HQ 556404: Applicability of duty exemption under U.S. Note 2(b), subchapter II, Chapter 98, HTSUSA, to small leather goods produced in the Dominican Republic; CSD 89-27(4),

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 556404

                        February 10, 1992

CLA-2 CO:R:C:S  556404  WAW

CATEGORY:  Classification

Mr. Ronald Jablonski
St. Thomas, Inc.
St. Thomas Place
P.O. Box 913
Gloversville, N.Y.  12078-0913

RE:  Applicability of duty exemption under U.S. Note 2(b),
     subchapter II, Chapter 98, HTSUSA, to small leather goods
     produced in the Dominican Republic; CSD 89-27(4),

Dear Mr. Jablonski:

     This is in reference to your letter of November 13, 1991,
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 small
leather goods, i.e., men's billfolds, ladies' french purses,
checkbook clutches, cosmetic cases, etc., from the Dominican
Republic.  You also ask whether the leather goods are subject to
country of origin marking requirements.

FACTS:

     You state that St. Thomas, Inc. assembles small leather
goods in the Dominican Republic from materials exported to the
Dominican Republic from the U.S.  Based on the information you
have submitted, the leather goods will be assembled in the
Dominican Republic from U.S.-origin cowhide, pigskin, taffeta
linings, paper stiffeners, and zippers.

ISSUE:

     (1) Whether the leather goods are eligible for duty-free
treatment under U.S. Note 2(b), subchapter II, Chapter 98,
HTSUSA.

     (2) What are the country of origin marking requirements for
articles which are eligible for duty-free treatment under U.S.
Note 2(b).

LAW AND ANALYSIS:

     Section 222 of the Customs and Trade Act of 1990 (Public Law
101-382) amended U.S. Note 2, subchapter II, Chapter 98, HTSUSA
("Note 2(b)"), to provide for the duty-free treatment of articles
(other than textile and apparel articles, and petroleum and
petroleum 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.

     Note 2(b) specifically 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), HTSUSA, 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.  The leather goods are not 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
Letter (HRL) 555742 dated November 5, 1990.

     You state that the assembly operations to be performed in
the Dominican Republic in the production of the billfolds,
purses, etc. consist of cementing and stitching together leather
and lining components.

     In regard to the operations performed in the Dominican
Republic, we believe that the stitching and cementing together of
the U.S. materials into the finished leather goods are
encompassed by the operations specified in Note 2(b).  See HRL
555742 dated November 5, 1990.  Therefore, if, in fact, all
materials are of 100 percent U.S.-origin and the leather goods
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 leather
goods will be entitled to duty-free treatment under this
provision.

     With regard to the country of origin marking requirements
for articles which 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.

     The conclusion set forth above that "there appears to be no
basis for requiring that the article be marked with the Caribbean
country of processing or assembly" is currently under review.
If, after the review process is completed, it is determined that
country of origin marking is required for some or all articles
entitled to duty-free treatment under Note 2(b), public notice
will be provided.  In the meantime, the instructions set forth in
the telex 9264071 remain in effect.

     We have enclosed a copy of Headquarters telex 9264071 which
sets forth procedures for the entry of articles under Note
2(b).
HOLDING:

     On the basis of the information submitted, we conclude that
the leather goods 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 the enclosed telex.  Moreover, at the
present time, regarding country of origin marking requirements,
the instructions set forth in the telex remain in effect.

                                   Sincerely,




                                   John Durant, Director
                                   Commercial Rulings Division

Enclosure