Applicability of subheading 9801.00.10, HTSUS, to cans and lids exported to be filled with vegetables abroad.

HQ 559349 December 5, 1995 CLA-2-05 RR:TC:SM 559349 KR CATEGORY: Classification TARIFF NO.: 9801.00.10 Mr. Solomon Weber Atty. In Fact ALL-WAYS FORWARDING INT'L INC. Hemisphere Center U.S. Route I-9 South Newark, NJ 07114 RE: Applicability of subheading 9801.00.10, HTSUS, to cans and lids exported to be filled with vegetables abroad. Dear Mr. Solomon: This is in reference to your letter on behalf of Mitsui Foods Inc., dated July 25, 1995, concerning the dutiability of U.S.-origin cans and lids exported to Turkey to be filled with vegetables and sealed and returned to the U.S. FACTS: You state that you intend to export to Turkey, U.S. cans and lids which are to be filled with Turkish vegetable products. After the cans are filled in Turkey the lids will be attached and the filled cans will be shipped to the U.S. ISSUE: Whether the imported canned vegetables are entitled to the duty exemption under subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS). LAW AND ANALYSIS: Subheading 9801.00.10, HTSUS, provides for duty free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad. Articles satisfying the above conditions of the statute will be afforded duty free treatment, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. With respect to containers, General Rule on Interpretation 5(b), HTSUS, provides that "packing materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use." Therefore, the value of a non-reusable container normally used for packing such goods is considered a part of the value of its contents and is dutiable at the rate of its contents. See HQ 557544 (October 28, 1993)(holding that shoe boxes of foreign origin were to be duty-free because they were filled with footwear which qualified for duty-free treatment under Note 2(b), HTSUS). However, Customs has also held that upon submission of satisfactory proof that a container is of U.S. origin and that it is returned without having been advanced in value or improved in condition while abroad, it is entitled to duty-free treatment under subheading 9801.00.10, HTSUS. The act of being filled with its contents is not considered to constitute such an advancement or improvement. See HQ 555527 (March 19, 1990), HQ 951319 (May 13, 1992), HQ 556956 (July 22, 1993), HQ 731806 (November 18, 1988). Further, Customs has found that a change in condition is allowed and the item may still qualify for duty-free treatment, so long as there is not an improvement in condition. See Border Brokerage Company Inc. v. United States, 65 Cust. Ct. 50, C.D. 4052, 314 F. Supp. 788, appeal dismissed, 58 CCPA 165 (1970). See HQ 956830 (March 27, 1995), HQ 555606 (July 26, 1990)(finding that the stamping of non-sterile lot numbers onto chipboard boxes and master cartons would not preclude the packaging material from receiving duty-free treatment under 9801.00.10, HTSUS). Customs found that forming a box by folding is a change in the condition of the box, but it is not an advancement in value or improvement in condition. See HQ 555664 (August 8, 1990). Further, in HQ 556679 (August 20, 1992), Customs cited as precedent for allowing duty-free treatment under 9801.00.10, HTSUS, a case under TSUS, HRL 553104 (February 6, 1985), which held that a container sealed by bending a lid to shape and using a sealing compound did not undergo an advancement in value or improvement in condition. In a case very similar to the instant case, HQ 556679 (August 20, 1992), Customs held that "the process of filling the U.S. made cans with various fruit and vegetable products abroad will not preclude the application of subheading 9801.00.10, HTSUS, to the cans and lids, when the canned goods are imported into the U.S." Further, this case also held that the process of sealing the metal containers with the corresponding lids did not constitute an advancement in value or improvement in condition. See also HQ 553104 (February 6, 1985). Based on the rulings cited above, we find that the U.S. manufactured cans and lids will be eligible for free entry under subheading 9801.00.10, HTSUS, upon compliance with the documentary requirements of 19 CFR 10.1. The foreign contents of the cans will, of course, be dutiable (at the applicable duty rate) on their full value. HOLDING: The U.S. cans and lids which are filled and sealed in Turkey and then imported to the U.S., are not improved in condition or advanced in value in China. Therefore, upon their return to the U.S. the value of the cans and lids will qualify for duty-free treatment under 9801.00.10, HTSUS, provided the documentation requirements of 19 CFR 10.1 are met. A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction. Sincerely, John Durant, Director Tariff Classification Appeals Division