MAR 02-05: RR:CR:SM 561242 MFC
Mr. Michael Capin
Capin Brokerage, Inc.
1315 North Industrial Park Avenue
Nogales, AZ 85621
RE: Request for NAFTA Marking Ruling; olives; country of origin marking; Article 509
Dear Mr. Capin:
This is in reference to your letter dated December 4, 1998, requesting a ruling on the country of origin marking requirements applicable to olives imported by your client, Early California Foods, Inc. (“ECF”), which is a Division of American Rice, Inc. ECF imports olives from Mexico for processing in the U.S. The final product consists of canned olives labeled as “California-style Black Ripe Olive.” The olives may be pitted and/or sliced in the U.S. ECF asserts that as a result of the processing in the U.S., the imported Mexican-origin olives become products of the U.S.
FACTS:
ECF imports fresh green olives which are grown in Mexico. In Mexico, the olives are hand-picked and sized. The olives are then either placed into bins or into plastic drums containing water. The bins and drums are labeled “Product of Mexico.” You note that the olives as imported are unsuitable for immediate consumption and are classified in subheading 0709.90.3500, Harmonized Tariff Schedule of the United States (“HTSUS”), as fresh green olives in natural condition, and/or in subheading 0711.20.3800, HTSUS, as olives for further processing provisionally preserved but unsuitable in the state for immediate consumption.
If dry olives are imported into the U.S., you state that they are transferred into 20 ton storage containers in a solution using water, acetic acid and calcium chloride. If the olives are imported into the U.S. in plastic drums, you state that they are maintained in the solution in which they are received. In order to transform the olives into black ripe olives, the olives are transferred into 10 ton processing chambers and subjected to a sequential series of caustic soda washes, water washes and oxygen splurges. This process is calculated to turn the individual olive black and to remove the natural bitterness. After the color/debittering process is completed, the olives are sized, their seeds removed and the olives may or may not be sliced depending upon size and customer demand.
The olives are treated in a brine solution to remove foreign material, washed, and visually inspected. The olives are then emptied into a filter to be canned. After the olives are placed in a can, the product is weighed and salt brine is added. The can of olives is double-seamed, identified with a coding device and cooked. Depending upon the size of the container and the size of the olive, the cooking time will vary from 16 minutes to 4 hours at 260 degrees F. The cans are cooled to approximately 100 degrees F. The cooled cans are taken to the warehouse for labeling and casing.
You state that after processing, the ripe black olives are classified either in subheading 2005.70.50, HTSUS, or subheading 2005.70.60, HTSUS.
Your request states that the pickling process of the olives serves to facilitate oxidation and polymerization of the natural phenolic compounds to form black pigment. Treatment with alkalies and aeration of the olives between such treatment develops the black color.
ISSUE:
What is the country of origin of the subject olives after the processing in the U.S.?
LAW AND ANALYSIS:
The marking statute, section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article 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, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304.
Section 134.1(b), Customs Regulations, defines “country of origin” as the country of manufacture, production, or growth. In order to change the country of origin, further work or material added to the article in another country must effect a substantial transformation. However, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. 19 CFR §134.1(b).
Section 134.1(j) provides that the “NAFTA Marking Rules” are the rules promulgated for the purposes of determining whether a good is a good of a NAFTA country. A “good of a NAFTA country” is an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules. 19 CFR §134.1(g).
Section 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. You have stated that the containers of the imported olives are marked as products of Mexico. The question is whether the country of origin remains Mexico after processing in the U.S.
Section 102.11, Customs Regulations, (19 CFR §102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11(a) provides that:
“[t]he country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.”
The olives as imported are products of Mexico. However, to determine whether the olives are considered to be goods of the U.S. after processing in the U.S., we must apply the above provisions. Subparts (1) and (2) do not apply because the olives are neither wholly obtained and produced nor produced exclusively from domestic materials. Subpart (3) requires us to analyze whether the olives undergo a change in tariff classification which satisfies section 102.20.
After processing in the U.S., the ripe black olives are stated to be classifiable under either subheading 2005.70.50, HTSUS, or subheading 2005.70.60, HTSUS. The applicable change in tariff classification for heading 2005 set out in section 102.20(d), Section IV: Chapters 16 through 24, provides: 2001-2007 ... A change to heading 2001 through 2007 from any other chapter.
Assuming the classifications stated by the importer are correct, the required tariff shift occurs. However, the Chapter 20 Note states:
Notwithstanding the specific rules of this chapter, fruit, nut and vegetable preparations of Chapter 20 that have been prepared or preserved merely 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 a good of the country in which the fresh good was produced.
In HQ 560991 (September 21, 1998), artichokes imported from Mexico were canned in the U.S. This canning process involved putting the artichokes and brine into the cans which were then conveyed into an exhaust box which heated the imported artichokes to a temperature of 190 degrees F. The can lids were double seamed onto the cans, and the cans were cooled. Customs found that this processing did not exceed the preparation of canning “in water, brine or natural juices” described in the Chapter 20 Note. Accordingly, the processing directly related to the canning of the olives in this case would not confer U.S. origin on the Mexican olives.
However, the “ripe olive process” described by the importer is a process unique to olives. As noted above, this process is unrelated to the canning in brine operation and transforms the olives into black ripe olives by a sequential series of caustic soda washes, water washes and oxygen splurges. Therefore, as the “ripe olive process” exceeds the operations described in the Chapter 20 Note, we find that the olives become a product of the U.S. as a result of the processing performed in the U.S. Accordingly, the olives are excepted from country of origin marking. However, use of the phrase "Made in U.S.A." is within the jurisdiction of the Federal Trade Commission. Therefore, you should contact the FTC regarding the appropriateness of the use of this phrase. The FTC address is: Federal Trade Commission, Division of Enforcement, 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20508.
HOLDING:
Based on the information submitted and according to the NAFTA Marking rules, the finished, canned olives are a product of the U.S. pursuant to 19 CFR §102.11(a)(3) and the “ripe olive process” exceeds the preparations described in the Chapter 20 Note of 19 CFR §102.20(d).
A copy of this ruling should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division