HQ 953052
March 18,1993
CLA-2 CO:R:C:F 953052 JGH
Mr. Ronald G. Setzer
Supervisor of Importation
Tax Department
R. J. Reynolds Tobacco Company
Winston-Salem, N.C. 27102
RE: Classification of U.S. Tobacco Stems Processed in Canada
and Returned to the U.S. for Use in the Manufacture of
Cigarettes.
Dear Mr. Setzer:
Your letter of November 19, 1992, concerns the
classification, under the Harmonized Tariff Schedule of United
States (HTSUS), of U.S. grown Flue-cured stems in Canada and
returned to the U.S. to be blended with cigarette leaf tobacco
and manufactured into cigarettes.
FACTS:
In Canada the U.S. grown Flue-cured stems will be
moisturized, then passed through a roller to be flattened, and
next cut to a length "at 160-200 cuts per inch." They are then
steamed, dried to the proper moisture content and packed in boxes
for shipment to the United States.
Samples of the tobacco stems before and after processing
were submitted. The Flue-cured stems sent to Canada were pieces
of crude stem of varying lengths, some pieces appearing to be
over 3 inches in length. The processed tobacco is returned as
cut-rolled stems: uniformly cut into vary small pieces or ground.
In the U.S., it is understood that such cut-rolled stems will be
blended with cigarette leaf tobacco and manufactured into
cigarettes. - 2 -
ISSUE:
Whether the processing of the tobacco stems in Canada
represents an alteration under subheading 9802.00.5060, HTSUS, so
that the processed stems may be entered under
2401.30.6000/9802.00.5060, HTSUS, with the duty based upon the
value of the alterations.
LAW & ANALYSIS:
Subheading 9802.00.5060, HTSUS, concerns other articles
returned to the United States after having been exported to be
advanced in value or improved in condition by repairs or
alterations. The duty in such a case would be assessed upon the
value of the repairs or alterations. However, this provision
does not apply where the exported articles are incomplete for
their intended use and the foreign processing operation is a
necessary step in the preparation or manufacture of finished
articles. Here pieces of stem in a crude state are processed
abroad and converted into uniformly small pieces and ground
tobacco: cut-rolled stems. This latter product when returned is
blended with cigarette leaf tobacco and manufactured into
cigarettes. Repairs and alterations are made to completed
articles and do not include intermediate processing operations
which are performed as a matter of course in the preparation or
the manufacture of finished articles. Dolliff & Company, Inc.,
v. United States, 66 CCPA 77, C.A.D. 1225 (1979).
HOLDING:
The U.S. tobacco processed in Canada and returned as cut-
rolled stems is classifiable under the provision for Tobacco
stems: cut, ground or pulverised in subheading 2401.30.6000,
HTSUS. If the stems shipped to Canada are wholly of U.S. origin,
the cut-rolled stems returned would be of Canadian origin within
the meaning of General Note 3(c)(vii)(B)(1), HTSUS, (United
States-Canada Free-Trade Implementation Act of 1988) and,
therefore, the applicable rate of duty would be 60.5 cents per
kg., if all the pertinent regulations are complied with.
Sincerely,
John Durant, Director