CLA-2 CO:R:C:V 555428 GRV
Richard S. Mailman, Esq.
Attorney at Law
Breyer Office Park, Suite 250
8380 Old York Road
Elkins Park, Pennsylvania 19117
RE: Applicability of duty exemption under HTSUS subheading
9801.00.10 to assorted, individually-wrapped candy products
of U.S.-origin variously packaged with foreign-made candy
products and/or plastic toys and other non-candy items
Dear Mr. Mailman:
This is in response to your letter of June 16, 1989, on
behalf of L.E.G., Inc., requesting a ruling on the applicability
of subheading 9801.00.10, Harmonized Tariff Schedule of the
United States (HTSUS), to assorted, individually-wrapped candy
products of U.S.-origin variously packaged in Mexico with
foreign-made candy products and/or plastic toys and other non-
candy items. Samples of the various candy packages to be
imported were submitted for examination. The proper tariff
classification(s) of the various packaged products will be the
subject of a separate letter. We regret the delay in responding
to your request.
FACTS:
Different types of individually-wrapped candy products of
U.S.-origin will be bulk shipped in boxes to Mexico to be
variously packaged with other types of individually-wrapped candy
and/or plastic toys and other non-candy items of foreign-origin
to form assorted candy packages. The candy packaging operations
proposed include variously filling (1) six or eight attached
clear plastic cups with 12 assorted pieces of candy of U.S. and
foreign origin to form a "Party Perfect" display card; and, (2)
single polyethylene bags with assorted pieces of candy of U.S.
and foreign origin or with assorted candy items of U.S. and
foreign origin and plastic toys and other non-candy items of
foreign origin. Following these various packaging operations,
the assorted candy packages will then be imported into the U.S.
ISSUE:
Whether the individually-wrapped, bulk shipped, candy
products of U.S.-origin, variously packaged abroad with other
candy and/or plastic toys and other non-candy items of foreign
manufacture to form assorted candy packages, will be eligible for
duty-free treatment under HTSUS subheading 9801.00.10 when
returned to the U.S.
LAW AND ANALYSIS:
HTSUS subheading 9801.00.10 provides for the duty-free entry
of products of the U.S. that are returned after having been
exported, without having been advanced in value or improved in
condition by any process of manufacture or other means while
abroad, provided there has been compliance with the documentary
requirements of section 10.1, Customs Regulations (19 CFR 10.1).
In Border Brokerage Company, Inc. v. United States, C.D.
4052, 65 Cust.Ct. 50, 314 F.Supp. 788, 792 (1970), appeal dis-
missed, 58 CCPA 165 (1970), tomatoes repacked in 18-pound cartons
were imported from Canada. The tomatoes had been exported in 40-
pound cartons from the U.S. to Canada where they were unloaded,
unpacked, sorted, graded by color and size, repacked in smaller
cartons and sold to customers in the U.S. at prices higher than
those paid by the exporter. There was no intermixing of sizes in
the repacking, but about 4% of the tomatoes were culled out as
spoiled or broken down. The court stated that:
...the test to be applied in item 800.00 [Tariff Sched-
ules of the United States (TSUS), the precursor tariff
provision to HTSUS subheading 9801.00.10] cases is
whether the merchandise of American origin has itself
(apart from its container) been the object of advance-
ment in value or improvement in condition while abroad.
The court found that nothing more was done to the tomatoes them-
selves in Canada than that which is entailed in their physical
transfer, with selectivity, from one size carton to a carton of a
smaller size. And the mere sorting of the tomatoes as found in
their natural condition did not advance their value or improve
their condition per se.
In United States v. John V. Carr & Son, Inc., C.D. 4377, 69
Cust.Ct. 78, 347 F.Supp. 1390, 1400 (1972), aff'd, C.A.D. 1118,
61 CCPA 52, 496 F.2d 1225 (1974), lithographed tin containers
with forty assorted-sized fish hooks were imported from Hong
Kong. The fish hooks were manufactured in the U.S. and had been
sorted as to size prior to being shipped to Hong Kong, where they
were packaged into the tin containers. The trial court deter-
mined that the fish hooks came within the ambit of TSUS item
800.00, noting that "nothing whatever was done to [them] which
altered them or changed their condition." As the same product
was imported as was exported, albeit, in a smaller package, the
court upheld the claim for duty-free entry, stating that:
...absent some alteration or change in the articles them-
selves, the mere sorting and repackaging of goods, even for
the purposes of resale to the ultimate consumer, were not
sufficient to preclude the merchandise from being classi-
fied as returned American products under item 800.00 of the
tariff schedules.
In Superscope, Inc. v. United States, Slip Op. 89-167, 13
CIT ____, 727 F.Supp. 629 (1989), the court found that certain
glass panels of U.S. origin that were exported, repacked abroad
with certain foreign components, and returned to the U.S. as part
of unassembled audio cabinets, were entitled to duty-free entry
under TSUS item 800.00, since the U.S. panel portion of the
imported article was "not 'advanced in value or improved in
condition ... while abroad,' but [was] merely repacked."
These packaging decisions clearly indicate that where
exported U.S. merchandise is merely repackaged into smaller units
of the same good or with foreign-origin merchandise abroad, so
that the U.S. merchandise returned is the same as the merchandise
that was exported, it is entitled to the duty-free benefits of
HTSUS subheading 9801.00.10. However, cf., Headquarters Ruling
Letter 555519 (March 12, 1990) (U.S. ingredients, separately bulk
shipped to Canada where they were combined together in premeas-
ured amounts in a package according to a specific recipe, were
found to be ineligible for HTSUS subheading 9801.00.10 treatment,
as the foreign operations advanced in value and improved in
condition the separate ingredients exported and resulted in a
different commercial article being imported).
In this case, the U.S. candy products are individually-
wrapped before they are exported in bulk form to Mexico. In
Mexico, the U.S. candy products are merely repackaged with
various candy and non-candy items of foreign-origin. Consistent
with the principles in the packaging decisions supra, we find
that the individually-wrapped U.S. candy products to be imported
will be the same products as were exported, and that they will
not be advanced in value or improved in condition while abroad.
Therefore, they will be entitled to duty-free entry under HTSUS
subheading 9801.00.10 when returned to the U.S. This assumes
that the documentary requirements of 19 CFR 10.1 are met, and
that the district director at the port of entry is satisfied of
the U.S.-origin of each product claimed to be entitled to this
duty exemption.
HOLDING:
On the basis of the information provided, and after viewing
the samples submitted, as the individually-wrapped candies of
U.S.-origin exported will not be advanced in value or improved in
condition as a result of the various packaging operations abroad,
they will be eligible for the duty exemption available under
HTSUS subheading 9801.00.10 when returned to the U.S., provided
the documentary requirements of 19 CFR 10.1 are satisfied.
Sincerely,
John Durant, Director
Commercial Rulings Division