HQ 554934: 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

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 554934

                                    April 3, 1989

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

          CATEGORY:  Classification

          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.

          FACTS:

                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.

          ISSUE:

                (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.
















                                         -2-



          LAW AND ANALYSIS:

                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
















                                         -3-



          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).






















                                         -4-



          HOLDING:

                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.

                                     Sincerely,





                                     John Durant
                                     Director, Commercial
                                     Rulings Division