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HQ 561903




May 9, 2002

MAR-2 RR:CR:SM 561903 KSG

CATEGORY: CLASSIFICATION

Jean-Pierre Bernier
Griffin Mfg. Co., Inc.
502 Bedford Street
P.O. Box 1671
Fall River, Massachusetts 02722

RE: U.S.-Caribbean Basin Trade Partnership Act; findings and trimmings; calculation of 25 percent of the "cost of the components"

Dear Mr. Bernier:

This is in response to your letter of December 12, 2000, requesting a binding ruling on the calculation of the 25 percent limit on the value of foreign-origin findings and trimmings used to make textile articles under the United States-Caribbean Basin Trade Partnership Act (“CBTPA”).

FACTS:

You are importing garments produced in a CBTPA beneficiary country. The findings and trimmings being used are not from the U.S. or a CBTPA beneficiary country. In regard to the 25% limit on the value of findings and trimmings, you ask whether the 25% limit is measured against the “cost of the components of the assembled article” or the total declared value of the finished article. If the former, you ask how to calculate the “cost of the components of the assembled article.”

ISSUE:

What is the proper manner in which to calculate the "cost of the components of the assembled article” to determine if foreign-origin findings and trimmings meet the 25 percent limit set forth in U.S. Note 3(a)(i), Subchapter XX, Chapter 98, Harmonized Tariff Schedule of the United States (HTSUS), and 19 U.S.C. 2703(b)(2)(vii)(I)?

LAW AND ANALYSIS:

Title II of the Trade and Development Act of 2000, (Pub. L. 106-200, 114 Stat. 251), concerns trade benefits for the Caribbean Basin and is referred to as the United States-Caribbean Basin Trade Partnership Act ("CBTPA"). Section 211 of the CBTPA amended section 213 (b) of the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2703(b)) to provide expanded trade benefits during a “transition period” to designated countries in the Caribbean Basin.

Section 211 of the CBTPA eliminates tariffs and quantitative restrictions on specific textile and apparel articles and extends North American Free Trade Agreement duty treatment standards to non-textile articles that previously were ineligible for preferential treatment under the CBERA. “Transition period” is defined in section 19 U.S.C. 2703(b)(5)(D) as meaning, with respect to a designated CBTPA country, the period that begins on October 1, 2000, and ends on the earlier of September 30, 2008, or the date on which a free trade agreement enters into force with respect to the U.S. and the CBTPA country.

Presidential Proclamation 7351, dated October 2, 2000, published in the Federal Register on October 4, 2000 (65 Fed. Reg. 59329), implemented the CBTPA by designating the eligible CBTPA countries and amending Chapter 98, HTSUS (including the creation of new subchapter XX) to facilitate the entry of the specific textile and apparel articles eligible for preferential treatment under the CBTPA.

The enhanced trade benefits provided by the CBTPA are available to eligible articles imported directly from a country: (1) that is designated as a CBTPA beneficiary country; and (2) which the U.S. Trade Representative (“USTR”) has determined has implemented and follows, or is making substantial progress toward implementing and following certain customs procedures that allow U.S. Customs to verify the origin of the articles.

In addition, Interim Customs Regulations to implement the trade benefit provisions of section 211 of the CBTPA were published in the Federal Register as T.D. 00-68 on October 5, 2000 (65 Fed. Reg. 59650). The T.D. invited public comments to be submitted on the Interim Regulations by December 4, 2000.

As amended by section 211 of the CBTPA, 19 U.S.C. 2703(b)(2)(A)(vii)(I) permits the use of foreign origin findings or trimmings, provided that such findings and trimmings do not exceed 25 percent of the cost of the components of the assembled article. (Also cited at U.S. Note 3(a)(i), Subchapter XX, HTSUS). As cited in 19 U.S.C. 2703(b)(2)(A)(vii)(I)(aa) and in U.S. Note 3(b), Subchapter XX, HTSUS, examples of findings and trimmings include "sewing thread, hooks and eyes, snaps, buttons, 'bow buds', decorative lace trim, elastic strips, zippers, including zipper tapes and labels, and other similar products." The exception for foreign origin elastic strips is limited to those elastic strips of less than one inch in width (2.54 cm) and used in the production of brassieres. See also section 10.223(b)(1)(i)(A) of the Interim Customs Regulations (19 CFR 10.223(b)(1)(i)(A)).

In response to your first question, the 25% limit on the value of foreign findings and trimmings is measured against the “cost of the components of the assembled article.” However, the CBTPA and the Interim Customs Regulations relating to the CBTPA do not address the issue of how to calculate the "cost of the components of the assembled article” for purposes of the 25% limitation. In addressing this issue here, we believe that It is instructive to examine the manner in which components are valued for goods entered under subheading 9802.00.80, HTSUS (see section 10.17, Customs Regulations (19 CFR 10.17)), and the manner in which materials are valued under the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2703 et seq.) (see section 10.196(c), Customs Regulations (19 CFR 10.196(c).

Based on the concepts found in 19 CFR 10.17 and 10.196(c), we find that the "cost of the components of the assembled article" for purposes of the 25 percent limitation on the use of foreign-origin findings and trimmings should be the price of the components when last purchased, f.o.b. port of exportation, as set out in the invoice or other commercial documents, or if the price is other than f.o.b. port of exportation, the price as set out in the invoice or other commercial documents adjusted to arrive at an f.o.b. port of exportation price. However, if the price cannot be determined as described above, or if that price is unreasonable, the “cost of the components” should include all reasonable expenses incurred in the growth, production, manufacture or other processing of the components, including the cost or value of materials and general expenses, plus a reasonable amount for profit, and the freight, insurance, packing and other costs incurred in transporting the components to the port of exportation.

In addition, we believe that the same methodology set forth in the previous paragraph should be used in determining the value of foreign findings and trimmings, as well as the value of foreign-origin interlinings under 19 U.S.C. 2703(b)(2)(A)(vii)(II) and section 10.223(b)(1)(i)(B) of the Interim Customs Regulations.

HOLDING:

The "cost of the components of the assembled article" for foreign-origin findings and trimmings as set forth in 19 U.S.C. 2703(b)(2)(A)(vii)(I), and U.S. Note 3(a)(I), Subchapter XX, Chapter 98, HTSUS, should be determined in the manner described above.

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 handling the transaction.

Sincerely,

John Durant, Director
Commercial Rulings Division

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