Applicability of subheading 9802.00.50, HTSUS, to cooked red beans and chick peas

HQ 559119 September 22, 1995 CLA-2 R:C:S 559119 BLS CATEGORY: Classification TARIFF NO.: 9802.00.50 Mr. Frank Brennan De Angelus, Schaeffer & Associates 1455 Pennsylvania Avenue, N.W. Washington, D.C. 20004 RE: Applicability of subheading 9802.00.50, HTSUS, to cooked red beans and chick peas Dear Mr. Brennan: This is in reference to your letter dated July 10, 1995, on behalf of Rienzi & Sons, Inc., in connection with a request for a ruling that red beans and chick peas exported to Italy will be eligible for preferential duty treatment under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), upon return. FACTS: The red beans and chick peas will be exported to Italy for washing, cooking and canning, and then will be returned to the United States. While you do not describe the condition of these products when exported, it is assumed that the exported and returned vegetables are whole. ISSUE: Whether the beans and chick peas will be eligible for preferential tariff treatment under subheading 9802.00.50, HTSUS, upon return to the U.S. LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the U.S. 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 Reulations, 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); - 2 - 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. As stated in Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 Fed. Supp. 618 (1978), aff'd, 66 CCPA 77, 82, C.A.D. 1225, 599 F.2d 1015, 1019 (1979), "repairs and alterations are made to completed articles and do not include intermediate processing operations which are performed as a matter of course in the preparation or the manufacture of finished articles." We have previously held that peanuts sent abroad to be shelled, roasted, salted or otherwise flavored were not eligible for subheading 9802.00.50, HTSUS, treatment, since these processes constituted intermediate steps in the preparation of finished peanut products. Headquarters Ruling Letter (HRL) 554934 dated April 3, 1989. (See also HRL 556384 dated May 22, 1992, where we held that a lipstick mass, exported abroad to be heated, formed into stick shapes and inserted into individual applicators was not a completed article and therefore ineligible for the partial duty exemption under subheading 9802.00.50, HTSUS; HRL 557994 dated May 23, 1994, where chili sent abroad to be cleaned, selected and ground was found to be incomplete for its intended use upon exportation; and HRL 557633 dated February 10, 1994, where we found that shredding, adding of a de-oxidant, and repackaging of exported block cheese constituted intermediate steps in the completion of the finished product.) In the submission of February 17, 1995, Mr. Rienzi is of the opinion that the beans and chickpeas in the instant situation are completed articles upon exportation, and that the processing performed abroad should be considered an alteration. In support thereof, he cites HRL 555325 dated September 6, 1989, and C.S.D. 90-26 dated December 26, 1989. In HRL 555325, we held that the freeze-drying of U.S. cooked diced chicken meat was an alteration under subheading 9802.00.50, HTSUS. In that case, however, we noted that "the description of diced chicken meat as cooked shows that the food is a finished product when exported." In C.S.D. 90-26, we affirmed an earlier ruling (HRL 554944) which held that the foreign washing, cooling, sorting, grading and retail packaging of carrots may be considered an alteration within the meaning of subheading 9802.00.50, HTSUS. We find that the beans and chickpeas in the subject situation are not complete for their intended use upon exportation, as they have not been cooked and therefore are not finished products, as was the diced chicken in HRL 555325. The cooking process is a required step in preparing the product for consumption- its intended use. On the other hand, the carrots in C.S.D. 90-26 were completed articles at the time of their exportation, and the washing, cooling, sorting, grading and repackaging merely enhanced their marketability. That a market exists for uncooked and therefore unfinished beans and chickpeas does not change the fact that in this case the intention is to prepare the foodstuffs in a finished condition, and that cooking is required - 3 - as part of the manufacturing process. We would further note that the concept of substantial transformation, which is discussed in Mr. Rienzi's submission in connection with a number of Customs rulings and court decisions, has relevance in various country of origin issues, and in certain other determinations, but is not relevant in determining the entitlement of an imported article for the partial duty exemption under subheading 9802.00.50, HTSUS. (Also note that for current country of origin determinations under the North American Free Trade Agreement (NAFTA), applicable to Canada, the United States and Mexico, reference should be made to Part 102, Part 19, Customs Regulations (19 CFR Part 102). These rules have also been proposed to apply for all country of origin determinations. See T.D. 94-4, and proposed amendments to the Customs Regulations to set forth uniform rules governing country of origin determinations, published in the Federal Register on January 3, 1994; and Notice of Proposed Rulemaking, proposing to make certain amendments to these rules and the proposed rules, published in the Federal Register on May 5, 1995.) HOLDING: It is our opinion that the foreign processing operations constitute further steps in finishing the red beans and chick peas for their intended use. Therefore, the foodstuffs will not be eligible for the partial duty exemption under subheading 9802.00.50, HTSUS, upon return to the United States Sincerely, John Durant, Director Commercial Rulings Division