CLA-2 CO:R:C:V 555490 GRV
District Director of Customs
San Juan, Puerto Rico 00903
RE: Application for Further Review of Protest Nos. 4909-5-
000075 and 4909-5-000047, protesting denials of HTSUS
subheading 9802.00.50 duty treatment to stemmed tobacco
leaves imported separately from their tobacco stems.19 CFR
10.8(g);portion;reconciled amounts;061362;067779;C.S.D. 81-
79 modified.
Dear Sir:
The above-referenced protests contest your denials of the
partial duty exemption under item 806.20, Tariff Schedules of the
United States (TSUS) (now subheading 9802.00.50, Harmonized
Tariff Schedule of the United States (HTSUS)), to stemmed tobacco
leaves (wrappers) imported during 1985.
FACTS:
The record in this matter reflects that tobacco leaves were
exported to the Dominican Republic for alterations in the nature
of a stemming operation. The stemming operation consists of
cutting the stem from the tobacco leaf, resulting in two tobacco
leaf halves and the stem. Following the stemming operation
abroad, the tobacco stems and stemmed wrapper leaves were
returned to the U.S. in different shipments. We understand that
both the stems and the stemmed leaves were entered at San Juan.
Your office denied the duty exemption to the stemmed leaf
entries, indicating that because only the stemmed leaves were
imported after the stemming operation, the merchandise in
question was not classifiable under TSUS item 806.20, citing
as authority Headquarters Ruling Letter (HRL) 064639 dated
July 18, 1980 (C.S.D. 81-79). You also cited HRL 061362 dated
October 13, 1981 (Internal Advice No. 78/79), and HRL 067779
dated June 6, 1983 (both concerning the dutiability of stemmed
tobacco leaves and stems), as supporting your position.
Counsel contends that the stemmed wrapper is entitled to
classification under TSUS 806.20 inasmuch as section 10.8(g),
Customs Regulations (19 CFR 10.8(g)), specifically provides
procedures for the entry under TSUS item 806.20 of a "portion" of
the articles exported for repairs or alterations.
ISSUE:
Whether the tobacco leaves and stems resulting from a
stemming operation abroad must be returned to the U.S. together
in the same shipment to qualify for the partial duty exemption
under TSUS item 806.20.
LAW AND ANALYSIS:
Articles returned to the U.S. after having been exported to
be advanced in value or improved in condition by means of repairs
or alterations may qualify for the partial duty exemption under
TSUS item 806.20, provided the operations do not destroy the
identity of the exported articles or create new or different
articles. Articles entitled to this partial duty exemption are
dutiable only upon the cost or value of the foreign repairs or
alterations, provided the documentary requirements of section
10.8, Customs Regulations (19 CFR 10.8), are satisfied.
Section 10.8(g), Customs Regulations (19 CFR 10.8(g)),
allows for "portions" of the exported merchandise to be entered
at different times and at different ports provided a certain
certification procedure is followed. Specifically, the
regulation provides, in part, that:
[w]hen all the merchandise covered by a Certificate of
Registration is not entered at one time or at one port of
entry,..., there shall be filed with the entry at the time
of entry the certification of the owner, importer,
consignee, or agent having knowledge of the facts, that the
articles entered in their repaired or altered condition are
a portion of the articles covered by such Certificate of
Registration.
C.S.D. 81-79 addressed the issue of whether tobacco stems
resulting from a stemming operation abroad may be returned
separately from the stemmed leaves and entered under a different
tariff provision (TSUS item 800.00). Within this context, we
concluded that "the leaves and stems of the stemmed tobacco must
be returned together in the same shipment under item 806.20,
TSUS," although the ruling included no discussion of 19 CFR
10.8(g). This issue was discussed further in HRL 061362, which
stated that the word "portion" as used in 19 CFR 10.8 "means a
'portion' of the entire repaired article, returned without
separation of its components." Stated more clearly, we inter-
preted this regulation as applying to a portion of a shipment
exported for repairs or alterations, as opposed to a portion of
an article which had been severed or separated abroad. Neverthe-
less, we concluded (exclusively in regard to the entries covered
by that case) that if the district director was satisfied that
the amount of the stems and leaves entered separately can be
reconciled with the amount of whole leaves exported for
stemming, we had no objection to classification of the entries
under TSUS item 806.20.
HRL 067779 was concerned with the underlying tariff classi-
fication of the returned stems and half leaves. It concluded
that, for duty rate purposes, the leaves are classifiable under
TSUS item 170.15 and the stems are classifiable under TSUS item
170.50. The only discussion in HRL 067779 of the specific issue
before us is the following: "To the extent that a single classi-
fication rule emerges from [C.S.D. 81-79], it is only that item
806.20, TSUS, must apply to all of the articles resulting from
the 'alterations' abroad."
Recognizing that the above rulings reflect somewhat contra-
dictory approaches and conclusions to the present issue, it is
our opinion that the better reasoned position is that expressed
in HRL 061362, which stated that so long as the district director
is satisfied that the amount of the stems and leaves entered
separately can be reconciled with the amount of whole leaves
exported for stemming, the returned articles may receive TSUS
item 806.20 treatment. In this regard, we believe that the word
"portion" in 19 CFR 10.8(g) can reasonably be interpreted as
applying not only to a portion of a shipment exported for repairs
or alterations, but to a portion of an article which has been
subjected to a repair or alteration abroad resulting in two or
more component parts that are returned separately. However,
this interpretation should not be construed to mean that stemmed
leaves may receive TSUS item 806.20 treatment when the stems are
not also returned to the U.S.
Owing to the nature of the alteration abroad, this decision
is specifically limited to the facts presented in this case,
i.e., where tobacco leaves are exported for a stemming operation
and the half leaves and stems are returned to the U.S. in
separate shipments. That portion of C.S.D. 81-79 holding that
the tobacco leaves and stems must be returned together in the
same shipment to receive the benefits of TSUS item 806.20
treatment is modified to comport with the holding in this
decision.
HOLDING:
On the basis of the record presented in this matter, it is
our opinion that the stemmed wrapper leaves entered separately
from the stems are entitled to the partial duty exemption under
TSUS item 806.20, provided your office is satisfied that the
amount of returned stems and leaves can be reconciled with the
amount of whole tobacco leaves exported for stemming. Accord-
ingly, you are directed to dispose of the protest in accordance
with this decision. A copy of this decision should be attached
to the Form 19, Notice of Action, to be sent to the protestant.
Sincerely,
John Durant, Director
Commercial Rulings Division