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HQ 555524


April 11, 1990

CLA-2 CO:R:C:V 555524 DSN

CATEGORY: CLASSIFICATION

TARIFF NO.: 2104.10.0060

Mr. Simbhoonath Maharaj
Production Manager
Flavorite Foods Ltd.
P.O. Box 597
Port-of-Spain
Trinidad and Tobago, West Indies

RE: CBERA treatment of frozen vegetable soup

Dear Mr. Maharaj:

This is in response to your letter of November 7, 1989, and January 4, 1990, in which you request a ruling that frozen vegetable soup produced in Trinidad and Tobago is entitled to duty-free treatment under the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2701-2706).

FACTS:

According to your submission, the merchandise at issue, referred to as "Callaloo Soup," is a semi-viscous vegetable soup. The ingredients include dasheen leaves, ochroes, coconut milk, refined cane sugar, soy bean oil, salt, chives, thyme, garlic, black pepper, monosodium glutamate and water. All ingredients are added together and boiled to a desired consistency. The soup is packaged hot into microwaveable bags which are then quickly frozen and packaged in small boxes and placed in cartons for export to the U.S.

The cost breakdown in U.S. dollars is as follows:

Dasheen leaves 0.173
Ochroes 0.138
Coconuts 0.061
Cane sugar 0.002
Chives, thyme, black pepper, garlic 0.036

Salt 0.001
Soy bean oil 0.017
Monosodium glutamate 0.022
Packaging 0.105
Direct labor 0.050
Direct supervision 0.021
Power 0.016
Fuel (propane) 0.007
TOTAL 0.649

You state that the dasheen leaves, ochroes, coconut, and sugar are obtained from indigenous sources, (wholly the growth of Trinidad and Tobago) while the chives, thyme, black pepper and garlic originate from Indonesia. The salt and the soy bean oil are of U.S. origin and the monosodium glutamate originates either in Brazil or Thailand.

ISSUE:

Whether frozen vegetable soup produced in Trinidad and Tobago is entitled to duty-free treatment under the CBERA when imported into the U.S.

LAW AND ANALYSIS:

Under the CBERA, eligible articles the growth, product or manufacture of designated beneficiary countries (BC's) may receive duty-free treatment if such articles are imported directly to the U.S. from a BC, and if the sum of 1) the cost or value of the materials produced in a BC or BC's, plus 2) the direct cost of processing operations performed in a BC or BC's, is not less than 35% of the appraised value of the article at the time it is entered into the U.S. See 19 U.S.C. 2703(a).

Trinidad and Tobago is a BC. See General Note 3(c)(v)(A), Harmonized Tariff Schedule of the United States Annotated (HTSUSA). Based on your description, it appears that the soup would be classified under subheading 2104.10.0060, HTSUSA, which provides for soups and broths and preparations therefor, other, other, which is a CBERA eligible provision. You state that the frozen soup will be exported from Trinidad and Tobago directly to the U.S. Accordingly, the soup will receive duty-free treatment if it is considered a "product of" Trinidad and Tobago and the 35% value-content requirement is met.

Based on your cost figures, the sum of the cost of the indigenous ingredients and the direct processing costs clearly will exceed 35% of the estimated appraised value of the imported soup. Therefore, the only remaining question is whether the soup is considered to be a "product of" Trinidad and Tobago.

Where an article is produced from materials imported into a BC from non-BC's, as in this case, the article is considered a "product of" the BC only if those materials are substantially transformed into a new and different article of commerce. See section 10.195(a), Customs Regulations (19 CFR 10.195(a)). A substantial transformation occurs when an article emerges from a process with a new name, character, or use different from that possessed by the article prior to processing. See Texas Instruments, Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982). No article shall be considered to be a "product of" a BC by virtue of merely having undergone simple combining or packaging operations or mere dilution with water. See 19 CFR 10.195(a).

We find that mixing the eleven different ingredients with water, boiling the mixture until the desired consistency is achieved, packaging the soup for retail sale, and quickly freezing the product results in a substantial transformation of those ingredients into a new and different article of commerce-- frozen vegetable soup--which is different in name, character and use from the separate ingredients. Each ingredient loses its separate identity when it is combined with the other ingredients and water, boiled, and then frozen to create the final product, which has its own distinct commercial and physical identity. Moreover, this process clearly is more than a simple combining or packaging operation, as indicated by 19 CFR 10.195(a)(2)(ii)(D), which provides that a such an operation shall not be taken to include a "simple combining or packaging operation ... coupled with any other type of processing such as testing or fabrication ...." In this case, not only are the combined ingredients subjected to boiling and freezing operations, but certain of the ingredients sourced from Trinidad and Tobago are subjected to operations, such as de-stemming, chopping and crushing, prior to being combined with the other ingredients. Therefore, it is our opinion that the frozen vegetable soup is a "product of" Trinidad and Tobago.

We have enclosed for your information a copy of the Customs Regulations relating to the CBERA (19 CFR 10.191-10.198).

HOLDING:

The frozen vegetable soup will be entitled to duty-free treatment under the CBERA when imported into the U.S.

Sincerely,

John Durant, Director
Commercial Rulings Division
Enclosure

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