HQ 0087454 - Raw, shelled, and split peanuts manufactured into peanut butter in Canada; eligibility under the United States- Canada Free Trade Agreement ("CFTA"), quota requirements - United States International Trade Commision Rulings

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HQ 087454

September 19, 1990

CLA-2 CO:R:C:G 087454 JMH

CATEGORY: CLASSIFICATION

TARIFF NO.: 1202.20.0040, 2008.11.0020, 9904.20.20

H. Frank Crawford, Esq.
Vandeberg & Johnson
1900 Interstate Plaza
1201 Pacific Avenue
Tacoma, Washington 98402-4391

RE: Raw, shelled, and split peanuts manufactured into peanut butter in Canada; eligibility under the United States- Canada Free Trade Agreement ("CFTA"), quota requirements

Dear Mr. Crawford:

This is in response to your June 11, 1990, request for a classification ruling under the Harmonized Tariff Schedule of the United States Annotated ("HTSUSA") on behalf of Nalley's Canada Limited ("Nalley's Canada") for peanut butter. The peanut butter is to be manufactured in Canada and then imported into the United States.

FACTS:

Nalley's Canada plans to manufacture natural old-fashioned peanut butter and homogenized peanut butter at a facility in Vancouver, British Columbia. The peanut butter will be made of peanuts from Argentina, Brazil, the United States and China. The peanuts imported into Canada will be raw, shelled and split. The peanuts will then be roasted, blanched, sorted, ground, mixed with salt and/or crunchy bits of peanuts and packed. The homogenized peanut butter has dextrose, salt and a stabilizer (hydrogenated vegetable oil) added during the grinding stage, and is put through a secondary grinder for a smoother texture. The peanut butter will be packed in glass or plastic jars or tubs and labelled in accordance with applicable Food and Drug Administration ("FDA") regulations for retail sale.

ISSUE:

Issue 1: What is the proper classification for the peanuts imported to Canada, and the peanut butter imported into the United States under the HTSUSA? (This office has no authority to
issue rulings regarding the classification of products imported into Canada. The classification of the peanuts, however, is necessary for the outcome of this ruling. Thus, this ruling analyzes the peanuts' classification as if the peanuts were imported into the United States.)

Issue 2: Is the peanut butter subject to any quota restrictions when imported into the United States?

Issue 3: Is the peanut butter imported into the United States eligible for treatment under the United States-Canada Free Trade Agreement ("CFTA")?

LAW AND ANALYSIS:

Issue 1: What is the proper classification for the peanuts imported to Canada, and the peanut butter imported into the United States under the HTSUSA? (This office has no authority to issue rulings regarding the classification of products imported into Canada. The classification of the peanuts, however, is necessary for the outcome of this ruling. Thus, this ruling analyzes the peanuts' classification as if the peanuts were imported into the United States.)

The classification of merchandise occurs under the HTSUSA (19 U.S.C. 1202). Omnibus Trade and Competitiveness Act of 1988, Pub. L. 100-418, Sec. 1204, codified at 19 U.S.C. 3007 (enacted August 23, 1988). The HTSUSA is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUSA, states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes..."

Heading 1202, HTSUSA, provides an eo nomine provision for raw peanuts, whether or not shelled. Therefore, in accordance with GRI 1, the classification of the raw, shelled and split peanuts (if imported to the United States) is subheading 1202.20.00, HTSUSA, as "Peanuts (ground-nuts), not roasted or otherwise cooked, whether or not shelled or broken...Shelled, whether or not broken..."

Peanut butter is a preparation of peanuts. Prepared peanuts are provided for in heading 2008, HTSUSA. In accordance with GRI 1, the proper classification for either natural old-fashioned or homogenized peanut butter is subheading 2008.11.00, HTSUSA, as "Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included...Nuts, peanuts...Peanuts..."

Issue 2: Is the peanut butter subject to any quota restrictions when imported into the United States?

The classification for peanuts, subheading 1202.20.00, is footnoted for reference to heading 9904.20.20, HTSUSA. Heading 9904.20.20 provides quota restrictions for peanuts of subheading 1202.20, HTSUSA. However, heading 9904.20.20 excepts peanut butter from this quota. The restriction does not apply to peanut butter imported into the United States.

Issue 3: Is the peanut butter imported into the United States eligible for treatment under the CFTA?

General Note 3(c)(vii) of the HTSUSA provides the rules which determine what products imported into the United States from Canada are entitled to duty treatment under the CFTA. Eligible goods must be "goods originating in Canada". General Note 3(c)(vii)(A), HTSUSA.

(B) For the purposes of subdivision (c)(vii) of this note, goods imported into the customs territory of the United States are eligible for treatment as "goods originating in the territory of Canada" only if--

(1) they are goods wholly obtained or produced in the territory of Canada and/or the United States, or

(2) they have been transformed in the territory of Canada and/or the United States, so as to be subject--

(I) to a change in tariff classification as described in the rules of subdivision
(c)(vii)(R) of this note...

General Note 3(c)(vii)(B), HTSUSA, as amended by Presidential Proclamation 6142 of May 25, 1990.

The peanut butter in question is not wholly obtained or produced in Canada and/or the United States since the peanuts will come from a variety of countries. Therefore, the peanut butter does not originate in Canada under General Note

The peanut butter manufactured in Canada does effect a change in tariff classification from the classification of the peanuts. However, for FTA eligibility the change must be authorized by General Note 3(c)(vii)(R). In this case, the
peanuts are classified in heading 1202 of Chapter 12 and the peanut butter is classified in heading 2008 of Chapter 20. Since the product to be imported into the United States is classified within Chapter 20, the General Note for Chapter 20 must be examined.

General Note 3(c)(vii)(R)(4)(aa), HTSUSA, states that for articles classified in chapter 16 to 24 a change from one chapter to another effects the required transformation. However, the note excepts goods of Chapter 20. General Note 3(c)(vii)(R)(4)(ee), HTSUSA, states that articles of Chapter 20 that have merely been frozen, packed in water, brine or natural juices, or roasted have not been transformed into "goods originating in Canada." The peanuts in question have been processed further than merely freezing, packing or roasting them. Thus, the subject peanut butter is a "good originating in the territory of Canada."

HOLDING:

Heading 1202, HTSUSA, provides an eo nomine provision for raw peanuts, whether or not shelled. Therefore, in accordance with GRI 1, the classification of the raw, shelled and split peanuts, if imported into the United States, is subheading 1202.20.00, HTSUSA, as "Peanuts (ground-nuts), not roasted or otherwise cooked, whether or not shelled or broken...Shelled, whether or not broken..."

In accordance with GRI 1, the proper classification for either natural old-fashioned or homogenized peanut butter is subheading 2008.11.00, HTSUSA, as "Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included...Nuts, peanuts...Peanuts..."

The classification for peanuts, subheading 1202.20.00, is footnoted for reference to heading 9904.20.20, HTSUSA. Heading 9904.20.20 provides quota restrictions for peanuts of subheading 1202.20, HTSUSA. However, heading 9904.20.20 excepts peanut butter from this quota. The restriction does not apply to peanut butter imported into the United States.

The peanuts in question, classified under heading 1202 of Chapter 12, are processed into peanut butter, classified under heading 2008 of Chapter 20. The change in classification which
occurs is a change authorized by General Note 3(c)(vii)(R) and implements CFTA eligibility. Therefore, the peanut butter in question is entitled to duty treatment under the CFTA.

Sincerely,

John Durant, Director
Commercial Rulings Division

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