CLA-2 CO:R:C:V 555524 DSN
Mr. Simbhoonath Maharaj
Production Manager
Flavorite Foods Ltd.
P.O. Box 597
Port-of-Spain
Trinidad and Tobago, West Indies
RE: CBERA treatment of frozen vegetable soup
Dear Mr. Maharaj:
This is in response to your letter of November 7, 1989, and
January 4, 1990, in which you request a ruling that frozen
vegetable soup produced in Trinidad and Tobago is entitled to
duty-free treatment under the Caribbean Basin Economic Recovery
Act (CBERA) (19 U.S.C. 2701-2706).
FACTS:
According to your submission, the merchandise at issue,
referred to as "Callaloo Soup," is a semi-viscous vegetable
soup. The ingredients include dasheen leaves, ochroes, coconut
milk, refined cane sugar, soy bean oil, salt, chives, thyme,
garlic, black pepper, monosodium glutamate and water. All
ingredients are added together and boiled to a desired
consistency. The soup is packaged hot into microwaveable bags
which are then quickly frozen and packaged in small boxes and
placed in cartons for export to the U.S.
The cost breakdown in U.S. dollars is as follows:
Dasheen leaves 0.173
Ochroes 0.138
Coconuts 0.061
Cane sugar 0.002
Chives, thyme, black pepper,
garlic 0.036
Salt 0.001
Soy bean oil 0.017
Monosodium glutamate 0.022
Packaging 0.105
Direct labor 0.050
Direct supervision 0.021
Power 0.016
Fuel (propane) 0.007
_____
TOTAL 0.649
You state that the dasheen leaves, ochroes, coconut, and
sugar are obtained from indigenous sources, (wholly the growth of
Trinidad and Tobago) while the chives, thyme, black pepper and
garlic originate from Indonesia. The salt and the soy bean oil
are of U.S. origin and the monosodium glutamate originates
either in Brazil or Thailand.
ISSUE:
Whether frozen vegetable soup produced in Trinidad and
Tobago is entitled to duty-free treatment under the CBERA when
imported into the U.S.
LAW AND ANALYSIS:
Under the CBERA, eligible articles the growth, product or
manufacture of designated beneficiary countries (BC's) may
receive duty-free treatment if such articles are imported
directly to the U.S. from a BC, and if the sum of 1) the cost or
value of the materials produced in a BC or BC's, plus 2) the
direct cost of processing operations performed in a BC or BC's,
is not less than 35% of the appraised value of the article at
the time it is entered into the U.S. See 19 U.S.C. 2703(a).
Trinidad and Tobago is a BC. See General Note 3(c)(v)(A),
Harmonized Tariff Schedule of the United States Annotated
(HTSUSA). Based on your description, it appears that the soup
would be classified under subheading 2104.10.0060, HTSUSA, which
provides for soups and broths and preparations therefor, other,
other, which is a CBERA eligible provision. You state that the
frozen soup will be exported from Trinidad and Tobago directly to
the U.S. Accordingly, the soup will receive duty-free treatment
if it is considered a "product of" Trinidad and Tobago and the
35% value-content requirement is met.
Based on your cost figures, the sum of the cost of the
indigenous ingredients and the direct processing costs clearly
will exceed 35% of the estimated appraised value of the imported
soup. Therefore, the only remaining question is whether the soup
is considered to be a "product of" Trinidad and Tobago.
Where an article is produced from materials imported into a
BC from non-BC's, as in this case, the article is considered a
"product of" the BC only if those materials are substantially
transformed into a new and different article of commerce. See
section 10.195(a), Customs Regulations (19 CFR 10.195(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). No article shall be considered to be a "product of" a BC
by virtue of merely having undergone simple combining or
packaging operations or mere dilution with water. See 19 CFR
10.195(a).
We find that mixing the eleven different ingredients with
water, boiling the mixture until the desired consistency is
achieved, packaging the soup for retail sale, and quickly
freezing the product results in a substantial transformation of
those ingredients into a new and different article of commerce--
frozen vegetable soup--which is different in name, character and
use from the separate ingredients. Each ingredient loses its
separate identity when it is combined with the other ingredients
and water, boiled, and then frozen to create the final product,
which has its own distinct commercial and physical identity.
Moreover, this process clearly is more than a simple combining
or packaging operation, as indicated by 19 CFR
10.195(a)(2)(ii)(D), which provides that a such an operation
shall not be taken to include a "simple combining or packaging
operation ... coupled with any other type of processing such as
testing or fabrication ...." In this case, not only are the
combined ingredients subjected to boiling and freezing
operations, but certain of the ingredients sourced from Trinidad
and Tobago are subjected to operations, such as de-stemming,
chopping and crushing, prior to being combined with the other
ingredients. Therefore, it is our opinion that the frozen
vegetable soup is a "product of" Trinidad and Tobago.
We have enclosed for your information a copy of the Customs
Regulations relating to the CBERA (19 CFR 10.191-10.198).
HOLDING:
The frozen vegetable soup will be entitled to duty-free
treatment under the CBERA when imported into the U.S.
Sincerely,
John Durant, Director
Commercial Rulings Division
Enclosure