CLA-2 CO:R:C:S 557544 WAS
John M. Peterson, Esq.
Neville, Peterson & Williams
39 Broadway
New York, N.Y. 10006
RE: Eligibility of foreign-origin packaging materials for duty-free treatment under U.S. Note 2(b), subchapter II, Chapter
98, HTSUS; Section 222 of the Customs and Trade Act;
packaging materials; footwear
Dear Mr. Peterson:
This is in response to your letter dated August 17, 1993,
concerning the dutiable status of foreign-origin packaging
materials used to package imported merchandise which is otherwise
eligible for duty-free treatment under U.S. Note 2(b), subchapter
II, Chapter 98, Harmonized Tariff Schedule of the United States
(HTSUS) ("Note 2(b)").
FACTS:
You state that Aris-Isotoner, Inc. proposes to produce
certain footwear (rubber-soled slippers) in the Dominican
Republic entirely from materials or ingredients of U.S.-origin,
Aris-Isotoner will ship to a Dominican factory all of the
materials used in the manufacture of the footwear, including
nylon-spandex, and man-made fiber fabrics in piece goods form,
knitted wool "sherpa" footwear linings (these linings will be cut
in the U.S. from woven wool fabric imported in piece goods form,
from Taiwan), molded rubber outsoles, lining fabrics in piece
goods form, foam plastic in roll form, thread, trimmings and
findings. In the Dominican Republic, the piece goods will be cut
into footwear parts, which will subsequently be joined together
with the other materials by means of sewing. The finished
slippers will then be inspected, tacked to a cardboard "header"
card which contains printed advertising information, packed into
corrugated cardboard outer containers, and shipped directly from
the Dominican Republic to the U.S.
Aris plans to send to the Dominican Republic printed
cardboard "header cards" and corrugated cardboard outer boxes
which are manufactured in the U.S. These non-reusable U.S. origin
packing materials will be used to package the slippers.
In the future, Aris-Isotoner anticipates that it may be necessary
to source some or all of these packaging materials from foreign
sources.
ISSUE:
Whether packaging materials of foreign origin qualify for
duty-free treatment when imported as the packing for articles
eligible for duty-free entry under Note 2(b).
LAW AND ANALYSIS:
Section 222 of the Customs and Trade Act of 1990 (Public Law
101-382) amended Note 2, subchapter II, Chapter 98, HTSUS, to
provide for the duty-free treatment of articles (other than
certain specified products) which are assembled or processed in a
CBERA beneficiary country (BC), wholly of fabricated components
or ingredients (except water) of U.S. origin. This amendment was
effective with respect to goods entered on or after October 1,
1990.
Specifically, 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.
As stated in this paragraph, the term "beneficiary country" means a country
listed in General Note 3(c)(v)(A).
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.
Pursuant to General Note 3(c)(v)(A), HTSUS, the Dominican Republic is a
designated BC for CBERA purposes. Note 2(b) specifies four categories of
products which are excluded from duty-free treatment under this provision:
textile articles; apparel articles; petroleum; and certain products derived
from petroleum. We have previously held that footwear and footwear parts,
including footwear and parts made of textile materials do not constitute
apparel or textile articles as contemplated by Note 2(b) and, therefore, are
eligible for duty-free treatment under this provision, provided that all of
the other requirements are satisfied. See Headquarters Ruling Letters (HRLs)
555742 dated November 5, 199; 555788 dated September 9, 1991; T.D. 9188, dated
November 6, 1991.
You state that the assembly operations to be performed in the Dominican
Republic in the production of the slippers consists of stitching together all
of the components. In regard to the operations performed in the Dominican
Republic, we believe that stitching together the U.S. materials into the
finished slippers is encompassed by the operations specified in Note 2(b). See
HRL 555742. Therefore, if, in fact, all materials are of 100 percent U.S.-origin and the slippers are shipped directly to the U.S. without entering into
the commerce of any foreign country other than a BC, and the applicable
documentation requirements are satisfied, the footwear will be entitled to
duty-free treatment under this provision.
The issue that we are asked to address is whether the presence of foreign-origin packaging materials used to import the slippers, which otherwise
qualify for duty-free treatment pursuant to Note 2(b), will defeat eligibility
of the slippers from receiving duty-free treatment.
General Rule of Interpretation 5(b), HTSUS, provides, in pertinent part:
packing materials and packing containers entered with the goods
therein shall be classified with the goods if they are of a kind
normally used for pecking such goods... [T]his provision does not
apply when such packing materials or packing containers are
clearly suitable for repetitive use.
We have also applied GRI 5(b) to packaging materials used for articles
which are entitled to duty-free treatment under subheading 9801.00.10, HTSUS.
Customs has consistently held that when articles which qualify for duty-free
treatment under subheading 9801.00.10, HTSUS, and its predecessors, are
imported
in foreign-origin packaging materials, the packaging materials are subject to
the duty rate applicable to their contents (i.e., duty-free). In Border
Brokerage Company, Inc. v. United States, 65 Cust. Ct. 50 (1970), the court
held that, for purposes of duty-free entry under item 800.00, Tariff Schedules
of the United States, (TSUS) (the precursor to subheading 9801.00.10, HTSUS),
goods which satisfy the requirements for duty-free entry, as well as their
foreign packaging, would enter duty-free. See also HRL 071449 dated October
17, 1983 (imported articles of U.S.-origin and their disposable, foreign-made
packaging are eligible for duty-free treatment under item 800.00, TSUS); HRL
556072 dated July 1, 1991 (foreign-origin packaging materials consisting of
disposable cardboard shoe boxes and paper, are entitled to duty-free treatment
when they are included with footwear which qualifies for duty-free treatment
under Note 2(b)).
Consistent with the foregoing case and rulings, we are of the opinion that
the foreign-origin packaging materials (header cards and outer cardboard
containers), which are of a type typically used in association with slippers
and clearly not intended for repetitive use, are classified with the footwear
they are used to package under GRI 5(b). Therefore, provided that the slippers
satisfy all of the requirements under Note 2(b), the packaging materials are
also entitled to duty-free treatment under this provision.
HOLDING:
We are of the opinion that the foreign-origin packaging materials (header
cards and outer cardboard containers), that are of a type typically used in
association with footwear and not intended for repetitive use, are classified
with the slippers they are used to package. Therefore, provided that the
slippers satisfy all of the requirements for duty-free treatment under Note
2(b), the packaging materials also are entitled to duty-free treatment.
Sincerely,
John Durant, Director
Commercial Rulings Division