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HQ 554934

April 3, 1989

CLA-2 CO:R:C:V 554934 DBI


TARIFF NO.: 9802.00.50, HTSUS (806.20, TSUS); 9801.00.10, HTSUS (800.00, TSUS)

Mr. Oscar Braslaw
American Import & Export Co. Inc.
P.O. Box 15405
New Orleans, Louisiana 70175

RE: Classification, applicability of the Peanut Quota Act and applicability of subheading 9802.00.50, HTSUS (item 806.20, TSUS) and subheading 9801.00.10, HTSUS (item 800.00, TSUS), to peanuts exported to Mexico to be shelled, roasted and salted

Dear Sir:

This is in response to your letter dated January 12, 1988, in which you request a ruling concerning the classification, applicability of the Peanut Quota Act and applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), and subheading 9801.00.10, HTSUS, to U.S. peanuts exported to Mexico to be shelled, roasted and salted. We regret the delay in responding to your inquiry.


You advise that U.S.-grown peanuts will be shipped to Mexico where they will be prepared by shelling, roasting and salting or otherwise flavoring the peanuts. The peanuts will then be vacuum packed and returned to the U.S. for sale in the snack trade.


(1) Tariff classification of the returned peanuts and whether they are subject to the Peanut Quota Act.

(2) Whether the peanuts, when returned to the U.S., will be eligible for the partial exemption from duty in subheading 9802.00.50, HTSUS, or the exemption from duty in subheading 9801.00.10, HTSUS.


According to the U.S. Department of Agriculture, these products, which are made in Mexico from U.S. grown peanuts and imported into the U.S., are not subject to the peanut quota. However, these products may be subject to marketing quota penalties pursuant to 7 CFR 1446.115 if they are "contract additional" or "loan additional" peanuts. If you have any additional questions regarding the quota or marketing quota penalties, contact Mr. Dallas Smith at the U.S. Department of Agriculture, Agriculture Stabilization and Conservation System, Tobacco and Peanuts Division, Room 5750-South Building, P.O. Box 2415, Washington, D.C. 20013 (telephone no. (202) 447-7413)).

As to the tariff classification of these products, we only address the classification under the HTSUS, which replaced the Tariff Schedules of the United States (TSUS), on January 1, 1989. The roasted, salted peanuts; the hot peanuts, which are roasted, salted, and chile flavored; the Japanese style peanuts, which are roasted, thinly covered with a flour coating and flavored with a soybean sauce; and the candied peanuts, which are roasted and thinly coated with sugar, are classifiable in subheading 2008.11.0060, HTSUS, which provides for "fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included: Nuts, peanuts (ground-nuts) and other seeds, whether or not mixed together: Peanuts (ground-nuts): Other." These four products are dutiable at the rate of 6.6 percent per kilogram. The mixed snack product consisting of shelled pumpkin seeds, peanuts, and Spanish peanuts is classifiable in subheading 2008.19.85, HTSUS, which provides for mixtures of nuts, and is dutiable at the rate of 28 percent ad valorem.

Item 806.20, TSUS, was carried over into the HTSUS as subheading 9802.00.50, and item 800.00, TSUS, was carried over as subheading 9801.00.10.

Subheading 9802.00.50, HTSUS, 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. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1957); Guardian Industries Corporation v. United States, 3 CIT 9 (1982). Treatment under subheading 9802.00.50, HTSUS, 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. Dolliff and Company, Inc. v. United States, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979).

We have previously held in a ruling dated May 25, 1988 (HQ 554834), that a foreign shelling process which consisted of hand picking pecan meat pieces from the shell constituted an operation that exceeded a repair or alteration. We reasoned that the pecan pieces that were shipped to Mexico were commercially different from the meat that returned. Additionally, the pecan pieces were incomplete for their intended use and required a further step in the preparation of the finished meat product.

In a ruling dated January 19, 1987 (HQ 543869), we held that the processing of eggs, which consisted of breaking the shell, separating the yolk and white, and salting and freezing the yolks, was an intermediate step in the preparation of the finished product and, as such, could not be characterized as an alteration.

In the present case, the U.S. grown peanuts that are shipped to Mexico are commercially different from the peanut product that returns. Additionally, the shelling, roasting, salting or otherwise flavoring process constitutes an intermediate step in the preparation of finished peanut products.

With regard to subheading 9801.00.10, HTSUS, we have previously held that nuts sent abroad to have the shells cracked and the meat separated from the shell were not eligible for duty- free treatment as American goods returned under item 800.00, TSUS (subheading 9801.00.10, HTSUS). See HQ 554932 (June 3, 1988); HQ 554966 (September 9, 1988).


On the basis of the information and samples submitted, it is our opinion that the products are classifiable in subheadings 2008.11.0060 and 2008.19.85, HTSUS. Additionally, the foreign processes may not be considered an alteration as that term is used in subheading 9802.00.50, HTSUS, thereby precluding the application of that subheading to the returned peanuts. Additionally, the peanuts are not eligible for duty-free treatment as American goods returned under subheading 9801.00.10, HTSUS.


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