United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1992 HQ Rulings > HQ 0556320 - HQ 0734154 > HQ 0734076

Previous Ruling Next Ruling



HQ 734076


September 10, 1991

MAR-2 CO:R:C:V 734076 GRV

CATEGORY: MARKING

Steven B. Zisser, Esq.
Stein Shostak Shostak & O'Hara
3580 Wilshire Blvd., Suite 1240
Los Angeles, California 90010-2597

RE: Country of origin marking of Meat/Sauce/Seasoning Mixes made by blending foreign and domestic ingredients together in a Foreign Trade Zone for entry into the U.S. 19 U.S.C. 81c; Hawaiian Independent Refinery; C.S.D. 83-48; 19 CFR 134.1(b); 134.35; substantial transformation; C.S.D. 82-152; 710586; 733207; 733945

Dear Mr. Zisser:

This is in response to your letter of October 22, 1990, to the Area Director of Customs, New York Seaport, on behalf of Case-Swayne Co., Inc., requesting a ruling regarding the classi- fication and country of origin marking of meat/sauce/seasoning mixes blended in a foreign trade zone (FTZ) and entered into the U.S. You also request that we confirm that the domestic status ingredients do not lose their domestic identity after processing in the foreign trade zone. Although the Area Director issued you a classification ruling in this matter on November 16, 1990, your letter was forwarded to this office for a direct reply concerning the outstanding issues you raise.

FACTS:

Foreign tomato powder--imported in bulk 55 lb. boxes from Spain, Portugal, Morocco or Switzerland--will be admitted into a U.S. foreign trade zone (FTZ) as nonprivileged foreign merchan- dise and variously mixed and blended with specific quantities of dry ingredients of U.S. origin--admitted into the FTZ as domestic merchandise--to make three different commercial products: (1) dry taco meat mix; (2) dry red chili sauce mix; and (3) dry taco seasoning mix. The dry taco meat mix consists of tomato powder, rolled oats, salt, and seasonings and spices. The dry red chili mix consists of tomato powder, starch and gums, salt, seasonings and spices, and paprika. The dry taco seasoning mix consists of tomato powder, salt, dehydrated onion, seasonings and spices, and flour. By weight, the tomato powder will constitute approximately 6%-23% of the various mixtures. No cost figures were submitted. The ingredients will be combined into 1000-1300 lb. batches, which will then be packaged into individual plastic bags, with 12-60 bags being packaged into a corrugated box.

ISSUE:

Whether the foreign tomato powder is substantially trans- formed when mixed/blended with specific quantities of domestic ingredients to make seasoning mixes, so that the seasoning mixes do not have to be marked when withdrawn from the foreign trade zone for entry into the customs territory of the U.S.

LAW AND ANALYSIS:

19 U.S.C. 81c provides, in part, that:

[f]oreign and domestic merchandise of every description, except such as is prohibited by law, may, without being subject to the customs laws of the United States, except as otherwise provided in this chapter, be brought into a zone ..., and be exported, destroyed, or sent into customs territory of the United States therefrom, ...but when foreign merchandise is so sent from a zone into customs territory of the United States it shall be subject to the laws and regulations of the United States affecting imported merchandise.... (Emphasis supplied).

Thus, merchandise is generally not subject to the customs laws while in a foreign trade zone (FTZ), unless the Foreign Trade Zones Act authorizes their application. However, once merchandise is withdrawn from a FTZ and entered into the customs territory of the U.S., it becomes subject to the customs laws and regulations of the U.S. Foreign merchandise in a zone is not subject to duty until it actually enters the Customs territory of the U.S. Hawaiian Independent Refinery v. United States, C.D. 4777, 81 Cust.Ct. 117, 460 F.Supp. 1249 (1978).

The marking statute, 304 of the 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 manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. (Emphasis supplied). Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Customs has determined that articles brought to the U.S. and admitted into a FTZ are not subject to the requirements of 19 U.S.C. 1304 at that time. C.S.D. 83-48, 17 Cust.Bull. 819 (1983). In that case, Customs found that canned foodstuffs may be brought to the U.S. for admission into a FTZ without the cans having been marked with their country of origin at the time of admission thereto.

However, merchandise processed in a FTZ must be marked to indicate its country of origin at the time it is withdrawn from the zone and brought into the customs territory for consumption, unless the article is substantially transformed in the FTZ. See, Headquarters Ruling Letter (HRL) 710586 dated June 25, 1979. In that case, piece goods were imported into a FTZ for production-- by cutting, sewing, and finishing--into finished terry towels. Customs determined that the country of origin marking require- ments of 19 U.S.C. 1304 were not applicable to the finished towels because the processing constituted a substantial transfor- mation. As such, at the time of their withdrawal from the FTZ the towels were considered products of the U.S., within the meaning of 19 CFR 134.1(e), and no foreign country of origin marking requirements applied.

Thus, the issue of whether the seasoning mixes must be marked to indicate the country of origin of the tomato powder, pursuant to 19 U.S.C. 1304, at the time they are withdrawn from the zone, hinges on whether the tomato powder is substantially transformed in the FTZ by the addition of the various domestic ingredients.

The primary purpose of the country of origin marking statute 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 CCPA 297, 302, C.A.D. 104 (1940).

The country of origin for marking purposes is defined at 134.1(b), Customs Regulations (19 CFR 134.1(b)), to mean 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 Part 134. The concept of what constitutes a substantial transformation is explained at 134.35, Customs Regulations (19 CFR 134.35), which provides, in relevant part, that:

[a]n article used in the U.S. in manufacture which results in an article having a name, character, or use differing from that of the imported article, will be within the principle of the decision in the case of United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267 (1940). Under this principle, the manufacturer or processor in the U.S. who converts or combines the imported article into the different article will be considered the "ultimate purchaser" of the imported article within the contemplation of [the marking statute], and the article shall be excepted from marking.

Thus, a substantial transformation occurs when articles lose their identity and become new articles having a new name, character, or use. National Juice Products Association v. United States, 10 CIT 48, 628 F.Supp. 978 (1986), Koru North America v. United States, 12 CIT 1120, 701 F.Supp. 229 (1988). The question of when a substantial transformation occurs for marking purposes is a question of fact, to be addressed on a case by case basis. Uniroyal Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026 (1982), aff'd, 1 Fed.Cir. 21, 702 F.2d 1022 (1983).

In HRL 733207 dated November 21, 1990, foreign and U.S. raw botanical ingredients were variously blended together in the U.S. to create aromatic products denominated "Potpourri." Relying on two previous rulings which reasoned that extensive processing could effect a substantial transformation of foreign ingredients, we determined that the production of the potpourri in the U.S., according to formula, substantially transformed the imported constituent materials into a product of the U.S. See, HRLs 553120 dated September 28, 1984, and 723312 dated November 22, 1983.

These "blending/mixing" rulings serve to show that where different ingredients are combined/mixed together, according to a designated recipe/formula, a new and different commercial article can be created; such processing constituting a substantial trans- formation. Cf., HRL 733945 dated March 26, 1991 (although the blending and mixing of two separate groups of ingredients to form a cream haircolor preparation was held to substantially transform the ingredients, cautionary language was included to distinguish other types of combining/blending operations). Accordingly, as the imported tomato powder here is blended with other ingredients according to a designated recipe, we follow the findings in the above referenced rulings to find in this case that the foreign tomato powder is substantially transformed in the FTZ and need not be marked when entered into the customs territory of the U.S.

Regarding the issue of whether merchandise with domestic zone status and merchandise with non-privileged zone status can be mixed and blended without either losing its respective zone status, as the nonprivileged foreign tomato powder will be mixed in proportions fixed by weight percentages with the domestic ingredients (oats, salt, paprika, flour, dehydrated onion, starch and gums, and seasonings and spices), and records will be kept to provide verification of that statement, we see no reason to prevent the application of the principles of C.S.D. 82-152 (copy enclosed) to the situation.

HOLDING:

As the foreign tomato powder will be admitted into a FTZ, pursuant to 19 U.S.C. 81c, it is not subject to the customs laws of the U.S., which includes the country of origin marking laws. Further, as the foreign tomato powder will be substantially transformed in the FTZ when it is blended with certain other domestic origin ingredients, the resultant meat/sauce/seasoning mixes also will not be subject to country of origin marking requirements of 19 U.S.C. 1304, when subsequently entered into the Customs territory of the U.S.

Sincerely,


Previous Ruling Next Ruling