Sunday, May 03, 2009

Has the Court of International Trade Gone Nuts?

No.  I just say that to amuse the 12-year old boy inside me.  

In reality, the Court did issue an opinion on the classification of Mrs. May's All Natural Almond Crunch, which is made in China from California almonds.  The almonds are sent to China for various processes including sorting, roasting, and combining with other ingredients for make the crunch.  

Whenever anyone sends U.S. products abroad for processing and return, it is worth considering whether a Chapter 98 provision provides a partial duty exemption for the value of the U.S. origin components.  Unfortunately, there are strings attached to those provisions.

The tariff item at issue in this case was 9802.00.50, which provides for "Articles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture or other means . . . Articles exported for repairs or alterations: . . .
9802.00.50 Other . . . ."  The tricky part is that for this to work, you need to export X and import repaired or altered X, not Y.  So, the Court held that almonds were exported and almond crunch was imported.  This not a mere alteration (clearly the almonds were not "repaired").  Since it was not an alteration, the decision went to the government.

The other commonly used tariff item for U.S. goods returning is 9802.00.80.  The trick with that one is that the exported articles need to be ready for use in assembly without further manufacturing and not subjected to processes abroad other than assembly and operations incidental to assembly such as cleaning, painting, and lubricating.

If you are in the trenches and using 9802.00.80, be advised that your operations should be limited to assembly (i.e., the physical joining of two or more parts), cleaning, lubricating, painting, and things reasonably like those three exemplars.  Customs has some regs with examples of what they consider to be incidental to assembly.

Back to the case at hand.  Does 9802.00.80 possibly apply to to the almond crunch?  

No.  It's not assembly to coat the almonds in sugar and other materials.  Assembly is accomplished with screws, nails, glue, welding guns, and the like.  When I find almond crunch that is welded together, I'll reconsider my analysis.

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