Eligibility for duty-free treatment as American goods returned of potted tree seeds from Mexico

HQ W556686 August 25, 1992 CLA-2 CO:R:C:S W556686 SER CATEGORY: Classification TARIFF NO.: 9801.00.10 Mr. Bernard R. Nettling Rudolph Miles & Sons, Inc. 4950 Gateway East P.O Box 11057 El Paso, TX 79942 RE: Eligibility for duty-free treatment as American goods returned of potted tree seeds from Mexico Dear Mr. Nettling: This is in reference to your letter of April 21, 1992, on behalf of Datil Mountain Evergreen ("Datil"), concerning the applicability of subheading 9801.00.10, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), to u.s.-origin potted tree seeds imported from Mexico. FACTS: Datil plans to export tree seeds of various varieties, peat "flower" pots approximately 5 centimeters tall, and bulk peat moss all of U.S.-origin, to Mexico. In Mexico, the peat pots will be loosely filled by hand approximately three quarters full, with the bulk peat moss. Three to five of the tree seeds will be placed onto the peat moss in the pot. A lightweight, stiff, circular paper cap will then be inserted in the pot to enclose the peat moss and seeds. The pot and an instruction book will then be placed into a box. The flap of the box will then be closed, and the box placed into a shipping carton. All materials are stated to be of U.S. origin. ISSUES: Whether the potted seeds are entitled to duty-free treatment under subheading 9801.00.10, HTSUSA, upon importation into the U.S. How must the articles be marked for purposes of 19 U.S.C. 1304 when imported into the U.S.?  -2- LAW AND ANALYSIS: Subheading 9801.00.10, HTSUSA. Subheading 9801.00.10, HTSUSA, provides for the free entry of products of the U.S. that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. Some change in the condition of the product while it is abroad is permissible. However, operations which either advance the value or improve the condition of the exported product render it ineligible for duty-free treatment upon return to the U.S. Border Brokerage Company. Inc. v. U.S., 314 F.Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970). It is Customs position that the combining of the peat moss, seeds and pot establishes a new product. The identity of each is merged into a new marketable product, having its own commercial identity and use. Accordingly, the combining of the seeds, peat moss and pot advances the value and improves in condition these materials and, therefore, they do not qualify for subheading 9801.00.10, HTSUSA, treatment. However, it is Customs position that the U.S.-origin instruction books and packaging materials (box, paper caps and carton) are not advanced in value or improved in condition, and, therefore, they are eligible for the duty exemption under subheading 9801.00.10, HTSUSA. Marking under 19 u.s.c. 1304. Section 304 of the Tariff Act of 1930, as amended {19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. must be marked to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR 134), implements the country of origin marking requirements and exceptions of 19 u.s.c. 1304. As provided at 19 CFR 134.l(b), "country of origin" means the country of manufacture, production, or growth of an article. Further work to an article in another country must effect a substantial transformation in order to render such other country the "country of origin." Although the seeds, peat moss, and pot are advanced in value and improved in condition in Mexico, the combining of these materials does not effect a substantial transformation. Therefore, pursuant to section 134.32(m), Customs Regulations (19 CFR 134.32(m)), which allows an exception for products of the U.S. exported and returned, the U.S.-origin seeds, peat moss, boxes, paper caps, and instruction booklets may be excepted from country of origin marking requirements. .' -3- HOLDING: The U.S.-origin packaging materials (paper caps, boxes, and cartons) and instruction books are eligible for duty-free treatment under subheading 9801.00.10, HTSUSA, provided that the documentation requirements of 19 CFR 10.1 are satisfied. The U.S.-origin seeds, peat moss, and pots are advanced in value and improved in condition, and, therefore, are ineligible for duty­ free treatment under subheading 9801.00.10, HTSUSA. The imported product is excepted from the marking requirements of 19 U.S.C. 1304, pursuant to 19 CFR 134.32(m). Sincerely, John Durant, Director Commercial Rulings Division