MAR-05 RR:TC:SM 560944 BLS
Port Director
New York Seaport
RE: Country of origin marking of olive oil; Internal Advice
Request (I/A) 9/98
Dear Sir:
This is in refeference to the memorandum dated March 25,
1998, from the Director, Trade Compliance Division, requesting
internal advice in connection with country of origin marking of
olive oil imported from Italy.
FACTS:
The Director, Trade Compliance, reports that certain imports
of olive oil from Italy have been marked with the designations
"Imported From Italy", Shipped From Italy", and "Packed In
Italy". These products may consist of either 100% Spanish olive
oil refined in Italy, or Spanish olive oil and Italian olive oil
blended in Italy. The Director also reports that olives
similarly marked and imported from Italy may in fact be a product
of Spain.
ISSUE:
What are the proper country of origin marking requirements
for the olive oil and olives imported from Italy?
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 U.S. shall be marked in a conspicuous
place as legibly, indelibly, and permanently as the nature of the
article (or 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 19
U.S.C. 1304. As defined in 19 CFR 134.1(b), "country of origin"
means the country of manufacture, production, or growth of
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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 change the country of
origin of the article. A substantial transformation is said to
occur when, after further processing or manufacture, an article
emerges having a new name, character, or use different from that
possessed by the article prior to processing. See Texas
Instruments, Inc. v. United States, 69 CCPA 152, 681 F. 2d 778
(1982).19 CFR 134.35.
The primary issue for resolution in this matter is whether
the Spanish olive oil is substantially transformed into an
article having a new name, character, or use when it undergoes a
refining process in Italy, or when it is blended with Italian
olive oil in Italy.
Refined Olive Oil
Customs has held on numerous occasions that the mere
refining or purification of a crude substance does not result in
a substantial transformation of the substance into a new and
different article of commerce with a new name, character or use.
In Headquarters Ruling Letter (HRL) 554644 dated October 29,
1987, we held that the processing of crude linseed oil into a
fully refined oil did not result in a substantial transformation.
The refining process in this case involved the dry caustic
neutralization of the fatty acids which was achieved through
heating and mixing the oil with sodium hydroxide. The fatty
acids were dispersed converting the acids and oil into water and
soapy matter. The oil was moved to centrifugal washers and
separators, removing the soaps. After centrifuging, all of the
remaining water was removed from the oil by vacuum drying. We
held in HRL 554644 that:
While it is clear that the processing of the crude
linseed
oil into a refined product results in a purified,
higher
grade oil with less contaminants and odor, the
essential
character is not altered and it does not become a
new and
different article of commerce. The removal of
impurities
and ultimate refinement is not sufficient to
effect any
major change in the product.
In HRL 556143 dated March 2, 1992, Customs held that the
purification of Crude Octamine (85-87 percent purity) into
Octamine R (97 percent purity) does not result in a substantial
transformation. In this case we stated that:
While it is clear that the processing of the Crude
Octamine
into a refined product described as Octamine R,
results in a
refined, higher grade aviation lubricant, the
essential
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character is not altered and the resulting product
does not
become a new and different article of commerce.
The
resulting product has the same chemical structure
as the
material from which it is made, the same Chemical
Abstract
Service Number, and the same tariff heading.
See also HRL 554637 dated July 13, 1987 (processing of raw
sugar into a refined product results in purified sugar with less
contaminants, which is not a new and different article of
commerce; HRL 082033 dated September 5, 1989 (refining cane sugar
upgrades and purifies the sugar, but it does not change the
essential character of the product); C.S.D. 84-112 dated July 2,
1984 (HRL 724640) (imported honey which was purified by heating
and filtering did not undergo a substantial transformation); HRL
555982 dated August 2, 1991 (evaporation of water from orange
juice and subsequent freezing in a CBERA BC does not change the
fundamental character of the imported juice).
These cases stand for the proposition that the crude (or
raw) and refined products are the same articles of commerce at
different stages of production. In Superior Wire v. United
States, 11 CIT 608, 669 F. Supp. 472 (CIT 1987), aff'd, 867 F.2d
1409 (Fed. Cir. 1989), the court held that for VRA purposes, wire
rod drawn into wire was not substantially transformed into a
product of Canada. In determining that there was no significant
change in use or character, the court concluded that the "wire
rod and wire may be viewed as different stages of the same
product." Id., 867 F.2d 1414.
Similarly, we find in this case that the essential character
of the crude olive oil is not altered by the refining process and
thus the product does not become a new article of commerce.
Rather, the refined olive oil retains the fundamental character
as well as the name and use of the crude product. As in Superior
Wire, we find that the imported product in the instant case
merely refers to olive oil at the final stage of production.
Accordingly, it is our opinion that the refining process in Italy
does not result in a substantial transformation of the crude
olive oil imported into Italy from Spain.
Blending of Olive Oils
Customs has consistently held that blending a product from
one country with the same product of another country does not
constitute a substantial transformation. In HRL 732260 dated
June 20, 1989, whiskey was imported from Scotland and Ireland and
blended In the U.S., adding about 2 1/2 percent blenders by
volume. In that case, we noted that both single type whiskeys
and blended whiskeys are alcoholic beverages, and that there was
no change in use of the product. As a result, we found
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that the blending of the whiskeys did not result in a substantial
transformation and that the marking had to reflect the country of
origin of each of the constituent whiskeys. See also
C.S.D. 84-112 dated July 2, 1984 (blending of foreign honey with
domestic honey) and HRL 724872 dated March 1, 1984 (blending of
Canadian maple syrup with domestic syrup), where we found that
blending of foreign and domestic products in the U.S. did not
result in a substantial transformation. The Court of
International Trade has also held that the blending of imported
orange juice concentrate with domestic concentrate did not result
in a substantial transformation. (National Juice Products v.
United States, 10 CIT 48, 628 F. Supp. 978 (1986).)
This position is further supported by the court in Coastal
States Marketing, Inc. v. United States, 10 CIT 613, 646 F. Supp.
255 (1986), aff'd, 818 F.2d 860 (Fed. Cir. 1987). In Coastal
States, the court held that the process of blending Russian No. 2
gas oil with Italian No. 5 fuel oil in Italy did not
substantially transform the Russian oil into a product of Italy.
In finding that the blended product was not a new and different
article, the court stated that "[t]he imported components are
each simply variant grade of the same product identified as fuel
oil, with the resulting blend also identified as fuel oil." Id.
at 618.
Therefore, it is our opinion that the blending of Spanish
olive oil with Italian olive oil in Italy does not result in a
substantial transformation of the Spanish product.
Marking Requirements
Since the Spanish origin olive oil is not substantially
transformed as a result of the refining and/or blending process
in Italy, when the product is imported into the U.S. the marking
must reflect Spain as the country of origin when it consists only
of Spanish olive oil refined in Italy, and Spain and Italy as the
countries of origin when it consists of a blend of both Spanish
and Italian oils. Olives of Spanish origin packed in Italy must
also reflect Spain as the country of origin. Markings such as
"Produced in Spain, Packed in Italy"; or "Olive Oil Produced in
Italy and Spain, Packed in Italy", as applicable, are examples of
acceptable country of origin markings in this case.
HOLDING:
Spanish origin olive oil which undergoes a refining
operation in Italy, or when blended with Italian olive oil in
Italy, does not undergo a substantial transformation. Therefore,
when imported into the U.S. from Italy, the product must be
marked to indicate Spain as the country of origin when it
consists solely of Spanish olive oil refined in Italy, and Spain
and Italy as the countries of origin when it is a blend of
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Spanish and Italian olive oils. if the product consists solely
of Spanish olives packed in Italy, the marking must indicate
Spain as the country of origin.
Sincerely,
John
Durant, Director
Commercial Rulings Division