us-cbp-cross-rulings-hq-220095•HQ 220095: The status and tariff treatment of pecans which are shelled in a foreign trade zone.
HQ 220095: The status and tariff treatment of pecans which are shelled in a foreign trade zone.
us-cbp-cross-rulings-hq-220095HQ 220095: The status and tariff treatment of pecans which are shelled in a foreign trade zone.Guidance
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 220095
February 9, 1989
FOR-2-04 CO:R:C:E 220095 KP
CATEGORY: Other
S. Richard Shostak, Esq.
Stein, Shostak, Shostak & O'Hara
Suite 1240
3580 Wilshire Boulevard
Los Angeles, California 90010-2597
RE: The status and tariff treatment of pecans which are shelled
in a foreign trade zone.
Dear Mr. Shostak:
In your letter dated January 18, 1988, which was submitted
on behalf of your client SNA Nut Company, you requested a binding
ruling with regard to a pecan-shelling operation which would be
performed in a foreign trade zone. We have considered your pro-
posal, and our decision follows:
FACTS:
A U.S. company plans to establish a pecan-shelling operation
in a foreign trade zone located in El Paso, Texas. Under the
proposed operation, unshelled pecans would be entered into the
zone. Some of the pecans would be of Mexican origin, and the
remainder would be of United States origin. Once in the zone,
the pecans would be sorted by size and separated from dirt and
debris. Next, they would be placed in hot water for cleaning and
softening the shells in preparation for the cracking process.
The pecans would then be cracked, and the shells would be sepa-
rated from the pecan meat. The shells would be transferred to a
trash bin for disposal, and the pecans would be sorted by color
with inedible meat being removed. Finally, the pecans would be
sorted by size according to USDA standards and boxed in 30-pound
cases.
The inquirer requests a binding ruling with respect to sev-
eral aspects of this operation, as set forth below.
ISSUES:
(1) May the imported Mexican unshelled pecans be designated
as privileged foreign merchandise in the foreign trade zone?
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(2) If the Mexican unshelled pecans may be and, in fact, are
designated as privileged foreign merchandise, would they be clas-
sifiable under subheading 0802.90.10, Harmonized Tariff Schedule
of the United States (HTSUS)(former item 145.22, Tariff Schedules
of the United States (TSUS))?
(3) Would the unshelled pecans from the United States quali-
fy for domestic status in the foreign trade zone, and therefore
be eligible for duty-free treatment upon returning to the customs
territory of the United States under section 146.43(c), Customs
Regulations (19 CFR 146.43(c))?
(4) May the nutshell waste from the shelling operation be
(a) destroyed in the foreign trade zone (e.g., by depositing it
in the trash), (b) removed to the customs territory of the United
States for disposal under 19 CFR 146.52(e), (c) exported, or (d)
entered into the United States?
(5) If the nutshell waste may be entered into the United
States, would it be classifiable under sub-heading 1404.90.00,
HTSUS, (former item 793.00, TSUS) upon entry?
LAW AND ANALYSIS:
Section 146.41(a), Customs Regulations (19 CFR 146.41(a)),
provides that, for purposes of foreign trade zones, foreign mer-
chandise which has not been manipulated or manufactured so as to
effect a change in tariff classification will be given status as
privileged foreign merchandise on proper application to the dis-
trict director. Under this section, then, if proper application
is made to the district director, the unshelled Mexican pecans
may be designated as privileged foreign merchandise provided that
they have not, at that time, been manipulated or manufactured
so as to effect a change in tariff classification. However, in
determining whether to approve the application for privileged
foreign status, the district director may consider whether the
merchandise will remain identifiable to his satisfaction so that
the revenue will be adequately protected if and when the pecans
are entered into the United States.
Under 19 CFR 146.65(a)(1), privileged foreign merchandise is
subject to tariff classification according to its character, con-
dition, and quantity, at the rate of duty and tax in force on the
date of filing, in complete and proper form, the application for
privileged status. Accordingly, if the unshelled Mexican pecans
are granted privileged foreign status, the sorted and packaged
shelled pecans produced therefrom will be classified, upon entry
into the United States, under subheading 0802.90.10, HTSUS, and
will be dutiable at the rate which was in effect for that
provision when the application to obtain privileged foreign
status was filed in complete and proper form. Currently,
subheading 0802.90.10, HTSUS, carries a duty rate of 11 cents per
kilogram.
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19 CFR 146.43(a) permits domestic status to be granted, for
purposes of foreign trade zones, to, inter alia, merchandise the
growth, product, or manufacture of the United States on which all
internal revenue taxes, if applicable, have been paid. Thus, the
U.S. domestic pecans would be eligible for domestic status in the
foreign trade zone provided that all applicable taxes on them, if
any, have been paid. Generally, no application or permit is re-
quired for the admission of domestic status merchandise into a
zone. However, if the U.S. pecans are granted domestic status,
an application or permit will be required under 19 CFR 146.43(b)
to process and transfer them to the customs territory of the
United States if they are mixed with merchandise in another zone
status (the Mexican pecans) as part of the contemplated opera-
tion. If the U.S. domestic pecans are granted domestic status
and all requirements pertaining to applications and permits
are complied with, then those pecans may return to the customs
territory of the United States free of quotas, duty, or tax, as
provided in 19 CFR 146.43(c). However, if the domestic pecans
lose their identity as domestic merchandise, then they will have
nonprivileged foreign status under 19 CFR 146.42(c) and will be
subject to tariff classification in accordance with their char-
acter, condition, and quantity at the time they enter the customs
territory of the United States.
Under title 19, United States Code, section 81c (19 U.S.C.
81c), as amended, foreign and domestic merchandise brought into a
foreign trade zone, whether for processing or otherwise, may be
exported, destroyed, or sent into the customs territory of the
United States from the zone. Thus, the nutshell waste from the
shelling operation may be exported from or destroyed in the zone.
However, insofar as your proposal to destroy the waste by depos-
iting it in a trash bin is concerned, we have said:
According to Webster's New World Dictionary, "destroy
implies a tearing down or bringing to an end by wreck-
ing, ruining, killing, eradicating, etc. * * *." Any
such process should be considered one of destruction
for the purposes of the Foreign Trade Zones Act.
C.S.D. 80-67, 14 Cust. Bull. 830, 832 (1979). We do not equate
the mere depositing of nutshell waste in a trash bin with pro-
cesses such as wrecking, ruining, killing, eradicating, and the
like. Therefore, we do not consider that action to be a destruc-
tion for purposes of the Foreign Trade Zones Act.
The nutshell waste from the proposed operation may also be
entered into the United States from the zone. Under 19 CFR
146.42(b), waste recovered from any manipulation or manufacture
of privileged foreign merchandise in a zone has the status of
nonprivileged foreign merchandise. Therefore, if entered for
consumption, the nutshell waste from the Mexican pecans would be
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classifiable under subheading 1404.90.00, HTSUS (currently duty-
free), regardless of whether the Mexican pecans were given
privileged foreign status. Nutshell waste from the U.S. domestic
pecans, though, would retain their domestic status if they did
not lose their identity as domestic merchandise, and could be
returned to the customs territory free of duty.
The nutshell waste could not be removed to the customs ter-
ritory of the United States for disposal under 19 CFR 146.52(e).
That section authorizes a district director to permit merchandise
in a foreign trade zone to be destroyed outside of the zone if it
cannot be properly destroyed within the zone. You have neither
established nor even alleged that the nutshells could not be
properly destroyed within a foreign trade zone. 19 CFR 146.52(e)
also provides that any residue from the destruction of merchan-
dise within a zone, which is determined to be without commercial
value, may be removed to the customs territory for disposal. The
nutshell waste, though, is not residue from the destruction of
other merchandise within a zone.
HOLDINGS:
(1) The imported Mexican unshelled pecans may be designated
as privileged foreign merchandise in the foreign trade zone upon
approval by the district director of a proper application there-
for.
(2) If the Mexican unshelled pecans are designated as privi-
leged foreign merchandise, they would be classifiable under
subheading 0802.90.10, HTSUS, upon entering the customs territory
of the United States.
(3) The unshelled pecans from the United States would quali-
fy for domestic status in the foreign trade zone, and therefore
would be eligible for duty-free treatment upon returning to the
customs territory of the United States under 19 CFR 146.43(c)
provided that they did not lose their identity as domestic mer-
chandise.
(4) The nutshell waste from the shelling operation may be
destroyed in the foreign trade zone, exported, or entered into
the United States. However, depositing the nutshell waste in the
trash would not constitute destruction for these purposes. The
nutshell waste could not be removed to the customs territory of
the United States for disposal under 19 CFR 146.52(e).
(5) Upon entering the United States, the nutshell waste from
the Mexican pecans would be classifiable under subheading
1404.90.00, HTSUS. The nutshell waste from the U.S. domestic
pecans could return duty-free to the customs territory of the
United States if it retains its identity as domestic merchan-
dise.
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Inasmuch as we understand that this matter has been brought
to the attention of the Foreign Trade Zones Board at the Depart-
ment of Commerce, we are furnishing the Board with a copy of this
ruling.
Sincerely,
John A. Durant
Director
Commercial Rulings Division
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