CLA-2 CO:R:C:S 558772 DEC
Ms. Tracy Ann Ehme
A.W. Fenton
P.O. Box 360614
Columbus, Ohio 43236-0614
RE: Applicability of duty exemption under U.S. Note 2(b), subchapter II,
Chapter 98, HTSUS, to footwear uppers and upper parts produced in
the Dominican Republic; C.S.D. 91-88; 555788; 555742; Headquarters
telex 9264071
Dear Ms. Ehme:
This is in reference to your letter of June 2, 1994, on behalf of Rocky Shoes &
Boots Company requesting a ruling on the eligibility for duty-free treatment under U.S.
Note 2(b), subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States
Annotated (HTSUSA), of footwear uppers and upper parts produced in the Dominican
Republic. You submitted a sample of the fully-assembled upper for our review.
FACTS:
You state that your client, Rocky Shoes & Boots Company, sends all materials
used in the production of the upper to the Dominican Republic. You further state the
following regarding the production process: (1) all materials are of United States origin;
(2) the factory in the Dominican Republic die cuts, assembles, and stitches the
materials to form an upper; and (3) the upper is shipped to Puerto Rico for bottoming. A
strobal process performed in Puerto Rico attaches the sidewall of the outsole to the
upper.
The sample (Style #7502) under consideration has an insole of T-35 Texon
partially stitched into the bottom. Normally, the insole board is not in place at time of
importation. For purposes of this ruling, Rocky Shoes & Boots Company is interested
in the Customs required marking of the upper if it is imported without the insole board
as a completely open and non-formed upper versus the required marking of the upper if
it is imported with the insole board partially attached.
ISSUE:
1. Whether the footwear uppers are eligible for duty-free treatment under U.S.
Note 2(b), subchapter II, Chapter 98, HTSUSA.
2. What is the proper country of origin of the footwear uppers if they are
imported without the insole board as a completely non-formed upper, or alternatively, if
they are imported with the insole board partially attached.
LAW AND ANALYSIS:
Section 222 of the Customs and Trade Act of 1990 (P.L. 101- 382) amended
U.S. Note 2, subchapter II, Chapter 98, HTSUSA, ("Note 2(b)") to provide for duty-free
treatment of articles, other than certain specified products, which are assembled or
processed in a Caribbean Basin Economic Recovery Act (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 that:
(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 in the United States, enters the commerce of any
foreign country other than a beneficiary country.
As used in this paragraph, the term "beneficiary country" means a country listed
in General Note 3(c)(v)(A), HTSUSA. Pursuant to General Note 3(c)(v)(A), HTSUSA,
the Dominican Republic has been designated as a BC for CBERA purposes.
As stated above, Note 2(b) specifies four categories of products that are
excluded from duty-free treatment under this provision: textile articles; apparel articles;
petroleum; and certain petroleum products. The issue presented in the instant case
concerns whether the footwear upper and upper parts are included in the "textile and
apparel article" exclusion for purposes of Note 2(b) and, therefore, precluded from
receiving duty-free treatment under this provision.
In T.D. 91-88, 25 Cust. Bull. 45 (1991), Customs addressed the question of what
is a "textile and apparel" article for purposes of Note 2(b). In T.D. 9l-88, we held that
footwear and parts of footwear are not textile and apparel articles for purposes of Note
2(b), regardless of whether they are subject to textile agreements. Customs has
followed this position on footwear and parts of footwear in Headquarters Ruling Letter
(HRL) 555742, dated November 5, 1990, and HRL 555788, dated September 9, 1991.
These rulings allowed duty-free treatment under Note 2(b) to footwear and footwear
uppers made, at least in part, of textile materials. This determination remains the same
regardless of whether the insole board is partially attached or not prior to importation
into the United States.
Regarding the operations performed in the Dominican Republic, we believe that
the assembly and processing of the U.S. materials that consist of cutting materials to
shape and stitching the cut pieces together to form an upper constitute the type of
operations contemplated by Note 2(b). See HRL 555788 and HRL 555742. Therefore,
if all of the materials shipped directly from the U.S. to the BC are of U.S.-origin and the
completed footwear uppers are shipped directly to the U.S. without entering into the
commerce of any foreign country other than a BC, these articles will be entitled to
duty-free treatment under Note 2(b), assuming all documentation requirements are met.
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides
that, unless excepted, every article of foreign origin imported into the United States
shall be marked in a conspicuous place as legibly, indelibly, and permanently as the
nature of the article (or its container) will permit, in such a manner as to indicate to the
ultimate purchaser in the United States the name of the country of origin of the article.
Part 134 of the Customs Regulations implements the country of origin marking
requirements and exceptions of 19 U.S.C. 1304.
Regarding the country of origin marking requirements for articles that are eligible
for duty-free treatment under Note 2(b), the Director of the Office of Trade Operations,
Headquarters, issued instructions to Customs field offices in Headquarters telex 9264071,
dated September 28, 1990. The following paragraph on marking appears in the telex:
Since the language of this provision [section 222] prohibits us from
treating these articles as foreign, there appears to be no basis for
requiring that the article be marked with the Caribbean country of
processing or assembly. If so desired, however, they may be marked
"assembled in (name of CBI country) of U.S. components" or other
similar wording. Whether or not the articles can be marked as
products of the United States must be decided by the Federal Trade
Commission (FTC). Until further instructions are issued, marking
requirements should be limited to these guidelines.
We have enclosed a copy of Headquarters telex 9264071, dated September 28, 1990, to
Customs field offices, setting forth procedures for the entry of articles under Note 2(b).
HOLDING:
1. The footwear uppers, whether imported with the insole board partially
attached or not, assembled and processed in the Dominican Republic entirely of
U.S.-origin components may enter the U.S. duty-free pursuant to Note 2(b), provided
the documentation requirements set forth in Headquarters telex 9264071 dated
September 28, 1990, are satisfied.
2. The imported uppers that qualify for Note 2(b) treatment are excepted from the
country of origin marking requirements.
A copy of this ruling letter should be attached to the entry documents filed at the
time this merchandise is entered. If the documents have been filed without a copy, this
ruling should be brought to the attention of the Customs officer.
Sincerely,
John Durant
Director, Commercial Rulings Division
Enclosure