OT:RR:CTF:VS H315291 AP
Maureen A. Celmer
Welke Customs Brokers
36 Delaware St.
Tonawanda, NY 14150
RE: Ground Date Sugar Powder; Country of Origin; Substantial Transformation; GSP; Subheading 9802.00.50
Dear Ms. Celmer:
This is in response to your October 6, 2020 ruling request, filed on behalf of Liva Foods, Inc. (the “importer”), regarding: (1) the country of origin of ground date sugar powder produced from raw dates; (2) the eligibility of the merchandise for duty exemption under the Generalized System of Preferences (“GSP”) when imported into the United States from Tunisia; and (3) the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”) to the ground sugar powder repackaged in Canada and reimported into the United States.
FACTS:
The merchandise at issue is ground date sugar powder used as a general sweetener or as a sugar substitute for baking, sauces, marinades, ice cream, and dessert toppings. It is light brown in color, with a very fine granular texture, comprised of 100 percent certified organic dates, with no additives or fillers. The ground sugar powder is made from raw dates grown in Tunisia classifiable in subheading 0804.10.40, HTSUS. The ground sugar powder itself is classified in subheading 1106.30.40, HTSUS. You present two scenarios.
In scenario 1, the raw dates are grown, inspected, de-pitted, washed, and sundried or dehydrated in Tunisia. They are imported into the U.S. under subheading 0804.10.40 to be ground into a fine powder, sieved through a micron sieve, passed through a metal detector, and packaged into bulk polypropylene 22 kg bags. Then, the ground date sugar is sent to Canada to be repackaged using Canadian materials for retail sale in Canada and the U.S. Some of the repackaged sugar powder is reimported into the U.S. from Canada.
In scenario 2, the dates are grown and fully processed into ground sugar powder in Tunisia. The sugar powder is imported into the U.S. under subheading 1106.30.40 packed in bulk polypropylene 22 kg bags. The ground date sugar is sent to Canada where it is repackaged using Canadian materials for retail sale in Canada and the U.S. Some of the repackaged ground sugar powder is reimported into the U.S. from Canada.
ISSUES:
What is the country of origin of the ground date sugar powder processed in Tunisia and the U.S.?
Do the raw dates and the ground date sugar powder qualify for duty exemption under the GSP when imported from Tunisia into the U.S.?
Once repackaged in Canada, will the returned ground date sugar powder qualify for tariff treatment pursuant to subheading 9802.00.50, HTSUS?
LAW AND ANALYSIS:
Country of Origin of the Ground Sugar Powder
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides, in relevant part:
(a) Marking of articles Except as hereinafter provided, 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 container) will permit in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article.
Part 134 of the CBP Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements of 19 U.S.C. § 1304. Title 19, Section 134.1(b) defines “country of origin” as “the 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 this part; ….”
A substantial transformation occurs “when as a result of a process an article emerges, having a distinctive name, character or use” from the original material subjected to the process. Belcrest Linens v. United States, 741 F.2d 1368, 1372 (Fed. Cir. 1984). A substantial transformation will not result from a minor manufacturing or combining process that leaves the identity of the article intact. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d per curiam, 702 F.2d 1022 (Fed. Cir. 1983) (adding a finished shoe upper to the outer sole of a shoe did not result in a substantial transformation of the upper); see also Nat’l Juice Prods. Ass’n v. United States, 10 CIT 48, 628 F. Supp. 978 (1986) (imported orange juice concentrate was not substantially transformed by post-importation processing that created frozen orange juice concentrate and reconstituted orange juice).
In Koru North Am. v. United States, 12 CIT 1120, 701 F. Supp. 229 (1988), the court held that headed and gutted New Zealand fish underwent a substantial transformation into processed frozen quick-frozen fish fillet in South Korea. The processing in South Korea consisted of thawing, skinning, boning, trimming, glazing, refreezing, and packaging. The court noted that while the fish arrived in South Korea with the look of a whole fish, when it left South Korea it no longer possessed the essential shape of the fish and was transformed into a new article of commerce. The whole fish was trimmed of fat lines and impurities, glazed to preserve its moisture and enhance its shelf life, and frozen to protect it from spoilage. These changes went “to the fundamental nature and character of the fish; the fish ha[d] been transformed, both in name and character.” Koru North Am., 12 CIT at 1127, 701 F. Supp. at 235.
In Headquarters Ruling Letter (“HQ”) 733814, dated June 24, 1991, Customs concluded that the manufacture of instant or soluble coffee from green coffee beans effected a substantial transformation of the beans because the processing changed the essential shape and character of the green coffee beans and resulted in a new product, instant coffee. The ruling noted that if in Nat’l Juice Prods. Ass’n, supra, the imported product was “fresh oranges, which were then processed into concentrate, the result would likely be the one reached in Koru and here.”
Under scenario 1, the raw dates are grown, inspected, de-pitted, washed, and sundried/dehydrated in Tunisia. In the U.S., the dates will be ground into a fine powder, sieved through a micron sieve, passed through a metal detector, and packaged into bulk bags. We find that a substantial transformation occurs in the U.S. As in Koru North Am. and HQ 733814, the Tunisian raw dates are substantially transformed into a processed retail product (ground sugar powder) in the U.S. These changes go to the “fundamental nature and character” of the dates. Koru North Am., 12 CIT at 1127, 701 F. Supp. at 235. Accordingly, the ground sugar powder will be considered a product of the U.S. Furthermore, repackaging in Canada will not change the origin. Similarly, under scenario 2, the processing of the dates into ground sugar powder will occur in Tunisia, and the final product will be considered a product of Tunisia.
GSP Eligibility of the Raw Dates and Sugar Powder Imported from Tunisia
Under the GSP, eligible articles, which are the growth, product, or manufacture of a designated beneficiary developing country (“BDC”) and are imported directly into the customs territory of the U.S. from a BDC, may receive duty-free treatment if the sum of: (1) the cost or value of materials produced in the BDC, plus (2) the direct costs of the processing operations performed in the BDC, is equivalent to at least 35 percent of the appraised value of the article at the time of entry into the U.S. See 19 U.S.C.
§ 2463(a)(2)(A).
Pursuant to General Note (“GN”) 4(a), HTSUS, Tunisia is a designated BDC for GSP purposes and may be afforded preferential tariff treatment if the imported raw dates or ground sugar powder are classified in a GSP-eligible provision containing SPI Code A. The raw dates imported from Tunisia are classified under subheading 0804.10.40, which is a GSP eligible provision. The ground date sugar powder imported from Tunisia is classified in subheading 1106.30.40, which is also a GSP eligible provision.
Similar to marking, the “product of” requirement under the GSP means that to receive duty-free treatment, an article either must be made of materials “wholly the growth, product or manufacture of” the BDC, or if made of materials imported into the BDC, those materials must be substantially transformed in the BDC into a new and different article of commerce. See 19 C.F.R. § 10.176(a). The raw dates imported from Tunisia to the U.S. will be considered “wholly the growth, product or manufacture of” Tunisia. Similarly, the ground sugar powder processed from Tunisian raw dates in Tunisia will either be considered “wholly the growth, product or manufacture” or to have undergone a substantial transformation (similar to the processing that occurs in the U.S. in scenario 2) in Tunisia.
With regard to the 35 percent value-content requirement, if a product is “wholly the growth, product or manufacture” of a BDC, we may presume that this requirement has been met. See HQ H301723, dated Nov. 8, 2019; HQ W563490, dated May 18, 2007. Here, the 35 percent value-content requirement is presumed to have been met Nonetheless, upon importation from Tunisia into the U.S., the importer will need to submit satisfactory evidence that the value-content requirement has been met.
Subheading 9802.00.50 Treatment
In both scenarios, ground date sugar in 22 kg bags is shipped to Canada where it is repackaged into retail bags. Subheading 9802.00.50, HTSUS, provides a full duty exemption for articles returned to the U.S. after having been repaired or altered in Canada. While regulations for the USMCA have not yet been issued, the existing and still valid regulations for the North American Free Trade Agreement (“NAFTA”) under 19 C.F.R. § 181.64(a) remain instructive. Section 181.64(a) defines “repairs or alterations” for purposes of NAFTA as:
… restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential character of, or create a new and commercially different good from, the good exported from the United States.
In HQ 556555, dated Apr. 15, 1992, individually shrink-wrapped blank recording media from Japan and France was imported into the United States, and then exported to Mexico for repackaging in plastic bags, plastic sleeves and cardboard trays. CBP determined that to qualify for subheading 9802.00.50 treatment, an article had to be advanced in value or improved in condition and that “the mere repacking of an article [did] not advance its value or improve its condition.” Thus, repackaging is not considered to be an “alteration” under subheading 9802.00.50, HTSUS.
In the instant matter, the sugar powder in both scenarios is exported to Canada solely for repackaging and is not advanced in value or improved in condition there. Therefore, as in HQ 556555, the repackaging in Canada does not constitute an “alteration” within the meaning of 19 C.F.R. § 181.64(a) and the repackaged sugar powder reimported into the U.S. will not qualify for subheading 9802.00.50 treatment.
However, you may wish to reimport the ground date sugar powder under subheading 9801.00.10, HTSUS. Subheading 9801.00.10 provides for: “Products of the United States when returned after having been exported, or any other products when returned within 3 years after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad.” Repackaging in Canada is not considered to be an advancement in value or an improvement in condition. See HQ 559611, dated May 7, 1996 (noting that “the packaging abroad of U.S.-made products will not preclude classification under subheading 9801.00.10, HTSUS, when there is no improvement in condition or advancement in value of the products themselves ….”); HQ 555685, dated Aug. 15, 1990 (U.S.-origin infant formulas exported to Canada to be packaged into consumer size cans were eligible for classification under subheading 9801.00.10 when they were imported into the U.S.). In scenario 1, where U.S.-origin sugar power is exported from the U.S. to Canada, subheading 9801.00.10 will be applicable, and in scenario 2, the Tunisian-origin sugar powder may be returned duty-free provided it is returned within three years and all other documentary requirements are met.
Further, if the Canadian customs authorities determine that the repackaged ground sugar powder processed in the U.S. under scenario 1 is eligible for USMCA preferential tariff treatment pursuant to GNs 11(b)(iii) and 11(o)/Chapter 11, HTSUS, then it would be duty free when reimported into the U.S., and provided all other requirements are satisfied.
HOLDING:
Based on the information provided, the countries of origin of the ground date sugar powder are the United States (scenario 1) and Tunisia (scenario 2).
The goods imported into the U.S. from Tunisia (scenarios 1 and 2) are eligible for preferential tariff treatment under the GSP, provided the 35 percent value-content requirement is met at the time of entry.
The repackaging of the ground sugar powder in Canada does not constitute an “alteration” within the meaning of 19 C.F.R. § 181.64(a) and the sugar powder reimported into the U.S. will not qualify for subheading 9802.00.50, HTSUS treatment.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a [CBP] field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
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 transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch