CLA-2 CO:R:C:V 555609 KCC

Mr. Oscar H. Francois
Intersol Limited
P.O. Box 698
Port of Spain, Trinidad

RE: CBERA treatment for Petroleum Jelly.Substantial transformation; blending; liquidizing; solidifying; 555524; value-content

Dear Mr. Francois:

This is in response to your letter dated March 6, 1990, requesting a ruling that petroleum jelly imported from Trinidad and Tobago is entitled to duty-free treatment under the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2701-2706). We regret the delay in responding.


You state that the petroleum jelly will be produced in Trinidad and Tobago from components of Trinidad and Tobago and U.S. origin. The manufacturing process involves a blending operation in a stainless steel jacketed kettle fitted with a lightening mixer. First, snow white petrolatum is added to the kettle and heated (to approximately 75-80 degrees Celsius) until it reaches a liquid form. Then amber petrolatum and 120-125 MP wax are added, melted and blended into the liquid mixture. Thereafter, drakeol 9 Lt. mineral oil, aloe oil extract #102, and D&C green #6 are blended into the liquid mixture. After the appropriate amount of blending is accomplished, the temperature of the mixture is reduced to 45-50 degrees Celsius. The mixture is then filled into retail containers, capped, labeled, and packaged into outers and seal outers. Upon completion of these operations, the petroleum jelly will be shipped to the U.S.

You have provided the following cost information concerning the manufacture (per 100 units) of the two sizes of petroleum jelly:

4 oz. U.S. Trinidad

Jars 58.9000 ------- Caps 27.1000 ------- Labels (front & back) ------- 9.4000 Snow White Petrolatum 40.9803 ------- Amber Petrolatum 2.3633 ------- 120-125 MP Wax 1.4329 ------- Drakeol 9 Lt. Mineral Oil 5.5995 ------- Aloe Oil Extract #102 3.6398 ------- D&C Green #6 .0930 ------- Labor ------- 40.0000

140.1088 49.4000 Total: $189.5088

8 oz. U.S. Trinidad Jars 81.7000 ------- Caps 40.5200 ------- Labels (front & back) ------- 10.8000 Snow White Petrolatum 82.3128 ------- Amber Petrolatum 4.7462 ------- 120-125 MP Wax 2.8785 ------- Drakeol 9 Lt. Mineral Oil 11.3241 ------- Aloe Oil Extract #102 7.3140 ------- D&C Green #6 .1870 ------- Labor ------- 50.0000

230.9826 60.8000 Total: $291.7826


Whether the petroleum jelly is entitled to duty-free treatment under the CBERA when imported into the U.S.


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 the materials produced in a BC or BC's, plus (2) the direct cost of processing operations performed in a BC or BC's, is not less that 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). The cost or value of materials produced in the U.S. may be applied toward the 35% value-content minimum in an amount not to exceed 15% of the imported article's appraised value. See, section 10.195(c), Customs Regulations (19 CFR 10.195(c)).

Trinidad and Tobago is a BC. See, General Note 3(c)(v)(A), Harmonized Tariff Schedule of the United States (HTSUS). According to New York Ruling Letter 840760 dated June 2, 1989, white petroleum jelly with aloe vera is classified under subheading 3004.90.6090, HTSUS, which provides for medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses or in forms or packings for retail sale, which is a CBERA eligible provision. Accordingly, if the petroleum jelly is considered a "product of" Trinidad and Tobago and the 35% value-content minimum is met, the petroleum jelly will be entitled to duty-free treatment under the CBERA.

Where an article is produced from materials imported into a BC from non-BC's, as in this case, the article is considered a "product of" the BC only if those materials are substantially transformed into a new and different article of commerce. See, 19 CFR 10.195(a). 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 processing. See, Texas Instruments, Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982).

We find that blending the various materials, while maintaining a certain temperature, into a liquidized mixture, reducing the temperature until the desired consistency is achieved, and then packaging for retail sale results in a substantial transformation of the imported materials into a new and different article of commerce--petroleum jelly with aloe vera-- which is different in name, character, and use from the separate materials. Each material loses its separate identity when it is combined with the others, liquified and then solidified to create the final product which has its own distinct commercial and physical identity. See, Headquarters Ruling Letter (HRL) 555524 dated April 10, 1990 (combining ingredients with water, boiling the mixture, packaging and quickly freezing the product results in a substantial transformation into a "product of" a BC).

With respect to the 35% value-content requirement, the cost information you have provided indicates that the sum of the labor costs incurred in Trinidad and Tobago, the cost of the Trinidad and Tobago labels, and the cost of the U.S. origin products (subject to the 15% cap) would represent 41.07% of the cost to manufacture the 4 oz. size of petroleum jelly and 35.84% of the total cost of the 8 oz. size. However, without a more detailed breakdown of the "cost of labor," we are unable to state definitively that the CBERA value requirement will be met. Concerning labor costs, section 10.197(a)(1), Customs Regulations (19 CFR 10.197(a)(1)), provides that direct processing costs include "all actual labor costs involved in the growth, production, manufacture, or assembly of the specific merchandise, including, fringe benefits, on the job training, and the cost of engineering, supervisory, quality control, and similar personnel."

We are enclosing for your information a copy of the Customs Regulations relating to the CBERA (19 CFR 10.191-10.198). We are also enclosing a copy of HRL 555379 dated May 6, 1989, which discusses in some detail those costs which are and are not considered direct processing costs.


The petroleum jelly manufactured in Trinidad and Tobago is considered a "product of" a BC for purposes of CBERA. Therefore, assuming that it is imported directly to the U.S., and the 35% value-content requirement is satisfied, the petroleum jelly will be entitled to duty-free treatment under the CBERA.


John Durant, Director
Commercial Rulings Division