CLA-2 RR:TC:SM 559793 MLR
Stephen J. Leahy, Esq.
Leahy & Ward
63 Commercial Wharf
Boston, MA 02110
RE: Applicability of partial duty exemption under HTSUS
subheading 9802.00.50 to Alaskan Pollock; blocks; cut;
battered; breaded; frozen; Canada; NAFTA; Article 509; 19
CFR 181.64
Dear Mr. Leahy:
This is in reference to your letter of March 25, 1996, to
Customs in Portland, Maine, requesting a ruling on behalf of
Fishery Products International, Ltd. ("FPI"), regarding the
applicability of subheading 9802.00.50, Harmonized Tariff
Schedule of the United States (HTSUS), to certain fish
products.
FACTS:
It is stated that FPI in Canada plans to receive Alaskan
Pollock blocks from a U.S. plant. The blocks will be cut into
portions in Canada, and these portions will be battered,
breaded, and frozen for shipment to the U.S. The merchandise
imported into the U.S. is classifiable under subheading
1604.19.40, HTSUS.
ISSUE:
Whether the Alaskan Pollock returned to the U.S. after
being cut, battered, breaded, and frozen in Canada will
qualify for the partial duty exemption available under
subheading 9802.00.50, HTSUS.
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides for a partial or
complete duty exemption for articles exported from and
returned to the U.S. after having been advanced in value or
improved in condition by repairs or alterations, provided the
documentary requirements of section 181.64, Customs
Regulations (19 CFR 181.64), are satisfied. However,
entitlement to this tariff treatment is precluded in
circumstances where the operations performed abroad destroy
the identity of the exported articles or create new or
commercially different articles through a process of
manufacture. See A.F. Burstrom v. United States, 44 CCPA 27,
C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956);
Guardian Industries Corp. v. United States, 3 CIT 9 (1982).
Section 181.64, Customs Regulations (19 CFR 181.64),
which implements Article 307 of the North American Free Trade
Agreement (NAFTA), provides that goods returned after having
been repaired or altered in Canada other than pursuant to a
warranty are subject to duty upon the value of the repairs or
alterations using the applicable duty rate under the United
States-Canada Free Trade Agreement, provided that the
documentation and other requirements of this section are met.
"Repairs or alterations" for purposes of 19 CFR 181.64
are defined as follows:
... restoration, addition, renovation, redyeing,
cleaning, resterilizing, or other treatment which does
not destroy the essential characteristics of, or create a
new or commercially different good from, the good
exported from the United States.
As support that the Canadian operations constitute
alterations, you cite C.S.D.
90-50, where Customs held that the cutting to length of
certain concrete reinforcing end bars was an alteration.
However, we note that in other rulings addressing cutting-to-length processes, Customs has held that certain cutting
operations constituted finishing steps. See Headquarters
Ruling Letter (HRL) 555174 dated April 25, 1989 (continuous
rolls of decorative banner material exported to Mexico and cut
to shorter lengths exceeded an alteration); and HRL 554736
dated February 16, 1988 (facial tissue paper exported in rolls
and cut to length, folded, and packaged for retail sale also
exceeded an alteration).
In regard to the processing of food products, in HRL
557633 dated February 10, 1994, Customs considered blocks of
mozzarella cheese cut into portions, shredded, repacked and
returned to the U.S. from Canada. In determining that
subheading 9802.00.50, HTSUS, did not apply, HRL 557633 relied
upon HRL 071399 dated July 19, 1983, where it was held that
frozen fish fillets caught by U.S. flag fishing boats and sent
to Korea and China where they were cut into three pieces,
wrapped in plastic, boxed and returned to the U.S. constituted
"more than an alteration." Using the factors set forth in
A.F. Burstrom, Customs stated that the fish slices created
differed in name, value, appearance, size and shape from the
exported material. Furthermore, in HRL 554934 dated April 3,
1989, Customs held that peanuts exported to Mexico where they
were shelled, roasted and salted were not eligible for
subheading 9802.00.50, HTSUS, treatment, as the operations
constituted intermediate steps in the preparation of finished
peanuts. Additionally, in HRL 952685 dated January 11, 1993,
Customs considered crabs shipped to China where they were
thawed, the meat was extracted, and the extracted body meat
was frozen into blocks and packed in coated boxes for export
to the U.S. Relying on HRL 051909 dated June 29, 1977, it was
determined that the crab was not eligible for subheading
9802.00.50, HTSUS, treatment, as the exported crab-in-shell
product was commercially different from the returned extracted
crab meat product. In HRL 555462 dated September 11, 1989
{abstracted at C.S.D. 89-134(2)}, Customs held that apples
exported to Mexico where they were diced and quick-frozen
exceeded the scope of the term "alteration." See also HRL
554654 dated July 28, 1987, (whole peaches sliced abroad not
only destroyed the identity of the exported peaches, but
resulted in new and different articles of commerce with many
uses different from those for whole peaches). However, in HRL
084353 dated June 2, 1989, Customs held that freeze drying
diced, frozen chicken in Canada was an alteration.
In this case, not only are the Alaskan Pollock blocks cut
into portions, but they are also battered and breaded which
presumably makes them ready for cooking and consumption.
Therefore, as determined in the rulings cited above regarding
the shredding of the mozzarella, the slicing of the fish
fillets, or the dicing of the apples, the portions of fish
created in this case are commercially different from the
blocks of Alaskan Pollock. Furthermore, the battering and
breading of the fish are intermediate steps in the preparation
of ready-to-eat fish, which clearly destroys the identity of
the Alaskan Pollock blocks. Accordingly, the returned fish
product will not be eligible for subheading 9802.00.50, HTSUS,
treatment.
HOLDING:
On the basis of the information submitted, we are of the
opinion that the operations in Canada are intermediate steps
in the preparation of the ready-to-eat fish, such that a new
and commercially different article is created, thereby
rendering the returned fish product ineligible for the partial
duty exemption under subheading 9802.00.50, HTSUS.
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
Tariff Classification Appeals
Division