CLA-2-15:OT:RR:NC:N5:231
Lynne McGowan
GHY USA Inc
572 S 5th St Pembina, ND 58271
RE: The tariff classification, country of origin, marking, and eligibility of the United States-Mexico-Canada Trade Agreement (USMCA) for Kappamega3 300 Lemon from Canada
Dear Ms. McGowan:
In your letter dated October 16, 2023, you requested a ruling on tariff classification, country of origin, and eligibility under the USMCA for Kappamega3 300 Lemon on behalf of your client, Algarithm Ingredients Inc.
The subject merchandise is composed of fully winterized algae oil, rosemary extract, mixed tocopherols, sunflower lecithin, sunflower oil, ascorbyl palmitate (docosahexaenoic acid - DHA), modified tapioca starch, lemon flavor, purity water, and glycerin. Per your letter, the DHA-rich triacylglycerols (TAG) are extracted from Schizochytrium sp., a marine-algae. The above stated ingredients are blended then encapsulated into a vegan soft gel capsules in Canada.
The tariff classification and country of origin for the stated ingredients are as follows - DHA Algae Oil (1515.60.0500, United Kingdom), Modified Tapioca Starch (3505.10.9090, China), Lemon Flavor (3301.13.0000, Canada), Purity Water (2201.90.0000, Canada), and Glycerin (2905.45.0000, Indonesia).
Classification
The applicable subheading for the Kappamega3 300 Lemon will be 1515.60.0500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Other fixed vegetable or microbial fats and oils (including jojoba oil) and their fractions, whether or not refined, but not chemically modified: Microbial fats and oils and their fractions. The rate of duty will be 3.2 percent ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided at https://hts.usitc.gov/current.
Country of Origin
The marking statute, section 304, 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 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.
The "country of origin" is defined in 19 C.F.R. § 134.1(b) 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; however, for a good of a NAFTA or USMCA country, the marking rules set forth in part 102 of this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin.”
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. See 19 C.F.R. § 102.11.
Applied in sequential order, 19 C.F.R. Part 102.11(a) provides that the 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 Part 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
The subject merchandise is neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, Sections 102.11(a)(1) and (a)(2) do not apply to the facts presented in this case. Because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we look to section 102.11(a)(3).
The subject merchandise is classified under subheading 1515.60.0500, HTSUS, The applicable tariff shift requirement in Part 102.20 for the subject merchandise of subheading 1515.60, HTSUS, states:
A change to headings 1501 through 1518 from any other chapter, except from heading 3823.
The subject merchandise Kappamega3 300 Lemon contains the following non-originating ingredients that need to undergo the tariff shift: DHA Algae Oil (1515.60.0500, United Kingdom), Modified Tapioca Starch (3505.10.9090, China), and Glycerin (2905.45.0000, Indonesia). Because one of the non-originating materials, DHA Algae Oil, is classified within the specified subheadings of 1501 through 1518, the merchandise at issue does not meet the tariff shift rule.
Since an analysis of section 102.11(a)(3) has not produced a country of origin determination, we turn to section 102.11(b) of the regulations.
Section 102.11(b) states, in relevant part:
Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section:
(1) The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good, or…
When determining the essential character of a good under 19 C.F.R. § 102.11, 19 C.F.R. § 102.18(b)(1) provides that only domestic and foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good shall be taken into consideration.
In this case, the foreign material, DHA algae oil of United Kingdom origin, is classified in heading 1515 within Chapter 15, which is a provision from which a change in tariff classification is not allowed under the tariff shift rule.
Section 102.18(b)(2) provides, in relevant part:
For purposes of determining which one of two or more materials described in paragraph (b)(1) of this section imparts the essential character to a good under § 102.11, various factors may be examined depending upon the type of good involved. These factors include, but are not limited to, the following:
(i) The nature of each material, such as its bulk, quantity, weight or value; and
(ii) The role of each material in relation to the use of the good.
In this instance we find that the DHA algae oil provides the essential character of the Kappamega3 300 Lemon is the greatest by value and weight of any item used to make the merchandise at issue. Therefore, in accordance with 19 C.F.R. § 102.11(b)(1), the country of origin of the Kappamega3 300 Lemon for origin and marking purposes is the United Kingdom.
USMCA
The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using non-originating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o));
Since the Kappamega3 300 Lemon contains non-originating ingredients, they are not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i), nor are the products produced exclusively from originating materials per GN 11(b)(ii). Thus, we must determine whether the product qualifies under GN 11(b)(iii). As previously stated, the merchandise at review is classified under subheading 1515.60.0500, HTSUS. The applicable rule of origin for goods classified under subheading 1515.60.0500, HTSUS, is found in GN 11(o)15.1, HTSUS, which provides for “A change to headings 1501 through 1518 from any other chapter, except from heading 3823.” The subject merchandise contains the following non-originating ingredients that need to undergo the tariff shift: DHA Algae Oil (1515.60.0500, United Kingdom), Modified Tapioca Starch (3505.10.9090, China), and Glycerin (2905.45.0000, Indonesia). Because one of the non-originating materials, DHA Algae Oil, is classified within the specified subheadings of 1501 through 1518, the merchandise at issue does not meet the tariff shift rule. Accordingly, the merchandise is not eligible for USMCA preferential treatment.
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
This merchandise is subject to The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (The Bioterrorism Act), which is regulated by the Food and Drug Administration (FDA). Information on the Bioterrorism Act can be obtained by calling FDA at 301-575-0156, or at the Web site www.fda.gov/oc/bioterrorism/bioact.html.
This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, please contact National Import Specialist Ekeng Manczuk at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division