CLA 2 CO:R:C:G 082033 JGH
TARIFF: 155.20
District Director of Customs
Patrick V. McNamara Building
477 Michigan Avenue
Detroit, Michigan 48226 2568
RE: Decision on application for further review of Protest No. 3801 8 000386, classification and quota standing of raw sugar from Australia refined in Canada
Dear Sir:
This protest concerns the question of whether the refining of sugar is a substantial transformation.
FACTS:
In July 1987, Customs issued a ruling letter (079630) which stated that the refining of raw cane sugar did not result in a substantial transformation, since the essential character of the sugar did not change, and, thus, a new and difference article of commerce did not emerge.
In November 1987, Redpath Sugars, a Canadian sugar refiner, attempted to enter at the port of Detroit, "Canadian refined sugars refined from raw sugar of Queensland, Australia." The entry was denied on the basis that, while the sugar was refined in Canada, it was not of Canadian origin and the refining process did not effect a substantial transforma tion and make it Canadian sugar for quota purposes.
ISSUE:
Whether the refining in Canada of raw sugar from Australia substantially transformed the sugar into a Canadian product for quota purposes.
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LAW AND ANALYSIS:
It is contended that the refining process in Canada of raw sugar from Australia creates a new product, making the refined sugar a product of Canada. During the refining, it is claimed that the raw sugar crystals are broken down and that, ultimately, a new and different product emerges. The new and different product is said to be the result of a series of treatments and filtrations, which alter the physical composition of the sugar.
The refining process was described in some detail. Raw sugar was said to be poured into a mingler and an affination syrup (molasses and other products) is added; the mingler heats the raw sugar and syrup, mixing the two together; the mixture is then transferred to a centrifuge which spins off the syrup along with the molasses and other substances, and the raw sugar crystals are then placed in a vat which is heated, with the raw crystals being dissolved in a refining sweet water and broken down into a mixture of sucrose and nonsucrose molecules. The liquor then undergoes carbonation, through the addition of lime and carbon dioxide to the liquor. The lime carbonated liquor is then press filtered under pressure, removing the precipitated calcium carbonates. The liquor is then piped through a char cistern to remove the coloring agents. An ion exchange resin removes more colorants.
The water white liquor is then piped to the vacuum pans for crystallization in an operation designed to prevent caramelization of the sugar. Next, the material is
centrifuged, separating the massecuite syrup from the sugar crystals, which are then washed. The moist, refined crystals are then conveyed to a metal drum, where the crystals are
dried and separated in hot air as the drum revolves. The dried, granulated sugar is then screened, sized, and packaged. Two new products are said to result: refined sugar and molasses.
In behalf of the protestant, it is claimed that the refining process meets the criteria set out for achieving a substantial transformation, in that there has been:
(a) A change in use Raw sugar cannot be used as food
for humans. While the raw sugar may be used in the production
of ethanol, or in cement manufacturing, only refined sugar can
be used as a human food.
(b) A change in commercial identity In the marketplace
raw sugar is consistently distinguished from refined;
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(c) A change in character The raw sugar crystal is
different from the refined crystal.
(d) A change in value It is estimated that refining
adds 40 to 50 percent to the value of the sugar.
As noted in a court decision involving the issue of substantial transformation, the question is whether the operations performed on the products in the country of exportation are of such a substantial nature as to justify the conclusion that the resulting product is a manufacture of that country. There must be transformation; a new and different article must emerge having a distinctive name, character, or use. Superior Wire v. U.S., 669 F. Supp. 472, (CT. Int'l
Trade 1987), aff'd 867 F.2d 1409 (1989).
In this case, it is contended that refining of raw sugar, described as an inedible, sticky, contaminated product, to an edible free flowing crystalline, nonperishable, high value product "with a completely different use mandated by law," amounts to a substantial transformation.
However, the facts are otherwise. Although it is contended that raw sugar is not fit for human food and that it is illegal to sell it for human consumption, raw sugar is in fact produced with sufficient purity to be used as a human food. Although the petitioner's exhibit (9), a Food and Drug Administration Compliance Policy Guide, states that, in general, raw sugar is unsuitable for food because it contains extraneous impurities which are removed by refining, it goes on to state that the "agency has taken action against raw sugar intended for food use without further refinement which was found to contain impurities rendering it unsuitable for
food use," and subsequently that "legal action will be taken against raw sugar intended for food use without further refinement which contains impurities making it unsuitable for food use." It is apparent, therefore, that it is not the raw sugar per se that is banned as food for humans, but the impure forms of raw sugar. That this view is widely held and generally accepted is shown by the comments in the Explanatory Notes to the Harmonized Tariff Schedule of the United States,
where in Chapter 17 it is stated that raw sugar may be of such high degree of purity that it is suitable for human consumption without refining.
Whether a substantial transformation has occurred depends upon a comparison of the article before the processing which is claimed to effect such transformation and the article after
processing. The Summaries of Trade and Tariff Information, Schedule 1, volume 9, p. 5, states that raw sugar of crystalline structure is generally 97 99 degree sugar in dry form. Refined crystalline sugar is almost 100 degree sugar. The purpose of refining cane sugar is to upgrade or purify it. The fundamental ingredient in the refined cane sugar is sucrose. Refining cane sugar is a cleaning process intended to concentrate the sucrose by removing the undesirable
by products and impurities. The qualities which give sucrose its chief value (sweetness and nutritional value) exist at the molecular level and are not products of the refining process.
In fact, in the refining process the sucrose molecule is not altered. The raw sugar, it is argued,
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is composed of sucrose and other materials which are completely broken down to their
molecular level, with the refined sugar crystals which emerge being a new and different product. However, what is actually done in the refining process is to remove the impurities. The
sugar molecule is not changed. The desired qualities of the sugar molecule are present in the raw sugar to the same degree that they were present in the refined sugar.
While the protestant's argument emphasizes the refining of the raw sugar, in comparing the refining process with the manufacture of the raw sugar from the cane, it is this latter
process which provides the sugar with its essential character. This view is supported by a recent appellate decision in which the court affirmed the lower court's conclusion that the
transformation of wire rod into wire was minor rather than substantial, since there was no significant change in the character or use of the product, the wire rod and wire being
viewed as different stages of the same product. It was the properties of the wire rod which determined the properties of the wire, said the court, adding that the changes resulting in
the wire were primarily cosmetic. Superior Wire v. United States, supra. The refining process does not change the product's intended use, which is dictated by the very nature
of the product the raw sugar with its desired sucrose. The raw sugar already possesses the qualities sought after in sugar (its sweetness and nutriousness). These are not the
result of the refining process. While the refining of sugar changes its color and increases its purity, as stated before, the refining process is not necessary to obtain its essential qualities. Refining cane sugar upgrades and purifies the sugar but it does not change the essential character of the product.
An example of a substantial transformation involving raw sugar would be the process which breaks down the sucrose molecule by chemical reaction into two different molecules:
fructose and glucose. The end product there would be two different sugars with different sweetening capabilities.
In sum, the refining of cane sugar does not create a new article with a new name, character or use. The product remains sucrose which, while upgraded by refining, retains the
same use as with the raw sugar: to provide a product with a sweet taste and nutrient value. To paraphrase the court in National Juice Products Assn. v. the United States, 10 CIT 49,
628 F. Supp. 978 (1986), while refining may make raw sugar more suitable for retail sale, the processing of the cane into raw sugar imparted the essential character of the sugar.
HOLDING:
Raw sugar from Australia which is refined in Canada is not substantially transformed into a Canadian product, since the refining process does not change the essential character
of the raw sugar and make it into a new article with a new name, character or use.
The protest is denied. A copy of this decision should be furnished to the protestant with the Form 19 Notice of Action.
Sincerely
John Durant, Director
Commercial Rulings Division