CLA-2 RR:TC:SM 559496 MLR
Port Director
U.S. Customs Service
111 W. Huron Street
Buffalo, New York 14202-2378
RE: Application for Further Review of Protest No. 0901-94-101425; Denial of duty exemption under HTSUS subheading 9801.00.10 to twine cut to 8 or 12 inch lengths
Dear Sir:
This is in reference to a protest and application for further review timely filed by
Pressman Toy Corporation, contesting the denial of the duty exemption of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to twine.
FACTS:
The record indicates that twine produced in the U.S. was exported to Canada by Pressman Toy. In Canada, the twine was cut into 50,000 eight or twelve feet length pieces for use in the manufacture of a specific toy. The protestant entered the twine under subheading 9802.00.50, HTSUS; however, the protestant claims that since the twine was not substantially transformed in Canada within the meaning of 19 CFR 12.130, the twine should be eligible for duty-free treatment under subheading 9801.00.10, HTSUS, when it was returned to the U.S.
ISSUE:
Whether the twine returned to the U.S. after being cut in Canada is eligible for duty-free treatment under subheading 9801.00.10, HTSUS.
LAW AND ANALYSIS:
Subheading 9801.00.10, HTSUS, 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 are satisfied. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported product render it ineligible for duty-free entry upon return to the U.S. Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970).
In determining whether an advancement in value or improvement in condition exists at the time of importation, the overall value and condition of the article at the time it was exported from the U.S. shall be compared with its overall value and condition at the time of return to the U.S. However, each case must be decided on its own facts. In Headquarters Ruling Letter (HRL) 555296 dated June 16, 1989, Customs held that U.S.-origin twine shipped in bulk on large cones to Canada, where it was cut to shorter lengths, rewound onto small cardboard tubes, and inserted into Canadian-made plastic dispensers was not eligible for subheading 9801.00.10, HTSUS, treatment, but rather was eligible for subheading 9820.00.50, HTSUS, treatment. See also HRL 554179 dated September 10, 1986 {U.S.-origin ribbon cut to length in Mexico, rewound onto spools, and wrapped in plastic packaging was not eligible for item 800.00, Tariff Schedules of the United States (TSUS) (now subheading 9801.00.10, HTSUS), as the cutting to shorter lengths improved the condition of the ribbon by making it ready for sale upon return to the U.S.}.
Similarly, in the instant case, cutting the twine to length is considered an operation which advances the value or improves the condition of the exported twine, rendering it ineligible for duty-free entry under subheading 9801.00.10, HTSUS, upon return to the U.S. While the twine is not "substantially transformed" in Canada pursuant to 19 CFR 12.130, as claimed by the protestant, duty-free entry under subheading 9801.00.10, HTSUS, is not based upon whether an article is substantially transformed but whether it was advanced in value or improved in condition.
HOLDING:
On the basis of the information submitted, we are of the opinion that the U.S.-origin twine is advanced in value or improved in condition by being cut in Canada. Therefore, the twine is not eligible for duty-free treatment under subheading 9801.00.10, HTSUS. Accordingly, this protest should be denied.
In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065 dated August 4, 1993, Subject: Revised Protest Directive, this decision should be attached to Customs Form 19, Notice of Action, and be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.
Sincerely,
John Durant, Director
Tariff Classification
Appeals Division