CLA-2 CO:R:C:V 555590 DSN
Mr. R. Gus Provost
Ragus Trading Corp.
P.O. Box 526372
Miami, Florida 33152
RE: CBERA treatment and country of origin of surgical towels
from the Dominican Republic
Dear Mr. Provost:
This is in response to your letter of February 2, 1990, on
behalf of Ragus Trading Corp., requesting a ruling as to whether
certain surgical towels produced in the Dominican Republic are
entitled to duty-free treatment under the Caribbean Basin
Economic Recovery Act (CBERA). You also request the country of
origin of the surgical towels. Samples were submitted with your
request.
FACTS:
According to your submissions, and conversations with a
member of my staff by telephone, 100% cotton fabric will be
imported into the Dominican Republic. In the Dominican Republic,
the fabric will be dyed, bleached, washed, cut to length and
width, and hemmed to create finished surgical towels. After
being packaged, the towels are exported to the U.S.
ISSUES:
1. Whether the surgical towels are entitled to duty-free
treatment under the CBERA when imported into the U.S.
2. Whether the operations performed in the Dominican
Republic render the Dominican Republic the country of origin of
the surgical towels.
LAW AND ANALYSIS:
1. Applicability of CBERA
For articles to be eligible for CBERA treatment, they must
first be classified under a CBERA eligible provision in the
Harmonized Tariff Schedule of the United States Annotated
(HTSUSA). An article classifiable under a CBERA eligible
provision is entitled to duty-free entry if it is the growth,
product or manufacture of a designated beneficiary country (BC),
the article is imported directly to the U.S. from a BC, and the
sum of the cost or value of the materials produced in a BC, plus
the direct cost of processing operations performed in a BC, is
not less than 35% of the appraised value of the article at the
time it is entered into the U.S.
The Dominican Republic is a BC. Based on the samples
submitted, as of May 1, 1990, the surgical towels are classified
under subheading 6307.90.8740, HTSUSA, which provides for other
made up articles, other, other, surgical towels. See
Presidential Proclamation No. 6123, 55 Fed. Reg. 18075 (1990).
Articles provided for in a provision for which a rate of duty of
"Free" appears in the "Special" subcolumn followed by the symbol
"E*" are eligible for duty-free treatment under the CBERA, except
for those articles specified in General Note 3(c)(v)(D), HTSUSA,
which includes textile articles with a cotton content of 50% or
more by weight. The "Special" subcolumn opposite subheading
6307.90.8740, HTSUSA includes the symbol "E*". Therefore, since
the surgical towels are composed of 100% cotton, they are
excluded from duty-free treatment under the CBERA, and would be
fully dutiable at the rate of 7% ad valorem.
2. Country of Origin
Textile articles produced in more than one foreign country
are subject to the country of origin criteria set forth in
section 12.130, Customs Regulations (19 CFR 12.130). According
to 19 CFR 12.130(b):
...a textile product...which consists of materials produced
or derived from or processed in, more than one foreign...
country shall be a product of that foreign...country where
it last underwent a substantial transformation. A textile
or textile product will be considered to have undergone a
substantial transformation if it has been transformed by
means of substantial manufacturing or processing operations
into a new and different article of commerce.
In determining whether merchandise has undergone substantial
manufacturing or processing operations, we consider the (1)
physical change in the material or the article; (2) time
involved; (3) complexity of the operations; (4) level or degree
of skill and/or technology required; and (5) value added to the
article in each country.
19 CFR 12.130(e)(2)(ii) states that an article or material
will not be consdiered to be a product of a particular country,
by virtue of merely having undergone:
cutting to length or width and hemming or
overlocking fabrics which are readily identifiable as
being intended for a particular commercial use.
It is clear that this provision does not disqualify the
surgical towels from consideration as products of the Dominican
Republic. The merchandise imported into the Dominican Republic
consists of cotton fabric, which is suitable for multiple uses.
There is no evidence, for example, of lines of demarcation on the
fabric that would be indicative that the fabric is intended for
use as surgical towels. In the Dominican Republic, the cotton
fabric will be transformed into a new and different article of
commerce as a result of the processing (dyeing, bleaching,
cutting to length and width, and hemming) performed there.
Therefore, the Dominican Republic would be the country of origin.
See Heaquarters Ruling Letter 086665 of March 23, 1990, regarding
the country of origin of cotton diapers, in which we held that
fabric woven in country A, shipped to country B where it is cut
to length and width, and hemmed, results in the diapers being
considered products of country B.
We note that at the present time, surgical towels from the
Dominican Republic are not subject to quota. However, due to the
changeable nature of quota agreements, you are advised to contact
your local Customs office prior to importation to determine the
current status of any textile agreements with the Dominican
Republic. Import restraints are imposed by the U.S. Custom
Service under directives of the Committee for the Implementation
of Textile Agreements, U.S. Department of Commerce, Washington,
D.C. 20230. Further advice or information pertaining to those
agreements may be obtained from the chairman of that Committee.
HOLDING:
The surgical towels are classified under subheading
6307.90.8740, HTSUSA, which provides for other made up articles,
other, other, surgical towels. The surgical towels are
ineligible for CBERA treatment under this provision. Therefore,
the rate of duty is 7% ad valorem. The country of origin for
quota purposes is the Dominican Republic.
Sincerely,
Acting Director
Commercial Rulings Division