CLA-2-16:OT:RR:NC:N2:231
Mr. Guy Manchuk
Tri Marine International, Inc
10500 N.E. 8th Street (Ste. # 1888)
Bellevue, WA 98004
RE: The tariff classification of canned tuna from Thailand; applicability of the “American Goods Returned,” “Assembly” and “Alterations” provisions of chapter 98, HTSUS.
Dear Mr. Manchuk:
In your letter dated March 9, 2012, you requested a ruling on whether certain canned albacore and skipjack tuna imported from Thailand will be eligible for duty-free or reduced-duty treatment under subheading 9801.00.10, 9802.00.80 or 9802.00.50 of the Harmonized Tariff Schedule of the United States (HTSUS).
You have outlined a scenario in which tunas will be captured exclusively by vessels operating under the flag of the United States. The fish will be frozen aboard the vessels and delivered to refrigerated carriers for transportation to a cannery in Thailand, where they will be processed into canned tuna.
All of the processing will occur at the cannery in Thailand. The whole, frozen tunas will first be thawed, butchered and steam-cooked. Heads, tails, fins, skin, red meat and bones will then be removed, leaving tuna loins and pieces. A mechanical filler will then automatically fill metal cans with a specific quantity of tuna meat. A condiment filler will then add water and salt to each can. The filled cans will then be fed into automatic can-sealing machinery, where ends will be attached and hermetically sealed. After being washed and inspected, the sealed cans will be transferred to autoclaves for retorting, a process that cooks the tuna again, this time to eliminate all bacteria and make the product shelf-stable and safe for human consumption. The cans will be allowed to cool, after which a labeling machine will apply a glued label to each one. The cans will then be put up in multi-can packs, cartons and shrink wrap, as necessary. The cartons of canned tuna will then be loaded into 20-foot shipping containers, which will be transferred to the port for loading onto container ships for shipment to the United States.
You wish to know whether any of the aforementioned chapter 98 provisions of the HTSUS will be applicable to the finished canned tuna when it is imported into the United States from Thailand.
Subheading 9801.00.10, HTSUS, provides for the duty-free entry of “products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad.” In your scenario, it appears that the frozen whole tunas would be considered “products of the United States.” However, as you note in your letter, the tunas, in fact, will be advanced in value or improved in condition while in Thailand. Therefore, subheading 9801.00.10, HTSUS, will not apply to the canned tuna imported into the United States.
Subheading 9802.00.80, HTSUS, provides a partial duty exemption for certain articles, assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating and painting. All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. Section 10.16(a), CBP Regulations (19 CFR §10.16(a)), provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, lamination, sewing, or the use of fasteners. However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See 19 CFR §10.16(c). We find that since the operations to be undertaken within your scenario clearly are not of a kind contemplated by the “assembly” provision and do not answer to the foregoing requirements, subheading 9802.00.80, HTSUS, will not apply to the canned tuna.
Subheading 9802.00.50, HTSUS, provides for a partial duty exemption for articles exported from and returned to the U.S. after having been advanced in value or improved in condition by repairs or alterations, provided the documentary requirements of section 10.8, CBP 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 exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982).
You assert that the whole, frozen tunas of your scenario undergo alterations (in Thailand), and that they qualify for eligibility under subheading 9802.00.50, HTSUS, because the circumstances are sufficiently similar to those discussed in Headquarters Ruling Letter (HRL) 561231, dated August 25, 1999. We disagree.
HRL 561231 described a situation in which U.S. cut-up fruit pieces in syrup were exported in bulk containers to the Philippines. In the Philippines, the syrup was drained in order to remove broken fruit pieces that separated during shipment. New syrup and, in some cases, other, Philippine-origin cut-up fruit, were then added to the remaining intact fruit pieces. The fruit and syrup were then packed in retail cans for shipment to the U.S. In granting eligibility for subheading 9802.00.50, HTSUS, the ruling noted that the draining of the syrup (and consequent removal of undesirable / broken pieces), addition of new syrup and, in some instances, addition of foreign fruit, constituted an alteration that improved the condition of the article. The ruling also noted, however, that the foreign processing did not destroy the identity of the exported fruit or create a new or different commercial article: “Essentially the same commercial article is returned, except in an ‘altered’ condition.”
We would thus point out that in the case of HRL 561231, cut-up pieces of fruit in syrup were exported (to the foreign country), and cut-up pieces of fruit in syrup came back (to the United States). In the present scenario, by contrast, whole, raw, frozen fish will be delivered to the foreign country (Thailand), and will subsequently be imported into the U.S. as ready-to-eat, canned product. In order to effectuate that transition, the whole tunas must be converted into skinless / boneless pieces of fish meat, and must also be cooked and canned into a shelf-stable item. Based on Koru North America v. United States, 701 F. Supp. 229 (CIT, 1988), CBP has held in a number of rulings that the conversion of whole fish into fillets, loins or similar boneless pieces of fish meat constitutes, in and of itself, a “substantial transformation,” yielding a new and different article of commerce. See, for example, HRL 735084, dated August 17, 1993, HRL 562708, dated June 13, 2003, and HRL W563318, dated Sept. 21, 2005. In the present case, not only are the whole, bone-in tunas converted into boneless portions, but they are also cooked, and the portions are also placed into a salt-water medium and canned. We thus find that the resulting, ready-to-eat canned product differs commercially from whole tuna, and that the processing operations in Thailand thereby exceed the scope of the term “alterations” for the purposes of subheading 9802.00.50, HTSUS.
The above analysis is consistent with a number of previous CBP rulings involving the applicability of subheading 9802.00.50 to various food products. In HRL 557633, dated February 10, 1994, CBP considered blocks of mozzarella cheese cut into portions, shredded, repacked and returned to the U.S. from Canada. In determining that subheading 9802.00.50, HTSUS, did not apply, HRL 557633 relied upon HRL 071399, dated July 19, 1983, where it was held that frozen fish fillets caught by U.S. flag fishing boats and sent to Korea and China where they were cut into three pieces, wrapped in plastic, boxed and returned to the U.S. constituted "more than an alteration." Using the factors set forth in A.F. Burstrom, CBP stated that the fish slices created differed in name, value, appearance, size and shape from the exported material. Furthermore, in HRL 554934, dated April 3, 1989, CBP held that peanuts exported to Mexico where they were shelled, roasted and salted were not eligible for subheading 9802.00.50, HTSUS, treatment, as the operations constituted intermediate steps in the preparation of finished peanuts. Additionally, in HRL 952685 dated January 11, 1993, CBP considered crabs shipped to China where they were thawed, the meat was extracted, and the extracted body meat was frozen into blocks and packed in coated boxes for
export to the U.S. Relying on HRL 051909 dated June 29, 1977, it was determined that the crab was not eligible for subheading 9802.00.50, HTSUS, treatment, as the exported crab-in-shell product was commercially different from the returned extracted crab meat product. In HRL 555462, dated September 11, 1989 {abstracted at C.S.D. 89-134(2)}, CBP held that apples exported to Mexico where they were diced and quick-frozen exceeded the scope of the term "alteration." See also HRL 554654 dated July 28, 1987, (whole peaches sliced abroad not only destroyed the identity of the exported peaches, but resulted in new and different articles of commerce with many uses different from those for whole peaches). Finally, New York Ruling Letter (NYRL) A89387, dated November 25, 1996, disallowed subheading 9802.00.50 for canned tuna made from U.S.-origin fish, holding that the manufacturing process exceeded the scope of the term “alterations” for purposes of that tariff provision.
In light of the foregoing discussion, subheading 9802.00.50, HTSUS, will not apply to the canned tuna of your scenario.
The applicable subheading for the canned tuna, if entered while the tariff-rate quota is open, will be 1604.14.22, HTSUS, which provides for prepared or preserved fish …: fish, whole or in pieces, but not minced: tunas, skipjack and bonito (Sarda spp.): tunas and skipjack: in airtight containers: not in oil: in containers weighing with their contents not over 7 kg each, and not the product of any insular possession of the United States, for an aggregate quantity entered in any calendar year not to exceed 4.8 percent of apparent United States consumption of tuna in airtight containers during the immediately preceding year, as reported by the National Marine Fisheries Service. The rate of duty will be 6% ad valorem.
The applicable subheading for the canned tuna, if entered after the tariff-rate quota for subheading 1604.14.22 has filled, will be 1604.14.30, HTSUS, which provides for prepared or preserved fish …: fish, whole or in pieces, but not minced: tunas, skipjack and bonito (Sarda spp.): tunas and skipjack: in airtight containers: not in oil: other. The rate of duty will be 12.5% ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.
This merchandise is subject to The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (The Bioterrorism Act), which is regulated by the Food and Drug Administration (FDA). Information on the Bioterrorism Act can be obtained by calling FDA at 301-575-0156, or at the Web site www.fda.gov/oc/bioterrorism/bioact.html.
This merchandise may also be subject to requirements administered by the National Marine Fisheries Service (NMFS) of NOAA, which may be contacted at 501 West Ocean Boulevard, Long Beach, CA 90802, telephone 562-980-4000. The Web site address is www.nmfs.noaa.gov/.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Nathan Rosenstein at (646) 733-3030.
Sincerely,
Thomas J. Russo
Director
National Commodity Specialist Division