MAR-2-05 RR:CR:SM 562642 EAC
Mr. William B. Schreiber
Wormser, Kiely, Galef & Jacobs, LLP
825 Third Avenue
New York, NY 10022-7519
RE: Country of origin marking requirements applicable to vodka produced in Sweden and France; grain neutral alcohol; substantial transformation
Dear Mr. Schreiber:
This is in response to your letter dated January 23, 2003, on behalf of Spirits Marque One LLC, in which you request a country of origin determination for vodka that will be imported into the United States from France.
FACTS:
You state that Spirits Marque One LLC is contemplating importing vodka into the United States. The vodka is produced by J&J Nordic AB, a Swedish corporation, and will be imported into the U.S. through various ports of entry, to include New York, Oakland, Miami, Chicago, Savannah and Minneapolis.
The vodka at issue is produced from grain neutral alcohol that is 192 proof. J&J Nordic AB obtains the grain neutral alcohol on the international market and transports the product to the company’s distillery located in Kallby, Sweden. At the distillery, the grain neutral alcohol is filtered through a charcoal filter system that has been designed to give the alcohol its distinctive taste characteristics. The charcoal-filtered alcohol is thereafter blended with Swedish water, thereby rendering a mixture of 150 proof. You state that at this point, the mixture is “classified under European Custom Classification 22.08.6099 as a ‘vodka with alcohol strength above 45.4% ABV (90.8 proof) packaged in container above 2 liters’.” The 150 proof mixture is then exported to France where it is further diluted with water, bottled, and labeled as “vodka.” The second dilution with water reduces the alcoholic content of the mixture to 80 proof. While in France, you state that the mixture is only subject to the dilution and bottling processes just mentioned, and that no other significant processing operations occur in that country.
ISSUE:
For country of origin marking purposes, what is the country of origin of the vodka?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930 (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 English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. §1304 was that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. “The evident purposes is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlander & Co., 27 C.C.P.A. 297 at 302 (1940).
Part 134, Customs Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. §1304. Section 134.1(b), Customs Regulations (19 C.F.R. §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 the marking laws and regulations. An article used in manufacture which results in an article having a name, character, or use differing from that of the constituent article will be considered substantially transformed. United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)(1940).
In the case under consideration, we must first determine if the grain neutral alcohol undergoes a substantial transformation in Sweden, thereby rendering the grain neutral alcohol into a product of Sweden for country of origin marking purposes. Secondly, we must consider what effect, if any, the dilution and bottling processes that occur in France has on this country of origin determination.
We believe that the Court of International Trade’s (CIT) analysis in National Juice Products Ass’n v. United States, 10 CIT 48, 628 F. Supp. 978 (1986), is applicable to this case. In National Juice, the CIT upheld Customs ruling in HRL 728557, dated September 4, 1985, in which we held that imported orange juice concentrate was not substantially transformed when it was mixed with water, essential oils, flavoring ingredients and domestic fresh juice in order to produce frozen concentrated orange juice and reconstituted orange juice. Customs found that the manufacturing process did not create an article with a new name, character or use. Customs held, and the CIT agreed, that the manufacturing process did not change the “fundamental character of the product” as “it was still essentially the juice of oranges.”
In contrast, Customs held in HRL 731685, dated March 15, 1990, that converting imported fruit juice concentrates and other imported ingredients into fruit drinks in Mexico constituted a substantial transformation. The manufacturing process involved mixing the juice concentrates with other ingredients including water, artificial flavor, sodium benzoate, and food coloring. We held that, considering the totality of the circumstances, a substantial transformation of the foreign ingredients had occurred because “[t]he juice concentrates are subsumed into a product that is no longer considered a juice”. Essentially, a substantial transformation was found because the raw ingredients had been converted into a different article of commerce through a process beyond simple combining, packaging or mere diluting.
In HRL 562468, dated October 4, 2002, we held that there had been a substantial transformation of grain neutral alcohol into vodka when grain neutral alcohol was imported into Sweden and subjected to a production process similar to that utilized in the case under consideration. For example, 192 proof grain neutral alcohol was filtered through a charcoal system and blended with Swedish spring water, thereby producing vodka of 80 proof. We held that the grain neutral alcohol “was substantially transformed into a product that has a new name (vodka and flavored vodka), character (comprised of 64 percent water, 35 percent alcohol and 1 percent flavoring), and use (alcoholic beverage intended purely for human consumption).” We further demonstrated the occurrence of a substantial transformation by contrasting the wide variety of uses for which 192 proof grain neutral alcohol is initially suited (mouthwashes, chemicals, varnishes, etc.), with the more limited scope of usage of the alcohol after it has been subsumed into vodka (beverage intended solely for human consumption).
The instant case may be distinguished because the vodka at issue is produced in both Sweden and France. You state, however, that the processes that occur in Sweden are those that actually result in the substantial transformation of the grain neutral alcohol into vodka, a product with a new name, character and use. In support of your position that the product is considered to be vodka prior to exportation to France, you note that, when exported to France, the mixture is classified under the European Custom Classification as “vodka with an alcohol strength above 90.8 proof.” For purposes of this ruling, we will additionally assume that, prior to being exported to France, the mixture at issue possesses the additional inherent qualities of vodka of being odorless and tasteless.
Therefore, considering the totality of the circumstances, we agree that the grain neutral alcohol has been converted into a different article of commerce within Sweden through a process beyond simple combining, packaging and diluting. Specifically, the grain neutral alcohol, with its initial capacity to be utilized as the primary component in numerous products, has been subsumed into a product with a new name (vodka), character (75 percent charcoal-treated alcohol, 25 percent water), and use (an alcoholic beverage intended solely for human consumption). Though the vodka in the present case is a potent blend prior to final dilution in France, it is clear that the charcoal driven distillation process has still imparted the mixture with the distinctive qualities of vodka within Sweden. Thus, the grain neutral alcohol is substantially transformed within Sweden.
The remaining issue in this case is what effect, if any, the processes that occur in France has on the country of origin of the Swedish vodka. As mentioned above, these processes are limited in scope: the Swedish product is diluted with water and the diluted product is then bottled. It is apparent that neither process results in a substantial transformation of the Swedish vodka, as the vodka has not been converted into a different article of commerce with a new name, character or use. As the processes that occur in France constitute mere dilution and bottling, the fundamental character of the product is not altered. Thus, the vodka is not substantially transformed in France.
HOLDING:
Grain neutral alcohol of 192 proof, imported into Sweden and converted into vodka in the manner described above, is substantially transformed into a product of Sweden as a result of that process. The subsequent operations that occur in France, consisting only of dilution and bottling, do not render a substantial transformation of the vodka into a product of France. The vodka in the instant case, therefore, is a product of Sweden for purposes of compliance with 19 U.S.C. §1304.
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,
Myles B. Harmon
Director,
Commercial Rulings Division