CLA-2 RR:CTF:VS 563318 KSG
Jonathan M. Epstein, Esq.
Holland & Knight LLP
2099 Pennsylvania Ave., NW
Suite 100
Washington, D.C. 20006
RE: Eligibility for UAFTA Preference for canned tuna
Dear Mr. Epstein:
This is in response to your letter dated July 22, 2005, requesting a binding ruling on behalf of Aussie Imports US, LLC (“Aussie”), as to whether certain imported canned tuna would qualify for preferential tariff treatment under the United States Australia Free Trade Agreement (“UAFTA”).
FACTS:
Aussie plans to import canned skipjack tuna from an Australian manufacturer/supplier, Port Lincoln Tuna Processors Pty Ltd (“Port Lincoln”). Whole skipjack tunas are caught on the high seas by New Zealand flag vessels, in Australian waters by Australian flag vessels, or by foreign flag vessels such as New Zealand in the New Zealand Fishing Zone.
In Australia, other ingredients are mixed with the tuna, including Australian and imported vegetables, Australian-origin canola oil, spices such as salt, pepper, chilies and garlic, and spring water. The exact make-up of the ingredients added varies.
The cans and labels are of Australian-origin.
The processing in Australia includes: thawing, gutting and cleaning the fish, steam cooking, picking, flaking the loins and mixing them with ingredients and canning with salt, water and oil. The sealed cans are washed and imprinted with a processing batch number, labeled, and packed into cartons.
ISSUE:
Whether the imported canned tuna described above is eligible for preferential tariff treatment under the U.S.- Australia FTA.
What is the proper country of origin marking for the imported canned tuna?
LAW AND ANALYSIS:
The U.S.-Australia Free Trade Agreement was signed on May 18, 2004, and entered into force on January 1, 2005, as approved and implemented by the UAFTA Implementation Act, Pub. L. 108-286, 118 Stat. 919 (August 3, 2004).
Section 203(b) of the United States-Australia Free Trade Agreement Implementation Act (General Note 28, HTSUS) provides, in pertinent part:
For purposes of this Act and purposes of implementing the preferential treatment provided for under the Agreement, a good is an originating good if -
the good is a good wholly obtained or produced entirely in the territory of Australia, the United States, or both;
the good –
is produced entirely in the territory of Australia, the United States, or both, and –
(i) each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in Annex 4-A or Annex 5-A of the Agreement….
General Note (“GN”) 28(c)(E), HTSUS, provides that the phrase “good wholly obtained or produced” means a good (fish, shellfish and other marine life) taken from the sea by vessels registered or recorded with Australia or the United States and flying the flag of that country. Since not all the fish in this case is caught by a vessel registered or recorded with a Party and flying its flag (such as New Zealand), the canned tuna would not be an originating good pursuant to Article 203(b)(1). Further, we note that not all the ingredients are originating from Australia or the United States.
Therefore, we must determine whether the canned tuna would satisfy Article 203(b)(2) when imported into the U.S. You state that the canned tuna would be classified in subheading 1601.14, HTSUS. The rule set forth in GN 28(n) for Chapter 16 is:
A change to headings 1601 through 1605 from any other chapter.
You assert that the whole skipjack tuna is classified in Chapter 3 of the HTSUS and that the vegetables would be classified in Chapter 7, HTSUS. For the purposes of this ruling, we assume that these classifications are correct and that the spring water and spices are also not classified in Chapter 16. Based on the above, the canned tuna would satisfy the tariff shift rule set forth in GN 28(n) by undergoing the required chapter change. The canned tuna would be considered originating under the U.S.-Australia Free Trade Agreement if imported directly into the United States.
II. Substantial Transformation
Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements of 19 U.S.C. 1304. Pursuant to 19 CFR 134.1(b), the country of origin is 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 this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. A substantial transformation occurs when a new and different article of commerce emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940).
In Koru North America v. United States, 701 F. Supp. 229 (CIT 1988), the court considered whether the processing of headed and gutted fish in South Korea by thawing, skinning, boning, trimming, freezing, and packaging constituted a substantial transformation. The court concluded that the processing performed in South Korea into “quick- frozen” fillets substantially transformed the headed fish because there was a change in name and character. The court noted that while the fish arrive in South Korea with the look of a whole fish, when they leave they no longer possess the essential shape of a fish. The fillets were considered discrete commercial goods and are had a different tariff classification.
In Headquarters Ruling Letter (“HRL”) 562708, dated June 13, 2003, Customs considered the processing of raw tuna and the canning of the tuna for purposes of the African Growth & opportunity Act and determined that the tuna would undergo a substantial transformation. Accordingly, based on Koru and HRL 562708, the whole skipjack tunas in this case would be substantially transformed in Australia when processed and canned. The cans should be marked to indicate that Australia is the country of origin.
HOLDING:
Based on the processing described above, the imported canned tuna would be considered an originating good under the U.S.-Australia Free Trade Agreement when imported directly into the U.S. The imported canned tuna would be considered a product of Australia pursuant to 19 U.S.C. 1304 and should be marked accordingly.
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 Customs official handling the transaction.
Sincerely,
Monika R. Brenner
Chief, Valuation & Special Programs Branch