OT:RR:CTF:VS H243328 HKP
Juno Lee
CIL International
4801 Wiltshire Blvd., #310
Los Angeles, CA 90010
RE: Eligibility of Certain Mixed Nuts for Preferential Treatment under the U.S.-Korea Free Trade Agreement; Request for Reconsideration of HQ H240383
Dear Ms. Lee:
This is in response to your correspondence of June 5, 2013, on behalf of your company, CIL International. You have asked us to consider whether the decision reached in Headquarters Ruling Letter (“HQ”) H240383, issued to your company on May 3, 2013, is correct.
FACTS:
In relevant part, HQ H240383 concerned whether mixed nuts imported from South Korea were eligible for preferential duty treatment under the U.S.-Korea Free Trade Agreement (“UKFTA”). According to the facts, the Korean exporter imported raw, dried cashew nuts from India, Vietnam, or Brazil and raw, dried Brazil nuts from either Bolivia or Peru into South Korea. The exporter roasted the cashew nuts and Brazil nuts in domestic peanut oil and salted them with domestic salt in South Korea. The exporter also roasted and salted Korean-origin raw, dried almonds, macadamia nuts and pecans, and mixed and packaged them together with the imported nuts for export to the United States. The finished good was classified in subheading 2008.19.85, Harmonized Tariff Schedule of the United States (“HTSUS”).
CBP found that the imported nut mixture was not eligible for duty preference under the UKFTA. The nut mixture did not satisfy any of the requirements of General Note (“GN”) 33(b), HTSUS, as the mixture was not wholly obtained in Korea or the U.S., or both, and did not meet the tariff shift requirements of GN 33(o)/Chp. 20/3, which provides for “a change to subheadings 2008.19 through 2008.99 from any other chapter, except as provided for in chapter rule 1 for chapter 20.” Chapter Rule 1 for Chapter 20, GN 33(o) provides, among other things, that nuts roasted in oil (and otherwise incidentally processed), shall be treated as originating only if the fresh good is wholly obtained or produced entirely in Korea or the United States, or both. CBP found that the exception to the product specific rule (Chapter Rule 1) applied to the non-originating nuts because salting was a process incidental to roasting. Accordingly, the mixed nuts imported from Korea were not eligible for preferential tariff treatment under the UKFTA.
ISSUE:
Whether the mixed nuts imported from Korea are eligible for preferential tariff treatment under the UKFTA.
LAW AND ANALYSIS:
The requirements for eligibility for preferential tariff treatment under the UKFTA are set forth in Note 33 to the General Notes to the Harmonized Tariff System (“HTSUS”) (19 U.S.C. §1202). This note provides in pertinent part:
(b) For the purposes of this note subject to the provisions of subdivisions (c), (d), (n) and (o) thereof, a good imported into the customs territory of the United States is eligible for treatment as an originating good of a UKFTA country under the terms of this note if-
The good is wholly obtained or produced entirely in the territory of
Korea or of the United States, or both.
The good is produced entirely in the territory of Korea or of the United
States, or both, and-
A. Each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in subdivision (o) of this note; or
B. The good otherwise satisfies any applicable regional value-content or other requirements set forth in such subdivision (o); and satisfies all other applicable requirements of this note and of applicable regulations; or
The good is produced entirely in the territory of Korea or of the United States, or both, exclusively from materials described in subdivisions (i) or (ii), above.
The applicable rule in subdivision (o) requires "a change to subheadings 2008.19 through 2008.99 from any other chapter, except as provided for in chapter rule 1 for chapter 20." Chapter rule 1 for chapter 20 states, in pertinent part, that:
Fruit, nut and vegetable preparations of headings 2001 through 2008 that have been prepared or preserved by freezing, by packing (including canning) in water, brine or natural juices, or by roasting, either dry or in oil (including processing incidental to freezing, packing or roasting) shall be treated as originating only if the fresh good were wholly obtained or produced entirely in the territory of Korea or of the United States, or both.
You believe that Chapter Rule 1 for Chapter 20, GN 33(o), is inapplicable to the mixed nuts because the non-originating nuts are dried when they are imported and the rule specifically references “fresh” goods. You note that the HTSUS distinguishes between fresh and dried nuts, as evidenced by the heading text of heading 0801, HTSUS, which provides for, among other things, “Brazil nuts and cashew nuts, fresh or dried”. You believe, for purposes of application of the Chapter Rule, that fresh goods should be distinguished from dried goods.
In addition, you cite New York Ruling Letter (“NY”) 228118, dated August 8, 2012, in which CBP determined that raw, salted cashew nuts imported into Canada from non-North American Free Trade Agreement (“NAFTA”) countries, and roasted and salted in Canada, were originating goods under NAFTA and qualified for NAFTA preferential duty treatment. In that ruling, CBP found that GN 12(s)(ii), which is similarly worded to Rule 1 for Chapter 20, was not triggered because the nuts additionally underwent salting after they had been roasted. You state that, in this case, the imported nuts were similarly salted after roasting and believe, therefore, that the outcome should be the same as in NY 228118, that is, preferential duty treatment should be granted to the mixed nuts under the UKFTA .
In this case, raw, dried cashew nuts were imported from India, Vietnam, or Brazil, and raw, dried Brazil nuts were imported from Bolivia or Peru. We assume that the nuts were dried in the countries in which they were grown and that their countries of origin are the countries in which they were dried and from which they were imported. We note, however, that even if the nuts were not grown in the countries in which they were dried, mere drying does not confer origin and the origin of the nuts remains the countries in which they were grown.
As provided by Chapter Rule 1 for Chapter 20, the origin of fruits, nuts and vegetables of heading 2008, HTSUS, prepared or preserved by freezing, packing or roasting is determined by the origin of the fruit, nut, or vegetable in its “fresh” state, that is, its state prior to being frozen, packed, or roasted. In order for prepared nuts of heading 2008, HTSUS, to be originating, the Chapter Rule requires that the “fresh goods” (nuts) used to make the nut preparation be wholly obtained or produced entirely in Korea or the United States or both. Whether the nuts were dried when imported is not a consideration under the rule. Furthermore, salting or processes incidental to roasting does not confer origin under the Chapter Rule because origin is determined only by the origin of the fresh good. Given the foregoing, the dried cashew and Brazil nuts may not be treated as originating because they do not meet the requirements of the Chapter Rule, that is, they were not wholly obtained or produced entirely in Korea or the United States or both as fresh nuts. Accordingly, HQ H240383 is correct, and is hereby affirmed.
We note that NY 228118 was decided by reference to the NAFTA, not the UKFTA. It is therefore inapplicable to rulings decided under the UKFTA, even though the language of the agreements may be similar. In addition, we note that in the case of NAFTA, there is the additional wording “merely” in the product specific rule exception, which is not the situation with the UKFTA.
HOLDING:
HQ H240383 is affirmed. The imported mixed nut mixture is not eligible for duty preference treatment under the UKFTA.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division