HQ 556321: Applicability of duty exemption under U.S. Note 2(b), subchapter II, Chapter 98, HTSUSA, to ribbons and bows produced in Haiti or the Dominican Republic

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                         HQ 556321      

                      January 23, 1992    
CLA-2 CO:R:C:S 556321 SER

CATEGORY: Classification

John D. Herter
Brooklyn Bow & Ribbon Co., Inc.
2010 Seabird Way  P.O. Box 10085
Riviera Beach, Fl  33404

RE:  Applicability of duty exemption under U.S. Note 2(b),
     subchapter II, Chapter 98, HTSUSA, to ribbons and bows
     produced in Haiti or the Dominican Republic

Dear Mr. Herter:

     This is in response to your letter of October 11, 1991,
concerning 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 ribbons and bows
produced in Haiti or the DOminican Republic.

FACTS:

     Ribbon and lace, wholly of U.S.-origin, are shipped to
either Haiti or the Dominican Republic where they are cut into
pieces, formed, and sewn into various ribbon and bow products. 
Some of the products contain only one piece of material, while
others may have three or four different materials used during
assembly.  The final products are then returned to the U.S.

ISSUE:

     Whether the ribbons and bows are entitled to duty-free
treatment under U.S. Note 2(b), subchapter II, Chapter 98,
HTSUSA.

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 Initiative beneficiary country
(BC) wholly of fabricated components or ingredients (except
water) of U.S. origin.  

     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   
            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"
     (BC) means a country listed in General Note 3(c)(v)(A),
     HTSUSA.  

     As stated above, 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 petroleum products.  Therefore, the first issue presented
concerns whether the footwear and footwear uppers 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 Headquarters Ruling Letters (HRLs) 555742 dated November
5, 1990, and 555788 dated September 9, 1991, we held that
footwear and footwear uppers are not considered textile or
apparel articles, and, therefore, are eligible for duty-free
treatment under this subheading. 

  2. Country of Origin of Fabric Sent to the Dominican Republic

     To qualify for Note 2(b) duty-free treatment, an eligible
article must be assembled or processed in a BC entirely of
components or ingredients that are a "product of" the U.S.  A
"product of" the U.S. is an article manufactured within the
customs territory of the U.S.  Foreign-made articles or materials
may become products of the U.S. if they undergo a process of
manufacture in the U.S. which results in their substantial
transformation.  See, for example, sections 10.12(e) and
10.14(b), Customs Regulations (19 CFR 10.12(e) and 10.14(b)).

     Section 12.130, Customs Regulations (19 CFR 12.130), governs
the determination of the country of origin of textiles or textile
products.  According to 19 CFR 12.130(b), 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.  A new and different article of commerce
will usually result from a manufacturing or processing operation
if there is a change in:  1) commercial designation or
identification; 2) fundamental character; or 3) commercial use. 
19 CFR 12.130(d)(1).

     In determining whether merchandise has undergone substantial
manufacturing or processing operations, we consider the
following: (1) Physical change in the material or article; (2)
Time involved in manufacturing or processing; (3) Complexity of
the operations; (4) Level or degree of skill and/or technology
required; and (5) Value added to the material or article. 19 CFR
12.130(d)(2).
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                               -4-



     In this case, imported foreign-made greige goods (textile
products for purposes of 19 CFR 12.130) are bleached, dyed and/or
printed in the U.S.  Two layers of the fabric are then laminated
together through the use of a latex adhesive, heat and pressure. 
After the lamination process, the fabric is then cut to shape in
the U.S.

     According to 19 CFR 12.130 (e)(1)(iv), a textile article or
material usually will be a product of a particular country if the
cutting of the fabric into parts and the assembly of those parts
into the completed article have occurred in that country. 
Customs has consistently ruled that cutting-to-shape operations
constitute a substantial transformation if the cutting creates
defined patterns or shapes suitable for use as components in an
assembly operation.  See HRLs 555742, 555788, 067823 dated June
2, 1982, 1991, and C.S.D. 89-27(4) (HRL 554929 dated November 3,
1988).  Therefore, the foreign greige goods which are imported
into the U.S. and subsequently cut into various shapes necessary
to construct the footwear and footwear uppers are substantially
transformed into "products of" the U.S.

  3. Assembly and Processing in the Dominican Republic

     The operations to be performed in the Dominican Republic in
the production of the footwear and footwear uppers consist
primarily of: sewing the laminated fabric components together;
applying a thin layer of plastic to the toe area of the vamp;
sewing different fabric components together; and inserting the
eyelets.  The footwear is completed by securing the upper to a
last and applying thermoplastic, formed by injection molding, to
the uppers.   

     We have previously held that operations similar to those
described above are encompassed by Note 2(b). See HRL 555742. 
Therefore, if, in fact, all materials are of U.S. origin, the
footwear and footwear uppers 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 uppers will be entitled to duty-free
treatment under this provision.  
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                               -5-



HOLDING:

     On the basis of the information submitted, we conclude that
the footwear and footwear uppers made in the Dominican Republic
wholly from materials of U.S. origin are entitled to duty-free
treatment under Note 2(b), upon compliance with the documentation
requirements set forth in Headquarters telex 9264071 dated
September 28, 1990 (copy enclosed).  

                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division