HQ 0734713 - Country of origin of Sparkling Water with Juice. 19 CFR 134.1(d); 19 CFR 134.35; substantial transformation. - United States International Trade Commision Rulings

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HQ 734713

November 30, 1993

MAR-2 CO:R:C:V 734713 RC

CATEGORY: MARKING

Mr. Wayne Hoyle
WinterBrook Corporation
5700 6th Avenue South, #200
Seattle, Washington 98108

RE: Country of origin of Sparkling Water with Juice. 19 CFR 134.1(d); 19 CFR 134.35; substantial transformation.

Dear Mr. Hoyle:

This is in response to your letter of June 12, 1992, on behalf of WinterBrook Corporation. You request a ruling regarding the country of origin marking requirements for a beverage made with fruit concentrates from the United States and carbonated water from Canada. We regret our delay in responding to your request.

FACTS:

Fruit juice concentrates produced in the U.S. are mixed and bottled in Canada with carbonated water from Canada. The bottles are of U.S. origin. The resulting beverage will be sold in the U.S. You have submitted a copy of the formulas used to make the following beverages: "Sparkling Water with Juice, Wild Berry", "Sparkling Water with Juice, Raspberry Black Currant", "Sparkling Water with Juice, Cherry Blackberry", "Sparkling Water with Juice, Lemonade", "Sparkling Water with Juice, Pink Grapefruit", "Sparkling Water with Juice, Guava Berry". We have not received samples at this time.

ISSUE:

Whether a flavored sparkling water made from fruit juice concentrate which is produced in the U.S. must be marked as a product of Canada upon its return to the U.S.

LAW AND ANALYSIS:

The marking statute, section 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 in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

Products of the U.S. are not subject to the country of origin marking requirements. As provided in section 134.32(m), Customs Regulations (19 CFR 134.32(m)), U.S. products exported and returned are specifically excepted from country of origin marking requirements. In applying this section, Customs has ruled that products of the U.S. exported and returned are not subject to country of origin marking unless, prior to their return, they are substantially transformed. To explain the concept of "substantial transformation", section 134.35, Customs Regulations (19 CFR 134.35), 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 an article loses its identity and becomes a new article 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 National Juice, the Court of International Trade determined that the blending of orange juice concentrates, which could include the addition of water, oils and essences, and pasteurization, was not a substantial transformation and consequently the origin of all the constituent concentrates would need to be revealed to ultimate purchasers.

Customs distinguished the facts in HQ 734732 (November 23, 1993) from those in National Juice. There, Customs found that juice concentrate of U.S. origin shipped to Canada for mixing
into a flavored mineral water beverage underwent a substantial transformation in Canada within the meaning of 19 U.S.C. 1304. Also see HQ 731685 (March 15, 1990).

The instant case is directly on point with HQ 734732. Likewise, we find that the mixture of U.S. origin juice concentrate with Canadian origin carbonated water effects a substantial transformation. Accordingly, the U.S.-origin fruit juice concentrate becomes part of the Canadian-origin sparkling water, which in turn is subject to the marking requirement of 19 U.S.C. 1304 and Part 134, Customs Regulations.

HOLDING:

Based upon the above considerations, we find that the processing performed in Canada effects a substantial transformation within the meaning of 19 U.S.C. 1304. As such, the imported sparkling water with juice must be marked "Product of Canada", "Made in Canada", or with words of similar meaning such as "Produced and Bottled in Canada".

Sincerely,

John Durant, Director

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