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NY B87161




July 9, 1997

CLA-2-17:RR:NC:SP:232 B87161

CATEGORY: CLASSIFICATION

TARIFF NO.: 1701.99.1000; 1701.99.5000

Mr. William H. Seeger
Favorite Brands International
75 Tri State International
Suite 222
Lincolnshire, Illinois 60069

RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA), of sugar/gelatin blends from Canada; Article 509

Dear Mr. Seeger:

In your letter dated June 25, 1997 you requested a ruling on the status of sugar/gelatin blends from Canada under the NAFTA.

Samples were included with your request. The subject merchandise consists of two sugar/gelatin blends, one containing 95 percent sugar and 5 percent gelatin, and the other containing 98 percent sugar and 2 percent gelatin. The sugar will either be produced in Canada, or raw sugar will be imported from a non-NAFTA country and refined in Canada. The gelatin will be produced in the United States. The sugar and gelatin will be blended in Canada and shipped to the United States. After importation, the sugar and gelatin will be separated, the sugar will be processed, and then the sugar and gelatin will be recombined. The sugar and gelatin blends will be mixed with other ingredients, including additional gelatin, to produce marshmallows and gummie bears.

The applicable subheading for the sugar/gelatin blends, if described in additional U.S. note 5 to chapter 17 and entered pursuant to its provisions, will be 1701.99.1000, Harmonized Tariff Schedule of the United States (HTS), which provides for cane or beet sugar and chemically pure sucrose, in solid form: other. The rate of duty will be 3.6606 cents per kilogram less 0.020668 cents per kilogram for each degree under 100 degrees (and fractions of a degree in proportion) but not less than 3.143854 cents per kilogram. If not described in additional U.S. note 5 to chapter 17 and not entered pursuant to its provisions, the applicable subheading will be 1701.99.5000, HTS. The duty rate will be 38.9 cents per kilogram. In addition, products classified under subheading 1701.99.5000, HTS, will be subject to additional duties based on their value as described in subheadings 9904.17.08 to 9904.17.15, HTS, if not a product of Canada.

If the sugar is produced in Canada, the sugar/gelatin blend, being wholly obtained or produced entirely in the territory of Canada and the United States, will meet the requirements of HTSUSA General Note 12(b)(i), and will therefore be entitled to a 0.1460 cents per kilogram less 0.002066 cents per kilogram for each degree under 100 degrees (and fractions of a degree in proportion) but not less than 0.094385 cents per kilogram rate of duty under the NAFTA upon compliance with all applicable laws, regulations, and agreements, when classified under subheading 1701.99.1000, HTS.

If the sugar is a raw sugar produced in a non-NAFTA country and is refined in Canada, the merchandise would not qualify for preferential treatment under the NAFTA because the non-originating sugar used in the production of the goods will not undergo the change in tariff classification required by General Note 12(t)/17, HTSUSA.

Your inquiry also requests a ruling on the country of origin marking requirements for an imported article which is processed in a NAFTA country prior to being imported into the United States. You also request the country of origin for marking purposes after the imported product is further processed in the United States into a finished article. A marked sample was not submitted with your letter for review.

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 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 appropriate Customs Regulations. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in Part 102, Customs Regulations. The marking requirements of these goods are set forth in Part 134, Customs Regulations.

Section 134.1(b) of the 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 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 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 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 order to determine the country of origin marking requirements we must first apply the NAFTA Marking Rules in order to determine whether the imported sugar/gelatin blends "are goods of a NAFTA country", prior to being further processed in the U.S. Part 102 of the 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 regulations, sets forth the required hierarchy for determining country of origin for marking purposes.

Applying the NAFTA rules of origin set forth in Part 102 of the regulations to the product which contains Canadian produced sugar and U.S. gelatin, we find that, for marking purposes, the imported sugar/gelatin blend is a good of a NAFTA country prior to being further processed in the U.S. Section 102.11(c)provides that for a good that is classified as a mixture under the HTSUS, the country of origin of such good is the country or countries of origin of all materials that merit equal consideration for determining the essential character of the good. The U.S. gelatin is exempt from marking. Therefore, the origin of the sugar, which in this case is Canada, must be indicated on the imported product.

The only issue which remains is whether the U.S. processor is the ultimate purchaser within the meaning of section 134.35(b). Section 134.35(b) of the regulations, provides that
a good of a NAFTA country which is to be processed in the United States in a manner that would result in the good becoming a good of the United States under the NAFTA marking rules is excepted from marking. Unless the good is processed by the importer or on its behalf, the outermost container of the good shall be marked in accord with this part.

Based on the facts of this case, we find that the imported sugar/gelatin blend as a result of the further processing performed in the U.S. becomes an article of U.S. origin under Part 102 of the regulations. The materials used to make the marshmallows and the gummie bears have satisfied the change in tariff classification set out in Section 102.20(d).

Accordingly, the imported sugar/gelatin blend, which is a good of a NAFTA country that became U.S. articles as a result of being further processed in the U.S., in the manner described above, are excepted from marking and only the outermost containers are required to be marked with the country of origin "Sugar Produced in Canada" if the imported sugar/gelatin blend is not processed by the importer or on its behalf.

Applying the NAFTA Marking Rules set forth in Part 102 of the regulations to the product which contains raw sugar from non-NAFTA countries and U.S. gelatin, we find that, for marking purposes, the imported sugar/gelatin blend is a good of the particular non-NAFTA country, which produced the raw sugar. Noting Section 102.11(c), the U.S. gelatin is exempt from marking, and the sugar must be marked to show the origin of the non-NAFTA country which produced the raw sugar.

The only issue which remains is to determine who is the ultimate purchaser of the imported sugar/gelatin blend. Since the imported sugar/gelatin blend is not a good of a NAFTA country, the general substantial transformation test (change in name, character or use), must be applied in order to determine who is the ultimate purchaser pursuant to 19 CFR 134.35(a) of the regulations.

In this case, we find that the imported sugar/gelatin blend is substantially transformed as a result of the U.S. processing into marshmallows and gummie bears, and therefore the U.S. manufacturer is the ultimate purchaser of the imported sugar/gelatin blend. Accordingly, the sugar/gelatin blend is exempt from marking. However, the outermost container must be marked to indicate the origin of the non-NAFTA country which produced the raw sugar noting 19 CFR 134.35(a) of the regulations.

The marking of U.S. made products is under the jurisdiction of the Federal Trade Commission (FTC). You can contact the FTC at:

Federal Trade Commission
Division of Enforcement
6th and Pennsylvania Ave.
N.W., Washington, D.C. 20508

Inquiries on the U.S. sugar tariff-quota program should be directed to:

United States Department of Agriculture
Foreign Agricultural Service
Import Policies & Programs Div.
14th Street & Independence Ave.
Washington, D.C. 20250-1000
Tel# 202-690-1632

Regarding your inquiry on the percentage of gelatin in a blend, which would allow the merchandise to be considered a product of Canada, there are no minimum or maximum amounts established by United States Customs.

This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181).

This ruling letter is binding only as to the party to whom it is issued and may be relied on only by that party.

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist John Maria at 212-466-5730.

Sincerely,

Gwenn Klein Kirschner
Chief, Special Products Branch

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