Applicability of partial duty exemption for cheese shredded and repackaged in Canada

HQ W557395 September 17, 1993 CLA-2 CO:R:C:S W557395 RAH CATEGORY: Classification TARIFF NO.: 9802.00.50 Ms. Dody Trombley Regional Manager - Post Entry Operations F.W. Myers & Co., Inc. 33 West Service Road P.O. Box 188 Champlain, New York 12919 RE: Applicability of partial duty exemption for cheese shredded and repackaged in Canada Dear Ms. Trombley: This is in response to your letter of November 23, 1992, requesting a ruling on the dutiable status of mozzarella cheese which is exported to Canada for processing. FACTS: Richmond Cheese Co. will ship mozzarella cheese manufactured at its plant in Vermont to Saputo Cheese in St. Leonard, Quebec, Canada, where it will be shredded and repackaged. When exported to Canada, the cheese will be in blocks weighing approximately 5.2 lbs. The blocks will be either wrapped singularly or four to a package. The cheese will not need any further processing other than shredding or dicing. There will be no need for cleaning or trimming the cheese. The plastic film will be opened and the cheese will be put directly into a shredding machine. After shredding, the cheese will have a small amount of anti-caking agent added. The cheese will then be put into a bag and "flushed" with carbon dioxide and nitrogen as the bag is sealed. The bags will weigh 5 lbs. and be put into boxes weighing 20 kilos. The shredded pieces will be approximately one half inch wide and two inches long.  - 2 - ISSUE: Whether cheese exported to Canada where it is shredded and repackaged is entitled to duty-free entry under subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), or a partial duty exemption under subheading 9802.00.50, HTSUS, when returned to the United States. LAW AND ANALYSIS: Subheading 9801.00.10, HTSUS, provides for the free entry of U.S.-made products that are 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. The cheese will not be entitled to duty-free treatment under this tariff provision because it is advanced in value or improved in condition as a result of the processing in Canada. Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the United States 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); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Tariff treatment under subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use prior to the foreign processing. Guardian; 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, 82, 599 F.2d 1015, 119 (1979). In the instant case, we find that shredding the cheese changes its identity in form and shape and prepares it for other, more specific uses. We further find that the cheese in block form is not a completed article when exported to Canada and that the shredding process constitutes a further manufacturing operation. Therefore, the cheese will not be entitled to a partial duty exemption under subheading 9802.00.50, HTSUS, upon return to the U.S.  - 3 - The cheese will be classified under subheading 0406.90.8060, HTSUS, at the rate of 10 percent ad valorem. Articles classifiable under that subheading are subject to quota quantity restrictions listed in subchapter IV of Chapter 99 in subheading 9904.10.54, HTSUS, which limits the amount of cheese that may be imported from other countries to an annual quantity of 201,635 kilograms. Additionally, an import license issued to the importer by the U.S. Department of Agriculture will be required at the time such merchandise is entered for consumption into the U.S. HOLDING: The shredding of cheese in block form is a process which exceeds the scope of the term alteration for purposes of subheading 9802.00.50, HTSUS. Therefore, the cheese in question will not be entitled to a partial duty exemption upon return to the U.S. Additionally, the cheese will not qualify for duty­ free treatment under subheading 9801.00.10, HTSUS, as shredding is a process that advances the value or improves the condition of the cheese. Sincerely, John Durant, Director Commercial Rulings Division