MAR-2-05 CO:R:C:S 557994 DEC
Mr. John Peterson
Neville, Peterson & Williams
2300 N Street, N.W.
Washington, D.C. 20037
RE: Country of origin marking for peanut butter; NAFTA; Article
509;
19 U.S.C. 1304; Part 102, Interim Regulations; 19 CFR
102.11-General Rules;
19 CFR 134.35(b); 19 CFR 102.18
Dear Mr. Peterson:
This is in response to your letter dated June 21, 1994, in
which you seek a ruling with respect to the appropriate country
of origin marking for a finished peanut butter product which your
client intends to import into the United States.
FACTS:
Your initial ruling request, file number 734946, dated
January 14, 1992, concerning the country of origin marking
requirements for peanut butter to be imported by your client was
administratively closed on April 29, 1994. On June 21, 1994, you
renewed your request for a ruling and indicated that the
applicable standard that should be applied to the processing of
the peanut butter is substantial transformation rather than the
North American Free Trade Agreement (NAFTA) Marking Rules.
Your client proposes to import shelled peanuts into Canada
where they will be roasted, blanched, split, and ground into a
"slurry" (a gritty paste). Subsequent to importation into the
United States, the foreign slurry will be combined with a slurry
made from United States-origin peanuts. Additional proprietary
processing is conducted in the United States once the slurries
are combined which include the addition of salt, sweeteners, and
stabilizers to complete the finished peanut butter.
ISSUE:
Whether the peanut slurry imported from Canada for
processing into peanut butter in the United States, through the
addition of U.S.-origin slurry as well as salt, sweeteners, and
stabilizers, results in the product becoming a good of the United
States pursuant to the NAFTA Marking Rules, thereby excepting the
product from country of origin marking requirements.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), provides that, unless excepted, every article of foreign
origin imported into the United States shall be marked in a
conspicuous place as legibly, indelibly, and permanently as the
nature of the article (or its container) will permit, in such a
manner as to indicate to the ultimate purchaser in the United
States the name of the country of origin of the article. Part
134 of the Customs Regulations implements the country of origin
marking requirements and exceptions of 19 U.S.C. 1304.
The country of origin marking requirements for a "good of a
NAFTA country" are also determined in accordance with Annex 311
of the North American Free Trade Agreement (NAFTA), as
implemented by section 207 of the North American Free Trade
Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057)
(December 8, 1993) and the interim amendments to the Customs
Regulations published as T.D. 94-4 (59 Fed. Reg. 109, January 3,
1994) with corrections (59 Fed. Reg. 5082, February 3, 1994) and
T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim
amendments took effect on January 1, 1994, to coincide with the
effective date of the NAFTA. The marking rules used for
determining whether a good is a good of a NAFTA country are
contained in T.D. 94-4 (adding a new Part 102, Customs
Regulations). The marking requirements of these goods are set
forth in T.D. 94-1 (interim amendments to various provisions of
Part 134, Customs Regulations).
Section 134.1(b) of the interim regulations defines "country
of origin" as
the country of manufacture, production, or growth
of any article of foreign origin entering the U.S.
Further work or material added to an article in another
country must effect a substantial transformation in
order
to render such other country the "country of origin"
within the meaning of this part; however, for a good of
a NAFTA country, the NAFTA Marking Rules will determine
the country of origin. (emphasis added).
Section 134.1(j) of the interim regulations, provides that
the "NAFTA Marking Rules" are the rules promulgated for purposes
of determining whether a good is a good
of a NAFTA country. Section 134.1(g) of the interim regulations
defines a "good of a NAFTA country" as an article for which the
country of origin is Canada, Mexico or the United States as
determined under the NAFTA Marking Rules. Section 134.45(a)(2)
of the interim regulations provides that a "good of a NAFTA
country may be marked with the name of the country of origin in
English, French, or Spanish.
Section 134.35(b), Customs Regulations (19 CFR 134.35(b))
states that
A good of a NAFTA country which is to be processed
in the United States in a manner that would result
in the good becoming a good of the United States
under the NAFTA Marking Rules is excepted from marking.
Unless the good is processed by the importer or on
its behalf, the outermost container of the good shall
be marked in accord with this part.
In order to determine the country of origin marking
requirements, we must first apply the NAFTA Marking Rules to
determine whether the imported peanut slurry is a good of a NAFTA
country prior to being further processed in the United States.
Part 102 of the interim regulations, sets forth the NAFTA Marking
Rules for purposes of determining whether a good is a good of a
NAFTA country for marking purposes. Section 102.11 of the
interim regulations sets forth the required hierarchy for
determining country of origin for marking purposes.
Applying the NAFTA Marking Rules set forth in Part 102 of
the interim regulations to the facts of this case, we find that,
for marking purposes, the imported peanut slurry is a product of
Canada prior to being further processed in the United States.
This conclusion is reached through an analysis of interim
regulation 102.11. Section 102.11(a)(1) and section 102.11(a)(2)
do not apply to the facts presented because the good (the
imported peanut slurry) is neither wholly obtained or produced in
Canada nor is it produced exclusively from domestic materials.
In fact, the shelled peanuts are imported into Canada from an
unspecified non-NAFTA country where they are roasted, blanched,
split, and ground.
Since an analysis of sections 102.11(a)(1) and 102.11(a)(2)
has not yielded a country of origin determination, we look to
section 102.11(a)(3). Section 102.11(a)(3) provides that the
country of origin is the country in which "[e]ach foreign
material incorporated in that good undergoes an applicable change
in tariff classification in
102.20. . .." When imported into Canada, the shelled peanuts
are classified under subheading 1202.10, Harmonized Tariff
Schedule of the United States (HTSUS). The peanut slurry is
classified under subheading 2008.11.90, HTSUS. The applicable
tariff shift rule found in section 102.20 provides as follows:
HTSUS Tariff Shift and/or other requirements
2008.11 ....... A change to subheading 2008.11 from any
other
chapter, provided that change is not the
result
of mere blanching of nuts.
Thus, the shelled peanuts, classified under subheading 1202.10,
HTSUS, undergo an applicable tariff shift when processed into a
peanut slurry. Consequently, the country of origin of the peanut
slurry imported into the United States is Canada.
Since the peanut slurry that will be imported is a good of a
NAFTA country (Canada) when imported into the United States, the
country of origin marking requirements of the finished peanut
butter will be based on the determination of whether the
processing in the United States would cause the final product to
be of United States origin pursuant to the NAFTA Marking Rules.
To make this determination, a similar hierarchical analysis as
detailed above must be undertaken. In this case, the items to be
analyzed include the peanut slurry of Canadian origin and the
addition of the United States origin peanut slurry.
Applying the NAFTA Marking Rules to the Canadian peanut
slurry and the processing to be performed in the United States,
no determination of country of origin can be made under section
102.11(a) of the interim regulations. The finished product,
peanut butter, is neither wholly obtained or produced in a single
country as is provided under section 102.11(a)(1) nor is the
finished product produced exclusively from domestic materials
(i.e. U.S.) as provided under section 102.11(a)(2). Section
102.11(a)(3) also does not provide a country of origin
determination because the imported peanut slurry does not undergo
an applicable tariff shift pursuant to 102.11(a)(3). The
imported peanut slurry is classified under subheading 2008.11.90,
HTSUS, and the finished peanut butter is classified under
subheading 2008.11.10, HTSUS. The tariff shift requirements for
subheading 2008.11 are not met.
Since an analysis of section 102.11(a) does not yield a
country of origin determination, the analysis turns to section
102.11(b) which focuses on an examination of the single material
that imparts the essential character of the good to determine the
country or countries of origin of the peanut butter. Section
102.18(b)(2) of the interim regulations provides that only
materials (domestic and foreign) that do not undergo a tariff
shift are to be taken into consideration in determining the
essential character of a good. We find that the imported and
domestic peanut slurry imparts the essential character of the
finished peanut butter. Accordingly, as the processing in the
United States does not result in the peanut butter becoming a
good of the United States under the NAFTA Marking Rules, the
section 134.35(b) exception from the country of origin marking
requirements does not apply. The retail container of the
finished product that reaches the ultimate purchaser must be
marked to reflect Canada as the country of origin.
Your request for confidential treatment of your client's
company name is not granted. Specific details with respect your
client's manufacturing process, the ratio of imported materials
used, the process diagram, and the marketing research study will
be honored.
HOLDING:
The Canadian-origin peanut slurry does not become a good of
the United States under the NAFTA Marking Rules when processed
into peanut butter in the United States. As a result, the
finished peanut butter is not excepted from country of origin
marking under 19 CFR 134.35(b), and the retail container must be
marked to indicate Canada as the country of origin.
Sincerely,
John Durant
Director, Commercial Rulings Division