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HQ 559991




November 27, 1996

CLA-2 RR:TC:SM 559991 DEC

Category: CLASSIFICATION

Mr. W. Clayton Holton, Jr.
197 Churchill Circle
Leesburg, Georgia 31763

RE: NAFTA Article 509; Originating good; General Note 12; Peanuts

Dear Mr. Holton:

This is in reference to your letter dated July 23, 1996, requesting a ruling concerning the eligibility of peanut products to be imported into the U.S. from Mexico for duty preference pursuant to the North American Free Trade Agreement (NAFTA).

FACTS:

You state that you intend to grow peanuts in Mexico to make various peanut-based products. The peanuts will be stored, and then shelled in Mexico. The peanuts will then be roasted, skinned, split apart, and germs removed while in Mexico. One product you intend to produce is peanut paste which is created by coarsely grinding roasted split peanuts. The paste will be put into 55 gallon drums in which the oil will separate in Mexico. Second, you intend to produce peanut butter out of the roasted split peanuts. You will add sugar, hydrogenated vegetable oil, molasses, and salt while the peanuts are being ground. The peanut butter will be packed in plastic 18 ounce jars and packaged in cases in Mexico. Third, you intend to honey dry roast whole peanuts. Whole blanched peanuts will be roasted and coated with honey, salt, corn starch, sugar, and other ingredients for enhancing flavor. These roasted peanuts will be packed in 16 ounce jars and placed in cases. Fourth, you intend to blanch and oil roast in peanut or cotton seed oil whole peanuts. Oil roasted blanched peanuts will be coated with sugar, honey, corn syrup, salt, and xanitan gum. These peanuts will be packaged in 12 ounce cans and put in cases. Blanched oil roasted peanuts with only salt added will be packaged in 12 ounce cans and put in cases and labeled cocktail peanut nuts. All labels will have nutritional information required by the U.S. and "Made in Mexico" will be printed on the label.

ISSUE:

Do the various peanut-based products described above that are produced from peanuts grown in Mexico qualify for NAFTA preferential tariff treatment?

LAW AND ANALYSIS:

To be eligible for tariff preferences under the NAFTA, goods must be "originating goods" within the rules of origin set forth in General Note 12(b), Harmonized Tariff Schedule of the United States (HTSUS). There are three methods applicable to the processes you present by which goods imported into the United States may be goods originating in the territory of a NAFTA party. The first method is that "they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States. See General Note 12(b)(i), HTSUS. The second method is that they have been "transformed in the territory of Canada, Mexico and/or the United States" pursuant to General Note 12(b)(ii)(A), HTSUS, which states:
except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein . . . .

The third method that will qualify a good as a good originating in the territory of a NAFTA party is if the goods are "produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials." General Note 12(b)(iii), HTSUS.

Your ruling request is silent on the issue of the origin of the other ingredients used to produce the various peanut-based products. We note that the ingredients, in addition to the Mexican origin-peanuts, used to produce the peanut butter (classified pursuant to subheading 2008.11, HTSUS) (sugar, hydrogenated vegetable oil, molasses, and salt) will not disqualify the peanut butter from eligibility under the NAFTA if the ingredients do not originate in a NAFTA country since the applicable tariff shift rule in General Rule 12(t)/20.3 allows a change to subheading 2008.11 from any other chapter. All of the ingredients of the peanut butter will meet this tariff shift. Accordingly, the peanut butter will qualify for the NAFTA preferential duty rate.

Similarly, the additional ingredients used for the roasted peanuts (honey, salt, corn starch, sugar, and other flavor enhancing ingredients) and the honey roasted peanuts (sugar, honey, corn starch, salt, and xanitan gum) will not disqualify these articles from eligibility under the NAFTA since the roasted and honey roasted peanuts are also classified under subheading 2008.11, HTSUS. All of these ingredients will meet the applicable tariff shift rule. Accordingly, the roasted peanuts and the honey roasted peanuts will qualify for the NAFTA preferential duty rate.

These articles, classifiable under subheading 2008.11, HTSUS, are subject to quantitative restrictions. Questions regarding licensing procedures and applications for license to import products subject to quotas should be addressed to the Foreign Agriculture Service, U.S. Department of Agriculture, 1400 Independence Avenue, S.W., Stop 1021, Washington, D.C. 20250-1021

HOLDING:

Under the facts presented, the peanut-based products described above are NAFTA originating goods. Accordingly, the products described above qualify for preferential duty treatment for purposes of the NAFTA. Since there are quantitative restrictions (e.g. quotas) applicable to the subject goods, we suggest that you contact the U.S. Department of Agriculture prior to attempting to import the merchandise.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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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