CLA-2 CO:R:C:S 556685 WAW
District Director
U.S. Customs
P.O. Box 3130
Laredo, TX 78044
RE: Request for Internal Advice No. 21/92 concerning the
applicability of the partial duty exemption under subheading
9802.00.50, HTSUS, to jalapeno peppers from Mexico; de-stem;
555490; 553740
Dear Sir:
This is in response to your letter dated April 2, 1992,
forwarding a Request for Internal Advice No. 21/92 concerning the
applicability of the partial duty exemption under subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), to jalapeno peppers which are exported to Mexico for de-
stemming. No sample of the merchandise was submitted for
examination.
FACTS:
The importer plans to export whole, U.S.-grown jalapeno
peppers to Mexico for removal of the stem. The stem is described
as the woody, inedible part of the pepper which fans out at the
point of attachment to the vegetable, forming a "crown." In
Mexico, the importer will have the stem and the crown removed by
hand, without opening a hole in the top of the pepper. The de-
stemmed peppers will then be shipped to the U.S. and sent to a
processing plant, where they will be cut up and combined with other
ingredients to produce a picante sauce.
ISSUE:
Whether jalapeno peppers imported into Mexico for de-stemming
are entitled to the partial duty exemption under subheading
9802.00.50, HTSUS, when reimported into the U.S.
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides a partial duty
exemption for 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. Such articles are dutiable only upon
the value of the foreign repairs or alterations, provided the
documentary requirements of section 10.8, Customs Regulations (19
CFR 10.8), are satisfied.
However, entitlement to this tariff treatment is precluded in
circumstances where the operations performed abroad destroy the
identity of the articles or create new or commercially different
articles. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D.
631 (1956), aff'd, C.D. 1752, 36 Cust. Ct. 46 (1956); and Guardian
Industries Corporation v. United States, 3 CIT 9 (1982), Slip Op.
82-4 (Jan. 5, 1982). Subheading 9802.00.50, HTSUS, treatment is
also precluded 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. See
Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D.
4755, 455 F. Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 599
F.2d 1015 (1979).
We have previously held in C.S.D. 81-79, 15 Cust. Bull. 896
(1980) and HRL 555490 dated August 8, 1990, that tobacco leaves
which are sent abroad for a stemming operation may receive TSUS
806.20 (precursor to HTSUS subheading 9802.00.50), treatment upon
their return to the U.S., provided that the tobacco leaves are also
returned with their stems. In another case involving a similar
processing operation to that in question, we held that dried figs
which are shipped abroad for a stemming operation and subsequently
returned to the U.S. with their stems are entitled to the partial
duty exemption under item 806.20, TSUS. See HRL 553740 dated July
24, 1985. .
In order to receive the partial duty exemption under
subheading 9802.00.50, HTSUS, the same commercially recognizable
article must be exported and returned. The only divergences
allowed under this provision are those resulting from the repairs
and alterations. Thus, if a new article is produced or if the
article is sent abroad to undergo repairs or alterations but
actually undergoes more than repairs or alterations, it may not
return under subheading 9802.00.50, HTSUS.
The requirement in C.S.D. 81-79 and HRL 555490 that the cut
tobacco leaves be returned with their stems was deemed necessary
to ensure that the same article would be returned, though in an
altered condition, as was exported. Leaves of stemmed tobacco,
returned without their stems, would not be entitled to subheading
9802.00.50, HTSUS, treatment because they are recognized as
commercially different articles from unstemmed tobacco leaves, as
evidenced by the fact that separate tariff classification
provisions exist for stemmed and unstemmed tobacco leaves.
In the instant case, there is no evidence that the stems
removed from the jalapeno peppers are returned with the peppers.
Nevertheless, we do not believe that this would preclude the
peppers from receiving the benefits of subheading 9802.00.50,
HTSUS, since, in our opinion, stemmed peppers are not commercially
different articles from unstemmed peppers. Unlike the stemmed and
unstemmed tobacco leaves, jalapeno peppers, with or without the
stems attached, are classified in a single tariff provision.
Accordingly, the processing operations performed in Mexico can be
considered an acceptable "alteration" within the meaning of HTSUS
subheading 9802.00.50.
The importer has also asked that we determine the applicable
rate of duty for the jalapeno peppers returned to the U.S. Fresh
jalapeno peppers from Mexico are classified under subheading
0709.60.00, HTSUS, which provides for Other vegetables, fresh or
chilled: Fruits of the genus Capsicum (peppers) or of the genus
Pimenta, and dutiable at the specific rate of 5.5 cents per
kilogram. To calculate the ad valorem percentage rate of duty to
be applied against the cost or value of the alteration, the
specific rate first is multiplied by the total number of kilograms
in the shipment, and the resulting amount is then divided by the
full appraised value of the shipment.
HOLDING:
On the basis of the information submitted, it is our opinion
that the processing operations performed in Mexico may be
considered an acceptable alteration as that term is used in HTSUS
subheading 9802.00.50. Accordingly, the jalapeno peppers will be
entitled to classification under this tariff provision with duty
to be assessed only on the cost or value of the operations
performed in Mexico, provided the documentary requirements of 19
CFR 10.8, are satisfied.
Sincerely,
John Durant, Director
Commercial Rulings Division