HQ 0734989 - Country of origin marking of imported cheese which is further processed in the U.S. and packaged into retail containers; grinding; substantial transformation; 19 CFR 134.35; National Juice Products; C.S.D. 84-112; HQ 555684 - United States International Trade Commision Rulings

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HQ 734989

June 23, 1993

Mar-2-05 CO:R:C:V 734989 AT

CATEGORY: MARKING

Anthony L. Piazza
Customs and Trade Law
404 Third Avenue
Avon-By-The-Sea, New Jersey 07717

RE: Country of origin marking of imported cheese which is further processed in the U.S. and packaged into retail containers; grinding; substantial transformation; 19 CFR 134.35; National Juice Products; C.S.D. 84-112; HQ 555684

Dear Mr. Piazza:

This is in response to your letters dated February 5 and June 14, 1993, on behalf of A B Food Company ("A B Food"), requesting a ruling on the country of origin marking for imported cheese which is further processed in the U.S. into ground cheese.

FACTS:

You state that A B Food imports whole wheels of Parmegiano and Romano chesse from the European Community into the U.S. for further processing to make single type ground cheese. The processing of the cheese includes chunking the form of cheese as imported, grinding and then drying it to prevent caking of the ground cheese. Approximately 17 percent of the cheese's moisture is removed and a small amount of cellulose is added to ensure a free running cheese. You also state that the cheese is never sold in the form it is imported but is ground, and packaged under the trade name of Chianti Cheese. You have informed us that ground and grated cheese are the same article.

You contend that it is the position of Philadelphia Customs, as well as A B Food, that the processing of the single type ground cheese in the U.S. does not constitute a substantial transformation and the finished article should be marked with the foreign country of origin. You state that although Customs takes this position, there appears to be some confusion in the cheese industry since numerous companies from the largest to the smallest, fail to mark finished single type ground cheese with the appropriate country of origin. Based on this, you have requested a ruling as to the appropriate country of origin for imported cheese processed in the manner described above.

ISSUE:

For purposes of 19 U.S.C. 1304, whether imported cheese is substantially transformed when it is further processed into single type ground cheese in the U.S. by the operations described above.

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or 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. Congressional intent in enacting 19 U.S.C. 1304 was that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose 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 C.C.P.A. 297 at 302, C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)) defines "country of origin" as 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. A substantial transformation occurs when an article loses its identity and becomes a new article having a new name, character, or use. United States v. Gibson-Thomsen Co. Inc., 27 C.C.P.A. 267, C.A.D. 98 (1940). The question of when a substantial transformation occurs is a question of fact to be determined 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). The country of origin of the finished single type ground cheese manufactured in the U.S. rests upon whether the imported cheese is substantially transformed as a result of the chunking, grinding, moisture removal, cellulose adding and packaging operations performed in the U.S.

In National Juice Products Association v. U.S., 10 CIT 48, 628 F.Supp. 978 (1986), the court upheld a Customs determination that imported orange juice concentrate is not substantially transformed when it is domestically processed into retail orange juice products. In that case, the concentrate was mixed with water, orange essences, orange oil and in some cases fresh juice and either packaged in cans and frozen or pasteurized, chilled and packed in liquid form. Customs found, and the court agreed, that the further processing of the juice did not produce an article with a new name, character or use because the essential character of the final product was imparted by the basic ingredient, the orange concentrate. The court stated "the retail product in this case is essentially the juice concentrate derived in substantial part from foreign grown, harvested and processed oranges. The addition of water, orange essences and oils to the concentrate, while making it suitable for retail sale does not change the fundamental character of the product, it is still essentially the product of the juice or oranges." Therefore, the repacked orange juice products had to be marked with the country of origin of the imported concentrate.

In HQ 555684 (January 18, 1991), Customs determined that raw cheese, imported into Panama did not undergo a substantial transformation when processed into grated cheese, and therefore was not entitled to receive duty-free treatment under the Caribbean Basin Initiative since it was not a "product of" Panama. In making this determination, Customs cited to the rationale in National Juice Products stating that "the change of the cheese from raw to grated is only minor and does not change the fundamental character of the cheese.

Similarly, in this case, consistent with the rationales stated above, we find that the imported cheese is not substantially transformed when it undergoes the processing from solid cheese to single type ground cheese in the U.S. Therefore, the consumer who obtains the ground cheese after the domestic processing is the ultimate purchaser. Like, the orange juice in National Juice Products and the grated cheese in HQ 555684, the imported cheese after being further processed into ground cheese, still has the essence of cheese, although it has changed from a solid to a powder like form as a result of the processing. Also, the operations performed in the U.S. (chunking, grinding, moisture removal, cellulose adding and packaging) are in our opinion minor finishing operations which do not change the character of the cheese after being processed into ground cheese. Accordingly, the country of origin of the single type ground cheese is the country where the imported cheese was made and the retail container in which the ground cheese is sold must be legibly, conspicuously, and permanently marked with the foreign origin of the cheese. The European Community is not a country for 19 U.S.C. 1304 marking purposes. See 19 CFR 134.1(a).

We note that since the imported cheese is processed and then repacked into retail containers in the U.S. the certification requirements of 19 CFR 134.25 are applicable. 19 CFR 134.25 provides in part that:

If an article subject to these requirements is intended to be repacked in new containers for sale to an ultimate purchaser after its release from Custom custody, or if the district director having custody of the article, has reason to believe such article will be repacked after its release, the importer shall certify to the district director that: (1) If the importer does the repackaging, the new container shall be marked to indicate the country of origin of the article in accordance with the requirements of this Part: or (2) If the article is intended to be sold or transferred to a subsequent purchaser or repacked, the importer shall notify such purchaser or transferee,in writing, at the time of sale or transfer, that any repacking of the article must conform to these requirements.

HOLDING:

For purposes of 19 U.S.C. 1304, the domestic processing of imported cheese by chunking, grinding, moisture removal, cellulose adding and packaging into single type ground cheese does not constitute a substantial transformation. Accordingly, the repacked ground cheese is subject to the country of origin marking requirements of 19 U.S.C. 1304 and 19 CFR Part 134 and the importer must follow the certification procedures of 19 CFR 134.25.

Sincerely,

John Durant, Director

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