S. origin gem stones mounted onto U.S. origin
castings to produce unfinished rings qualified for duty-free
entry pursuant to Note 2(b).
III. Subheading 9802.00.80
Subheading 9802.00.80, HTSUS, provides a partial duty
exemption 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 this tariff provision
is subject to duty upon the full cost or value of the
imported assembled article, less the cost or value of the
U.S. components assembled therein, upon compliance with the
documentary requirements of section 10.24, Customs
Regulations (19 CFR 10.24).
Section 10.14(a), Customs Regulations {19 CFR
10.14(a)}, states in part that:
[t]he components must be in condition ready for
assembly without further fabrication at the time
of their exportation from the United States to
qualify for the exemption. Components will not
lose their entitlement to the exemption by being
subjected to operations incidental to the assembly
either before, during, or after their assembly
with other components.
Section 10.16(a), Customs Regulations {19 CFR
10.16(a)}, provides that the assembly operation performed
abroad may consist of any method used to join or fit
together solid components, such as welding, soldering,
riveting, force fitting, gluing, lamination, sewing, or the
use of fasteners.
Operations incidental to the assembly process are not
considered further fabrication operations, as they are of a
minor nature and cannot always be provided for in advance of
the assembly operations. See 19 CFR 10.16(a). However, any
significant process, operation or treatment whose primary
purpose is the fabrication, completion, physical or chemical
improvement of a component precludes the application of the
exemption under subheading 9802.00.80, HTSUS, to that
component. See 19 CFR 10.16(c).
In HRL 555801, Customs held that attaching a foreign or
U.S.-origin gem stone with a U.S.-origin ring casting was an
acceptable assembly operation pursuant to 19 CFR 10.16(a).
Therefore, a duty exemption under subheading 9802.00.80,
HTSUS, was available for the cost or value of the U.S.
origin components when the rings were returned to the U.S.
However, in HRL 555801, the rings were returned to the U.S.
in an unfinished state, and were subjected to further
grinding, buffing, and polishing operations in the U.S.
In HRL 555119 dated May 30, 1989, Customs considered
silver rings, earrings, charms, and similar items cast in
the U.S. and exported to Mexico for certain processing
operations. The processes included clipping which consisted
of closely removing any unwanted material, removing any
rough spots by means of a grinding wheel, tumbling in a
steel drum using an abrasive or steel shot media to remove
scratches or oxides, and in the case of rings, tapping to
straighten and restore to true round. Certain articles,
such as earrings, pins, or dangles, were subjected to
assembly operations to attach wires, posts, or pins by
soldering or crimping. Burn marks or oxidation caused by
soldering were removed by tumbling. In HRL 555119, it was
held that jewelry items assembled by soldering or crimping
wires or posts onto parts of earrings or broach pins would
not be eligible for the partial duty allowance of subheading
9802.00.80, HTSUS, if the components were subjected to
grinding or tumbling operations abroad prior to the assembly
process.
In HRL 555595 dated May 21, 1990, Customs considered
leather-wrapped eyeglass temples and nylon sunglass frames.
In the case of the leather-wrapped eyeglass temples, it was
held that bending the temple so that it will fit behind the
eyeglass wearer's ear was a "fabrication" or "completion" of
the temple within the meaning of 19 CFR 10.16(c), and did
not constitute an adjustment in the shape or form of the
component pursuant to Samsonite Corp. v. United States, 702
F. Supp. 908 (CIT 1988), aff'd, 889 F.2d 1074 (Fed. Cir.
1989). However, with regard to the nylon sunglass frames,
Customs determined that the pre-assembly process of removing
mold closure marks by using a hand grinder with an abrasive
wheel was an operation incidental to the assembly process
pursuant to 19 CFR 10.16(b)(4), because it was a trimming or
filing operation designed to remove small amounts of excess
plastic after the molding of the frame fronts and temples.
Furthermore, Customs held that polishing the areas of the
temples or frame fronts where the mold closure marks were
removed constituted an operation incidental to the assembly
process. While 19 CFR 10.16(c)(5) states that polishing
which imparts significant new characteristics or qualities
to an article is not an incidental operation, in HRL 555595,
Customs found that the polishing did not impart a
significant new characteristic to the temple or frame front,
but was instead analogous to a cleaning operation.
In this case, we find that riveting, wiring, soldering,
and setting components together are acceptable assembly
operations within the meaning of subheading 9802.00.80,
HTSUS, as determined in HRL 555119 and HRL 555801. The
degree of grinding, polishing, and/or straightening
operations is dependent on the number of components to be
assembled together, and whether or not Progressive wishes to
perform such operations in the Dominican Republic or the
U.S. Thus, the question that remains to be resolved is
whether the grinding, tumbling, reshaping, and polishing
operations performed in the Dominican Republic may be
considered a further fabrication or incidental to the
assembly process.
In HRL 555801, the grinding, buffing, and polishing
operations were performed in the U.S. after assembly abroad,
whereas in HRL 555119, Customs determined that components
subject to grinding or tumbling operations prior to the
assembly process would not be eligible for subheading
9802.00.80, HTSUS, treatment. However, in HRL 555595,
Customs found that certain grinding and polishing operations
were incidental to the assembly process. Therefore, the
degree to which material is removed is critical as to
whether or not the operation is incidental to assembly.
In this case, it is stated that the castings are ground
and polished before assembly. As in HRL 555119, we find
that grinding and polishing operations performed before
assembly to finalize the shape of the casting or to impart a
luster to the jewelry components, will not be incidental to
the assembly process. In particular, 19 CFR 10.16(c)(5)
states that "machining, polishing, burnishing" are not
incidental to the assembly process as these operations
impart significant new qualities to the exported components.
While it may be more feasible to perform these operations in
the Dominican Republic when the assembler determines which
components are to be assembled together, it is our opinion
that these constitute a further fabrication of the exported
components. In such circumstances the components do not
meet the initial subheading 9802.00.80 criterion of having
been exported "in condition ready for assembly without
further fabrication".
However, we find that if in the Dominican Republic only
a small portion of a casting needs to be ground, polished,
or straightened to allow it to fit together with another
component, then this operation would be considered
"incidental to assembly", as 19 CFR 10.16(b)(4), allows
"trimming, filing, or cutting off of small amounts of excess
materials" and 19 CFR 10.16(b)(5) allows "adjustments in the
shape or form of a component to the extent required by the
assembly being performed abroad". Furthermore, we find that
re-polishing the assembled piece is incidental to assembly
as this type of re-polishing to remove oil and dirt is akin
to a cleaning operation which is allowed by 19 CFR
10.16(b)(1). Accordingly, we find that provided only small
amounts of material are ground and polished away from a
casting component and only minor straightening operations
are performed in the Dominican Republic as necessary to
permit the fitting together of fully fabricated components
and the documentary requirements under 19 CFR 10.24 are met,
the finished jewelry pieces will qualify for the partial
duty allowance under subheading 9802.00.80, HTSUS.
HOLDING:
Based on the information provided, the jewelry articles
alloyed and cast in the Dominican Republic will be entitled
to duty-free treatment under the CBERA, provided they are
imported directly into the U.S., they are classifiable in a
CBERA-eligible tariff provision and the 35 percent
value-content requirement is satisfied at the time of entry.
However, the jewelry articles alloyed and cast in a non-BC
and only assembled in the Dominican Republic may not be
considered "products of" the Dominican Republic and will not
be eligible for duty-free treatment under the CBERA.
Jewelry articles made in the Dominican Republic will be
entitled to duty-free treatment under Note 2(b), assuming
they are made wholly from materials of U.S. origin, and upon
compliance with the documentation requirements set forth in
Headquarters telex 9264071 dated September 28, 1990.
Riveting, wiring, soldering, and setting components
together to form jewelry articles are acceptable assembly
operations. However, we find that only certain grinding and
straightening operations that adjust the shape of the
casting but do not complete the fabrication of the casting
will be incidental to the assembly process. Furthermore, we
find that polishing that imparts an initial luster to the
jewelry will not be considered as incidental to the assembly
process, but only re-polishing which removes oil and dirt
from the assembly article. Accordingly, we find that
provided only small amounts of material are ground and
polished away from a casting component and only minor
straightening operations are performed in the Dominican
Republic as necessary to permit the fitting together of
fully fabricated components and the documentary requirements
under 19 CFR 10.24 are met, the finished jewelry pieces will
qualify for the partial duty allowance under subheading
9802.00.80, HTSUS.
A copy of this ruling letter should be attached to the
entry documents filed at the time the goods are entered. If
the documents have been filed without a copy, this ruling
should be brought to the attention of the Customs officer
handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division