HQ 559737

June 27, 1997

CLA-2 RR:TC:SM 559737 KBR

CATEGORY: Classification

Area Director

U.S. Customs Service

J.F.K. Airport

Building 178

Jamaica, New York 11430

RE: Protest 1001-96-100147; Eligibility of hair adornments

imported from the Dominican Republic for duty-free treatment

under the Caribbean Basin Economic Recovery Act (\"CBERA\").

Dear Port Director:

This is in response to Protest 1001-96-100147, filed January

4, 1996, concerning Riviera Trading Company (\"Riviera\"),

regarding the eligibility for duty-free treatment of hair

adornments imported from the Dominican Republic, pursuant to the

Caribbean Basin Economic Recovery Act (\"CBERA\"); or, in the

alternative, for treatment pursuant to subheading 9802.00.80,

HTSUS.

FACTS:

Riviera imported various hair adornments from the Dominican

Republic. The Assist Value Breakdown Sheets included with the

entry lists the various values of the components of the four

different hair adornments imported. These sheets also list the

country of origin of the components. The four types of hair

adornments are: pony trios, long pony twisters, skinny trios

HBs, and trios mini bows. The sheets indicate that the origin of

all of the components is the U.S. However, your office has

determined that although Riviera may have purchased the

components from a U.S. company such as High Fashion - New York,

the country of origin of the components was actually Japan or

Korea. Information included with the entry indicate the costs

incurred in the Dominican Republic comprise between 22% to 25% of

the appraised value of the articles. You office classified these

articles under subheading 9615.19.6010, Harmonized Tariff

Schedule of the United States (\"HTSUS\"), at the General subcolumn

rate of 11% ad valorum.

ISSUES:

1\. Whether the hair adornments assembled in the Dominican

Republic are eligible for duty-free treatment under CBERA.

2\. Whether the components imported to the Dominican

Republic from the U.S. qualify for treatment pursuant to

subheading 9802.00.80, HTSUS.

LAW AND ANALYSIS:

1\. CBERA

Under the CBERA, eligible articles the growth, product, or

manufacture of a designated beneficiary country (BC), which are

imported directly to the U.S. from a BC, qualify for duty-free

treatment, provided the sum of (1) the cost or value of materials

produced in a BC or two or more BCs, plus (2) the direct costs of

processing operations performed in a BC or BCs is not less than

35 percent of the appraised value of the article at the time it

is entered into the U.S. 19 U.S.C. §2703(a)(1). In addition,

the cost or value of materials produced in the U.S. may be

applied toward the 35 percent value-content minimum in an amount

not to exceed 15 percent of the imported article\'s appraised

value. See 19 CFR §10.195(c). As stated in General Note 7(a),

Harmonized Tariff Schedule of the United States (HTSUS), the

Dominican Republic is a designated BC under the CBERA.

To determine whether an article will be eligible to receive

duty-free treatment under the CBERA, it must first be classified

under a tariff provision for which a rate of duty of \"Free\"

appears in the \"Special\" subcolumn followed by the symbol \"E\" or

\"E\*.\" The hair adornments appear to be classifiable under

subheading 9615.19.6010, HTSUS, which is a CBERA-eligible

provision. Therefore, the hair adornments will receive duty-free

treatment if they are considered to be a \"product of\" the

Dominican Republic, the 35 percent value-content requirement is

met, and it is \"imported directly\" into the U.S. from the

Dominican Republic.

In this situation, the hair adornments do not meet the 35

percent value-content requirement. The \"Assist Value-Breakdown

Sheets\" show that the costs incurred in the Dominican Republic

total only between 22 percent to 25 percent of the articles\'

appraised value. Further, the value of the components imported

into the Dominican Republic imported from the U.S. and used in

the assembly of these articles may not be included in the 35%

calculation as U.S. materials because these components are of

Japanese or Korean origin.

Where an article is produced from materials imported into a

BC from non-BC\'s, as in this case, the cost or value of the

materials from non-BC\'s may be counted toward satisfying the 35%

value-content requirement only if there is a finding that the

materials have been subjected to a double substantial

transformation in the BC. See section 10.196(a), Customs

Regulations (19 CFR 10.196(a).) That is, the cost or value of

the imported materials used to produce the hair adornments may be

included in the 35% value-content requirement only if such

materials are first substantially transformed into a new and

different intermediate article of commerce, which is itself

substantially transformed into the hair adornments.

A substantial transformation occurs when an article emerges

from a process with a new name, character, or use different from

that possessed by the article prior to the processing. See Texas

Instruments, Inc. v. United States, 69 CCPA 152, 681 F.2d 778

(1982). In the current situation, there is no evidence that the

non-BC components undergo the required double substantial

transformation. Therefore, the value of the components imported

into the Dominican Republic from the U.S. may not be included

towards meeting the 35 percent value-content requirement.

Therefore, because the evidence does not show that the hair

adornments meet the 35 percent value-content requirement, the

hair adornments do not qualify for duty-free treatment under

CBERA.

2\. Subheading 9802.00.80

Subheading 9802.00.80, HTSUS, provides for a partial duty

allowance for:

\[a\]rticles assembled abroad in whole or in part of

fabricated components, the product of the United

States, which (a) were exported in condition ready for

assembly without further fabrication, (b) have not lost

their physical identity in such articles by change in

form, shape or otherwise, and (c) have not been

advanced in value or improved in condition abroad

except by being assembled and except by operations

incidental to the assembly process such as cleaning,

lubricating and painting.

All three requirements of subheading 9802.00.80, HTSUS, must

be satisfied before a component may receive a duty allowance. An

article entered under subheading 9802.00.80, HTSUS, is subject to

duty upon the full value of the imported assembled article less

the cost or value of the U.S. components, upon compliance with

the documentary requirements of section 10.24, Customs

Regulations (19 CFR §10.24).

As discussed above, the components imported to the Dominican

Republic from the U.S. are not of U.S. origin. Customs has

determined that these components were imported from Japan or

Korea. Therefore, the components will not qualify for a duty

allowance pursuant to subheading 9802.00.80, HTSUS.

HOLDING:

Based on the information submitted, the hair adornments

manufactured in the Dominican Republic and imported into the U.S.

do not meet the 35 percent value-content requirement and,

therefore, do not qualify for duty-free treatment under the

CBERA. The components imported from the U.S. are not of U.S.

origin and, therefore, do not qualify for a duty allowance

pursuant to subheading 9802.00.80, HTSUS, when returned as part

of the hair adornments. Therefore, the protest should be denied

in full.

In accordance with Section 3A(11)(b) of Customs Directive

099 3550-065 dated August 4, 1993, Subject: Revised Protest

Directive, this decision should be attached to Customs Form 19,

Notice of Action, and be mailed by your office to the protestant

no later than 60 days from the date of this letter. Any

reliquidation of the entry in accordance with the decision must

be accomplished prior to mailing of the decision. Sixty days

from the date of the decision the Office of Regulations and

Rulings will take steps to make the decision available to Customs

personnel via the Customs Rulings Module in ACS and the public

via the Diskette Subscription Service, Lexis, Freedom of

Information Act and other public access channels.

Sincerely,

John Durant, Director

Tariff Classification Appeals

Division