MAR-2-05 CO:R:C:S W 558733 WAS
Ms. Diane Valine
Calavo Foods, Inc.
P.O. Box 751
Santa Paula, CA 93061
RE: Country of origin marking of frozen guacamole; Article 509; NAFTA; substantial transformation
Dear Ms. Valine:
This is in reference to your letters dated June 14, and July 25, 1994, concerning the country of origin marking of frozen guacamole made in the U.S. from either imported acidified avocado pulp from Mexico or imported avocados from Chile.
FACTS:
You state that Calavo produces frozen avocado guacamole at its plant in California. You have presented two different scenarios for our consideration. Under the first scenario, you state that fresh whole avocados will be imported from Chile to the U.S. You state that in the U.S., the avocados will be ripened and then processed into guacamole in your California plant. You describe the manufacturing process in the U.S. as follows:
In the U.S. avocados are received from packing houses. The fruit is sorted and placed in ripening rooms. After ripening, the fruit is chilled, washed and the seed and peel are removed. The avocado pulp is blended with ingredients such as water, citric and erythorbic acid, seasonings, chile peppers and other food ingredients. The blended product is filled into containers and frozen. You state that the avocado content of the finished product consists of approximately 75 percent avocado and 25 percent water and other food ingredients.
Under the second scenario, refrigerated, acidified Mexican pulp will be imported from Mexico into the U.S. You state that at the California plant, the acidified pulp may be mixed with California avocado pulp, seasonings, chile peppers and other food ingredients. The Mexican avocado pulp will consist of approximately 30 percent to 100 percent of the total avocado content; you state that this represents approximately 22.5 - 75 percent of the total guacamole product. You submit that, depending upon production requirements, under both scenarios, the Chilean or Mexican-origin product may be combined with California pulp, or the Mexican-origin pulp may be the sole fruit ingredient in the guacamole.
ISSUES:
(1) Are Chilean-origin avocados substantially transformed when they are ripened in the U.S. and mixed with other U.S.- origin ingredients to produce frozen guacamole?
(2) Is the frozen guacamole which is made in the U.S. from Mexican-origin acidified pulp and other U.S.-origin ingredients a good of the U.S. under the NAFTA Marking Rules?
LAW AND ANALYSIS:
I. Country of origin marking of frozen guacamole made from Chilean-origin avocados.
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. 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 U.S. 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. Friedlaender & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104.(1940).
Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines “country of origin” as the country of manufacture, production or growth of any article of foreign origin entering the U.S. 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 laws and regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked (see section 134.35, Customs Regulations).
With regard to the question of whether the Chilean-origin avocados are substantially transformed in the U.S. when they are ripened, made into pulp, and mixed with other U.S.-origin ingredients to produce guacamole, we find relevant Headquarters Ruling Letter (HRL) 555062 dated February 23, 1990. In HRL 555062, raw peanuts from Caribbean Basin Economic Recovery Act (CBERA) beneficiary countries (BC'S) were processed in a bonded warehouse in Puerto Rico into peanut butter. We found that the manufacture of peanuts into peanut butter clearly constituted a substantial transformation within the meaning of 19 CFR 134.1(b). We stated that, in addition to the name change, the character and use for the two products are entirely different. We found that, “although peanut butter is made from peanuts and has the taste of peanuts, the two products look different, have different consistencies and are used for different purposes; peanut butter as a spread and peanuts as food to ‘munch’ on.” Therefore, we held that the country of origin of the imported product was the country where the peanut butter was made.
Consistent with our holding in HRL 555062, we are of the opinion that the production of guacamole in the U.S. from imported avocados and other U.S.-origin ingredients results in a substantial transformation of the Chilean avocados. Although the guacamole is made from the avocado and has the taste of avocado, the two products are different in appearance, have different consistencies, and are used for different purposes. The frozen guacamole product has a different name, character and use from the imported avocados. Thus, the guacamole made from Chilean avocados as well as the guacamole made from both Chilean and U.S.-origin avocados are excepted from marking.
We note that avocados are listed on the J-List in section 134.33, Customs Regulations (19 CFR 134.33), as an article which is excepted from the requirements of country of origin marking in accordance with the provisions of section 304(a)(3)(J), Tariff Act of 1930, as amended (19 U.S.C. 1304(a)(3)(J)). However, if the avocados are imported in a container, the outermost container in which the avocados ordinarily reach the ultimate purchaser is required to be marked to indicate the country of origin of its contents in accordance with the requirements of subpart C of 19 CFR Part 134. Whether or not the guacamole may be marked with the words “Made from California Avocados” or “Made with California Avocados” label is a determination to be made by the Federal Trade Commission, not the Customs Service. We suggest that you contact that agency for a determination.
II. Country of origin marking of frozen guacamole made from Mexican-origin acidified pulp.
The country of origin marking requirements for a “good of a NAFTA country” are also determined in accordance with Annex 311 of the North American Free Trade Agreement (“NAFTA”), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993) and the interim amendments to the Customs Regulations published as T.D. 94-4 (59 Fed. Reg. 109, January 3,1994).
Section 134.1(b) of the interim regulations, defines “country of origin” as:
the country of manufacture, production, or growth of any article of foreign origin entering the U.S. 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”; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin (emphasis added).
Section 134.1(j) of the interim regulations, provides that the “NAFTA Marking Rules” are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) of the interim regulations, defines a “good of a NAFTA country” as an article for which the country of origin is Canada, Mexico or the United states as determined under the NAFTA Marking Rules. Section 134.45(a)(2) of the interim regulations, provides that “a good of a NAFTA country may be marked with the name of the country of origin in English, French, or Spanish.”
Section 134.35(b) of the interim regulations provides 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.
Part 102 of the interim regulations, sets forth the “NAFTA Marking Rules” for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the interim regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the interim regulations states 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.”
In this case, the applicable rule is section 102.11(a)(3) of the interim regulations. “Foreign Material” is defined in section 102.1(e) of the interim regulations as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” In order to determine whether the United States is the country of origin, we must look at those materials whose country of origin is other than the United States.
In the instant case, as the frozen guacamole is classified in subheading 2008.99.10, HTSUS, the change in tariff classification must be made in accordance with section 102.20(d), Section IV: Chapters 16 through 24 of the interim regulations, which states in part that:
A change to subheading 2008.19 through 2008.99 from any other chapter, provided that change is not the result of mere blanching of nuts.
Therefore, each foreign material incorporated in the frozen guacamole must come from a chapter outside of chapter 20, HTSUS. In the instant case, the frozen guacamole is classified ih subheading 2008.99.10, HTSUS, and the acidified avocado pulp is classified in 2008.99, HTSUS. Since the frozen guacamole and Mexican pulp are classified in the same chapter, the change in tariff classification requirement under section 102.11(a)(3) of the interim marking rules is not satisfied.
Since the country of origin is not determined by section 102.11(a) (incorporating section 102.20) of the interim regulations, the next step in the country of origin interim regulations hierarchy is section 102.11(b). Section 102.11(b) of the interim regulations states as follows:
Except for a good that is specifically described in the Harmonized Tariff Schedule as a set, or is classified as a set pursuant to General Rule of Interpretation 2, where the country of origin cannot be determined under paragraph (a), the country of origin of the good:
Is the country or countries of origin of the single material that imparts the essential character of the good. . .
“Material” is defined in section 102.1(1) of the interim regulations as “a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components.”
Pursuant to section 102.18 (b) (2), “for purposes of applying section 102.11, only domestic and foreign materials (including self-produced materials) that are classified in a tariff provision from which a change in tariff classification is not allowed in the rule for the good set out in section 102.20 shall be taken into consideration in determining the parts or materials that determine the essential character of the good.”
Therefore, taking into account only those domestic and foreign materials that are classified in a tariff provision for which a change in tariff classification is not allowed in the rule for the good under section 10.20, we find that the acidified avocado pulp is the material that imparts the essential character of the good. Therefore, with respect to the guacamole which is made using only Mexican-origin acidified avocado pulp, the country of origin is Mexico, and the retail container of the finished product that reaches the ultimate purchaser must be marked to reflect Mexico as the country of origin.
In the case where frozen guacamole is produced in the U.S. from a combination of Mexican- and U.S.-origin acidified avocado pulp, both the domestic and the Mexican-origin pulp are considered in determining the essential character of the good pursuant to section 102.18(b)(2), since they both are classified in subheading 2008.99, HTSUS,--the tariff provision that does not undergo the requisite change in tariff classification. Therefore, as the single material that imparts the essential character of the guacamole is the acidified pulp, and the pulp is from both the U.S. and Mexico, the origin of the guacamole is Mexico and the U.S. Under these circumstances, the retail container of the finished product must be marked to reflect Mexico as the country of origin, although Customs would not object if the marking reflects both the Mexican- and U.S.-origin of the guacamole.
HOLDING:
Based on the information submitted, we are of the opinion that the production of guacamole in the U.S. from Chilean-origin avocados as well as from both Chilean- and U.S.-origin avocados results in a substantial transformation of the foreign avocados. Therefore, the U.S. processor is the ultimate purchaser and the avocados and guacamole are excepted from marking, although the outermost containers in which the Chilean origin avocados reach the ultimate purchaser must be marked with product's country of origin.
The Mexican-origin acidified avocado pulp does not become a good of the U.S. under the NAFTA Marking Rules when processed in the U.S. into guacamole. As a result, the guacamole made in the U.S. from Mexican-origin pulp and from both Mexican- and U.S. origin pulp is not excepted from country of origin marking and the retail container of the finished product must be marked to indicate Mexico as the country of origin.
Sincerely,
John Durant, Director
Commercial Rulings Division