CLA-2 CO:R:C:S 556479 RA
TARIFF NOs.: 9802.00.50, 9802.00.80
Mr. Anthony P. Verdino
Tax Director
The American Tobacco Co.
Six Stamford Forum
P.O. Box 10380
Stamford, Connecticut 06904-2380
RE: Partial exemption for cigarettes made in England using
tobacco of U.S. origin
Dear Mr. Verdino:
In your letter of January 10, 1992, you requested a ruling
on the partial free entry of cigarettes produced abroad from
tobacco exported from the United States.
FACTS:
You state that your company will send processed tobacco to
England to be manufactured into cigarettes which will be packaged
and returned to the U.S. for sale as one specific brand. An
allowance in duties is sought for the value of the tobacco which
is of United States origin.
ISSUE:
Are the imported cigarettes entitled to a partial exemption
from duty under subheading 9802.00.50 or subheading 9802.00.80,
Harmonized Tariff Schedule of the United States (HTSUS)?
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides for a duty only on
the cost or value of alterations made on articles returned to the
U.S. after having been exported for that purpose. However, the
application of this tariff provision is precluded where the
operations performed abroad result in articles with new and
different uses or where the processing constitutes a part of the
manufacturing process begun in the U.S. Dollill & Company v.
United States, 66 CCPA 77, C.A.D. 1225 (1979).
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Alterations can be made only to completed articles and the term
does not include intermediate operations performed in the
manufacture of finished articles. Congress did not intend to
permit uncompleted articles to be exported abroad and there made
into finished products and when returned to be subject to duties
only on the cost of the so-called alterations. United States v.
J.D. Richardson Co., 36 CCPA 15, C.A.D. 390 (1948). The
manufacture of cigarettes from paper and tobacco clearly exceeds
an alteration so a partial exemption under subheading 9802.00.50,
HTSUS, is precluded.
Subheading 9802.00.80, HTSUS, provides a partial exemption
from duty for articles assembled abroad in whole or in part of
U.S.-fabricated components, provided the components (a) are
exported in condition ready for assembly without further
fabrication; (b) do not lose their physical identity by change in
form, shape, or otherwise, and; (c) are not 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 recelve 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 such U.S. components, upon compliance with
the documentation requirements of section 10.24, Customs
Regulations (19 CFR 10.24). Section 10.16(a), Customs
Regulations (19 CFR 10.16(a)), provides that the assembly
operations may consist of any method used to join together solid
components and may be preceded, accompanied, or followed by
operations incidental to the assembly process. However, the
combining of amorphous solids with each other or with solid
components is not regarded as an assembly. Thus, powders,
liquids, and analogous substances are considered to be incapable
of combining in a genuine assembly within the meaning of the
tariff provision. The cigarette tobacco under consideration is
merely a fungible material which must be changed from bulk
quantities into precise proportions before being combined with
papers to form the cigarettes and, therefore, cannot be
considered as fabricated components when exported from the
United States. Therefore, we are of the opinion that the tobacco
portion of the finished cigarettes is not entitled to a duty
allowance under subheading 9802.00.80, HTSUS.
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HOLDING:
Tobacco of U.S. origin exported to England and used in the
manufacture of cigarettes is not covered by the alterations
provision in subheading 9802.00.50, HTSUS, and is a fungible
material and not a fabricated component within the meaning of the
provision in subheading 9802.00.80, HTSUS, and cannot qualify for
partial exemption from duty under either subheading.
Sincerely,
John Durant, Director
Commercial Rulings Division