CLA-2-95:RR:NC:2:224 L80976
Val Bailey
Island Fiberglass Pools, Inc.
1420 SW 12th Street
Ocala, FL 34472
RE: The tariff classification of swimming pools from Honduras.
Dear Mr. Bailey:
This is in response to your letter of October 28, 2004, requesting a tariff classification ruling regarding the eligibility of swimming pools manufactured in Honduras for duty-free treatment under the Caribbean Basin Economic Recovery Act (“CBERA”).
Your company will manufacture one-piece fiberglass swimming pools in Honduras from raw materials and components such as vinyl ester resin, gelcoat, fiberglass cloth material and wood purchased from different suppliers located in the United States, Venezuela, Guatemala, Ecuador, and Honduras. The finished pools will be shipped to various ports in the U.S. The issue is whether the pools qualify for preferential treatment provided by CBERA.
The applicable subheading for the subject imported swimming pools will be 9506.99.5500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for swimming pools and wading pools and parts and accessories thereof. The general rate of duty will be 5.3 percent ad valorem.
In 1983, the 98th Congress enacted the Caribbean Basin Economic Recovery Act (P.L. 98-67, codified at 19 USC § 2701 et seq.) to provide unilateral preferential trade and tax benefits for Caribbean Basin countries and territories. The CBERA is implemented by regulation at 19 C.F.R. § 10.191 through §10.199 and in the HTSUS at General Note (GN) 7. Pursuant to 19 U.S.C. § 2702, GN 7(a) provides a list of designated beneficiary countries, which includes Honduras and Guatemala.
Section 213(a) of the CBERA provides duty-free treatment of articles from a beneficiary country which meet three requirements:
The articles must be imported directly from a beneficiary country into the U.S. customs territory;
The articles must contain a minimum 35 percent local content of one or more beneficiary countries. U.S. origin materials may be counted towards the 35 percent requirement up to a maximum of 15 percent of the total appraised value of the article at the time of entry; and
The article must be wholly the growth, product, or manufacture of a beneficiary country or, if it contains foreign (non-BC) materials, be substantially transformed into a new or different article in a beneficiary country.
The first criterion is stated in 19 C.F.R. § 10.193 and GN 7(b)(i) of the HTSUS, the former which states in pertinent part that “To qualify for treatment under the CBI, an article shall be imported directly from a beneficiary country into the customs territory of the U.S….” In the instant case, Honduras is a BC for purposes of the CBERA (pursuant to General Note 7(a)) and you have represented that the product will be imported directly from Honduras into the U.S. Furthermore, articles from Honduras classified under HTSUS subheading 9506.99.55 are eligible for duty-free treatment under the CBERA.
The second criterion is stated in 19 C.F.R. § 10.195(a)(1) and in GN 7(b)(i), the former which states, in pertinent part, that:
Duty-free entry under the CBI may be accorded to an article only
if the sum of the cost or value of the material produced in a beneficiary
country or countries, plus the direct costs of processing operations
performed in a beneficiary country or countries, is not less than 35
percent of the appraised value of the article at the time it is entered. (Emphasis added)
19 C.F.R. § 10.195(b) further allows U.S. origin material to be counted towards the 35 percent local content requirement up to a maximum of 15 percent of the total value of the article at the time of entry:
For purposes of determining the percentage referred to in
paragraph (a) of this section, an amount not to exceed 15 percent
of the appraised value of the article at the time it is entered may be
attributed to the cost or value of materials produced in the customs
territory of the U.S….
You have provided a cost analysis of the various materials and processing operations. Calculations are broken down by component materials, by fabrication costs, and by country of origin of the material: beneficiary country, U.S., and non-beneficiary country. Based on the figures presented, the cost of the materials originating in the beneficiary countries of Honduras and Guatemala and in the U.S., and the costs of processing and labor in the beneficiary country, equal more than 35 percent of the asserted value of the swimming pool style whose figures were submitted as an example. However, the actual appraised value of the products cannot be determined until entry is made at the ports you have selected in the U.S. Therefore, a determination regarding whether the various swimming pool styles meet the 35 percent value content requirement of the CBERA must await actual entry of the products.
Relating to the third criterion, the swimming pools are produced with some components and materials that do not originate in a beneficiary country. Any material that does not originate in a BC is required to undergo a substantial transformation in a BC. Considering the totality of the evidence provided, it is our opinion that the foreign (non-BC) materials used in the pools undergo a substantial transformation in Honduras and qualify as “products of” Honduras for purposes of the CBI.
Therefore, based on the information provided and for the purposes of this ruling, it is our opinion that the subject swimming pools manufactured in Honduras are considered a “product of” a BC for purposes of the CBERA. The cost or value of the materials manufactured in Guatemala as well as in the non-BC countries, and the parts from the U.S. (not to exceed 15 percent of the appraised value) may be included in the calculation of the 35 percent value-content requirement. The swimming pools will be entitled to duty-free treatment under the CBERA, assuming compliance with the 35 percent value content and “imported directly” requirements. As stated above, whether the 35 percent test is met must await actual entry of the merchandise.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Tom McKenna at 646-733-3025.
Sincerely,
Robert B. Swierupski
Director,
National Commodity
Specialist Division