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HQ 555490


August 8, 1990

CLA-2 CO:R:C:V 555490 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

District Director of Customs
San Juan, Puerto Rico 00903

RE: Application for Further Review of Protest Nos. 4909-5- 000075 and 4909-5-000047, protesting denials of HTSUS subheading 9802.00.50 duty treatment to stemmed tobacco leaves imported separately from their tobacco stems.19 CFR 10.8(g);portion;reconciled amounts;061362;067779;C.S.D. 81- 79 modified.

Dear Sir:

The above-referenced protests contest your denials of the partial duty exemption under item 806.20, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS)), to stemmed tobacco leaves (wrappers) imported during 1985.

FACTS:

The record in this matter reflects that tobacco leaves were exported to the Dominican Republic for alterations in the nature of a stemming operation. The stemming operation consists of cutting the stem from the tobacco leaf, resulting in two tobacco leaf halves and the stem. Following the stemming operation abroad, the tobacco stems and stemmed wrapper leaves were returned to the U.S. in different shipments. We understand that both the stems and the stemmed leaves were entered at San Juan.

Your office denied the duty exemption to the stemmed leaf entries, indicating that because only the stemmed leaves were imported after the stemming operation, the merchandise in question was not classifiable under TSUS item 806.20, citing as authority Headquarters Ruling Letter (HRL) 064639 dated July 18, 1980 (C.S.D. 81-79). You also cited HRL 061362 dated October 13, 1981 (Internal Advice No. 78/79), and HRL 067779 dated June 6, 1983 (both concerning the dutiability of stemmed tobacco leaves and stems), as supporting your position.

Counsel contends that the stemmed wrapper is entitled to classification under TSUS 806.20 inasmuch as section 10.8(g), Customs Regulations (19 CFR 10.8(g)), specifically provides procedures for the entry under TSUS item 806.20 of a "portion" of the articles exported for repairs or alterations.

ISSUE:

Whether the tobacco leaves and stems resulting from a stemming operation abroad must be returned to the U.S. together in the same shipment to qualify for the partial duty exemption under TSUS item 806.20.

LAW AND ANALYSIS:

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 may qualify for the partial duty exemption under TSUS item 806.20, provided the operations do not destroy the identity of the exported articles or create new or different articles. Articles entitled to this partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied.

Section 10.8(g), Customs Regulations (19 CFR 10.8(g)), allows for "portions" of the exported merchandise to be entered at different times and at different ports provided a certain certification procedure is followed. Specifically, the regulation provides, in part, that:

[w]hen all the merchandise covered by a Certificate of Registration is not entered at one time or at one port of entry,..., there shall be filed with the entry at the time of entry the certification of the owner, importer, consignee, or agent having knowledge of the facts, that the articles entered in their repaired or altered condition are a portion of the articles covered by such Certificate of Registration.

C.S.D. 81-79 addressed the issue of whether tobacco stems resulting from a stemming operation abroad may be returned separately from the stemmed leaves and entered under a different tariff provision (TSUS item 800.00). Within this context, we concluded that "the leaves and stems of the stemmed tobacco must be returned together in the same shipment under item 806.20, TSUS," although the ruling included no discussion of 19 CFR 10.8(g). This issue was discussed further in HRL 061362, which stated that the word "portion" as used in 19 CFR 10.8 "means a 'portion' of the entire repaired article, returned without separation of its components." Stated more clearly, we inter- preted this regulation as applying to a portion of a shipment exported for repairs or alterations, as opposed to a portion of an article which had been severed or separated abroad. Neverthe- less, we concluded (exclusively in regard to the entries covered by that case) that if the district director was satisfied that the amount of the stems and leaves entered separately can be reconciled with the amount of whole leaves exported for stemming, we had no objection to classification of the entries under TSUS item 806.20.

HRL 067779 was concerned with the underlying tariff classi- fication of the returned stems and half leaves. It concluded that, for duty rate purposes, the leaves are classifiable under TSUS item 170.15 and the stems are classifiable under TSUS item 170.50. The only discussion in HRL 067779 of the specific issue before us is the following: "To the extent that a single classi- fication rule emerges from [C.S.D. 81-79], it is only that item 806.20, TSUS, must apply to all of the articles resulting from the 'alterations' abroad."

Recognizing that the above rulings reflect somewhat contra- dictory approaches and conclusions to the present issue, it is our opinion that the better reasoned position is that expressed in HRL 061362, which stated that so long as the district director is satisfied that the amount of the stems and leaves entered separately can be reconciled with the amount of whole leaves exported for stemming, the returned articles may receive TSUS item 806.20 treatment. In this regard, we believe that the word "portion" in 19 CFR 10.8(g) can reasonably be interpreted as applying not only to a portion of a shipment exported for repairs or alterations, but to a portion of an article which has been subjected to a repair or alteration abroad resulting in two or more component parts that are returned separately. However, this interpretation should not be construed to mean that stemmed leaves may receive TSUS item 806.20 treatment when the stems are not also returned to the U.S.

Owing to the nature of the alteration abroad, this decision is specifically limited to the facts presented in this case, i.e., where tobacco leaves are exported for a stemming operation and the half leaves and stems are returned to the U.S. in separate shipments. That portion of C.S.D. 81-79 holding that the tobacco leaves and stems must be returned together in the same shipment to receive the benefits of TSUS item 806.20 treatment is modified to comport with the holding in this decision.

HOLDING:

On the basis of the record presented in this matter, it is our opinion that the stemmed wrapper leaves entered separately from the stems are entitled to the partial duty exemption under TSUS item 806.20, provided your office is satisfied that the amount of returned stems and leaves can be reconciled with the amount of whole tobacco leaves exported for stemming. Accord- ingly, you are directed to dispose of the protest in accordance with this decision. A copy of this decision should be attached to the Form 19, Notice of Action, to be sent to the protestant.

Sincerely,


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