CLA-2 RR:CR:SM 560681 RSD
Ms. Jeanie McCombs
Executive Assistant
International BioProducts Incorporated
PO Box 2728
Redmond Washington 980783
RE: Country of origin marking requirements for diagnostic or
laboratory reagents and prepared culture media exported to
Canada for sterilization and returned to the United States;
NAFTA marking rules; Essential character; 19 CFR Part 102
Dear Ms. McCombs:
This is in response to your letter dated August 29, 1997,
addressed to the Director, National Commodity Specialist
Division, requesting a ruling regarding reagent and culture media
products known as "RediSwab" and "Quick Enrich" which will be
sent to Canada for sterilization by an Electron Beam Machine. In
response to an earlier ruling request dated May 16, 1997, NY
ruling B89235 dated September 15, 1997, was issued which denied
the eligibility of the products for the partial duty exemption
under subheading 9802.00.50 Harmonized Tariff Schedule of United
States (HTSUS), relating to articles exported for repairs or
alterations. The National Commodity Specialist Division
forwarded your subsequent ruling request to Customs Headquarters
for a response. In a subsequent letter dated October 27, 1997,
you indicate that you are requesting a ruling only on the country
of origin marking requirements applicable to the products and
their eligibility for tariff treatment under the North American
Free Trade Agreement (NAFTA). Consequently, this ruling will
only address the country origin and the NAFTA eligibility of the
subject products and will not address issues related to
subheading 9802.00.50, HTSUS.
FACTS:
The first product is called "RediSwab". It consists of
ready-to-use plastic tubes, each containing a Dacron tipped swab
affixed to a screw cap. The tubes are pre-filled with either 4
ml of sterile neutralizing buffer solution or 4 ml of sterile
Letheen Broth culture media. You state that the product will be
used by food producers and government agencies to detect
bacterial
contamination in food. In use, the cap is removed and the
moistened swab is rubbed across the area to be sampled. The cap
is returned to the tube and the "RediSwab" is transported to the
laboratory for analysis.
The second product, "Quick Enrich", consists of sealed,
plastic bags (pouches) containing either 225 ml or 400 ml of
Modified Buffered Peptone Water culture media, Buffered Peptone
Water culture media, Lactose Broth culture media, or
Butterfield's Buffer solution. Some of the pouches may also have
a sponge or swab in them, in addition to the sterile liquids.
The "Quick Enrich" product will also be used to detect bacterial
contamination in food.
You indicate that both products will be manufactured in the
United States from ingredients and components that to the best
of your knowledge are produced entirely in the United States.
Although an attempt is made to make the products completely
sterile in the United States, you are only able to reach a level
of sterility so that one out of 1,000 or one out of 10,000 of the
products is not sterile. To eliminate this one out of 1,000 or
one of 10,000 items that may not be sterile, you plan to ship the
subject products to Canada, where they will be further sterilized
by the ionizing radiation produced by an electron beam machine.
You describe the electronic beam machine as something like a
large X-ray machine. It will ensure that the one out of 1,000 or
one out of 10,000 products that is not sterile is rendered
sterile after processing. You indicate that nothing else is done
to the products in Canada other than the sterilization.
According to the National Commodity Specialist Division, the
"RediSwab" containing Neutralizing Buffer and the "Quick Enrich"
bag containing Butterfield's Buffer are classifiable under
subheading 3822.00.5090, HTSUS, which provides for "Diagnostic or
laboratory reagents on a backing and prepared diagnostic or
laboratory reagents whether or not on a backing, other than those
of heading 3002 or 3006". The applicable subheading for the
"RediSwab" tubes containing Letheen Broth culture media, and the
"Quick Enrich" sealed plastic bags containing Modified Buffered
Peptone Water culture media, Buffered Peptone Water culture
media, or Lactose Broth culture media, is 3821.00.0000, HTSUS
which provides for "Prepared culture media for development of
microorganisms."
ISSUES:
1. What are the country of origin marking requirements for
the above described products, when returned to the United States
after having been shipped to Canada for an ionizing sterilization
process?
2. Whether the subject products are eligible for tariff
preferences under the NAFTA.
LAW AND ANALYSIS:
I. Country of Origin Marking
The marking statute, section 304, Tariff Act of 1930, as
amended (19 U.S.C. 1304), provides that, unless excepted, every
article of foreign origin (or its container) imported into the
U.S. 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 U.S. the English name of the country of origin
of the article. Part 134, Customs Regulations (19 CFR Part 134),
implements the country of origin marking requirements and
exceptions of 1304. Section 134.1(b), Customs Regulations (19
CFR 134.1(b)), defines "country of origin" as:
The country of manufacture, production, or growth of
any
article of foreign origin entering the United States.
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.
The country of origin marking requirements for a "good of a
NAFTA country" are 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). Section 134.1(j) 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), Customs
Regulations (19 CFR 134.1(g)), defines a "good of a NAFTA
country" as an article for which the country of origin is Canada,
Mexico, or the U.S. as determined under the NAFTA Marking Rules
set out at Part 102, Customs Regulations (19 CFR Part 102).
Section 102.11, Customs Regulations (19 CFR 102.11), sets
forth the required hierarchy for determining whether a good is a
good of a NAFTA country for marking purposes. That section
states that the country of origin of a good is the country in
which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic
materials; or
(3) Each foreign material incorporated in that good
undergoes an
applicable change in tariff classification set out in
section 102.20
and satisfies any other applicable requirements of that
section, and
all other applicable requirements of these rules are
satisfied.
"Foreign material" is defined in section 102.1(e), Customs
Regulations (19 CFR 102.1(e)), as "a material whose country of
origin as determined under these rules is not the same country as
the country in which the good is produced."
In this case, based on your representations, we will assume
that all the ingredients and the components used to make the
products are of U.S. origin. Since both the "RediSwab" and the
"Quick Enrich" products are processed in Canada with U.S.-origin
materials, these goods are neither wholly obtained or produced,
nor produced exclusively from domestic materials. Therefore, it
must be determined whether pursuant to 102.11(a)(3), the foreign
materials incorporated into these products meet the specific
tariff shift rule of 102.20. Thus, we must look at those
materials whose country of origin is other than Canada to see if
they undergo the required change in tariff classification.
According to the information provided by the National Import
Specialist, the "RediSwab" exported to Canada, containing
Neutralizing Buffer and the sealed plastic bags containing "Quick
Enrich" Butterfield's Buffer are classifiable under subheading
3822.00.5090, HTSUS. The "RediSwab" tubes containing Letheen
Broth culture media and "Quick Enrich" the sealed plastic bags
containing Modified Buffered Peptone Water culture media,
Buffered Peptone Water culture media, and Lactose Broth culture
media, are classifiable under subheading 3821.00.0000 HTSUS. The
applicable change in tariff classification set out in Customs
Regulations 102.20(b) (19 C.F.R. 102.20(b)) for articles
classified under heading 3822 HTSUS is:
A change to heading 3822 from any other heading, except
from subheading 3002.10 or 3502.90 or heading 3504.
For articles classified under heading 3821, the applicable change
in tariff classification is
A change to heading 3821 from any other heading
In this instance, the tariff classification of the products
sent to Canada will not change as a result of the sterilization
process performed in Canada. Therefore, the requisite tariff
classification changes for the products in question cannot be met
in this case. In these circumstances, Customs Regulations
102.11(b) (19 C.F.R. 102.11(b)) must be applied. 102.11(b)
provides that:
Except for a good that is specifically described in the
Harmonized System as a set, or is classified as a set
pursuant to General Rule of Interpretation 3, where the
country of origin cannot be determined under paragraph
(a), the country of origin of the good:
(1) Is the country or countries of origin of the single
material that imparts the essential character of the
good....
Section 102.18(b)(1) Customs Regulations, states that:
For purposes of identifying the material that imparts the
essential character to a good under 102.11, the only
materials that shall be taken into consideration are those
domestic or foreign materials that are classified in a tariff
provision from which a change in tariff classification is
not allowed under the 102.20 specific rule or other
requirements applicable to the good. For purposes of this
paragraph (b)(1):
. . .
(iii) If there is only one material that is classified
in a tariff provision from which a change in tariff
classification is not allowed under the 102.20
specific rule or other requirements applicable to the
good, then that material will represent the single
material that imparts the essential character to the
good under 102.11.
For the goods in question, there is only one material in
each product that is classified in a tariff provision from which
a change in tariff classification is not allowed under the
specific rule in 102.20. These materials are the "RediSwab"
and "Quick Enrich" products themselves. Accordingly, Customs
finds that these are the materials that impart the essential
character to the finished articles. Because the U.S. is the
country of origin of the materials that impart the essential
character to the products, Customs finds that the country of
origin of the finished products known as "RediSwab" and "Quick
Enrich" for purposes of the marking requirements under 19 U.S.C.
1304, is the U.S. Accordingly, these products are not subject
to the provisions of 19 U.S.C. 1304 because they are not
"article(s) of foreign origin." Thus, the "RediSwab" and "Quick
Enrich" products do not require country of origin marking upon
importation into the U.S.
II. NAFTA Eligibility
The next issue that we will address is whether the
"RediSwab" and the "Quick Enrich" products will be entitled to
preferential tariff treatment under the NAFTA when they are
returned to the United States after they are further processed in
Canada. The General Note 12, HTSUS, incorporates Article 401 of
the North American Free Trade Agreement ("NAFTA") into the HTSUS.
Note 12(a)(i) provides, in pertinent part:
(i) Goods that originate in the territory of a NAFTA
party under subdivision (b) of this note and that
qualify to be marked as goods of Canada under the terms
of the marking rules set forth in regulations issued by
the Secretary of the Treasury (without regard to
whether the goods are marked), when such goods are
imported into the customs territory of the United
States and are entered under a subheading for which a
rate of duty appears in the Special' subcolumn
followed by the symbol CA' in parentheses, are
eligible for such duty rate...
Accordingly, the "RediSwab" and the "Quick Enrich" products
will be eligible for the "Special" "CA" rate of duty provided
they are NAFTA "originating" goods under General Note 12(b),
HTSUS, and if they qualify as products of Canada under the
marking rules.
First, we consider whether the products are "originating
goods" within the rules of origin in General Note 12(b), HTSUS.
General Note 12(b)(i) HTSUS, states in pertinent part as
follows:
[f]or the purposes of this note, goods imported into the
customs territory of the United States are eligible for
the tariff treatment and quantitative limitations set
forth in the tariff schedule as "goods originating in
the territory of a NAFTA party" only if--
(i) they are goods wholly obtained or produced
entirely
in the territory of Canada, Mexico and/or the
United States; or
(ii) they have been transformed in the territory of
Canada, Mexico and/or the United States so
that --
(A) except as provided in subdivision (f) of this
note, each of the non-originating materials
used in the production of such goods undergoes
a change in tariff classification described in
subdivisions (r), (s) and (t) of this note or
the rules set forth therein, or...
(iii) they are goods produced entirely in the
territory of Canada, Mexico and/or the United
States exclusively from originating
materials....
You have stated that both that the "RediSwab" and "Quick
Enrich" products are made in the U.S. exclusively from U.S. made
ingredients and materials. Therefore, assuming that the subject
articles are made in U.S. exclusively from originating materials,
they will be originating goods pursuant to General Note
12(b)(iii).
Next, in determining the whether the products are eligible
for NAFTA duty preference, we must consider whether the products
qualify as products of Canada under the NAFTA marking
rules. As previously discussed, for marking purposes the
appropriate country of origin of the
products under the NAFTA marking rules is the United States.
However, according to the terms of section 102.19(b), Customs
Regulations (19 C.F.R. 102.19(b):
If, under any other provision of this
part, the country of
origin of a good which is originating within the
meaning of section
181.1(q) of this chapter is determined to be the United
States
and that good has been exported from, and returned to,
the
United States after having been advanced in value or
improved in condition in another NAFTA
country, the country of origin of
such good for Customs duty purposes is the last NAFTA
country in which that good was advanced in value or
improved in condition before its return to the United
States.
As the processes performed in Canada, sterilizing the
products by ionizing radiation, clearly advance them in value and
improve them in condition, section 102.19(b), Customs
Regulations, is applicable, and the country of origin of the
products, for duty purposes is Canada. Thus, when the "RediSwab"
and the "Quick Enrich" products are returned to United States
they are entitled to NAFTA preferential treatment at the "CA"
rate, assuming a Certificate of Origin (See 19 C.F.R. 181.11) is
completed and signed for the goods.
HOLDING:
Based upon the information provided, the proposed Canadian
processing by sterilizing the U.S. made "RediSwab" and "Quick
Enrich" products does not change their country of origin for
marking purposes. Customs also concludes that, for purposes of
country of origin marking, the country of origin of these
articles is the U.S. Upon importation they are not subject to
the marking requirements of 19 U.S.C. 1304 as they are not
foreign articles. Assuming that the "RediSwab" and "Quick
Enrich" products are made elusively from U.S. ingredients and
materials, they would be eligible for preferential duty treatment
under the NAFTA pursuant to General Note 12(b)(iii) and 19 CFR
102.19(b).
A copy of this ruling letter should be attached to the entry
documents filed at the time the goods are entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Commercial
Rulings Division