HQ 735496 - Country of origin marking requirements for packaged cheeses imported from Canada; Article 509; NAFTA Marking Rules; section 134.1(d) of the interim regulations; section 102.11(a) and (b) of the interim regulations; section 102.20 of the interim regulations; section 102.14 of the interim regulations - United States International Trade Commision Rulings

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HQ 735496

October 26, 1994

Mar-2-05 CO:R:C:S 735496 AT

CATEGORY: MARKING

John S. Rode, Esq.
Rode & Qualey
295 Madison Avenue
New York, New York 10017

RE: Country of origin marking requirements for packaged cheeses imported from Canada; Article 509; NAFTA Marking Rules; section 134.1(d) of the interim regulations; section 102.11(a) and (b) of the interim regulations; section 102.20 of the interim regulations; section 102.14 of the interim regulations

Dear Mr. Rode:

This is in response to your letters dated November 1, 1993 and May 18, 1994, on behalf of Kraft USA ("Kraft"), an operating unit of Kraft General Foods Inc., requesting a ruling on the country of origin marking requirements for various cheeses imported from Canada to be distributed and sold in the U.S. We regret the delay in responding.

FACTS:

According to your submission, the imported cheeses (cheddar cheese, gouda cheese, monterey jack cheese, mozzeralla cheese and swiss cheese) are entirely manufactured in the U.S. and will be exported to Canada in block form (between 20 and 700 pounds each) for further processing. In Canada, the block cheese will be cut or shredded, packaged and returned to the U.S. for retail sale. The cutting operation is performed by passing a heated wire through the cheese block into six, eight, ten, twelve or sixteen ounce sticks. Other blocks will be cut into one or three pound chunks. The shredded cheese is mechanically shredded into pieces each approximately 0.125 inches thick and between 0.25 and 0.50 inches in length, and packed in recloseable plastic bags containing four, six, eight, ten, twelve or sixteen ounces of shredded cheese. You ask whether the phrase "Cheese Produced in the United States, Cut [Or Shredded,] And Packaged In Canada" would be an acceptable country of origin marking for the retail containers of the imported cheeses.

ISSUE:

What are the country of origin marking requirements for imported cheeses processed from U.S. manufactured cheeses in Canada in the manner described above?

LAW AND ANALYSIS:

The marking statute, section 304, 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 a 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.

The country of origin marking requirements for a "good of a NAFTA country" are also determined in accordance with Annex 311 of the North American Free Trade Agreement ("NAFTA"), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat 2057) (December 8, 1993) and the interim amendments to the Customs Regulations published as T.D. 94-4 (59 Fed. Reg. 109, January 3, 1994) with corrections (59 Fed. Reg. 5082, February 3, 1994) and T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim amendments took effect on January 1, 1994, to coincide with the effective date of the NAFTA. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in T.D. 94-4 (adding a new Part 102, Customs Regulations). The marking requirements of these goods are set forth in T.D. 94-1 (interim amendments to various provisions of Part 134, Customs Regulations).

Section 134.1(b) of the interim regulations, 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 this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. (Emphasis added).

Section 134.1(j) of the interim regulations, provides that the "NAFTA Marking Rules" are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) of the interim regulations, defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules. Section 134.45(a)(2) of the interim regulations, provides that a "good of a NAFTA country" may be marked with the name of the country of origin in English, French or Spanish.

In this case, cheese, which we are assuming for purposes of this ruling is a good of the U.S, is imported into Canada to be either cut or shredded and repackaged for exportation to the U.S. for retail sale. Thus, in order to determine the appropriate marking requirements for the imported cheese we must determine under the NAFTA Marking Rules the country of origin of the repackaged shredded or cut cheese imported from Canada.

Part 102 of the interim regulations, sets forth the "NAFTA Marking Rules" for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the interim regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the interim regulations states that "[t]he country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied."

"Foreign Material" is defined in section 102.1(e) of the interim regulations as "a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced."

Since the cut or shredded cheese is produced in Canada from U.S. cheese (foreign as defined in section 102.1(e) of the interim regulations) the cut or shredded cheese is neither wholly obtained/produced nor is it produced exclusively from domestic materials and therefore paragraphs (a)(1) and (a)(2) of section 102.11 cannot be used to determine the country of origin of the finished article. Thus, paragraph (a)(3) of section 102.11 is the applicable rule that first must be applied to determine the origin of the finished article. The block cheese is classified under heading 0406, HTSUS. The shredded or cut repackaged cheese is classified in the same heading. The applicable change in tariff classification set out in section 102.20(a), Section I, Chapters 1 through 5, 0405-0406 of the interim regulations provides:

0405-0406 .... A change to heading 0405 through 0406 from any other heading, including another heading within that group.

In this case, we find that the U.S. cheese does not undergo the applicable change in tariff classification set out in section 102.20(a), and, as a result, section 102.11(b) of the hierarchial rules must be applied next to determine the country of origin of the cut and shredded cheese.

Section 102.11(b) of the interim regulations provides that:

Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a), the country of origin of the good:

(1) Is the country or countries of origin of the single material that imparts the essential character of the good, or

(2) If the material that imparts the essential character of the good is fungible, has been commingled, and direct physical identification of the origin of the commingled material is not practical, the country or countries of origin may be determined on the basis of an inventory management method provided under the Appendix to part 181 of the Customs Regulations.

Here, because section 102.11(b)(2) is not applicable in this case, the applicable rule that must be applied to determine the country of origin of the cut and shredded cheese is section 102.11(b)(1). Applying section 102.11(b)(1) to the facts of this case, we find that the single material that imparts the essential character of the cut and shredded cheese is the U.S. cheese. Therefore, pursuant to section 102.11(b)(1), the country of origin of the cut and shredded cheese for marking purposes is the U.S. However, section 102.14 of the interim regulations provides in pertinent part that
no good, last advanced in value or improved in condition outside the United States has United States origin. If under any other provisions of this part such a good is determined to be a good of the United States, that determination will be disregarded and the country of origin of the good will be the last foreign country in which the good was advanced in value or improved in condition. (Emphasis added).

"Advanced in value" is defined in section 102.1(a) as "an increase in the value of a good as a result of production with respect to that good, other than by means of those "minor processing" operations described in paragraphs (m)(5), (m)(6) and (m)(7) of this section". "Improved in Condition" is defined in section 102.1(i) as "the enhancement of the physical condition of a good as a result of production with respect to that good, other than by means of those "minor processing" operations described in paragraphs (m)(5), (m)(6) and (m)(7) of this section". Minor processing operations described in paragraphs (m)(5), (m)(6) and (m)(7) of section 102.1, include unloading reloading or any other operation necessary to maintain the good in good condition; putting up in measured doses, packing, repacking, packaging, repackaging; and testing, marking, sorting or grading.

In this case, we find that the U.S. cheeses are advanced in value or improved in condition as a result of the operations performed in Canada and that the cutting and shredding operations are not considered to be minor processing as defined in paragraphs (m)(5), (m)(6) and (m)(7) of section 102.1. Accordingly, pursuant to section 102.14, the country of origin of the imported cut and shredded cheese is "Canada" the last foreign country in which the good was advanced in value or improved in condition. Therefore, for purposes of the country of origin marking requirements of 19 U.S.C. 1304, the country of origin is "Canada".

We note however, that section 134.43(e) of the interim regulations, provides in part that "where the country of origin of an article is determined in accordance with section 102.14, part 102 of this Chapter, such article, at the choice of the importer, exporter or producer of the good, may be marked, as appropriate, in a manner such as the following:

(1) Assembled in (name of foreign country) from U.S. Components;

(2) Further processed in (name of country of origin) from U.S. materials;

(3) Product of (name of foreign country) made from U.S. components; or

(4) Product of (name of foreign country)".

We find that the proposed marking "Cheese Produced in the United States, Cut [Or Shredded,] And Packaged In Canada" is not similar in meaning to the marking examples set forth in section 134.43(e) and is not an acceptable country of origin marking for the imported cut and shredded cheese. However, the origin marking "Further Processed in Canada from U.S. Cheese" would be consistent with section 134.43(e) and would be an acceptable country of origin marking for the imported cut and shredded cheese.

HOLDING:

Pursuant to section 102.14, of the interim amendments to the Customs Regulations, the U.S. origin block cheeses are advanced in value or improved in condition as a result of the Canadian operations. Accordingly, for marking purposes, the country of origin of the cut and shredded cheese is "Canada". The proposed marking "Cheese Produced in the United States, Cut [Or Shredded,] And Packaged In Canada" is not similar in meaning to the marking examples set forth in section 134.43(e) and is not an acceptable country of origin marking for the imported cut and shredded cheese. A marking such as "Further Processed in Canada from U.S. Cheese" is an acceptable country of origin marking.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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