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(continued)
[T.D. 76–2, 40 FR 60049, Dec. 31, 1975, as amended by T.D. 86–118, 51 FR 22515, June 20, 1986]
§ 10.178 Direct costs of processing operations performed in the beneficiary developing country.
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(a) Items included in the direct costs of processing operations. As used in §10.176, the words “direct costs of processing operations” means those costs either directly incurred in, or which can be reasonably allocated to, the growth, production, manufacture, or assembly of the specific merchandise under consideration. Such costs include, but are not limited to:
(1) All actual labor costs involved in the growth, production, manufacture, or assembly of the specific merchandise, including fringe benefits, on-the-job training, and the cost of engineering, supervisory, quality control, and similar personnel;
(2) Dies, molds, tooling, and depreciation on machinery and equipment which are allocable to the specific merchandise;
(3) Research, development, design, engineering, and blueprint costs insofar as they are allocable to the specific merchandise; and
(4) Costs of inspecting and testing the specific merchandise.
(b) Items not included in the direct costs of processing operations. Those items which are not included within the meaning of the words “direct costs of processing operations” are those which are not directly attributable to the merchandise under consideration or are not “costs” of manufacturing the product. These include, but are not limited to:
(1) Profit; and
(2) General expenses of doing business which are either not allocable to the specific merchandise or are not related to the growth, production, manufacture, or assembly of the merchandise, such as administrative salaries, casualty and liability insurance, advertising, and salesmen's salaries, commissions, or expenses.
[T.D. 76–2, 40 FR 60049, Dec. 31, 1975]
§ 10.178a Special duty-free treatment for sub-Saharan African countries.
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(a) General. Section 506A of the Trade Act of 1974 (19 U.S.C. 2466a) authorizes the President to provide duty-free treatment for certain articles otherwise excluded from duty-free treatment under the Generalized System of Preferences (GSP) pursuant to section 503(b)(1)(B) through (G) of the Trade Act of 1974 (19 U.S.C. 2463(b)(1)(B) through (G)) and authorizes the President to designate a country listed in section 107 of the African Growth and Opportunity Act (19 U.S.C. 3706) as an eligible beneficiary sub-Saharan African country for purposes of that duty-free treatment.
(b) Eligible articles. The duty-free treatment referred to in paragraph (a) of this section will apply to any article within any of the following classes of articles, provided that the article in question has been designated by the President for that purpose and is the growth, product, or manufacture of an eligible beneficiary sub-Saharan African country and meets the requirements specified or referred to in paragraph (d) of this section:
(1) Watches, except those watches entered after June 30, 1989, that the President specifically determines, after public notice and comment, will not cause material injury to watch or watch band, strap, or bracelet manufacturing and assembly operations in the United States or the United States insular possessions;
(2) Certain electronic articles;
(3) Certain steel articles;
(4) Footwear, handbags, luggage, flat goods, work gloves, and leather wearing apparel which were not eligible articles for purposes of the GSP on January 1, 1995, as the GSP was in effect on that date;
(5) Certain semimanufactured and manufactured glass products; and
(6) Any other articles which the President determines to be import-sensitive in the context of the GSP.
(c) Claim for duty-free treatment. A claim for the duty-free treatment referred to in paragraph (a) of this section must be made by placing on the entry document the symbol “D” as a prefix to the subheading of the Harmonized Tariff Schedule of the United States for each article for which duty-free treatment is claimed;
(d) Origin and related rules. The provisions of §§10.171, 10.173, and 10.175 through 10.178 will apply for purposes of duty-free treatment under this section. However, application of those provisions in the context of this section will be subject to the following rules:
(1) The term “beneficiary developing country,” wherever it appears, means “beneficiary sub-Saharan African country;'
(2) In the GSP declaration set forth in §10.173(a)(1)(i), the column heading “Materials produced in a beneficiary developing country or members of the same association” should read “Material produced in a beneficiary sub-Saharan African country or in the U.S.;”
(3) The provisions of §10.175(c) will not apply; and
(4) For purposes of determining compliance with the 35 percent value content requirement set forth in §10.176(a):
(i) An amount not to exceed 15 percent of the appraised value of the article at the time it is entered may be attributed to the cost or value of materials produced in the customs territory of the United States, and the provisions of §10.177 will apply for purposes of identifying materials produced in the customs territory of the United States and the cost or value of those materials; and
(ii) The cost or value of materials included in the article that are produced in more than one beneficiary sub-Saharan African country may be applied without regard to whether those countries are members of the same association of countries.
(e) Importer requirements. In order to make a claim for duty-free treatment under this section, the importer:
(1) Must have records that explain how the importer came to the conclusion that the article qualifies for duty-free treatment;
(2) Must have records that demonstrate that the importer is claiming that the article qualifies for duty-free treatment because it is the growth of a beneficiary sub-Saharan African country or because it is the product of a beneficiary sub-Saharan African country or because it is the manufacture of a beneficiary sub-Saharan African country. If the importer is claiming that the article is the growth of a beneficiary sub-Saharan African country, the importer must have records that indicate that the product was grown in that country, such as a record of receipt from a farmer whose crops are grown in that country. If the importer is claiming that the article is the product of, or the manufacture of, a beneficiary sub-Saharan African country, the importer must have records that indicate that the manufacturing or processing operations reflected in or applied to the article meet the country of origin rules set forth in §10.176(a) and paragraph (d) of this section. A properly completed GSP declaration in the form set forth in §10.173(a)(1) is one example of a record that would serve this purpose;
(3) Must establish and implement internal controls which provide for the periodic review of the accuracy of the declarations or other records referred to in paragraph (e)(2) of this section;
(4) Must have shipping papers that show how the article moved from the beneficiary sub-Saharan African country to the United States. If the imported article was shipped through a country other than a beneficiary sub-Saharan African country and the invoices and other documents from the beneficiary sub-Saharan African country do not show the United States as the final destination, the importer also must have documentation that demonstrates that the conditions set forth in §10.175(d)(1) through (3) were met;
(5) Must have records that demonstrate the cost or value of the materials produced in the United States and the cost or value of the materials produced in a beneficiary sub-Saharan African country or countries and the direct costs of processing operations incurred in the beneficiary sub-Saharan African country that were relied upon by the importer to determine that the article met the 35 percent value content requirement set forth in §10.176(a) and paragraph (c) of this section. A properly completed GSP declaration in the form set forth in §10.173(a)(1) is one example of a record that would serve this purpose; and
(6) Must be prepared to produce the records referred to in paragraphs (e)(1), (e)(2), (e)(4), and (e)(5) of this section within 30 days of a request from Customs and must be prepared to explain how those records and the internal controls referred to in paragraph (e)(3) of this section justify the importer's claim for duty-free treatment.
[T.D. 00–67, 65 FR 59675, Oct. 5, 2000]
Canadian Crude Petroleum
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§ 10.179 Canadian crude petroleum subject to a commercial exchange agreement between United States and Canadian refiners.
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(a) Crude petroleum (as defined in Chapter 27, Additional U.S. Note 1, Harmonized Tariff Schedule of the United States (19 U.S.C. 1202)) produced in Canada may be admitted free of duty if the entry is accompanied by a certificate from the importer establishing that:
(1) The petroleum is imported pursuant to a commercial exchange agreement between United States and Canadian refiners which has been approved by the Secretary of Energy;
(2) An equivalent amount of domestic or duty-paid foreign crude petroleum on which the importer has executed a written waiver of drawback, has been exported to Canada pursuant to the export license and previously has not been used to effect the duty-free entry of like Canadian products; and,
(3) An export license has been issued by the Secretary of Commerce for the petroleum which has been exported to Canada.
(b) The provisions of this section may be applied to:
(1) Liquidated or reliquidated entries if the required certification is filed with the director of the port where the original entry was made on or before the 180th day after the date of entry; and
(2) Articles entered, or withdrawn from warehouse, for consumption, pursuant to a commercial exchange agreement.
(c) Verification of the quantities of crude petroleum exported to or imported from Canada under such a commercial exchange agreement shall be made in accordance with import verification provided in Part 151, Subpart C, Customs Regulations (19 CFR part 151, subpart C).
[T.D. 81–292, 46 FR 58069, Nov. 30, 1981, as amended by T.D. 89–1, 53 FR 51252, Dec. 21, 1988; T.D. 91–82, 56 FR 49845, Oct. 2, 1991]
Certain Fresh, Chilled, or Frozen Beef
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§ 10.180 Certification.
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(a) The foreign official's meat-inspection certificate required by U.S. Department of Agriculture regulations (9 CFR 327.4) shall be modified to include the certification below when fresh, chilled, or frozen beef is to be entered under the provisions of subheadings 0201.20.10, 0201.30.02, 0202.20.02, 0202.20.10, Harmonized Tariff Schedule of the United States (HTSUS). The certification shall be made, prior to exportation of the beef, by an official of the government of the exporting country and filed with Customs with the entry summary or with the entry when the entry summary is filed at the time of entry. The requirements of this section shall be in addition to those requirements contained in 9 CFR 327.4. Appropriate officials of the exporting country should consult with the U.S. Department of Agriculture as to the beef grades or standards within their country that satisfy the certification requirement. Exporters or importers of beef to be entered under the provisions of subheadings 0201.20.10, 0201.30.02, 0202.20.02, 0202.20.10, HTSUS, should consult with the U.S. Department of Agriculture prior to exportation in order to insure that the beef will satisfy the certification requirements. This certification is relevant only to U.S. Customs tariff classification and is not applicable to marketing of beef under U.S. Department of Agriculture grading standards, a matter within U.S. Department of Agriculture's jurisdiction.
Certification
I hereby certify to the best of my knowledge and belief that the herein described fresh, chilled, or frozen beef, meets the specifications prescribed in regulations issued by the U.S. Department of Agriculture (7 CFR 2853.106 (a) and (b)).
(b) Appropriate officials of the following countries have agreed with the U.S. Department of Agriculture as to the grades or standards for fresh, chilled, or frozen beef within their respective countries which will satisfy the certification requirements of paragraph (a) of this section: Canada.
[T.D. 82–8, 47 FR 945, Jan. 8, 1982, as amended by T.D. 89–1, 53 FR 51252, Dec. 21, 1988; T.D. 97–82, 62 FR 51769, Oct. 3, 1997]
Watches and Watch Movements From U.S. Insular Possessions
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§§ 10.181-10.182 [Reserved]
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Civil Aircraft
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§ 10.183 Duty-free entry of civil aircraft, aircraft engines, ground flight simulators, parts, components, and subassemblies.
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(a) Applicability. Except as provided in paragraph (b) of this section, this section applies to aircraft, aircraft engines, and ground flight simulators, including their parts, components, and subassemblies, that qualify as civil aircraft under General Note 6(b) ofthe Harmonized Tariff Schedule of the United States (HTSUS) by meeting the following requirements:
(1) The aircraft, aircraft engines, ground flight simulators, or their parts, components, and subassemblies, are used as original or replacement equipment in the design, development, testing, evaluation, manufacture, repair, maintenance, rebuilding, modification, or conversion of aircraft; and
(2) They are either:
(i) Manufactured or operated pursuant to a certificate issued by the Administrator of the Federal Aviation Administration (FAA) under 49 U.S.C. 44704 or pursuant to the approval of the airworthiness authority in the country of exportation, if that approval is recognized by the FAA as an acceptable substitute for the FAA certificate;
(ii) Covered by an application for such certificate, submitted to and accepted by the FAA, filed by an existing type and production certificate holder pursuant to 49 U.S.C. 44702 and implementing regulations (Federal Aviation Administration Regulations, title 14, Code of Federal Regulations); or
(iii) Covered by an application for such approval or certificate which will be submitted in the future by an existing type and production certificate holder, pending the completion of design or other technical requirements stipulated by the FAA (applicable only to the quantities of parts, components, and subassemblies as are required to meet the stipulation).
(b) Department of Defense or U.S. Coast Guard use. If purchased for use by the Department of Defense or the United States Coast Guard, aircraft, aircraft engines, and ground flight simulators, including their parts, components, and subassemblies, are subject to this section only if they are used as original or replacement equipment in the design, development, testing, evaluation, manufacture, repair, maintenance, rebuilding, modification, or conversion of aircraft and meet the requirements of either paragraph (a)(2)(i) or (a)(2)(ii) of this section.
(c) Claim for admission free of duty. Merchandise qualifying under paragraph (a) or paragraph (b) of this section is entitled to duty-free admission in accordance with General Note 6, HTSUS, upon meeting the requirements of this section. An importer will make a claim for duty-free admission under this section and General Note 6, HTSUS, by properly entering qualifying merchandise under a provision for which the rate of duty “Free (C)” appears in the “Special” subcolumn of the HTSUS and by placing the special indicator “C” on the entry summary. The fact that qualifying merchandise has previously been exported with benefit of drawback does not preclude free entry under this section.
(d) Importer certification. In making a claim for duty-free admission as provided for under paragraph (c) of this section, the importer is deemed to certify, in accordance with General Note 6(a)(ii), HTSUS, that the imported merchandise is, as described in paragraph (a) or paragraph (b) of this section, a civil aircraft or has been imported for use in a civil aircraft and will be so used.
(e) Documentation. Each entry summary claiming duty-free admission for imported merchandise in accordance with paragraph (c) of this section must be supported by documentation to verify the claim for duty-free admission, including the written order or contract and other evidence that the merchandise entered qualifies under General Note 6, HTSUS, as a civil aircraft, aircraft engine, or ground flight simulator, or their parts, components, and subassemblies. Evidence that the merchandise qualifies under the general note includes evidence of compliance with paragraph (a)(1) of this section concerning use of the merchandise and evidence of compliance with the airworthiness certification requirement of paragraph (a)(2)(i), (a)(2)(ii), or (a)(2)(iii) of this section, including, as appropriate in the circumstances, an FAA certification; approval of airworthiness by an airworthiness authority in the country of export and evidence that the FAA recognizes that approval as an acceptable substitute for an FAA certification; an application for a certification submitted to and accepted by the FAA; a type and production certificate issued by the FAA; and/or evidence that a type and production certificate holder will submit an application for certification or approval in the future pending completion of design or other technical requirements stipulated by the FAA and of estimates of quantities of parts, components, and subassemblies as are required to meet design and technical requirements stipulated by the FAA. This documentation need not be filed with the entry summary but must be maintained in accordance with the general note and with the recordkeeping provisions of Part 163 of this chapter. Customs may request production of documentation at any time to verify the claim for duty-free admission. Failure to produce documentation sufficient to satisfy the port director that the merchandise qualifies for duty-free admission will result in a denial of duty-free treatment and may result in such other measures permitted under the regulations as the port director finds necessary to more closely monitor the importer's importations of merchandise claimed to be duty-free under this section. Proof of end use of the entered merchandise need not be maintained.
(f) Post-entry claim. An importer may file a claim for duty-free treatment under General Note 6, HTSUS, after filing an entry that made no such duty-free claim, by filing a written statement with Customs any time prior to liquidation of the entry or prior to the liquidation becoming final. When filed, the written statement constitutes the importer=s claim for duty-free treatment under the general note and its certification that the entered merchandise is a civil aircraft or has been imported for use in a civil aircraft and will be so used. In accordance with General Note 6, HTSUS, any refund resulting from a claim made under this paragraph will be without interest, notwithstanding the provision of 19 U.S.C. 1505(c).
(g) Verification. The port director will monitor and periodically audit selected entries made under this section.
[T.D. 01–31, 67 FR 39289, June 7, 2002]
Subpart B—Caribbean Basin Initiative
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Source: Sections 10.191 through 10.197 issued by T.D. 84–237, 49 FR 47993, Dec. 7, 1984, unless otherwise noted.
§ 10.191 General.
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(a) Statutory authority. Subtitle A, Title II, Pub. L. 98–67, entitled the Caribbean Basin Economic Recovery Act (19 U.S.C. 2701–2706) and referred to as the Caribbean Basin Initiative (CBI), authorizes the President to proclaim duty-free treatment for all eligible articles from any beneficiary country.
(b) Definitions—(1) Beneficiary country. For purposes of §10.191 through §10.199 and except as otherwise provided in §10.195(b), the term “beneficiary country” means any country or territory or successor political entity with respect to which there is in effect a proclamation by the President designating such country, territory or successor political entity as a beneficiary country in accordance with section 212(a)(1)(A) of the Caribbean Basin Economic Recovery Act (19 U.S.C. 2702(a)(1)(A)).
(2) Eligible articles. Except as provided herein, for purposes of §10.191(a), the term “eligible articles” means any merchandise which is imported directly from a beneficiary country as provided in §10.193 and which meets the country of origin criteria set forth in §10.195 or in §10.198b. The following merchandise shall not be considered eligible articles entitled to duty-free treatment under the CBI.
(i) Textile and apparel articles which were not eligible articles for purposes of the CBI on January 1, 1994, as the CBI was in effect on that date.
(ii) Footwear not designated on August 5, 1983, as eligible articles for the purpose of the Generalized System of Preferences under Title V, Trade Act of 1974, as amended (19 U.S.C. 2461 through 2467).
(iii) Tuna, prepared or preserved in any manner, in airtight containers.
(iv) Petroleum, or any product derived from petroleum, provided for in headings 2709 and 2710, Harmonized Tariff Schedule of the United States (HTSUS).
(v) Watches and watch parts (including cases, bracelets and straps), of whatever type including, but not limited to, mechanical, quartz digital or quartz analog, if such watches or watch parts contain any material which is the product of any country with respect to which HTSUS column 2 rates of duty apply.
(vi) Articles to which reduced rates of duty apply under §10.198a.
(vii) Sugars, sirups, and molasses, provided for in subheadings 1701.11.00 and 1701.12.00, HTSUS, to the extent that importation and duty-free treatment of such articles are limited by Additional U.S. Note 4, Chapter 17, HTSUS.
(viii) Articles subject to the provisions of the subheadings of Subchapter III, from the beginning through 9903.85.21, Chapter 99, HTSUS, to the extent that such provisions have not been modified or terminated by the President pursuant to section 213(e)(5) of the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(e)(5)).
(ix) Merchandise for which duty-free treatment under the CBI is suspended or withdrawn by the President pursuant to sections 213 (c)(2), (e)(1), or (f)(3) of the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703 (c)(2), (e)(1), or (f)(3)).
(3) Wholly the growth, product, or manufacture of a beneficiary country. For purposes of §10.191 through §10.199, the expression “wholly the growth, product, or manufacture of a beneficiary country” refers both to any article which has been entirely grown, produced, or manufactured in a beneficiary country or two or more beneficiary countries and to all materials incorporated in an article which have been entirely grown, produced, or manufactured in any beneficiary country or two or more beneficary countries, as distinguished from articles or materials imported into a beneficiary country from a non-beneficiary country whether or not such articles or materials were substantially transformed into new or different articles of commerce after their importation into the beneficiary country.
(4) Entered. For purposes of §10.191 through §10.199, the term “entered” means entered, or withdrawn from warehouse for consumption, in the customs territory of the U.S.
[T.D. 84–237, 49 FR 47993, Dec. 7, 1984, as amended by T.D. 89–1, 53 FR 51252, Dec. 21, 1988; T.D. 00–68, 65 FR 59657, Oct. 5, 2000; T.D. 01–17, 66 FR 9645, Feb. 9, 2001]
§ 10.192 Claim for exemption from duty under the CBI.
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A claim for an exemption from duty on the ground that the CBI applies shall be allowed by the port director only if he is satisfied that the requirements set forth in this section and §10.193 through §10.198b have been met. Duty-free treatment may be claimed at the time of filing the entry summary by placing the symbol “E” as a prefix to the HTSUS subheading number for each article for which such treatment is claimed on that document.
[T.D. 84–237, 49 FR 47993, Dec. 7, 1984, as amended by T.D. 89–1, 53 FR 51252, Dec. 21, 1988; T.D. 94–47, 59 FR 25570, May 17, 1994; T.D. 00–68, 65 FR 59658, Oct. 5, 2000]
§ 10.193 Imported directly.
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To qualify for treatment under the CBI, an article shall be imported directly from a beneficiary country into the customs territory of the U.S. For purposes of §10.191 through §10.198b the words “imported directly” mean:
(a) Direct shipment from any beneficiary country to the U.S. without passing through the territory of any non-beneficiary country; or
(b) If the shipment is from any beneficiary country to the U.S. through the territory of any non-beneficiary country, the articles in the shipment do not enter into the commerce of any non-beneficiary country while en route to the U.S. and the invoices, bills of lading, and other shipping documents show the U.S. as the final destination; or
(c) If the shipment is from any beneficiary country to the U.S. through the territory of any non-beneficiary country, and the invoices and other documents do not show the U.S. as the final destination, the articles in the shipment upon arrival in the U.S. are imported directly only if they:
(1) Remained under the control of the customs authority of the intermediate country;
(2) Did not enter into the commerce of the intermediate country except for the purpose of sale other than at retail, and the port director is satisfied that the importation results from the original commericial transaction between the importer and the producer or the latter's sales agent; and
(3) Were not subjected to operations other than loading and unloading, and other activities necessary to preserve the articles in good condition.
[T.D. 84–237, 49 FR 47993, Dec. 7, 1984, as amended by T.D. 00–68, 65 FR 59658, Oct. 5, 2000]
§ 10.194 Evidence of direct shipment.
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(a) Documents constituting evidence of direct shipment. The port director may require that appropriate shipping papers, invoices, or other documents be submitted within 60 days of the date of entry as evidence that the articles were “imported directly”, as that term is defined in §10.193. Any evidence of direct shipment required shall be subject to such verification as deemed necessary by the port director.
(b) Waiver of evidence of direct shipment. The port director may waive the submission of evidence of direct shipment when otherwise satisfied, taking into consideration the kind and value of the merchandise, that the merchandise was, in fact, imported directly and that it otherwise clearly qualifies for treatment under the CBI.
§ 10.195 Country of origin criteria.
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(a) Articles produced in a beneficiary country—(1) General. Except as provided herein, any article which is either wholly the growth, product, or manufacture of a beneficiary country or a new or different article of commerce which has been grown, produced, or manufactured in a beneficiary country, may qualify for duty-free entry under the CBI. No article or material shall be considered to have been grown, produced, or manufactured in a beneficiary country by virtue of having merely undergone simple (as opposed to complex or meaningful) combining or packaging operations, or mere dilution with water or mere dilution with another substance that does not materially alter the characteristics of the article. Duty-free entry under the CBI may be accorded to an article only if the sum of the cost or value of the material produced in a beneficiary country or countries, plus the direct costs of processing operations performed in a beneficiary country or countries, is not less than 35 percent of the appraised value of the article at the time it is entered.
(2) Combining, packaging, and diluting operations. No article which has undergone only a simple combining or packaging operation or a mere dilution in a beneficiary country within the meaning of paragraph (a)(1) of this section shall be entitled to duty-free treatment even though the processing operation causes the article to meet the value requirement set forth in that paragraph.
(i) For purposes of this section, simple combining or packaging operations and mere dilution include, but are not limited to, the following processes:
(A) The addition of batteries to devices;
(B) Fitting together a small number of components by bolting, glueing, soldering etc.;
(C) Blending foreign and beneficiary country tobacco;
(D) The addition of substances such as anticaking agents, preservatives, wetting agents, etc.;
(E) Repacking or packaging components together;
(F) Reconstituting orange juice by adding water to orange juice concentrate; and
(G) Diluting chemicals with inert ingredients to bring them to standard degrees of strength.
(ii) For purposes of this section, simple combining or packaging operations and mere dilution shall not be taken to include processes such as the following:
(A) The assembly of a large number of discrete components onto a printed circuit board;
(B) The mixing together of two bulk medicinal substances followed by the packaging of the mixed product into individual doses for retail sale;
(C) The addition of water or another substance to a chemical compound under pressure which results in a reaction creating a new chemical compound; and
(D) A simple combining or packaging operation or mere dilution coupled with any other type of processing such as testing or fabrication (e.g., a simple assembly of a small number of components, one of which was fabricated in the beneficiary country where the assembly took place).
The fact that an article or material has undergone more than a simple combining or packaging operation or mere dilution is not necessarily dispositive of the question of whether that processing constitutes a substantial transformation for purposes of determining the country of origin of the article or material.
(b) Commonwealth of Puerto Rico and U.S. Virgin Islands—(1) General. For purposes of determining the percentage referred to in paragraph (a) of this section, the term “beneficiary country” includes the Commonwealth of Puerto Rico and the U.S. Virgin Islands. Any cost or value of materials or direct costs of processing operations attributable to the U.S. Virgin Islands must be included in the article prior to its final exportation from a beneficiary country to the United States.
(2) Manufacture in the Commonwealth of Puerto Rico after final exportation. Notwithstanding the provisions of 19 U.S.C. 1311, if an article from a beneficiary country is entered under bond for processing or use in manufacturing in the Commonwealth of Puerto Rico, no duty will be imposed on the withdrawal from warehouse for consumption of the product of that processing or manufacturing provided that:
(i) The article entered in the warehouse in the Commonwealth of Puerto Rico was grown, produced, or manufactured in a beneficiary country within the meaning of paragraph (a) of this section and was imported directly from a beneficiary country within the meaning of §10.193; and
(ii) At the time of its withdrawal from the warehouse, the product of the processing or manufacturing in the Commonwealth of Puerto Rico meets the 35 percent value-content requirement prescribed in paragraph (a) of this section.
(c) Materials produced in the U.S. For purposes of determining the percentage referred to in paragraph (a) of this section, an amount not to exceed 15 percent of the appraised value of the article at the time it is entered may be attributed to the cost or value of materials produced in the customs territory of the U.S. (other than the Commonwealth of Puerto Rico). In the case of materials produced in the customs territory of the U.S., the provisions of §10.196 shall apply.
(d) Textile components cut to shape in the U.S. The percentage referred to in paragraph (c) of this section may be attributed in whole or in part to the cost or value of a textile component that is cut to shape (but not to length, width, or both) in the U.S. (including the Commonwealth of Puerto Rico) from foreign fabric and exported to a beneficiary country for assembly into an article that is then returned to the U.S. and entered, or withdrawn from warehouse, for consumption on or after July 1, 1996. For purposes of this paragraph, the terms “textile component” and “fabric” have reference only to goods covered by the definition of “textile or apparel product” set forth in §102.21(b)(5) of this chapter.
(e) Articles wholly grown, produced, or manufactured in a beneficiary country. Any article which is wholly the growth, product, or manufacture of a beneficiary country, including articles produced or manufactured in a beneficiary country exclusively from materials which are wholly the growth, product, or manufacture of a beneficiary country or countries, shall normally be presumed to meet the requirements set forth in paragraph (a) of this section.
(f) Country of origin marking. The general country of origin marking requirements that apply to all importations are also applicable to articles imported under the CBI.
[T.D. 84–237, 49 FR 47993, Dec. 7, 1984; 49 FR 49575, Dec. 20, 1984, as amended by T.D. 95–69, 60 FR 46197, Sept. 5, 1995; T.D. 95–69, 60 FR 55995, Nov. 6, 1996; T.D. 00–68, 65 FR 59658, Oct. 5, 2000]
§ 10.196 Cost or value of materials produced in a beneficiary country or countries.
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(a) “Materials produced in a beneficiary country or countries” defined. For purposes of §10.195, the words “materials produced in a beneficiary country or countries” refer to those materials incorporated in an article which are either:
(1) Wholly the growth, product, or manufacture of a beneficiary country or two or more beneficiary countries; or
(2) Subject to the limitations set forth in §10.195(a), substantially transformed in any beneficiary country or two or more beneficiary countries into a new or different article of commerce which is then used in any beneficiary country in the production or manufacture of a new or different article which is imported directly into the U.S.
Example 1. A raw, perishable skin of an animal grown in one beneficiary country is sent to another beneficiary country where it is tanned to create nonperishable “crust leather”. The tanned product is then imported directly into the U.S. Because the material of which the imported article is composed is wholly the growth, product, or manufacture of one of more beneficiary countries, the entire cost or value of that material may be counted toward the 35 percent value requirement set forth in §10.195.
Example 2. A raw, perishable skin of an animal grown in a non-beneficiary country is sent to a beneficiary country where it is tanned to create nonperishable “crust leather”. The tanned skin is then imported directly into the U.S. Although the tanned skin represents a new or different article of commerce produced in a beneficiary country within the meaning of §10.195(a), the cost or value of the raw skin may not be counted toward the 35 percent value requirement because (1) the tanned material of which the imported article is composed is not wholly the growth, product, or manufacture of a beneficiary country and (2) the tanning operation creates the imported article itself rather than an intermediate article which is then used in the beneficiary country in the production or manufacture of an article imported into the U.S. The tanned skin would be eligible for duty-free treatment only if the direct costs attributable to the tanning operation represent at least 35 percent of the appraised value of the imported article.
Example 3. A raw, perishable skin of an animal grown in a non-beneficiary country is sent to a beneficiary country where it is tanned to create nonperishable “crust leather”. The tanned material is then cut, sewn and assembled with a metal buckle imported from a non-beneficiary country to create a finished belt which is imported directly into the U.S. Because the operations performed in the beneficiary country involved both the substantial transformation of the raw skin into a new or different article and the use of that intermediate article in the production or manufacture of a new or different article imported into the U.S., the cost or value of the tanned material used to make the imported article may be counted toward the 35 percent value requirement. The cost or value of the metal buckle imported into the beneficiary country may not be counted toward the 35 percent value requirement because the buckle was not substantially transformed in the beneficiary country into a new or different article prior to its incorporation in the finished belt.
Example 4. A raw, perishable skin of an animal grown in the U.S. Virgin Islands is sent to a beneficiary country where it is tanned to create nonperishable “crust leather”, which is then imported directly into the U.S. The tanned skin represents a new or different article of commerce produced in a beneficiary country within the meaning of §10.195(a), and under §10.195(b), the raw skin from which the tanned product was made is considered to have been grown in a beneficiary country for the purpose of applying the 35 percent value requirement. The tanned material of which the imported article is composed is considered to be wholly the growth, product, or manufacture of one or more beneficiary countries with the result that the entire cost or value of that material may be counted toward the 35 percent value requirement.
(b) Questionable origin. When the origin of a material either is not ascertainable or is not satisfactorily demonstrated to the port director, the material shall not be considered to have been grown, produced, or manufactured in a beneficiary country.
(c) Determination of cost or value of materials produced in a beneficiary country. (1) The cost or value of materials produced in a beneficiary country or countries includes:
(i) The manufacturer's actual cost for the materials;
(ii) When not included in the manufacturer's actual cost for the materials, the freight, insurance, packing, and all other costs incurred in transporting the materials to the manufacturer's plant;
(iii) The actual cost of waste or spoilage (material list), less the value of recoverable scrap; and
(iv) Taxes and/or duties imposed on the materials by any beneficiary country, provided they are not remitted upon exportation.
(2) Where a material is provided to the manufacturer without charge, or at less than fair market value, its cost or value shall be determined by computing the sum of:
(i) All expenses incurred in the growth, production, or manufacture of the material, including general expenses;
(ii) An amount for profit; and
(iii) Freight, insurance, packing, and all other costs incurred in transporting the material to the manufacturer's plant.
If the pertinent information needed to compute the cost or value of a material is not available, the appraising officer may ascertain or estimate the value thereof using all reasonable ways and means at his disposal.
§ 10.197 Direct costs of processing operations performed in a beneficiary country or countries.
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(a) Items included in the direct costs of processing operations. As used in §10.195 and §10.198, the words “direct costs of processing operations” mean those costs either directly incurred in, or which can be reasonably allocated to, the growth, production, manufacture, or assembly of the specific merchandise under consideration. Such costs include, but are not limited to the following, to the extent that they are includable in the appraised value of the imported merchandise:
(1) All actual labor costs involved in the growth, production, manufacture or assembly of the specific merchandise, including fringe benefits, on-the-job training, and the cost of engineering, supervisory, quality control, and similar personnel;
(2) Dies, molds, tooling, and depreciation on machinery and equipment which are allocable to the specific merchandise;
(3) Research, development, design, engineering, and blueprint costs insofar as they are allocable to the specific merchandise and;
(4) Costs of inspecting and testing the specific merchandise.
(b) Items not included in the direct costs of processing operations. Those items which are not included within the meaning of the words “direct costs of processing operations” are those which are not directly attributable to the merchandise under consideration or are not “costs” of manufacturing the product. These include, but are not limited to:
(1) Profit; and
(2) General expenses of doing business which are either not allocable to the specific merchandise or are not related to the growth, production, manufacture, or assembly of the merchandise, such as administrative salaries, casualty and liability insurance, advertising, and salesmen's salaries, commissions, or expenses.
[T.D. 84–237, 49 FR 47993, Dec. 7, 1984; 49 FR 49575, Dec. 20, 1984]
§ 10.198 Evidence of country of origin.
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(a) Shipments covered by a formal entry—(1) Articles not wholly the growth, product, or manufacture of a beneficiary country—(i) Declaration. In a case involving an article covered by a formal entry which is not wholly the growth, product, or manufacture of a single beneficiary country, the exporter or other appropriate party having knowledge of the relevant facts in the beneficiary country where the article was produced or last processed shall be prepared to submit directly to the port director, upon request, a declaration setting forth all pertinent detailed information concerning the production or manufacture of the article. When requested by the port director, the declaration shall be prepared in substantially the following form:
CBI Declaration
I, ______________,
(name), hereby declare that the articles described below (a) were produced or manufactured in ________ (country) by means of processing operations performed in that country as set forth below and were also subjected to processing operations in the other beneficiary country or countries (including the Commonwealth of Puerto Rico and the U.S. Virgin Islands) as set forth below and (b) incorporate materials produced in the country named above or in any other beneficiary country or countries (including the Commonwealth of Puerto Rico and the U.S. Virgin Islands) or in the customs territory of the United States (other than the Commonwealth of Puerto Rico) as set forth below:
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Processing operations performed Material produced in a
on articles beneficiary country or in the
--------------------------------- U.S.
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Description of Description of Description of
Number and date of invoices articles and processing Direct costs material,
quantity operations and of processing production Cost or value
country of operations process, and of material
processing country of
production
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............... ............... .............. .............. ..............
............... ............... .............. .............. ..............
............... ............... .............. .............. ..............
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Date____________________
Address____________________
Signature____________________
Title____________________
(ii) Retention of records and submission of declaration. The information necessary for preparation of the declaration shall be retained in the files of the party responsible for its preparation and submission for a period of 5 years. In the event that the port director requests submission of the declaration during the 5-year period, it shall be submitted by the appropriate party directly to the port director within 60 days of the date of the request or such additional period as the port director may allow for good cause shown. Failure to submit the declaration in a timely fashion will result in a denial of duty-free treatment.
(iii) Value added after final exportation. In a case in which value is added to an article in a bonded warehouse or in a foreign-trade zone in the Commonwealth of Puerto Rico or in the U.S. after final exportation of the article from a beneficiary country, in order to ensure compliance with the value requirement under §10.195(a), the declaration provided for in paragraph (a)(1)(i) of this section shall be filed by the importer or consignee with the entry summary as evidence of the country of origin. The declaration shall be properly completed by the party responsible for the addition of such value.
(2) Merchandise wholly the growth, product, or manufacture of a beneficiary country. In a case involving merchandise covered by a formal entry which is wholly the growth, product, or manufacture of a single beneficiary country, a statement to that effect shall be included on the commercial invoice provided to Customs.
(b) Shipments covered by an informal entry. Although the filing of the declaration provided for in paragraph (a)(1)(i) of this section will not be required for a shipment covered by an informal entry, the port director may require such other evidence of country of origin as deemed necessary.
(c) Verification of documentation. Any evidence of country of origin submitted under this section shall be subject to such verification as the port director deems necessary. In the event that the port director is prevented from obtaining the necessary verification, the port director may treat the entry as dutiable.
[T.D. 94–47, 59 FR 25570, May 17, 1994]
§ 10.198a Duty reduction for certain leather-related articles.
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Except as otherwise provided in §10.233, reduced rates of duty as proclaimed by the President will apply to handbags, luggage, flat goods, work gloves, and leather wearing apparel that were not designated on August 5, 1983, as eligible articles for purposes of the Generalized System of Preferences under Title V, Trade Act of 1974, as amended (19 U.S.C. 2461 through 2467), provided that the article in question at the time it is entered:
(a) Was grown, produced, or manufactured in a beneficiary country within the meaning of §10.195;
(b) Meets the 35 percent value-content requirement prescribed in §10.195; and
(c) Was imported directly from a beneficiary country within the meaning of §10.193.
[T.D. 00–68, 65 FR 59658, Oct. 5, 2000]
§ 10.198b Products of Puerto Rico processed in a beneficiary country.
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Except in the case of any article described in §10.191(b)(2)(i) through (vi), the duty-free treatment provided for under the CBI will apply to an article that is the growth, product, or manufacture of the Commonwealth of Puerto Rico and that is by any means advanced in value or improved in condition in a beneficiary country, provided that:
(a) If any materials are added to the article in the beneficiary country, those materials consist only of materials that are a product of a beneficiary country or the United States; and
(b) The article is imported directly from the beneficiary country into the customs territory of the United States within the meaning of §10.193.
[T.D. 00–68, 65 FR 59658, Oct. 5, 2000]
§ 10.199 Duty-free entry for certain beverages produced in Canada from Caribbean rum.
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(a) General. A spirituous beverage that is imported directly from the territory of Canada and that is classifiable under subheading 2208.40 or 2208.90, Harmonized Tariff Schedule of the United States (HTSUS), will be entitled, upon entry or withdrawal from warehouse for consumption, to duty-free treatment under section 213(a)(6) of the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(a)(6)), also known as the Caribbean Basin Initiative (CBI), if the spirituous beverage has been produced in the territory of Canada from rum, provided that the rum:
(1) Is the growth, product, or manufacture either of a beneficiary country or of the U.S. Virgin Islands;
(2) Was imported directly into the territory of Canada from a beneficiary country or from the U.S. Virgin Islands; and
(3) Accounts for at least 90 percent of the alcoholic content by volume of the spirituous beverage.
(b) Claim for exemption from duty under CBI. A claim for an exemption from duty for a spirituous beverage under section 213(a)(6) of the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(a)(6)) may be made by entering such beverage under subheading 9817.22.05, HTSUS, on the entry summary document or its electronic equivalent. In order to claim the exemption, the importer must have the records described in paragraphs (d), (e), (f) and (g) of this section so that, upon Customs request, the importer can establish that:
(1) The rum used to produce the beverage is the growth, product or manufacture either of a beneficiary country or of the U.S. Virgin Islands; (continued)