CLA-2 CO:R:C 555182 CW
Mr. Medford Alexander
Nadav, Inc.
11901 Ambleside Drive
Potomac, Maryland 20854
RE: Duty-free treatment of high fructose syrup under the
CBERA.Substantial transformation;sugar;cane molasses.
Dear Mr. Alexander:
This is in response to your letter of October 4, 1988,
requesting a ruling on the eligibility of high fructose syrup for
duty-free treatment under the Caribbean Basin Economic Recovery
Act (CBERA) (19 U.S.C. 2701-2706). We regret the delay in
responding to your request.
FACTS:
You state that a plant will be constructed in the Bahamas to
manufacture high fructose syrup and ethanol from cane molasses.
(Your ruling request relates only to the syrup). Approximately
75 to 80 percent of the cane molasses from which the high
fructose syrup is made is sourced from CBERA designated
beneficiary countries (BC's), while the remainder is sourced from
non-BC's, other than the U.S. The first step in the manufacture
of the syrup consists of pretreating the cane molasses by an
operation described as the "enzymatic inversion of the sucrose
content of the cane molasses to glucose and fructose." The next
step involves the chromatographic separation of the pretreated
molasses into a non-sugar fraction and a reducing sugars
fraction. Finally, the glucose in the reducing sugars fraction
is isomerized to fructose. The resultant product will be in the
form of a liquid or dry powder, and will have the properties and
specification of 55 percent high fructose corn syrup.
ISSUE:
Whether the high fructose syrup produced in the Bahamas is
entitled to duty-free treatment under the CBERA.
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LAW AND ANALYSIS:
Under the CBERA, eligible articles the growth, product, or
manufacture of a BC which are imported directly to the U.S. from
a BC qualify for duty-free treatment, provided the sum of (1) the
cost or value of materials produced in a BC or BC's, plus (2)
the direct costs of processing operations performed in a BC or
BC's, is not less than 35 percent of the appraised value of the
article at the time it is entered. See section 10.195(a),
Customs Regulations (19 CFR 10.195(a)).
An article is considered to be the growth, product, or
manufacture of a BC if it is produced exclusively from materials
which are wholly the growth, product, or manufacture of a BC or
BC's, or, if the article consists of materials imported into a BC
from a non-BC, those materials are substantially transformed in
the BC in the production of the article. See 19 CFR 10.195(a).
Similarly, the cost or value of materials which are used in the
production of the article may be counted toward the 35 percent
value-content requirement if they are either wholly the growth,
product, or manufacture of a BC or BC's, or have been
substantially transformed in a BC or BC's into a new or different
article of commerce, which is itself substantially transformed in
the production of the final article. See section 10.196(a),
Customs Regulations (19 CFR 10.196(a)).
A substantial transformation occurs when an article emerges
from a process with 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).
The Bahamas is a BC. See General Note 3(c)(v)(A),
Harmonized Tariff Schedule of the United States (HTSUS).
Moreover, the high fructose syrup to be imported appears to be
properly classifiable under subheading 1702.60.00, HTSUS, which
is a CBERA eligible provision. ("Other fructose and fructose
syrup, containing in the dry state more than 50 percent by weight
of fructose.")
As the high fructose syrup in this case will be made from
cane molasses sourced, in part (approximately 20-25 percent),
from non-BC's, the syrup will be considered to be the "product
of" the Bahamas only if the non-BC molasses are substantially
transformed in the Bahamas into a new or different article of
commerce. We find that this requirement clearly is satisfied
here. The pretreatment of the cane molasses by the enzymatic
inversion process, the chromatographic separation of the
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pretreated molasses into non sugar and reducing sugar fractions,
and the isomerization of glucose to fructose in the reducing
sugar fraction, results in a product (high fructose syrup) with a
new name and significantly different characteristics from the
cane molasses from which it is made. Moreover, the processing
operations in the Bahamas transforms cane molasses, which is a
multifunctional product, into a distinct article of commerce
suitable for specific uses.
Finally, there appears to be no question that the high
fructose syrup will meet the CBERA 35 percent value-content
requirement. The cost or value of the cane molasses originating
in BC's, which you state comprises approximately 75 to 80 percent
of the molasses used to produce the syrup, may be counted toward
the 35 percent minimum, as may the direct processing costs
incurred in the Bahamas.
For your information, we are enclosing a copy of the Customs
Regulations relating to the CBERA (19 CFR 10.191-10.198).
HOLDING:
Based on the information provided, high fructose syrup
produced in the Bahamas will be entitled to duty-free treatment
under the CBERA, assuming that it is imported directly to the
U.S. and that the 35 percent value-content requirement is
satisfied.
Sincerely,
John Durant
Director, Commercial
Rulings Division
Enclosure