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HQ 560612

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May 1, 1998

MAR-2-05 RR:CR:SM 560612 MLR

CATEGORY: MARKING

John M. Peterson, Esq.
Margaret R. Polito, Esq.
Neville, Peterson & Williams
80 Broad Street, 34th Floor
New York, NY 10004

RE: Country of Origin Marking for Pepper Salads; Substantial Transformation

Dear Mr. Peterson and Ms. Polito:

This is in reference to your letters of August 8, 12, September 16 and 25, 1997, requesting a ruling on behalf of Pillsbury Company ("Pillsbury"), concerning the country of origin marking for two pepper salads.

FACTS:

It is stated that Pillsbury sells two pepper salads. The first pepper salad is produced using primarily red and green bell peppers grown in the U.S. Tuscan peppers grown in Greece are also used. All of these peppers are washed, blanched, de-stemmed, de-seeded, and cut into pieces. The pepper pieces are then mixed with spices and placed in a solution containing water, vinegar, oils, garlic, calcium chloride, benzoate of soda, coloring, and preservatives. In its finished condition, it is stated that the pepper salad can be used as a condiment or accompaniment for meats, poultry, and similar dishes. It is stated that the pepper salad has a shelf life of one year.

The second pepper salad consists primarily of tuscan peppers grown in Greece. The tuscan peppers are imported into the U.S. and washed, blanched, de-stemmed, de-seeded, and cut into pieces. The peppers are then placed in a solution of water, vinegar, salt, coloring, citric acid and preservatives. The finished salad has a stated shelf life of one year.

ISSUE:

Whether the imported peppers undergo a substantial transformation in the U.S. for purposes of 19 U.S.C. 1304.

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.

I. Substantial Transformation

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 the marking laws and regulations. For country of origin marking purposes, a substantial transformation of an imported article occurs when it is 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. See 19 CFR 134.35.

It is claimed that the tuscan peppers for both salads undergo a substantial transformation in the U.S. As support, Koru North America v. United States, 701 F. Supp. 229 (CIT 1988), is cited, where the court considered whether headed and gutted fish underwent a change in origin when they were processed into fish fillets. The fish were boned, skinned, cut into fillets, fat was trimmed, and the fillets were glazed to preserve their moisture content and enhance their shelf life. The court held that the headed and gutted fish underwent a substantial transformation and noted that the fillets were different articles of commerce than the fish itself and were sold in different areas of supermarkets than fresh fish.

It is claimed that as in Koru, the Greek tuscan peppers undergo a substantial transformation in the U.S. as they are converted from fresh produce that is sold in the vegetable section of a supermarket with a limited shelf life, into condiments sold in a different area of a supermarket with an extended shelf life. It is also claimed that the pepper salads are a different article of commerce than fresh peppers, just as fish fillets are a different article of commerce than headed and gutted fish.

Azteca Milling Co. v. United States, 703 F. Supp. 949, aff'd, 890 F.2d 1150 (Fed. Cir. 1989), is also cited as support. In Azteca, corn grown in the U.S. was exported to Mexico where it was removed from the cob, cleaned and cooked in vats with lime to produce masa, or corn flour. The court concluded that there was not a double substantial transformation in Mexico but only a single transformation from corn to corn flour. Based upon Azteca, it is claimed that the fresh peppers are converted into a processed food product that has a different use. It is claimed that the imported tuscan peppers can be used as an ingredient in a Greek Salad or a variety of recipes and are converted into a condiment that has a single use . It is claimed that as in Azteca, a chef cannot substitute the pepper salads for tuscan peppers in a recipe that requires tuscan peppers since the pepper salads contain additional ingredients, such as oils and vinegar, that may spoil a recipe that calls for fresh tuscan peppers.

It is claimed that National Juice Products, Ass'n v. United States, 10 CIT 48 (1986), does not apply, where the court considered frozen orange juice concentrate which was mixed in the U.S. with other concentrate, diluted with water, flavored, and packaged. The court held that the addition of water and orange flavors did not change the fundamental character of the imported concentrate, and you note that National Juice was expressly distinguished in Koru:

Unlike the product in National Juice Products, the fresh article here (the headed and gutted fish) undergoes its transformation into a retail product (fillet) in the second country (Korea). These changes go to the fundamental nature and character of the fish; the fish have been transformed, both in name and character. Therefore a new article of commerce has been created. 701 F. Supp. at 235.

Headquarters Ruling Letter (HRL) 558733 dated December 28, 1994, is also cited as support, where Customs held that whole avocadoes from Chile underwent a substantial transformation in the U.S. when processed into guacamole. The U.S. processing operation entailed removing the seeds and blending the avocado pulp with water, citric acid, seasonings, and chile peppers.

In HRL 559841 dated July 25, 1996, Customs held that tomato sauce used for cooking traditional Hispanic dishes as well as to marinate meats and fish, and composed of tomato paste concentrate from a non-beneficiary country, various spices, modified corn starch, beet powder, and water was eligible for preferential tariff treatment under the Caribbean Basin Economic Recovery Act (CBERA), as the mixing of these ingredients was a substantial transformation.

In this case, we agree that the imported Greek tuscan peppers undergo a substantial transformation in the U.S. when they are processed by blanching, de-stemming, de-seeding, cut into small pieces, and blend with oils, to become pepper salads. After chopping and blending the peppers with the various ingredients, the finished pepper salads have an entirely different appearance, consistency, and purpose than fresh peppers. Furthermore the pepper salads/condiments have a different name, character, and use from the imported fresh tuscan peppers. We also note that the peppers are not merely mixed together, but are combined with other ingredients to transform the fresh peppers into a processed food product which has different uses and tastes. Accordingly, we find that Pillsbury will be the ultimate purchaser of the imported tuscan peppers and the finished salads will not be required to be marked with a foreign country of origin.

HOLDING:

Based upon the information provided, it is our opinion that the imported Greek Tuscan peppers are substantially transformed in the U.S. when they are processed by blanching, de-stemming, de-seeding, cut into small pieces, and blended with oils, to become pepper salads. Therefore, Pillsbury will be the ultimate purchaser of the imported tuscan peppers and the finished salads will not be required to be marked with a foreign country of origin.

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
Commercial Rulings Division

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