CLA-2-CO:R:C 555459 CW/KG

TARIFF NOS.: 9503.90.60; 9503.90.70; 9802.00.80

Mr. Sal Blandi
Vice President
Bantam Collections Inc.
2 Highland Street
Port Chester, New York 10573

RE: Applicability of duty exemption under GSP or CBI, and country of origin marking requirements, to certain baby toys assembled in Haiti

Dear Mr. Blandi:

This is in response to your letter of May 10, 1989, to the District Director, Miami, Florida, regarding the eligibility for duty-free treatment under the Generalized System of Preferences (GSP) and Caribbean Basin Economic Recovery Act (CBERA) of two baby toys assembled in Haiti from components made in the United States. You also inquire concerning the country of origin marking requirements applicable to these products. Your letter has been referred to this office for the preparation of a response. We regret the delay in responding.

FACTS:

The first toy, called "Mobile", is made to hang over a baby's crib and consists of a plastic frame with a circular opening at the top for hanging five stuffed lambs by means of strings. The lambs have an outer shell of terry and are stuffed with polyester material. The processing in Haiti amounts to simple assembly by sewing and stuffing. The toy will be finished in the U.S. by the attachment of a musical movement and crib stand and packaged in a box.

The second toy, called "Ring Rattle", is a baby's rattle with an outer shell of terry and stuffed with polyester material. The assembly operations consistof sewing together pre-cut pieces of terry cloth and stuffing the handle. The product will be finished when returned to the U.S. by the insertion of the rattle, stuffing of the head, and retail packaging.

ISSUES:

1. Will the two toy articles from Haiti be entitled to free entry under the GSP or CBERA?

2. If GSP and CBERA are inapplicable, are the toys entitled to the partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS)?

3. What is the proper country of origin marking of the two imported toys?

LAW AND ANALYSIS:

1. Applicability of GSP and CBERA

Under the GSP, eligible articles which are imported directly into the customs territory of the U.S. from a designated beneficiary developing country (BDC) may received duty-free treatment if the sum of 1) the cost or value of materials produced in the BDC, plus 2) the direct costs of the processing operation in the BDC, is equivalent to at least 35% of the appraised value of the article at the time of entry. See 19 U.S.C. 2463(b) and section 10.176(a), Customs Regulations (19 CFR 10.176(a)).

Under the CBERA, eligible articles the growth, product or manufacture of designated beneficiary countries (BC's) may receive duty-free treatment if such articles are imported directly to the U.S. from a BC, and if the sum of 1) the cost or value of materials produced in a BC or BC's, plus 2) the direct costs of the processing operations performed in a BC or BC's, is not less than 35% of the appraised value of the article at the time it is entered into the U.S. See 19 U.S.C. 2703(a) and section 10.195(a), Customs Regulations (19 CFR 10.195(a)). Unlike the GSP, the CBERA provides that the cost or value of materials produced in the customs territory of the U.S. (other than Puerto Rico) may be applied toward the 35% value-content minimum in an amount not to exceed 15% of the imported articles' appraised value.

Haiti is a BDC and a BC. The "Mobile" is classifiable in subheading 9503.90.70, HTSUS (other toys), while the "Ring Rattle" is classifiable in subheading 9503.90.60, HTSUS (other toys (except models), not having a spring mechanism). Articles from Haiti classifiable under either provision are eligible for GSP or CBERA tariff treatment.

Regarding the "Mobile", you advise that the direct costs of processing to be incurred in Haiti will be $4.69 per dozen, the cost of the U.S. components will be $20.22 per dozen, and the total value as imported will be $38.97 per dozen. As the direct processing costs represent only 12% of the full value of the article, the GSP 35% value-content requirement will not be satisfied and, therefore, the article will not be entitled to free treatment under this program. The "Mobile" also may not receive free entry under the CBERA since the direct processing costs plus the cost of the U.S. materials (subject to the 15% cap) will represent only 27% of the article's estimated appraised value.

The direct processing cost information you have provided in regard to the "Ring Rattle" ($.8125 per piece or $9.75 per dozen) appears to have been misstated since the total value of the finished article as imported is given as $7.30 per dozen. Based on the direct cost information provided in regard to the "Mobile", we assume that the $.8125 figure for the "Ring Rattle" should have been stated as $.08125 per piece, which represents 13.35% of the total value of the article. Under these circumstances, the article would not satisfy the GSP value- content requirement and would not qualify for treatment under this program. Moreover, as the direct processing costs (assuming $.08125 per piece is correct) plus the cost of U.S. materials (subject to the 15% cap) represents only 28% of the estimated appraised value of the "Ring Rattle", the article will not be entitled to free entry under the CBERA.

For your information, we are enclosing copies of the Customs Regulations relating to the GSP (19 CFR 10.171-10.178) and the CBERA (19 CFR 10.191-10.198).

2. Applicability of subheading 9802.00.80, HTSUS

From the information provided, it appears that the two baby toys are entitled to the partial duty exemption provided for in subheading 9802.00.80, HTSUS. This tariff provision applies to:

[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 value of the imported assembled article, less the cost or value of such U.S. components, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

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, laminating, sewing, or the use of fasteners. See section 10.16(a), Customs Regulations (19 CFR 10.16(a)). In this case, the operations of sewing pre-cut pieces of material together and stuffing parts of the toys are considered acceptable assembly operations. See Headquarters Ruling Letter 554920 (completely enclosing a metal weight in the hem of vertical blinds by sewing is an acceptable assembly operation). Therefore, allowances in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the U.S. components, upon compliance with the documentation requirements of 19 CFR 10.24. The duty rate applicable to the toys under subheadings 9503.90.60 and 9503.90.70, HTSUS, is 6.8 % ad valorem.

3. Country of origin marking requirements

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires that, unless excepted, every article of foreign origin imported into the U.S. shall be marked in a legible and conspicuous manner to indicate the country of origin to the ultimate purchaser in the U.S. Section 10.22, Customs Regulations (19 CFR 10.22), provides that assembled articles entitled to the exemption set forth in subheading 9802.00.80, HTSUS, are considered products of the country of assembly for the purposes of the country of origin marking requirements. If an imported assembled article is made entirely of American-made materials, the U.S. origin of the materials may be disclosed by using a legend such as "Assembled in ________ from material of U.S. origin," or a similar phrase.

As the toys in this case are entitled to the partial duty exemption in subheading 9802.00.80, HTSUS, they would be considered products of Haiti, the country of assembly. The toys could be marked with the phrase "Assembled in Haiti from material of U.S. origin," or a similar phrase.

Your letter states that you plan to package the imported toys in boxes in the U.S. Since the imported toys are sold in boxes, it may be possible to mark the boxes instead of the toys. Pursuant to section 134.32(d), Customs Regulations (19 CFR 134.32(d)), imported articles for which the marking of the containers will reasonably indicate the origin of the articles are excepted from individual marking. Section 134.34, Customs Regulations (19 CFR 134.34), provides that for imported articles which will be repacked after release from Customs custody, the 19 CFR 134.32(d) exception may be granted in the discretion of the district director if the containers in which the articles are repacked will indicate the origin of the articles to the ultimate purchaser in the U.S. and the importer arranges for supervision of the marking of the containers by Customs officers at the importer's expense or secures such verification as may be necessary, by certification and the submission of a sample or otherwise, of the marking prior to the liquidation of the entry. The imported toys themselves may be excepted from marking if the district director is satisfied that 1) the boxes in which they are shipped to retailers are sealed; 2) the boxes are the same boxes in which the ultimate purchaser would receive the imported toys; 3) the boxes are clearly and conspicuously marked to indicate the country of origin; and 4) the importer satisfies the requirements of 19 CFR 134.34.

HOLDING:

Baby toys, known as "Mobile" and "Ring Rattle", assembled in Haiti from U.S.-made materials are classifiable under subheadings 9503.90.70 and 9503.90.60, HTSUS, respectively, which provide for a duty rate of 6.8% ad valorem. As the cost information submitted indicates that the toys will not satisfy the GSP and CBERA 35% value-content requirements, the articles will not be entitled to free entry under these programs. However, the articles are entitled to the partial duty exemption under subheading 9802.00.80, HTSUS, provided the documentation requirements of 19 CFR 10.24 are met.

Pursuant to 19 CFR 10.22, the country of origin of the imported toys for marking purposes will be Haiti. The legend "Assembled in Haiti from material of U.S. origin" or a similar phrase is acceptable for country of origin marking purposes. The toys may be excepted from individual marking if the district director is satisfied that all the requirements of 19 CFR 134.34 are met.

Sincerely,

John Durant, Director
Commercial Rulings Division

Enclosures