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HQ 557783


May 19, 1994

CLA-2 CO:R:C:S 557783 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10

District Director
U.S. Customs Service
Commercial Operations Division
477 Michigan Ave., Room 200
Detroit, MI 48226

RE: Application for Further Review of Protest No. 3801-93-102752; Denial of duty exemption under HTSUS subheading 9801.00.10 to roasted watermelon seeds; U.S.-Canada Free Trade Agreement

Dear Sir:

The above-referenced Application for Further Review timely filed by Choucri Hamasni Roasted Nuts, Inc., contests the denial of the duty exemption of subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), to certain roasted watermelon seeds. In the alternative, the protestant requests a refund of $485.93 under the U.S.-Canada Free Trade Agreement (CFTA).

FACTS:

The record indicates that U.S.-origin watermelon seeds were exported to Canada on March 13, 1993, where they were roasted. On March 26, 1993, the roasted watermelon seeds were returned to the U.S., and the protestant now seeks a complete refund of duties paid claiming that the watermelon seeds remain a product of the U.S., and, therefore, are duty-free under subheading 9801.00.10, HTSUS. In the alternative, the protestant seeks a refund in the amount of $485.93 under the CFTA.

ISSUE:

Whether the U.S. watermelon seeds returned to the U.S. after being roasted in Canada are eligible for duty-free treatment under subheading 9801.00.10, HTSUS.

LAW AND ANALYSIS:

Subheading 9801.00.10, HTSUS, provides for the free entry of products of the U.S. that have been exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations are satisfied. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported product render it ineligible for duty-free entry upon return to the U.S. Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970).

In determining whether an advancement in value or improvement in condition exists at the time of importation, the overall value and condition of the article at the time it was exported from the U.S. shall be compared with its overall value and condition at the time of return to the U.S. However, each case must be decided on its own facts. In HRL 554934 dated April 3, 1989, Customs held that U.S. peanuts exported to Mexico where they were shelled, roasted and salted were not eligible for duty-free treatment as American goods returned under subheading 9801.00.10, HTSUS.

In the instant case, although the watermelon seeds are not shelled as the peanuts were in HRL 554934, we find that the roasting of the watermelons is similar enough to find that the watermelon seeds were advanced in value or improved in condition while in Canada, thereby rendering them ineligible for subheading 9801.00.10, HTSUS, treatment. However, the roasted watermelon seeds are eligible for the tariff preferences provided under the CFTA, since the watermelon seeds were entered in 1993 and were considered "originating goods" under the rules of origin in General Note 3(c)(vii)(B), HTSUS (1993).

HOLDING:

On the basis of the information submitted, we are of the opinion that the U.S.-origin watermelon seeds are advanced in value or improved in condition by being roasted in Canada. Therefore, they are not eligible for duty-free treatment under subheading 9801.00.10, HTSUS. However, the roasted watermelon seeds are eligible for the tariff preferences provided under the U.S.-Canada Free Trade Agreement, since the watermelon seeds are "originating goods" under the rules of origin in General Note 3(c)(vii)(B), HTSUS (1993). Accordingly, this protest should be granted and denied in part.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065 dated August 4, 1993, Subject: Revised Protest Directive, this decision should be attached to Customs Form 19, Notice of Action, to be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director

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