WAR-3-01/WAR-3-02/FOR-2-01/CON-9-04
CO:R:C:E 225490 TLS
District Director
U.S. Customs Service
P.O. Box 1490
St. Albans, Vermont 05478
RE: Internal Advice request concerning manipulation or
manufacture in a foreign trade zone (FTZ); admissibility of
exported domestic merchandise in an FTZ; transfer of bonded
warehouse inventory to an FTZ; 19 U.S.C. 1562; 19 U.S.C. 81c(a);
19 CFR 146.33; 19 CFR 141.2; 19 CFR 146.44(d); United States v.
National Sugar Refining Co., 39 CCPA 96 (1951); Tropicana Food
Products, Inc. v. United States, 789 F. Supp. 1154 (CIT 1992);
M.H. Garvey Co. v. United States, 15 Cust. Ct. 130 (1945).
Dear Sir:
This office has received the above-referenced request for
internal advice as provided for under Customs regulations. We
have considered the request and have made the following decision.
FACTS:
Your letter of June 16, 1994 states that a company has
proposed that certain operations be performed in an FTZ. The
company operates an FTZ in your district. It manufactures milk
supplements, two of which, Enercal and Promil, are manufactured
in a bonded warehouse in another district. Some of the product
manufactured in the bonded warehouse was recently rejected upon
arrival after exportation because it was discovered that some of
it may contain salmonella. These products are also manufactured
in the subject FTZ on an export-only basis.
The company would like to import the rejected merchandise
into the subject FTZ and move its existing inventories from the
bonded warehouse to the FTZ. The inventories would be reworked
into the manufacturing the process. The products are in powder
form and require reliquefying, mixing with existing raw
materials, drying, and repackaging for export. The inventory
product being introduced into the process for reprocessing would
be the same as the product being produced by this process.
ISSUES:
Whether the proposed transaction is a manipulation or
remanufacture.
Whether the inventory product from the class-6 bonded
warehouse that was exported and returned may be entered into the
FTZ for reprocessing.
Whether the exported product from the class-6 bonded
warehouse may be imported directly to the FTZ for reprocessing.
LAW AND ANALYSIS:
There are two groups of products. The infant food product
that was exported and the infant food product that was made in a
class 6 bonded warehouse.
The proposal is to bring both groups into a subzone for
heat-treatment to eliminate salmonella contamination. It is
clear that the product sent abroad was exported. There was an
intent to join that product to the commerce of a foreign country
and it had actually reached the countries involved. The
rejection of importation by those countries would not nullify the
fact of exportation. In the case of U.S. v. National Sugar
Refining Co., 39 CCPA 96 (1951), the court held that sugar which
was returned to the U.S. after a shipwreck had been exported
based on the company's intent to join that sugar to a foreign
country when coupled with the physical movement out of the U.S.
The same principles are applicable here. It is equally clear
that the subsequent return to the U.S. would be an importation.
See 19 CFR 141.2. As such, that exported product is eligible for
admission into the subzone.
The second group has not been exported and is in a Customs
bonded warehouse. Generally, goods in a Customs bonded warehouse
are not eligible for admission into a foreign trade zone except
under the fourth proviso to 19 U.S.C. 81c(a). That statute has
been implemented by 19 CFR 146.44(d). It provides that goods
which had been entered for warehousing so as to avoid entry into
U.S. commerce may be removed from such a warehouse for admission
only in zone-restricted status. Admission in zone-restricted
status is limited to storage, destruction, or exportation.
Admission of the infant food product for heat-treatment would not
be eligible if the product was in zone-restricted status.
However, there is an exception to that general rule. Goods can
be put into a zone temporarily for manipulation under 19 U.S.C.
1562. That statute permits a product to be cleaned, sorted,
repacked, or otherwise changed in condition, but not
manufactured. The question is whether the heat treatment of the
infant food product falls within those exemplars. The statutory
language was interpreted in the case of Tropicana Food Products,
Inc. v. United States, 789 F. Supp. 1154 (CIT 1992). In that
case, the court held that blending of orange juice concentrates
to achieve desired Brix to acid ratios changed the fundamental
character of the imported unblended concentrate. In concluding
that the blending operation was not a permitted manipulation, the
court analyzed the exemplars in the statute. Clearly, "blending"
was not one of the listed terms. The court also held that
"blending" was not analogous to "cleaning, sorting, or repacking"
so that the phrase "or otherwise changed in condition" did not
apply.
In this case, the 22-second heat treatment does not change
the structure or purpose of the infant food product. In the case
of M.H. Garvey Co. v. United States, 15 Cust. Ct. 130 (1945), the
court defined cleaning to be the process of mechanically or
otherwise eliminating dirt or other foreign substances from
imported merchandise. That court, at pages 138-140, noted with
approval various cases involving bleaching, combing, and washing
with water and acids that are considered to be cleaning. The
proposed heat treatment to eliminate the salmonella contamination
is analogous. Therefore, the infant food product at the Customs
bonded manufacturing warehouse is eligible to be temporarily
deposited in the subzone in accordance with 19 CFR 146.33.
HOLDING:
The heat treatment process to remove salmonella
contamination is a manipulation as cleaning.
The infant food product that was exported may be admitted
into a foreign trade zone as imported merchandise.
The infant food product in a bonded warehouse may be
temporarily deposited in a foreign trade zone pursuant to 19 CFR
146.33 to be cleaned as permitted by 19 U.S.C. 1562.
This decision should be mailed by your office to the
internal advice requester no later than 60 days from the date of
this letter. On that date the Office of Regulations and Rulings
will take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS and to the public
via the Diskette Subscription Service, Lexis, Freedom of
Information Act, and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division