HQ 556565: Eligibility of videocassettes from the Netherlands Antilles for duty-free treatment under the CBERA; direct costs of processing operations; 556226

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 556565

                         April 22, 1992

CLA-2 CO:R:C:S 556565 CW

CATEGORY:  Classification

Mr. Carlito Camargo
TVTEC
Brievengat Industrial Park
P.O. Box 6024
ITC Building
Curacao, The Netherland Antilles

RE:  Eligibility of videocassettes from the Netherlands Antilles
     for duty-free treatment under the CBERA; direct costs of 
     processing operations; 556226

Dear Mr. Camargo:

     This is in response to your letter of March 6, 1992,
requesting a ruling on whether pre-recorded videocassettes
produced in the Netherland Antilles satisfy the 35% value-content
requirement under the Caribbean Basin Economic Recovery Act
(CBERA).  In response to your original request for a ruling dated
August 19, 1991, on the eligibility of the videocassettes for
duty-free treatment under the CBERA, we advised by letter dated
December 27, 1991 (Headquarters Ruling Letter (HRL) 556226), that
more detailed cost information was required before a
determination could be made as to whether the 35% value-content
requirement would be met.

FACTS:

     Magnetic tape from Japan and videocassette boxes from the
U.S. are imported into the Netherlands Antilles for use in
producing pre-recorded videocassettes, made from a master tape on
a high-speed duplicator machine.

ISSUE:

     Whether the pre-recorded videocassettes satisfy the 35%
value-content requirement under the CBERA.

LAW AND ANALYSIS:

     Under the CBERA, eligible articles the growth, product or
manufacture of designated beneficiary countries (BCs), may enter
the U.S. free of duty if such articles are imported directly to
the U.S. from the BC, and the sum of (1) the cost or value of the
                              - 2 -


materials produced in the BC or BCs, plus (2) the direct cost of
processing operations performed in the BC or BCs, is not less
than 35% of the appraised value of the article at the time it is
entered into the U.S.  See 19 CFR 2703(a).  The cost or value of
materials produced in the U.S. may be applied toward the 35%
value-content minimum in an amount not to exceed 15% of the
imported article's appraised value. See section 10.195(c),
Customs Regulations (19 CFR 10.195(c)).

     In HRL 556226, we stated that the videocassettes in question
are considered to be "products of" the Netherlands Antilles for
CBERA purposes.  However, because the materials imported into the
Netherlands Antilles are not subjected to a double substantial
transformation in producing the videocassettes, we advised that
the 35% requirement must be met by the direct costs of processing
performed in the BC, plus the cost or value of U.S.-origin
materials (subject to the 15% cap).

     The additional cost information you have provided indicates
that the sum of the direct processing costs incurred in the
Netherlands Antilles, plus the cost or value of U.S. materials
(videocassette boxes), represents 39.2% of the estimated
appraised value of the imported videocassettes.  Therefore,
assuming that the direct cost and appraised value figures
provided accurately represent the figures applicable to the
videocassettes when imported into the U.S., the merchandise will
be entitled to duty-free treatment under the CBERA.

HOLDING:

     Based on the direct cost and appraised value information
provided, the pre-recorded videocassettes will satisfy the 35%
value-content requirement and, therefore, will be entitled to
duty-free treatment under the CBERA, assuming they are imported
directly to the U.S.     

                           Sincerely,




                           John Durant, Director