United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1996 HQ Rulings > HQ 559032 - HQ 559296 > HQ 559161

Previous Ruling Next Ruling
HQ 559161




September 19, 1995

CLA-2 R:C:S 559161 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.80

District Director of Customs
U.S. Customs Service
P.O. Box 025280
Miami, Florida 33102-5280

RE: Request for Internal Advice; Classification of domestically-produced cigarettes; drawback; C.S.D. 85-32; 19 CFR 10.3(a)(1)

Dear Sir:

This is in response to your memorandum dated April 7, 1995, forwarding an internal advice request concerning the classification of domestically-produced cigarettes.

FACTS:

U.S.-origin cigarettes, produced from foreign-origin tobacco and wrappers, are exported from the U.S. and then entered into the U.S. by importers who are neither the manufacturer nor the exporter of the goods, claiming entry under subheading 9801.00.80, Harmonized Tariff Schedule of the United States (HTSUS). Internal-revenue tax was not paid upon exportation of the cigarettes. While the importers do not submit evidence of the amount of drawback, if any, that was allowed on exportation, this type of merchandise normally is subject to a drawback allowance in connection with its exportation from the U.S.

ISSUE:

Whether U.S-origin cigarettes are classifiable on entry under subheading 9801.00.80, HTSUS, when such cigarettes are the type of merchandise normally exported with benefit of drawback, and the importers are neither the manufacturer nor exporter of the goods.

LAW AND ANALYSIS:

Subheading 9801.00.10, HTSUS, provides for the free entry of articles of U.S.-origin which are exported and returned without having been advanced in value or improved in condition while
abroad. U.S. Note 1 of subchapter I, Chapter 98, HTSUS (which encompasses subheading 9801.00.10), provides, in pertinent part, as follows:

The subheadings in this subchapter (except subheadings 9801.00.70 and 9801.00.80) shall not apply to any article:

(a) Exported with benefit of drawback;

(b) Of a kind with respect to the importation of which an internal-revenue tax is imposed at the time such article is entered, unless such article was subject to an internal- revenue tax imposed upon production or importation at the time of its importation from the United States and it shall be proved that such tax was paid before exportation and was not refunded. (Emphasis added.)

In the instant case, it appears that the cigarettes have neither been advanced in value nor improved in condition while abroad. However, under U.S. Note 1(a), subchapter I, Chapter 98, HTSUS, the cigarettes would not be entitled to free entry as American goods returned if they were exported with benefit of drawback. In this regard, this type of merchandise normally is subject to a drawback allowance in connection with its exportation from the U.S. Further, even if no drawback was allowed, the imposition of an internal-revenue tax at the time of entry would preclude classification of the cigarettes under subheading 9801.00.10, HTSUS. See U.S. Note 1(b), subchapter I, Chapter 98, HTSUS.

Subheading 9801.00.80, HTSUS, encompasses "Articles previously exported from the U.S. which, except for U.S. Note 1 of this subchapter, would qualify for free entry under one of the foregoing items and are not free of duty: Other." The subject U.S.-origin cigarettes have neither been advanced in value nor improved in condition abroad, and therefore are classifiable under this provision. See Headquarters Ruling Letter (HRL) 555066 dated July 3, 1989. The duty to be assessed under subheading 9801.00.80, HTSUS, is equal to:
the sum of any duty and internal revenue tax imposed upon the importation of like articles not previously exported, but in no case in excess of the sum of (a) any customs drawback proved to have been allowed upon such exportation of the article, and (b) any internal-revenue tax imposed, at the time such article is entered, upon the importation of like articles not
previously exported.

In determining the duty under this provision, it is noted that the term like articles refers to foreign articles not previously exported.

However, it also appears that the additional issue which you wish us to address is whether the importer or Customs is required to determine the amount of the drawback allowed under subheading 9801.00.80, since the importer does not have access to this information.

In C.S.D. 85-32 dated January 28, 1985, the protestant imported camera film of U.S-origin, which was exported with benefit of drawback by a party other than the claimant. The protestant did not have access to information to determine the drawback paid (as in the instant case) and the manufacturer drawback/claimant refused to supply this information. We pointed out in that case that Customs is required by authority delegated by the Secretary of the Treasury, pursuant to Headnote 2(c) of Schedule 8, Part 1, Subpart A, TSUS (predecessor to Headnote 2(c) of Chapter 98, Subchapter I, HTSUS), to:

* * * ascertain and specify the amounts of duty equal to drawback or internal revenue tax which shall be applied to articles or classes or kinds of articles, and to exempt from the assessment of duty articles or classes or kinds of articles with respect to which the collection of such duty involves expense and inconvenience to the Government which is disproportionate to the probable amount of such duty.

Accordingly, we held in that case that an importer seeking to enter goods under section 804.20, Tariff Schedules of the United States (predecessor to subheading 9801.00.80, HTSUS), is not required to determine the amount of the drawback paid if the evidence indicates the merchandise was in all likelihood exported with drawback. Rather, Customs is required to determine the duty to be paid either through retrieval of Customs records, if available, or in accordance with section 10.3(a)(1), Customs Regulations (19 CFR 10.3(a)(1)), which provides for the determination of estimated drawback.

HOLDING:

Imported cigarettes normally exported with benefit of drawback, which have not been advanced in value or improved in condition while abroad, are classifiable in subheading 9801.00.80, HTSUS. In determining the duty to be paid upon importation, It is incumbent upon

Customs to determine the drawback allowed upon exportation of the cigarettes, either from actual records, or in accordance with the methodology provided in section 10.3(a)(1), Customs Regulations (19 CFR 10.3(a)(1)).

Sincerely,

John Durant, Director

Previous Ruling Next Ruling

See also: