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NY K85532




May 25, 2004
CLA-2-04:RR:NC:2:231 K85532

CATEGORY: CLASSIFICATION

TARIFF NO.: 0406.90.9500; 0406.90.9700

Mr. Jeff Satterlee
Russell A. Furrow (U.S.), Inc.
27221 Northline Road
Taylor, MI 48180-4400

RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA) of battered mozzarella cheese sticks from Canada; Article 509.

Dear Mr. Satterlee:

In your letter, dated April 22, 2004, on behalf of your client, Omstead Foods Limited, Wheatley, Ontario, you requested a ruling on the status of battered mozzarella cheese sticks from Canada under the NAFTA.

Omstead Foods Limited will purchase mozzarella cheese, of American origin, in the form of cut sticks. The cheese sticks may be either fresh or frozen and their size will range from 5/8 inch to 2 ¾ inches in length. The butter fat content of the cheese will range from 17 to 23 percent. The American mozzarella cheese sticks will be exported to Canada, where they will be coated with breading or batter, packed in retail or food service packaging, and exported to the United States. The percentage of breading on the cheese sticks will range from 44 to 53 percent of the finished product. The country of origin of the breading is Canada and the country of origin of the mozzarella cheese is the United States.

The applicable subheading for battered mozzarella cheese sticks, if entered under quota, will be 0406.90.9500, Harmonized Tariff Schedule of the United States (HTS), which provides for cheese and curd, other cheese, other cheeses, and substitutes for cheese, including mixtures of the above, other, including mixtures of the above (excluding goods containing mixtures of subheadings 0406.90.61 or 0406.90.63), other, other, containing cow’s milk (except soft-ripened cow’s milk cheese) described in additional U.S. note 16 to chapter 4 and entered pursuant to its provisions. The rate of duty will be 10 percent ad valorem.

The applicable subheading for battered mozzarella cheese sticks, if entered outside the quota, will be 0406.90.9700, HTS, which provides for cheese and curd, other cheese, other cheeses, and substitutes for cheese, including mixtures of the above, other, including mixtures of the above (excluding goods containing mixtures of subheadings 0406.90.61 or 0406.90.63), other, other, other. The rate of duty will be $1.509 per kilogram. Goods classified in subheading 0406.90.9700, HTS, are, generally, subject to additional safeguard duties based on their value, as described in subheadings 9904.06.38 – 9904.06.49. However, U.S. Note 1 to Subchapter IV, Chapter 99, states, “Goods of Canada, Mexico, Jordan, Singapore or Chile imported into the United States shall not be subject to any of the provisions, duties or limitations of this subchapter.” The battered mozzarella cheese sticks, although they have not lost their identity as American goods, are products of Canada for duty purposes, pursuant to section 102.19(b) of the NAFTA marking regulations (See 19 CFR 102.19(b)). Accordingly, the additional duties provided for in subheadings 9904.06.38 - 9904.06.49, in Subchapter IV, shall not apply.

For goods classified in subheading 0406.90.9500, an import license, issued to the importer by the United States Department of Agriculture, will be required at the time that such merchandise is entered for consumption into the United States.

Goods, entered under license in subheading 0406.90.9500, HTS, being wholly obtained or produced entirely in the territory of Canada and/or the United States, will meet the requirements of HTSUSA General Note 12(b)(i), and will therefore be entitled to a free rate of duty under the NAFTA upon compliance with all applicable laws, regulations, and agreements.

In your correspondence you inquire as to whether the merchandise is entitled to duty-free treatment under subheading 9801.00.10, HTS, or 9802.00.50, HTS.

Subheading 9801.00.10, HTS, provides for the free entry of products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided that the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met. In the instant case, the breading or battering of the cheese sticks would be considered an advance item in value and improvement in condition that occurred when the goods were processed in Canada. Accordingly, these goods do not qualify for preferential duty treatment under subheading 9801.00.10, as American Goods Returned.

Subheading 9802.00.50, HTS, provides for the assessment of duty on the value of repairs or alterations performed on articles returned to the U.S. after having been exported for that purpose. However, the application of this tariff provision is precluded in circumstances where the operations performed abroad destroy the identity of the articles or create new or commercially different articles. Treatment under 9802.00.50, HTS, is also precluded 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.

In the instant case, the mozzarella cheese sticks that are shipped to Canada are commercially different from the battered mozzarella cheese sticks that are returned. When exported, they are incomplete for their intended use. Note that, in a ruling dated February 10, 1994 (File Number 557633), Customs Headquarters held that mozzarella cheese exported to Canada from the United States and, there, shredded and repackaged, did not qualify for preferential duty treatment under heading subheading 9802.00.50. The shredding operation was found to constitute a finishing step in the total manufacturing process of the finished article. Here, too, the breading or battering operation would appear to constitute a finishing step in the total manufacturing process of the finished battered mozzarella cheese sticks.

Questions regarding licensing procedures and applications for licenses to import cheese subject to quota should be addressed to:

Import Quota Manager for Dairy Products
STOP 1029/Room 5531-S
U.S. Department of Agriculture
1400 Independence Avenue, S.W.
Washington, DC 20250-1029

Importations of this product are subject to import regulations administered by various U.S. agencies. Requests for information regarding applicable regulations administered by the U.S. Department of Agriculture may be addressed to that agency at the following location:

A.P.H.I.S., Veterinary Services
Federal Building, Room 756
6505 Belcrest Road
Hyattsville, MD 20782

This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 CFR 181).

This ruling letter is binding only as to the party to whom it is issued and may be relied on only by that party.

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Thomas Brady at (646) 733-3030.

Sincerely,

Robert B. Swierupski
Director

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