CLA-2-07:OT:RR:NC:N2:228
Mr. Scott Hoffman
Trans American CHB, Inc.
4902 North America Drive
Buffalo, NY 14224
RE: The tariff classification, and status under the North American Free Trade Agreement (NAFTA) of spinach processed in Canada and returned to the United States; Article 509; Eligibility under 9801.00.1095
Dear Mr. Hoffman:
In your letter dated July 10, 2013, on behalf of Ippolito Fruit & Produce Ltd., Ontario, Canada, you requested a ruling on the tariff classification, eligibility for a free duty under subheading 9801.00.1095, Harmonized Tariff Schedule of the United States (HTSUS), and the status under the NAFTA of the spinach processed in Canada and returned to the United States.
A detailed processing description was provided with your letter. U.S.-origin raw spinach (your suggested classification is in subheading 0709.70, HTSUS) is shipped directly in bulk crates averaging 20 pounds to 30 pounds from the United States to Ippolito Fruit & Produce Ltd in Canada. Crates are individually dumped onto a conveyor system where the product enters a grading tunnel to remove field dirt and small weeds. The product enters 1st wash tank, goes through a rinse, enters 2nd wash tank, then goes through a second rinse. The wash tanks use citric acid and chlorine. After washed, the product is dried [dried off of exterior water only], cooled, sent through optical sorters to remove any foreign material, scaled, and packed into various retail package sizes. No cutting or trimming takes place in the process in Canada. The packaged spinach will be re-imported back into the United States.
The applicable subheading for the returned spinach will be 0709.70.0000, HTSUS, which provides for other vegetables, fresh or chilled … spinach. The rate of duty will be 20 percent ad valorem.
In your letter, you suggested the product may fall in subheading 9801.00.1095, HTSUS, the provision for other 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. Based on the operations (cleaning, washing, drying, cooling, sorting, scaling, and retail packaging) performed in Canada, the spinach has been advanced in value and improved in condition abroad. The returned spinach does not qualify as a U.S. Good Returned under 9801.00.1095, HTSUS.
Subheading 9802.00.50, HTSUS, provides a partial or complete duty exemption for articles exported from and returned to the United States after having been advanced in value or improved in condition abroad by repairs or alterations, provided the documentary requirements of section 181.64 (for articles returned from Canada or Mexico) or section 10.8 (for articles returned from any other country), CBP Regulations (19 CFR §§ 181.64 and 10.8), are satisfied.
The application of this tariff provision 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), aff’d C.D. 1752, 36 Cust.Ct. 46 (1956), and Guardian Industries Corp. v. United States, 3 CIT 9 (1982). The partial duty exemption provided by subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use and the foreign operation constitutes an intermediate processing operation, which is performed as a matter of course in the preparation or the manufacture of finished articles. See Dolliff & Co. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F.Supp. 618 (1978), aff’d, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015, 1019 (1979).
Section 181.64(a), CBP Regulations (19 CFR 181.64(a)), defines "repairs or alterations" for goods re-entered after repair or alteration in Canada or Mexico as follows:
“Repairs or alterations” mean restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment, which does not destroy the essential character of, or create a new and commercially different good from, the good exported from the United States.
Based upon our review of the detailed description of the operations performed in Canada, we found the Canadian processing (cleaning and washing) of U.S.-origin spinach constitutes an "alteration" as that term is defined under Customs Regulations 181.64 (a) (19 CFR 181.64(a)). Provided the documentary requirements of Section 181.64 of the Customs Regulations (19 CFR 181.64) are satisfied, the spinach when returned to the U.S. is eligible for treatment under subheading 9802.00.5060, HTSUS, which provides for articles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture ... articles exported for repairs or alterations ... other ... other.
Chapter 98, Subchapter II, U.S. Note 3(d) states:
For the purposes of subheadings 9802.00.40 and 9802.00.50, the rates of duty in the “Special” subcolumn of column 1 followed by the symbol “CA” or “MX” in parentheses shall apply to any goods which are returned to the United States after having been repaired or altered in Canada or in Mexico, respectively, whether or not such goods are goods of Canada or goods of Mexico under the terms of general note 12 to the tariff schedule.
Headquarters Ruling Letter 562672, dated May 27, 2003, states:
Goods entitled to classification in subheading 9802.00.50 treatment after having been repaired or altered in Canada are subject to duty upon the value of the repairs or alterations using the applicable NAFTA “CA” rate set forth in the applicable HTSUS tariff provision describing the good.
Since the NAFTA “CA” rate set forth in subheading 0709.70.00, HTSUS, to be applied to the value of the alterations performed in Canada is “free,” there will be no duty on the cost (or value) of the processing performed in Canada.
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 the World Wide Web at http://www.usitc.gov/tata/hts/.
General Note 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the NAFTA. General Note 12(b), HTSUS, (19 U.S.C. § 1202) states, in pertinent part, that
For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if--
(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that--
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note. . . .
Based on the facts provided, the returned spinach described above also qualifies for NAFTA preferential treatment because it meets the requirement of HTSUS General Note 12(b)(i). The good will therefore be entitled to a free rate of duty under the NAFTA upon compliance with all applicable laws, regulations, and agreements.
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 ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181).
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 Bruce N. Hadley, Jr. at (646) 733-3029.
Sincerely,
Thomas J. Russo
Director
National Commodity Specialist Division