HQ 555385: Application for Further Review of Protest No. 3004-8-000102, contesting the denial of item 806.20, TSUS, treatment to coffee which was decaffeinated abroad

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 555385

                         August 6, 1990


CLA-2 CO:R:C:V   555385 RA

CATEGORY:  Classification

TARIFF NO.:   9802.00.50

District Director of Customs
909 First Avenue
Room 2039
Seattle, Washington 98174

RE:  Application for Further Review of Protest
     No. 3004-8-000102, contesting the denial of item 
     806.20, TSUS, treatment to coffee which was 
     decaffeinated abroad

Dear Sir:

     The above-referenced protest contests your denial of the
partial duty exemption under item 806.20, Tariff Schedules of 
the United States (TSUS) (now subheading 9802.00.50, 
Harmonized Tariff Schedule of the United States (HTSUS)), to 
raw or crude coffee which was exported to Canada for 
decaffeination and returned.

FACTS:

     Coffee in a raw or crude condition was sent to Canada 
where it was subjected to processing to remove its carrein. 
It was then returned to the U.S. for additional processing,
consisting of roasting, grounding, and packaging for retail 
sale.

ISSUE:

     Does the processing abroad of coffee to remove the 
carrein constitute an alteration, thereby entitling the 
returned product to the partial exemption from duty under item
806.20,  TSUS?

LAW AND ANALYSIS:

     Item 806.20, TSUS, provides a partial duty exemption for
articles returned to the U.S. after having been exported to be
advanced in value or improved in condition by means of repairs 
or alterations.  The application of this provision is 
precluded where the operations abroad result in new or
                              - 2 -

different articles or are for the purpose of finishing 
products to certain specifications.  Thus, intermediate processing
operations which are performed in the preparation 
of finished articles do not come within the scope of the term
"alterations."

     An article entitled to classification under item 806.20, TSUS,
is dutiable only upon the cost or value of the foreign repairs or
alterations.

     In Dolliff & Company Inc. v. U.S., 66 CCPA 77, C.A.D. 
1225 (1979), the court fou d that the processing steps 
performed on exported greige goods were undertaken to produce the
finished fabric and could not be considered as 
alterations.  The court stated that alterations are made to
completed articles and do not include intermediate processing
performed on unfinished goods, leading to completed articles.
Moreover, in U.S. v. J.D. Richardson Co., 36 CCPA 15, C.A.D. 
390 (1948), the court stated that Congress did not intend that
incomplete articles, manufactured in the U.S. or imported into the
U.S., could be exported to a foreign country and there manufactured
into completed articles, and when returned to the U.S., be subject
only to duties on the so-called alterations.

     It is clear from the holdings in the above judicial 
decisions that a manufacturing operation which constitutes an
intermediate step in the preparation of a finished product 
cannot be characterized as an alteration.   In this case, after 
the processing of the coffee in Canada, it must be roasted, 
ground, and packaged in the U.S. before it can be sold at 
retail.  Accordingly, the operation of removing the caffein 
abroad was only an intermediate step in making a finished 
product and, therefore, cannot be treated as an alteration.

HOLDING:

     The processing in Canada to remove the carrein from crude
coffee amounts to an intermediate step in making the finished
article and cannot be considered an alteration under item 
806.20, TSUS.  Therefore, the protest should be denied in 
full.  A copy of this decision should be attached to the Form 
19, Notice of Action, to be sent to the protestant.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division