Applicability of partial duty exemption of item 806.20, TSUS, to certain pecan pieces exported for removal of meat

HQ 554834 May 25, 1988 CLA-2 CO:R:C:V 554834 DBI CATEGORY: Classification TARIFF NO: 9802.00.40, HTSUSA (806.20, TSUS) Jack Alsup Alsup and Associates P.O. Box 125 Del Rio, Texas 78841 RE: Applicability of partial duty exemption of item 806.20, TSUS, to certain pecan pieces exported for removal of meat Dear Mr. Alsup: This is in response to your letter of September 16, 1987, in which you request a ruling concerning the applicability of item 806.20, Tariff Schedules of the United States (TSUS), to certain U.S. grown pecan pieces exported to Mexico for removal of the meat from the shells. The removed meat is then returned to the U.S. for consumption. FACTS: You advise that in the U.S., your client will place whole U.S. grown pecans (not shelled) in a pecan sheller. The shells are cracked and the empty shells and whole meat pieces are removed. You indicate that following the shelling process, approximately 20% to 30% of the pecans remain as pecan pieces with pieces of the shell and meat still attached. Your client will ship these remaining pieces to Mexico where the meat will be hand picked from the shell. The meat will then be packaged and shipped to the U.S. for consumption. ISSUE: Whether the described pecan pieces, when returned to the U.S., will be eligible for the partial exemption from duty provided for in item 806.20, TSUS, (9802.00.40, Harmonized Tariff Schedule of the United States Annotated (HTSUSA)). LAW AND ANALYSIS: Item 806.20, TSUS, provides for the assessment of duty on the value of repairs or alterations performed on articles returned to the U.S. after having been exported to be advanced in value or improved in condition by any process of manufacture or other means. However, 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 (1957); Guardian Industries Corporation v. United States, USITR, 3 CIT 9, Slip Op 82-4 (Jan. 5, 1982). Item 806.20, TSUS, treatment also is precluded where the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. Dolliff and Company, Inc. v. United States, 66 CCPA 77, CAD 1225, 599 F.2d 1015 (1979). We have previously held in a ruling dated January 19, 1987 (HQ 543869) that the processing of eggs by cracking the shells and separating various parts of the eggs consisted of operations which exceeded the meaning of the term alterations and therefore precluded tariff treatment of the returned yolks under the provisions of item 806.20, TSUS. In that case we found that the returned processed egg yolks constituted new and commercially different articles than the exported whole eggs and that this process was an intermediate step in the preparation of the finished product which could not be characterized as an alteration. We have also held in a ruling dated June 29, 1977 (HQ 051909) that the extraction of crab meat from snow crab clusters (crab in shell) constituted an operation which created a commercially different article and therefore the foreign processing of the crab product went beyond the scope of item 806.20, TSUS, and was not an alteration. We believe that the foreign shelling process constitutes an operation that exceeds a repair or alteration based on our previous rulings. The pecan pieces that are shipped to Mexico are commercially different from the meat that returns. Additionally, the pecan pieces are incomplete for their intended use and require a further step in the preparation of the finished meat product. HOLDING: On the basis of the information submitted, it is our opinion that the Mexican shelling process may not be considered an alteration as that term is used in item 806.20, TSUS, and, therefore, precludes tariff treatment of the returned pecan meat under the provisions of item 806.20, TSUS. Sincerely, John Durant Director, Commercial Rulings Division