HQ 556619: Eligibility of fuel grade ethyl alcohol under the CBERA

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 556619

                        April 29, 1992

CLA-2 CO:R:C:S 556619 SER

CATEGORY: Classification

Robert E. Ruggeri, Esq.
Rogers & Wells
1737 H Street, N.W.
Washington, D.C. 20006-3922

RE:  Eligibility of fuel grade ethyl alcohol under the CBERA

Dear Mr. Ruggeri:

     This is in response to your letter of March 31, 1992, on
behalf of Liga Agricola Industrial de la Cana Azucar ("LAICA"),
concerning the eligibility of fuel grade ethyl alcohol from Costa
Rica for duty-free treatment under the Caribbean Basin Economic
Recovery Act (CBERA)(19 U.S.C. 2701-2706), and the Tax Reform Act
of 1986 (Pub. L. 99-514), as amended by the Steel Trade
Liberalization Act of 1989 (Pub. L. 101-221 and Pub. L. 101-382).

FACTS:

     LAICA, which is the marketing association of sugarcane
growers, mill owners and alcohol producers in Costa Rica, is
responsible for the export of dehydrated alcohol to the U.S.

     The proposed transactions, for purposes of this ruling
request, involve ethyl alcohol which will be produced in a non-
CBERA beneficiary country and is exported to Costa Rica.  In
Costa Rica, the ethyl alcohol is stated to be rectified and
dehydrated.  The ethyl alcohol will then be exported to the U.S.
to be used exclusively for motor fuel purposes.

ISSUE:

     Whether dehydrated ethyl alcohol, which meets the indigenous
products requirement of section 423 of the Tax Reform Act, as
amended, is subject to the 35% value-content requirement of 19
U.S.C. 2703(a)(1)(B).

LAW AND ANALYSIS:

     Under the CBERA, eligible articles from BCs are accorded
duty-free treatment.  The requirements for eligibility are
established in 19 U.S.C. section 2703(a), which provides as
follows:
                               -2-

     (1)  Unless otherwise excluded from eligibility by this
     chapter, and subject to section 423 of the Tax Reform
     Act of 1986, the duty-free treatment provided under
     this chapter shall apply to any article which is the
     growth, product, or manufacture of a beneficiary
     country if-

          (A) that article is imported directly from a
          beneficiary country into the customs territory of the
          United States; and

          (B) the sum of (i) the cost or value of the materials
          produced in a beneficiary country or two or more
          beneficiary countries, plus (ii) the direct costs of
          processing operations performed in a beneficiary
          country or countries is not less than 35 per centum of
          the appraised value of such article at the time it is
          entered. (Emphasis added).

     Section 423 of the Tax Reform Act, as amended by the Steel
Trade Liberalization Act of 1989 (P.L. 101-221, section 7(a) 103
Stat. 1886, 1890 (1989)), states that ethyl alcohol qualifies as
an eligible article if the ethyl alcohol or mixture thereof is an
"indigenous product" of the BC.  Specifically, section 423
provides, in pertinent part, as follows:

     (a)  IN GENERAL. -Except as provided in subsection (b), no
     ethyl alcohol or a mixture thereof may be considered-

                           *    *    *

          (2) for purposes of section 213 [19 U.S.C.
          2703] of the Caribbean Basin Economic
          Recovery Act, to be-
               (A) an article that is wholly the
               growth, product, or manufacture of
               a beneficiary country,
               (B) a new or different article of
               commerce which has been grown,
               produced, or manufactured in a
               beneficiary country,
               (C) a material produced in a
               beneficiary country, or
               (D) otherwise eligible for duty-
               free treatment under this Act as
               the growth, product, or manufacture
               of a beneficiary country;
     unless the ethyl alcohol or mixture thereof is an
     indigenous product of that insular possession or
     beneficiary country.
                           *    *    *

                               -3-

   (c)  DEFINITIONS...

                           *    *    *

          (3)(A) Ethyl alcohol and mixtures thereof
          that are only dehydrated within an insular
          possession or beneficiary country ... shall
          be treated as being indigenous products of
          that possession or country only if the
          alcohol or mixture when entered, meets the
          applicable local feedstock requirement.
          (B) The local feedstock requirement with
          respect to any calendar year is-
               (i) 0 percent with respect to the
               base quantity of dehydrated alcohol
               and mixtures that is entered;
               (ii) 30 percent with respect to the
               35,000,000 gallons of dehydrated
               alcohol and mixtures next entered
               after the base quantity; and
               (iii) 50 percent with respect to
               all dehydrated alcohol and mixtures
               entered after the amount specified
               in clause (ii) is entered.
          (C) For purposes of this paragraph:
               (i) The term 'base quantity' means,
               with respect to dehydrated alcohol
               and mixtures entered during any
               calendar year, the greater of-
                    (I) 60,000,000 gallons;
                    or
                    (II) an amount (expressed
                    in gallons) equal to 7
                    percent of the United
                    States domestic market
                    for ethyl alcohol...
               (ii) The term 'local feedstock'
               means hydrous ethyl alcohol which
               is wholly produced or manufactured
               in any insular possession or
               beneficiary country.
               (iii) The term 'local feedstock
               requirement' means the minimum percent,
               by volume, of local feedstock that must
               be included in dehydrated alcohol and
               mixtures.  (Emphasis added).

     Congress, in amending 19 U.S.C. 2703(a)(1) to be "subject to
section 423 of the Tax Reform Act of 1986," as amended,
prescribed a unified scheme for tariff treatment of ethyl alcohol
under the CBERA.  See National Corngrowers Ass'n v. Von Raab,
650 F.Supp. 1007 (CIT 1986), aff'd, 814 F.2d 651 (Fed. Cir.
                               -4-


1987).  As indicated in the language of section 423, and
supported by the legislative history of section 423, it is
Customs position that ethyl alcohol which meets the "indigenous
product" requirement would be considered to be "wholly the
growth, product, or manufacture of a beneficiary country."
Section 10.195(d), Customs regulations (19 CFR 10.195(d)),
states that articles which are wholly the growth, product, or
manufacture of a BC shall normally be presumed to meet the CBERA
origin requirements set forth in 19 CFR 10.195(a) (including the
35% value-content requirement).  Therefore, ethyl alcohol which
satisfies the "indigenous product" requirement is normally
presumed to meet the CBERA 35% requirement, and is entitled to
duty-free treatment under this program when imported directly
from the BC to the U.S.

HOLDING:

     Ethyl alcohol which is dehydrated in a BC and which meets
the "indigenous product" requirement established in section 423
of the Tax Reform Act of 1986, as amended, is normally presumed
to meet the 35% value-content requirement of the CBERA and will
receive duty-free treatment, assuming it is imported directly
from the BC to the U.S.

                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division