CLA-2 CO:R:C:S 556597 RAH
Mr. R.E. Vander Yacht
President
Border Brokerage Company
P.O. Box B
Blaine, Washington 98230
RE: Applicability of duty exemption to juice concentrates
exported to Canada to produce apple juice or apple-raspberry
juice; Packaging
Dear Mr. Yacht:
This is in response to your letter of March 17, 1992,
requesting a ruling on behalf of your client, Tree Top, Inc., on
the tariff status of apple juice and apple-raspberry juice
produced and packaged in Canada.
FACTS:
Tree Top, Inc., is a major producer of apple juice, apple
juice concentrates and other juice products with apple juice as
the basic component. In the instant case, apple juice
concentrate and apple juice essence is made in the United States
from U.S.-grown apples. Apple juice concentrate is imported from
West Germany, Austria, Hungary, Chile and Argentina. Both
imported and domestic concentrates are laboratory tested in the
United States to determine color, acidity, flavor and other
factors. Selected concentrates are then mixed in the United
States to create a "Master Blend" of pure apple concentrate. The
"Master Blend" has a ratio by value of 83% U.S.-origin and 17%
imported product. The apple "Master Blend" is sometimes mixed
with raspberry concentrate to create a blend of 85% apple and 15%
raspberry. The raspberry concentrate used in this blend is 100%
U.S. origin.
The apple "Master Blend" and the apple-raspberry "Master
Blend" are exported to Canada with 250 ml boxes of U.S.-origin,
corrugated trays of U.S.-origin and straws made in South Korea.
Water is added in Canada to produce a reconstituted apple juice
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or apple-raspberry juice. The juice is packed in the U.S. boxes
and U.S. trays. Straws are affixed and the package is shrink
wrapped with Canadian origin materials. The finished product is
returned to the United States for retail sale.
You contend that the juices in question should be classified
under subheading 9801.00.1099, Harmonized Tariff Schedule of the
United States (HTSUS), free of duty and not subject to
merchandise processing fees.
ISSUE:
Whether apple or apple-raspberry concentrate composed of
apple juice concentrate and/or raspberry concentrate from the
United States mixed with apple juice concentrate from West
Germany, Austria, Hungary, Chile or Argentina, is entitled to
free entry under subheading 9801.00.10, HTSUS, or a partial duty
allowance under subheading 9802.00.50, HTSUS, when returned to
the United States from Canada where water is added to produce a
reconstituted apple or apple-raspberry juice.
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 juice concentrate in question exported to Canada is a
mixture of U.S. concentrate and concentrate from other countries.
Customs has long held that the simple mixing of two types of
concentrate does not constitute a substantial transformation of
the substance into a new and different article of commerce
thereby rendering it a "product of" the country where the
blending occurs. Headquarters Ruling Letter 554161 dated July 3,
1986. Therefore, as the juice concentrate exported to Canada
contains foreign concentrate, it is not a U.S.-made product for
purposes of subheading 9801.00.10, HTSUS.
Moreover, water is added to the concentrate in Canada to
make juice. This procedure makes the product consumable and
clearly will advance the value and/or improve the condition of
the concentrate. Accordingly, the apple and/or apple-raspberry
juice in question does not qualify for duty free treatment under
subheading 9801.00.10, HTSUS, because it is not a U.S.-made
product and it will be advanced in value or improved in condition
in Canada.
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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, the operations performed in Canada
exceed an alteration. The concentrate is incomplete for its
intended use (as a consumable beverage) prior to the addition of
water in Canada which constitutes a finishing operation necessary
to produce the completed product. Accordingly, the apple and/or
apple-raspberry juice will not be entitled to a partial duty
exemption under subheading 9802.00.50, HTSUS, upon importation
into the United States.
With respect to the dutiability of the packing materials,
General Rule of Interpretation 5(b), HTSUS, provides that:
[p]acking materials and packing containers entered with
the goods therein shall be classified with the goods if
they are of a kind normally used for packing such
goods. However, this provision does not apply when
such packing materials or packing containers are
clearly suitable for repetitive use.
Therefore, the value of non-reusable packing materials or
containers normally used for packing such goods is considered a
part of the value of its contents and is dutiable at the rate of
its contents. However, we have held that U.S.-origin packaging
materials which are not advanced in value or improved in
condition while abroad are separately entitled to duty-free
treatment under subheading 9801.00.10, HTSUS. The act of being
filled with their contents is not considered to be an advancement
in the condition of the container or materials. See,
Headquarters Ruling Letter 731806 dated November 18, 1988. Thus,
the U.S.-origin corrugated trays and boxes will be entitled to
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duty-free treatment under subheading 9801.00.10, HTSUS, upon
compliance with the documentation requirements of 19 CFR 10.1.
The straws of South Korean-origin will be dutiable at the same
rate as the juice.
HOLDING:
The apple or apple-raspberry juice concentrate composed of
U.S. and foreign concentrate which is exported to Canada where
water is added to produce a reconstituted apple and or apple-
raspberry juice will not be entitled to duty-free treatment under
subheading 9801.00.10, HTSUS, because it is not a U.S.-made
product and it will be advanced in value or improved in condition
in Canada. Additionally, the apple and/or apple-raspberry juice
will not be entitled to a partial duty exemption under subheading
9802.00.50, HTSUS, as it is incomplete for its intended use (as a
consumable beverage) prior to the foreign processing.
Sincerely,
John Durant, Director
Commercial Rulings Division