MAR-2-05 CO:R:C:S 735559 DEC
Mr. Robert H. Schor
Barnes, Richardson & Colburn
475 Park Avenue South
New York, New York 10016
RE: Country of origin marking for dry gelatin/sugar mix; NAFTA;
Article 509; 19 U.S.C. 1304; Part 102, Interim Regulations;
19 C.F.R. 102.11-General Rules; 19 C.F.R. 102.18 - Rules
of Interpretation; 19 C.F.R. 102.19-NAFTA Preference
Override;
Essential Character; 19 C.F.R. 134.22; 19 C.F.R. 134.32;
19 C.F.R. 134.25; 19 C.F.R. 134.46
Dear Mr. Schor:
This is in response to your letter dated February 25, 1994,
in which you seek a ruling with respect to the appropriate
country of origin marking for a dry gelatin/sugar mix which your
client, Hormel Foods Corporation ("Hormel") intends to import
into the United States.
FACTS:
Hormel plans to manufacture a dry gelatin powder in the
United States. Gelatin is classified under heading 3503,
Harmonized Tariff Schedule of the United States Annotated
("HTSUSA"). The dry gelatin will be shipped to Canada to be
mixed with powdered sugar (from sugar cane or sugar beets) to
form a dry gelatin/sugar combination. The sugar is from an
unspecified, non-NAFTA country and is classified under heading
1701, HTSUSA. This dry gelatin/sugar blend, which will contain
approximately ninety (90%) sugar and ten (10%) gelatin, will be
imported into the United States where Hormel will combine it with
United States-made powder flavorings, coloring, preservatives,
other additives, and sugar/dextrose to form a powder mix which
will be packaged for retail sale as a gelatin dessert mix.
You have received New York Ruling 895327, dated March 22,
1994, in which Customs has classified the gelatin and sugar blend
to be imported from Canada under subheading 2106.90.2070, HTSUSA.
The New York ruling also states that the imported sugar, after
being blended with the gelatin, will satisfy the change in tariff
classification required under HTSUSA General Note 12(t)/21.
Consequently, the sugar and gelatin blend will be entitled to the
2.4 percent ad valorem preferential rate of duty under the NAFTA.
You contend that the imported merchandise is excepted from
country of origin marking because the gelatin/sugar blend becomes
a product of the United States due to the substantial additions
to the blend once it is imported into the United States. Various
chemicals are added to lower the ph, to preserve the product, and
to give the product an anti-foaming agent. In addition, a "core
mix" is added which includes flavoring and coloring. Additional
sugar or dextrose is added to the blend in the United States as
well.
ISSUE:
Whether the further processing of a gelatin/sugar blend in
the United States, through the addition of chemicals and
coloring, results in an applicable tariff shift pursuant to the
NAFTA Marking Rules, thereby excepting the finished gelatin
dessert mix from the country of origin marking requirements
because it would be considered a product of the United States.
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 English 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 C.F.R.
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 gelatin/sugar blend 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 gelatin/sugar blend 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 blend) is neither wholly obtained or produced in Canada
nor is it produced exclusively from domestic materials. In fact,
the gelatin is imported from the United States and the sugar is
imported from a non-NAFTA country.
Since an analysis of sections 102.11(a)(1) and 102.11(a)(2)
have 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
gelatin is classified under heading 3503, HTSUSA and the sugar is
classified under heading 1701, HTSUSA. The gelatin/sugar blend
is classified under subheading 2106.90, HTSUSA. The applicable
tariff shift rule found in section 102.20 provides as follows:
HTSUS Tariff Shift and/or other requirements
2106.90 ....... A change to subheading 2106.90 from any
other subheading except from Chapter 4,
Chapter 17, heading 2009, subheading 1901.90
or subheading 2202.90; or
A change to subheading 2106.90 from Chapter 4
or subheading 1901.90 provided that the good
contains no more than 50 percent of milk
solids by weight; or
A change to subheading 2106.90 from Chapter
17
provided that the good contains less than 65
percent by dry weight of sugar; or . . ..
Thus, the gelatin, classified under heading 3503, HTSUSA,
undergoes an applicable tariff shift when blended with the sugar.
However, the sugar does not meet the applicable tariff shift rule
because the blend does not contain less than sixty-five percent
(65%) sugar by dry weight. In this case, the sugar component of
the blend is ninety percent (90%).
Since an analysis of section 102.11(a) has not produced a
country of origin determination for the gelatin/sugar blend, we
turn to section 102.11(b) of the interim regulations. Section
102.11(b) provides that where the country of origin cannot be
determined under section 102.11(a), and the good is not
specifically designated as a set pursuant to the Harmonized
System nor classified as a set under General Rule of
Interpretation 3, the country of origin of the article is "the
country or countries of origin of the single material that
imparts the essential character of the good. . .."
The rule of interpretation which determines the "essential
character" of the blend is found in section 102.18(b)(2) of the
interim regulations. This rule states that
For purposes of applying 102.11, only domestic
and foreign materials (including self-produced
materials) that are classified in a tariff provision
from which a change in tariff classification is not
allowed in the rule for the good set out in 102.20
shall be taken into consideration in determining the
essential character of the good.
In this case, the sugar is the foreign material that does not
undergo the applicable tariff shift. Consequently, it is the
origin of the sugar (an unspecified non-NAFTA country) that
imparts the essential character of this gelatin/sugar blend and
determines its country of origin under the NAFTA Marking Rules.
However, section 102.19, the NAFTA preference override, of
the interim regulations provides that
Notwithstanding any provision of these rules other
than 102.11(a) or (b) or 102.14, if a good
originates under Chapter Four of the NAFTA, and the
country of origin of that good is not determined to
be a single NAFTA country under 102.11(a) or (b),
the country of origin of the good is the last NAFTA
country in which the good underwent production other
than minor processing, provided that a Certificate of
Origin has been completed and signed for the good.
Since it has been determined that the gelatin/sugar blend to be
imported into the United States is entitled to preferential duty
treatment under the NAFTA and that its country of origin is not
determined to be a single NAFTA country, it is subject to the
NAFTA preference override. Provided that the Certificate of
Origin is completed and signed, the country of origin of the
gelatin/sugar
blend, therefore, is Canada because Canada is the last NAFTA
country in which the blend will undergo production other than
minor processing as defined in section 102.1(m) of the interim
regulations.
Since the gelatin/sugar blend is a good of a NAFTA country
(Canada) when imported into the United States, the country of
origin marking requirements of the finished gelatin dessert mix
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 gelatin/sugar blend of Canadian origin and the
addition of the various chemicals and colorings in the United
States.
Applying the NAFTA Marking Rules to the Canadian
gelatin/sugar blend 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, a gelatin dessert mix, is neither wholly obtained or
produced in a single country as is required under section
102.11(a)(1) nor is the finished product produced exclusively
from domestic materials (i.e. U.S.) as required under section
102.11(a)(2). Section 102.11(a)(3) also does not provide a
country of origin determination because the imported
gelatin/sugar blend does not undergo an applicable tariff shift
pursuant to 102.11(a)(3).
Section 102.11(b) turns the focus of our analysis to the
essential character of the finished product to determine the
country of origin of the finished gelatin dessert mix. Section
102.18(b)(2) of the interim regulations provides that only
materials that do not undergo a tariff shift are to be taken into
consideration to
determine the essential character of a good. Therefore, the
gelatin/sugar blend, which has been determined to be of Canadian
origin and does not undergo a tariff shift in the United States,
imparts the essential character of the finished gelatin dessert
mix.
The retail packaging in which the gelatin dessert mix will reach
the ultimate purchaser must be marked to reflect the product's
Canadian origin.
Under the provisions of section 134.25, Customs Regulations
(19 C.F.R. 134.25), if an article is to be repacked in new
containers for sale to an ultimate purchaser after its release
from Customs custody, the importer shall certify to the district
director that the new container shall be marked to indicate the
country of origin of the article in accordance with Part 134
(Customs Regulations) or if the article is intended to be sold or
transferred to a subsequent purchaser or repacker, the importer
shall notify such purchaser or transferee, in writing, at the
time of sale or transfer, that any repacking of the article must
conform to these requirements. The importer or his authorized
agent shall sign a statement to this effect. In this case,
because the imported gelatin/sugar blend will be repackaged
before it reaches the ultimate purchaser, the certification
procedures should be followed.
You ask whether the retail package may be marked "Made in
Canada" or "Product of Canada, made in part from U.S.
components." The marking "Made in Canada" is acceptable.
However, the second proposed marking is unacceptable because it
has two conflicting origin statements, i.e., "Product of Canada"
and "made in part from U.S. components," which may confuse the
ultimate purchaser. Therefore, the words "made in" or a similar
statement of origin may not be used in connection with the words
"U.S. components." However, Customs has no objection to the
reference to "U.S. components" in the proposed marking, provided
that the name of the country of origin, Canada, is preceded by
the words "made in", "produced" or other words of similar
meaning. See 19 C.F.R. 134.46. Thus, for example, "Made in
Canada in part of U.S. materials" would be an acceptable marking.
HOLDING:
The Canadian-origin gelatin/sugar blend does not undergo the
applicable tariff shift in the United States. As a result, the
retail package containing the finished gelatin dessert mix must
be marked indicating Canada as the country of origin.
Sincerely,
John Durant
Director, Commercial Rulings Division