19 Cfr 10.195

§ 10.193

19 CFR Ch. I (4–1–07 Edition)

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.

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 nonbeneficiary 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.
(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.
(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

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Bureau of Customs and Border Protection, DHS, Treasury
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.

§ 10.195

(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

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§ 10.196

19 CFR Ch. I (4–1–07 Edition)

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.
(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.

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