Eligibility of footwear uppers from the Dominican Republic for duty-free treatment under U.S. Note 2(b), Subchapter II, Chapter 98, HTSUS; sewing

HQ W559362 October 17, 1995 CLA-2 R:C:S W559362 MLR CATEGORY: Classification Mr. Victor M. Morales Fritz Companies, Inc. 259 Recinto Sur Street San Juan, Puerto Rico 00901 RE: Eligibility of footwear uppers from the Dominican Republic for duty-free treatment under U.S. Note 2(b), Subchapter II, Chapter 98, HTSUS; sewing Dear Mr. Morales: This is in response to your letter of June 28, 1995, on behalf of Tonka Footwear Co., Inc. (“Tonka”), regarding the applicability of duty-free treatment for leather footwear uppers to be produced in the Dominican Republic, pursuant to Section 222 of the Customs Trade Act of 1990 (Public Law 101-382), which amended U.S. Note 2, Subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States (HTSUS), {hereinafter “Note 2(b)”}. Samples were submitted with your request. FACTS: The articles at issue are ladies’ leather footwear uppers. It is stated that Tonka acquires thread, elastic band, buckles, ornaments, and leather from various U.S. vendors. All of these materials are stated to be of U.S. origin. Certificates from six manufacturers are submitted stating that cast ornaments, nickel posts, rivets, elastic, braid, thread, buckles, and leather are manufactured in the U.S., or if these materials were made with foreign materials, that the foreign materials were substantially transformed in the U.S. Tonka receives the leather in Puerto Rico where it is cut into parts for the footwear uppers. It is also stated that Tonka plans to mark one of the leather cut upper parts “Made in U.S.A.” before shipment to the Dominican Republic. Once the leather parts, elastic and buckles (which are already cut and sewn together in Puerto Rico), thread, and ornaments are shipped to the Dominican Republic, the leather is split, skived, and folded; the elastic is cemented; the lining is glued; and the materials are sewn together to form a leather upper. The leather upper is then shipped to Puerto Rico. Some of the operations performed by Tonka in Puerto Rico include cementing the bottom sole and sole lining, lasting, and drying to complete the upper into a finished ladies’ mocassin shoe. Samples of the cut leather components, and buckle and elastic sewn together shipped from Puerto Rico to the Dominican Republic are submitted, as well as samples of the uppers imported from the Dominican Republic and of the shoes finished in Puerto Rico. ISSUES: I. Whether the leather uppers produced in the Dominican Republic are eligible for duty-free treatment under Note 2(b). II. Whether the finished leather footwear may be marked “Made in U.S.A.” LAW AND ANALYSIS: I. Note 2(b) Section 222 of the Customs and Trade Act of 1990 (Public Law 101-382) amended U.S. Note 2, Subchapter II, Chapter 98, HTSUS, 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. 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 into the United States, enters the commerce of any foreign country other than a beneficiary country. To qualify for Note 2(b) dutyfree 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. General Note 2, HTSUS, states that the term “customs territory of the U.S.,” as used in the tariff schedule, includes Puerto Rico. Therefore, the leather certified to be of U.S. origin and cut into parts in Puerto Rico, remains a product of the U.S. See Headquarters Ruling Letter (HRL) 557216 dated August 19, 1993 (foreign neoprenenylon material cut in Puerto Rico into component parts suitable for use in the production of a knee brace, resulted in a substantial transformation of the foreign material into a new and different article of commerce). As used in this paragraph, the term "beneficiary country" means a country listed in General note 7(a), HTSUS, which includes the Dominican Republic. We have also previously 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. See T.D. 9188, 25 Cust. Bull. 45 (1991). Customs followed this position on footwear and parts of footwear in HRL 555742 dated November 5, 1990, and HRL 555788 dated September 9, 1991. These rulings allowed dutyfree treatment under Note 2(b) to footwear and footwear uppers made, at least in part, of textile materials. Regarding the operations performed in the Dominican Republic, 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. In HRL 556487 dated April 1, 1992, footwear uppers and socks were manufactured in the Dominican Republic using materials which originated entirely in the U.S. The uppers and socks were shipped to Puerto Rico directly from the Dominican Republic where, in some instances, they were manufactured into completed footwear. We held that the footwear uppers and socks were eligible articles under Note 2(b), and could enter dutyfree pursuant to Note 2(b), provided the documentation requirements set forth in Headquarters telex 9264071 dated September 28, 1990, were satisfied. Similarly, in this case, it is our opinion that the assembly and processing of the U.S. leather and other materials to form an upper constitute the type of operations contemplated by Note 2(b). Therefore, if all of the materials shipped directly from Puerto Rico to the BC are of U.S.origin and the completed footwear uppers are shipped directly to Puerto Rico without entering into the commerce of any foreign country other than a BC, these articles will be entitled to dutyfree treatment under Note 2(b), assuming all documentation requirements are met. II. Country of Origin Marking 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. In this case, Tonka plans to mark one of the cut leather components in Puerto Rico, prior to shipment to the Dominican Republic, “Made in U.S.A.” Regarding the country of origin marking requirements for articles that are eligible for dutyfree treatment under Note 2(b), Headquarters telex 9264071 dated September 28, 1990, provides, in part, that: 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. Accordingly, for U.S. Customs purposes, when the footwear uppers are imported into Puerto Rico, no country of origin marking will be required. However, as to the appropriateness of “Made in U.S.A.,” we suggest you contact the Federal Trade Commission (FTC), Division of Enforcement, 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20508. HOLDING: The footwear uppers, assembled entirely from U.S. materials in the Dominican Republic and imported into Puerto Rico to be used in the manufacture of finished footwear may enter the U.S. dutyfree pursuant to Note 2(b), provided the direct shipment requirements and the documentation requirements set forth in Headquarters telex 9264071 dated September 28, 1990, are satisfied. Furthermore, the imported uppers that qualify for Note 2(b) treatment are excepted from country of origin marking requirements; however, the FTC should be contacted regarding the use of “Made in U.S.A.” 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 Tariff Classification Appeals Division