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HQ 953052


March 18,1993

CLA-2 CO:R:C:F 953052 JGH

CATEGORY: CLASSIFICATION

TARIFF NO.: 2401.30.6000/ 9802.00.5060

Mr. Ronald G. Setzer
Supervisor of Importation
Tax Department
R. J. Reynolds Tobacco Company
Winston-Salem, N.C. 27102

RE: Classification of U.S. Tobacco Stems Processed in Canada and Returned to the U.S. for Use in the Manufacture of Cigarettes.

Dear Mr. Setzer:

Your letter of November 19, 1992, concerns the classification, under the Harmonized Tariff Schedule of United States (HTSUS), of U.S. grown Flue-cured stems in Canada and returned to the U.S. to be blended with cigarette leaf tobacco and manufactured into cigarettes.

FACTS:

In Canada the U.S. grown Flue-cured stems will be moisturized, then passed through a roller to be flattened, and next cut to a length "at 160-200 cuts per inch." They are then steamed, dried to the proper moisture content and packed in boxes for shipment to the United States.

Samples of the tobacco stems before and after processing were submitted. The Flue-cured stems sent to Canada were pieces of crude stem of varying lengths, some pieces appearing to be over 3 inches in length. The processed tobacco is returned as cut-rolled stems: uniformly cut into vary small pieces or ground. In the U.S., it is understood that such cut-rolled stems will be blended with cigarette leaf tobacco and manufactured into cigarettes. - 2 -

ISSUE:

Whether the processing of the tobacco stems in Canada represents an alteration under subheading 9802.00.5060, HTSUS, so that the processed stems may be entered under 2401.30.6000/9802.00.5060, HTSUS, with the duty based upon the value of the alterations.

LAW & ANALYSIS:

Subheading 9802.00.5060, HTSUS, concerns other articles returned to the United States after having been exported to be advanced in value or improved in condition by repairs or alterations. The duty in such a case would be assessed upon the value of the repairs or alterations. However, this provision does not apply 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. Here pieces of stem in a crude state are processed abroad and converted into uniformly small pieces and ground tobacco: cut-rolled stems. This latter product when returned is blended with cigarette leaf tobacco and manufactured into cigarettes. 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. Dolliff & Company, Inc., v. United States, 66 CCPA 77, C.A.D. 1225 (1979).

HOLDING:

The U.S. tobacco processed in Canada and returned as cut- rolled stems is classifiable under the provision for Tobacco stems: cut, ground or pulverised in subheading 2401.30.6000, HTSUS. If the stems shipped to Canada are wholly of U.S. origin, the cut-rolled stems returned would be of Canadian origin within the meaning of General Note 3(c)(vii)(B)(1), HTSUS, (United States-Canada Free-Trade Implementation Act of 1988) and, therefore, the applicable rate of duty would be 60.5 cents per kg., if all the pertinent regulations are complied with.

Sincerely,

John Durant, Director

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