CLA-2 OT:RR:CTF:TCM H213362 RES
Mr. Marc E. Sorini
McDermott Will & Emery
600 Thirteenth Street, NW
Washington, D.C. 20005-3096
RE: Country of Origin Marking of Hard Apple Cider made from Apple Wine imported from a European Union Member Country.
Dear Mr. Sorini:
This is in response to your letter dated March 16, 2012, on behalf of your client Company A, for a ruling concerning the country of origin marking of hard apple cider made from apple wine imported from a European Union member country.
FACTS:
Company A plans to import an article it calls “apple wine” from a European Union member country. The apple wine is described by the importer as made by the fermentation of crushed apples and sugar and has an alcohol content of approximately 13.5%. The importer states that the apple wine is unflavored, dry, spirituous, unsweetened, undiluted, unpreserved, uncarbonated, and is used in the manufacture of other alcohol beverages. The imported apple wine will be processed to make a hard apple cider product and other flavored hard ciders, such as pear, by adding flavoring compounds other than apple. The following ingredients will be mixed in the imported apple wine: sugar, malt extract, fruit juice syrups, fruit flavorings, coloring, flavor enhancers, preservatives, carbon dioxide, malic or citric acid, and specially-treated water. After the ingredients are mixed, the product is filtered to remove solids and then bottled.
ISSUE:
Whether the apple wine imported from a European Union member country is substantially transformed in the United States for the purposes of country of origin marking?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304 (2011)), provides that unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) 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. Congressional intent in enacting 19 U.S.C. § 1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940) (emphases added).
Part 134, U.S. Customs and Border Protection (CBP) Regulations (19 C.F.R. § 134 (2011)) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b) defines “country of origin” as:
[T]he country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of [the marking regulations]…
A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use that differs from the original material subjected to the process. M.B.I. Merchandise Industries, Inc. v. United States, 16 C.I.T. 495, 502 (1992) (citing United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267, 270 (C.A.D. 98) (1940)). The question of whether a substantial transformation occurs for marking purposes is a question of fact; to be determined on a case-by-case basis. National Hand Tool Corp. v. United States, 16 C.I.T. 308, 311 (1992) (quoting Uniroyal Inc. United States, 3 C.I.T. 220 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983)).
An instructive country-of-origin marking case involving a similar situation as the articles at issue here is National Juice Products Association v. United States, 10 C.I.T. 48 (1986). In National Juice, the Court of International Trade (“CIT”), upheld CBP’s ruling that imported “manufacturing orange juice concentrate” was not substantially transformed by post-importation processing that created frozen orange juice concentrate and reconstituted orange juice. The imported orange juice concentrate was mixed with purified and dechlorinated water, orange essences, orange oil, and fresh juice. National Juice, 10 C.I.T. at 57. Noting that the orange juice concentrate lacked the characteristic flavor of oranges because the oils and flavoring ingredients were lost during the manufacturing process, the court held that the addition of water, orange essences, and oils to the concentrate, while making it suitable for retail sale, did not change the fundamental character of the product, that it was still essentially the product of the juice of oranges. Id. at 60-61. Citing Uniroyal, the court noted that the imported manufacturing concentrate was the “very essence” of the post-importation processed retail product, because the retail product was “essentially the juice concentrate derived in substantial part from foreign grown, harvested, and processed oranges.” Id. at 61.
As discussed supra, the hard apple cider end product is produced through the process of mixing imported apple wine with various flavoring, carbonation, sugars, and other ingredients. The threshold question is whether the imported apple wine loses its identity as a result of the processing in the United States. To address this issue, we analyze the extent that the apple wine undergoes a change in name, character, and use.
Hard apple cider is known as “fermented apple juice” while apple wine also means, in general, “fermented alcoholic beverage made from apple juice.” Even though the name of the finished end product is “hard apple cider” while the name of the imported article is “apple wine”, there is technically no change in the name of the apple wine because in Europe “cider” refers to fermented apple juice that contains varying levels of alcohol (except in Germany, where it is called “apfelwein” as the German language does not have a word for “cider”).
The character of the apple wine is defined by its chemical composition and flavor. The addition of the preservatives, flavoring, flavoring enhancers, coloring, preservatives, sugar, carbonation, malic/citric acid, and water, does not chemically alter the apple wine: no chemical transformation takes place such as what occurred during the fermentation process to make the apple wine (cider) from apples. The added flavor doesn’t change what the flavor of apple wine is, but increases the level/intensity of the taste, e.g., a product made from apples is expected to have an apple flavor. Both the imported apple wine and the hard apple cider end product, no matter the flavoring of it, are products of the same fermented apple juice. The apple wine may be “unflavored” as the importer has stated, but apple wine is not flavorless. Similar to the situation in National Juice in which the orange juice concentrate loses some of its flavoring during the concentrate manufacturing process, apple wine loses some of its delicate flavor during the juicing of apples and during the fermentation process.
Furthermore, the only notable difference between apple wine and hard apple cider appears to be the alcohol by volume (“ABV”) percentage. Hard apple cider, generally, has 7% ABV or less while anything above 7% ABV is considered apple wine. A minor difference is that hard apple ciders are also carbonated, apple wine is typically not. However, besides the ABV, apple wine and hard apple cider are essentially the same (with varying degrees of sweetness and taste depending on the specific end products as some apple wine products are as sweet as hard apple cider or sweeter). The essence of the hard apple cider end product is, as its name indicates, fermented apple juice. The imported apple wine is, by definition fermented apple juice and hence, imparts the essential character to the hard apple cider by providing the actual “cider”—fermented apple juice—to the retail hard apple cider product. The hard apple cider is derived from the foreign grown, harvested, juiced, and fermented apples.
Thus, as in National Juice, adding flavoring, preservatives, coloring, and carbonation to the apple wine to make it suitable for retail sale as a hard cider, does not change the essence, hence character, of the apple wine, which is a product of the fermentation of apples. The character of the apple wine is not substantially changed.
The use of the apple wine as an apple flavored alcoholic beverage is not changed by the after-importation process to make a hard apple cider, which still is an apple flavored alcoholic beverage. The primary difference is the ABV, which is merely lowered by dilution. Any other differences in flavor strength, sweetness, and dryness between the imported apple wine and hard apple cider is a matter of taste preference characteristics altered by mixing in the ingredients. Furthermore, although mixing the various ingredients in the apple wine makes it more palatable, and hence marketable, to consumers on a retail level, this still does not alter the basic identity of the apple wine as imported. Both are products of the fermentation of apple juice, with the only difference being the ABV. Even though the imported apple wine is not marketed to consumers as imported, the apple wine’s sole use and function is predetermined at the time of importation, which is that of an alcoholic beverage made from the fermentation of apple juice.
A factor to consider in analyzing the degree of a change in use and name is whether there is a change in classification between the imported and processed articles. Superior Wire v. United States 11 C.I.T. 608, 614 (1987) (citing Belcrest Lines v. United States, 741 F.2d 1368, 1372-73 (Fed. Cir. 1984)). Whether there is a change in tariff classification between an imported article and the resulting finished product, although not dispositive, is a factor to be considered on the issue of whether a substantial transformation occurred. Id. Apple wine is classified under heading 2206, HTSUS, as a fermented beverage. Likewise, hard apple cider is classified under the same heading. See EN 22.06 (defining “cider” as being “an alcoholic beverage obtained by fermenting the juice of apples”). Thus, the lack of change in tariff classification between the imported apple wine and hard apple cider in conjunction with the fact that both are alcoholic beverages made of fermented apple juice support a finding that there is no change in use between the imported and processed articles.
Company A cites to the HQ 562642, dated April 14, 2003, and HQ 562468, dated October 4, 2002, (“the vodka rulings”) in support of its substantial transformation claim. However, the production of vodka is distinguishable from the production of hard apple cider. The imported article in the vodka cases was grain neutral alcohol that underwent various processes to become the vodka final product. Grain neutral alcohol is an almost pure ethanol alcohol product made (fermented) from grain-based mash (any type of cereal grain) that has a very high ethanol content. A critical difference between the grain neutral alcohol in the vodka rulings and the apple wine here is that the grain neutral alcohol use and function is not predetermined at importation because it has many consumer and industrial uses. It is used to make many different consumer alcoholic beverages besides vodka, such as blended whiskey, cut brandy, gin, and is used to make non-consumable goods such as rubbing alcohol. In contrast, the use of apple wine is very limited and is generally predetermined at importation as the essential ingredient in hard apple cider and other ciders. Hard apple cider is in essence the same thing as the apple wine: both are technically an apple cider with alcohol. Furthermore, the vodka making process takes an article that is unfit for human consumption and creates one that is fit for human consumption. In contrast, apple wine is fit for human consumption upon importation. In addition, the grain neutral alcohol has to go through a distillation process that further alters the composition of the grain neutral alcohol while the apple wine is mixed with ingredients that do not fundamentally affect the chemical composition of the apple wine. Finally, the grain neutral alcohol and the vodka end product both have different classifications: heading 2207, HTSUS, versus heading 2208, HTSUS. Therefore, we find that the production of vodka in HQ 562642 and HQ 562468 is not analogous to the production of hard apple cider from apple wine on the issue of substantial transformation here.
The processing of apple wine here is also distinguishable from HQ 562522, dated November 20, 2002, involving the manufacturing of fruit drinks from fruit juices. In HQ 562522, two different imported fruit juices, orange and pineapple, were mixed together to form a new product. After the mixing, neither the orange or pineapple juices were distinguishable from each other in the new mixture; neither juice was the sole source of the end product’s flavor or provided the essential character of the resulting fruit drink. In contrast, the apple wine is the sole source of the essential character of the hard apple cider and is not diluted or mixed with any other type of fruit wine or juice. Therefore, HQ 562522 is not persuasive to the apple wine situation here.
The importer also indicated that it will make other flavored hard ciders, such as pear, by adding flavoring compounds other than apple. Although a change in flavor would change a part of the character and retail name but not the use, this change is not substantial enough to change the identity of the apple wine. Such flavored products are still hard ciders and the essence of the apple wine, regardless of the flavor, is left intact.
In summary, after examining all the factors, CBP finds that the imported apple wine is not substantially transformed during the post-importation mixing operations because its identity—primarily character and use—is left intact. Thus, Company A would not be considered the ultimate purchaser of the imported apple wine for purposes of 19 CFR 134.35(a). The ultimate purchaser of the imported apple wine would be the consumers who purchase hard apple cider (or any flavored cider) from Company A.
HOLDING:
Pursuant to 19 U.S.C. § 1304, the apple wine imported from a European Union member country and processed into hard cider is not substantially transformed in the United States. In accordance with 19 C.F.R. §§ 134.35(a) and (b), Company A is not considered the “ultimate purchaser” for purposes of 19 U.S.C. § 1304, and the hard cider is subject to the country of origin marking requirements provided for in the marking statute.
A copy of this ruling letter 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 CBP officer handling the transactions.
Sincerely,
Monika Brenner, Chief
Valuation and Special Programs Branch