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HQ 561494




August 24, 2000

MAR-05 RR:CR:SM 561494 BLS

CATEGORY: MARKING

Special Agent in Charge
Office of Enforcement
U.S. Customs Service
1420 West Mariposa Road
Nogales, Arizona 85622

RE: Internal advice request; Country of origin marking of garbanzo beans; Chapter 20 Note, 19 CFR 102.20; packing, canning

Dear Sir:

This is in reference to a request for internal advice on behalf of Allen Canning Company (“Allen”), filed by counsel, concerning the country of origin marking requirements for garbanzo beans (“chickpeas”) imported from Mexico. We note that this request was prompted by the issuance of a pre-penalty notice for violations of law and regulations including 19 U.S.C. 1592 and 19 CFR 134.26.

FACTS:

Counsel for Allen describes the processing after the beans are imported as follows:

Rehydration

The beans are dry and rock-hard in their raw state and must be hydrated to approximately 50 percent moisture content. This is accomplished by soaking the beans in warm water (i.e., 100-120 degrees F) for 4-6 hours. The beans are rehydrated in large vessels to begin tenderizing their seeds and to assure uniform expansion of the bean in the U.S. processing.

2) Destoning

After rehydration, a gravity fed flume transports the beans to a pump that forces the beans into an even feed hopper that feeds the beans into a dry bean destoner. The raw commodity harvested from the fields contains stones. The destoner works on the concept that stones are of higher specific gravity than

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dry beans. As a result, heavier stones are removed from the processing stream.

3) Blanching

The destoning step is engineered to be part of the transportation system that transports the beans to a blancher. Blanching is the next important step in the production process and involves placing the beans in a water bath at 170 degrees – 180 degrees F for 3-4 minutes. This step in the processing is important because it inactivates enzymes that may contribute to off flavors and colors in the beans. Two of the most heat-resistant enzymes in vegetables are catalase and peroxidase, and they are destroyed in the blanching process. The destruction of these enzymes also inactivates other enzymes that would otherwise contribute to deterioration of the beans. If not destroyed, enzymes may reduce the color of the beans, which are important to the marketing process. In addition, if enzymes are not destroyed, then the flavor of the beans may change unfavorably and thus destroy the beans marketability.

The blanching process also starts the conditioning of long chain polysaccarides in the beans. This conditioning is basically a pre-softening reaction that allows the cans to be filled more accurately and begins but does not complete the process of accelerating the biochemical reactions that soften the beans.

Electronic Inspection

After the blanching process, the beans are electronically inspected. Specifically, the beans are optically sorted with computer imaging equipment that takes three-dimensional photographs of the beans as they move from one conveyor belt to another. This photograph is processed constantly and evaluated against predetermined defect limits programmed into computers. Any defective bean, piece of bean, or foreign material present is removed.

Canning

After electronic inspection, the beans are pumped to the filler that places a specified quantity of beans into each can. Filling is a critical control point for the process because the length of time and amount of temperature required to sterilize the beans are based upon how many beans are in the can. Extremely precise and accurate filling equipment is used to control this process. Filling is monitored twice per hour to ensure accuracy and all documentation necessary to maintain control is retained. 3

Once filled into cans, the beans are immediately covered in a liquid medium that consists of water, salt and calcium chloride to help maintain firmness, and disodium EDTA to help maintain color. This medium also facilitates heat transfer to assure proper sterilization of the beans.

After filling and covering with a liquid medium, the cans are sealed. This seal is hermitic which means that bacteria cells and spores cannot re-enter the can nor can gases escape. This is a critical control point in the process and is precisely controlled and measured.

6) Thermal Processing – Changes in Texture

Lastly, the cans are thermally processed in order to destroy all pathogenic bacteria that would cause adverse public health problems. The subject beans are thermally processed on average for over 20 minutes at approximately 260 degrees F. This is also a critical point in the process and is regulated by the FDA.

The subject beans are ready-to-eat and require no further processing because they are also cooked during the thermal processing in order to alter their texture. In this regard, Allen explains that texture is considered an important characteristic of canned foods, and control or modification of texture is a major objective in modern food technology.

Allen explains that texture is largely dependent upon changes in the bean cell wall complex and loss of turgor pressure during thermal processing. The structure of the bean cell wall consists of cellulose fibrils imbedded in a matrix consisting largely of pectic substances, hemicelluloses, protein, lower molecular weight solutes, and water. The pectic substances comprise approximately 1/3 of the dry substance of the primary cell wall of the beans. They contribute to the strength of the wall. Their basic structure is altered by the thermal process due to a variety of chemical changes in the cell wall matrix. Bean softening during processing is the result of pectin depolymerization, which occurs via a beta-elimination reaction. This process converts large molecular weight pectins to smaller molecular weight compounds which causes loosening of the cell wall, and thus, softening.

The other factor influencing texture of processed vegetables is loss of turgor pressure during thermal processing. When vegetables are processed in a salt brine, the membrane structures of the cells are destroyed, resulting in a

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loss of crispness. Thus, both pectin depolymerization and loss of turgor pressure play a critical role in softening of the subject beans during thermal processing. These changes are critical in terms of consumer acceptability of the product.

In addition to changes in texture, the beans undergo other changes during the U.S. processing.

Physicochemical Changes
a) Changes in Moisture and Solid Content

The subject beans absorb moisture during the U.S. processing. The moisture content of the beans changes from 8.99% when raw, to 56.5% after rehydration, to 56.9% after blanching, to 67.6% when thermally processed. These moisture changes affect the total solids content of the subject beans, which changes from 91.0% when raw, to 43.5% after rehydration, to 40.11% after blanching, to 32.33% after thermal processing.

Changes in Color

The processing changes the color of the beans from a light reddish color to a more dark-intense yellow color.

Specifically, the processing changes the L-value of the beans. The L-value indicates the degree of lightness of a food. A high L-value indicates a lighter color while a lower L-value indicates a darker color. The subject beans become darker during blanching and thermal processing. The L-values for raw, rehydrated, blanched and thermally processed beans are 55.4, 56.4, 46.9 and 51.70, respectively.

The processing also changes the chroma values of the beans. Chroma is used to evaluate the vivid or dull color of foods. The chroma values of raw, rehydrated, blanched and thermally processed beans are 18.3, 26.8, 13.4 and 18.0, respectively.

The processing also changes the hue angle values of the beans. Hue angle values indicate the actual color of foods on a color wheel. The hue angle values of raw, rehydrated blanched and thermally processed beans are 70.7, 81.9, 86.3 and 85.9 respectively. The large increase in hue angle values reflects an increase in yellow color. 5
c) Changes in Texture

The firmness of raw, rehydrated, blanched and thermally processed beans are 167.8, 10.9, 8.7 and 2.8, respectively. The firmness value indicates the maximum force in newtons required to rupture the beans. The processed beans are significantly less firm than the raw beans.

Changes in Flavor Volatiles

The above-described processing changes the flavor of the subject beans. The raw beans have an earthy, beany flavor (e.g., grass or hay-like) while the processed beans have a mild flavor. Most flavor volatiles are removed by the heat treatments in the processing operations. Many of the flavor volatiles in raw beans are significantly removed during rehydration, blanching and thermal processing.

Changes in Antinutritional Factors

The raw beans are inedible due to the presence of numerous factors including trypsin, chymotrypsin and amylase inhibitors, oligosaccarides, saponins, and polyphenols. The protease inhibitors (i.e., trypsin and chymotrypsin) of beans are known to reduce protein digestibility and cause hypertrophy. Processing methods such as heating reduce or destroy protease inhibitor activities. Thermal processing is the most effective means of destroying the trypsin and amylase inhibitors, allowing the starch and protein in the beans to be fully utilized for nutrition.

The subject beans also contain high levels of the oligosaccarides, verbascose, stachyose and raffinose. Without proper hydration and heating treatments, which are strictly controlled in the subject operations, these oligosaccarides are fermented in the human gut by indigenous microflora resulting in abdominal discomfort and flatus. The rehydration and blanching operations effectively reduce the amount of soluble oligosaccarides in the beans.

Naturally occurring tannins (polyphenols) of the subject beans interfere with proteins to form tannin-protein complexes resulting in inactivation of digestive enzymes and protein solubility. In addition, tannins are reported to reduce the availability of vitamins and minerals. Processing treatments such as rehydration and heating are reported to reduce the tannin content of the subject beans by 77%. 6

Other antinutritional factors in the subject beans include lectins, saponins and mycotoxins. The saponins interact with glycoproteins or red blood cell surface-causing agglutination. The toxic effect of lectins when ingested orally may be due to their ability to bind to specific receptor sites on the surface of the intestinal epithelial cells, which thus causes a non-specific interference with the absorption of nutrients across the intestinal wall. The lectins are readily destroyed by heating, and thus, are completely destroyed by thermal processing. Saponins and polyphenols are also sensitive to heating and their levels are significantly reduced by thermal processing. Mycotoxins are also destroyed by thermal processing.

Changes in Nutritive Components

Allen cites certain authorities reporting that pressure cooking, which simulates a thermal processing operation, improves the protein efficiency ratio of the raw beans, decreases the starch content and increases the level of total soluble sugars, reducing sugar and starch digestibility of the beans. Thermal processing is also said to reduce the mineral, vitamin, lipid and amino acid content of the raw beans, typically by 70-80%, due predominately to increased moisture uptake during hydration and thermal processing.

Changes in Starch

The U.S. processing changes the starch content of the beans. When starch is heated in the presence of water, the starch granules absorb moisture, and swell depending upon temperature. At a specific temperature, the starch becomes fully gelatinized, which occurs when the beans undergo thermal processing.

Changes in Pectic Substances

Changes in solubility characteristics of pectic substances occur during processing of the subject beans. The levels of water soluble pectins (“WSP”) decline readily during hydration, decline slightly during blanching and increase substantially during thermal processing. The large increase in WSP during thermal processing is consistent with degradation of large molecular weight pectins via a beta-elimination reaction. The levels of celator soluble pectins (“CSP”) and dilute alkali soluble pectins (“OHSP”) decline after rehydration, with large losses observed during thermal processing. This decline is consistent with tissue softening, which occurs during the processing of many fruits and vegetables. These changes in solubility of pectic substances indicate that the 7
large molecular weight pectins are depolymerized to the extent that they become water soluble. These changes in pectic solubility are required to soften the subject beans to a state suitable for consumption, which occurs during thermal processing.

Changes in Protein

The protein content declines linearly in the raw, rehydrated, blanched and thermally processed beans. These protein losses are consistent with tissue softening. As the subject beans absorb moisture and pectic substances are degraded during processing, the tissue softens considerably, and the protein is solubilized in the aqueous solutions.

Ultrastructural Changes

The importer has used electron micrographs to show the subject beans in various stages during processing, i.e., from raw beans to rehydrated beans, to blanched beans, to thermally processed beans. Based on these micrographs, the importer concludes that the raw beans have a rigid, tightly packed structure, consistent with the highest firmness value.

At the rehydration stage, the micrographs show that the starch granules are still intact, but they have a larger diameter that that of the raw beans. This change is consistent with the large increase in moisture absorption that occurs during rehydration. During rehydration, the starch granules absorb moisture, but are still relatively ungelatinized. A major difference between the raw and rehydrated beans is the appearance of a granular matrix material in the rehydrated beans. Overall, the rehydrated beans appear to have a more loosely packed structure than that of the raw beans.

Allen explains that the most obvious structural difference in the blanched beans is the separation between separate cells, indicating degradation of the cell wall-middle lamella. This causes the tissue to appear loosely connected and mushy. Additionally, the structural components have lost their structural integrity compared to raw and rehydrated beans. Many of the starch globules are disrupted and gelatinized.

Similar to the blanched beans, the thermally processed beans exhibited separation between adjacent cells, and degradation of the cell wall-middle lamella. However, the changes observed in the cell wall-middle lamella region are more severe than observed with the blanched beans. The cell wall appears 8
to be puckered, and its contents appear to be coalesced with the cellular components. The ultrastructural cell wall changes are consistent with the softening discussed above, and degradation of pectic substances, above, which occurred during thermal processing. Another difference is the complete destruction of starch granules. Allen states that these ultrastructural changes are consistent with physicochemical measurements, which show that the thermally processed beans are softer and have experienced complete starch gelatinization.

In summary, the importer concludes that the physicochemical and ultrastructural changes in the raw beans during the U.S. processing are as follows:

Moisture content increases while solids content decreased;

The color changes from light reddish to a darker more intense yellow color;

Texture decreases;

4. Flavor volatiles are removed;

Starch is partially gelatinized during rehydration and blanching and fully gelatinized during thermal processing;

Large molecular weight pectins are degraded during rehydration, blanching and thermal processing, while small molecular weight pectins are increased during thermal processing;

Protein cell decreases;

Cell separation occurs due to destruction of the cell wall-middle lamella complex; and

9. Starch granules are disrupted and fully gelatinized during thermal processing.

ISSUE:

What are the country of origin marking requirements for the subject beans grown in Mexico and processed in the U.S.?

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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 United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article will permit, in such a manner as to indicate to the ultimate purchaser in the United States 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.

Section 134.1(b), Customs Regulations, defines “country of origin” as the country of manufacture, production, or growth. In order to change the country of origin, further work or material added to the article in another country must effect a substantial transformation. However, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. 19 CFR §134.1(b).

Section 134.1(j) provides that the “NAFTA Marking Rules” are the rules promulgated for the purposes of determining whether a good is a good of a NAFTA country. A “good of a NAFTA country” is an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules. 19 CFR §134.1(g).

Section 134.35(b) 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.

Section 102.11, Customs Regulations (19 CFR §102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11(a) provides that the 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

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(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.

As the beans are neither wholly obtained and produced nor produced exclusively from domestic (U.S.) materials, neither 102.11(a) nor (b) is applicable. Therefore, we must determine whether the beans undergo a change in tariff classification in the U.S. pursuant to the applicable rule under section 102.20.

After processing in the U.S., Allen states that the canned beans are classifiable under subheading 2005.90.85, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Other vegetables prepared or preserved otherwise than by vinegar or acetic acid . [c]hickpeas (garbanzos).” Allen also states that the raw beans are classifiable under heading 0713, HTSUS, “Dried leguminous vegetables, shelled, whether or not skinned or split” The applicable change in tariff classification for heading 2005 set out in section 102.20(d), Section IV: Chapters 16 through 24, provides as follows:

2001-2007 ... A change to heading 2001 through 2007 from any other chapter.

Assuming the tariff classifications stated by the importer for the raw and processed products are correct, the required tariff shift occurs. However, the Chapter 20 Note for section 102.20(d), provides as follows:

Notwithstanding the specific rules of this chapter, fruit, nut and vegetable preparations of Chapter 20 that have been prepared or preserved merely by freezing, by packing (including canning) in water, brine or natural juices, or by roasting, either dry or in oil (including processing incidental to freezing, packing, or roasting), shall be treated as a good of the country in which the fresh good was produced. Emphasis added.

Accordingly, if the processing in the U.S. constitutes merely a canning operation (including processing incidental thereto), the country of origin of the

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subject beans processed in the U.S. is Mexico, and the product must be so marked.

Allen argues that as a result of this processing of the beans in the U.S., as described above, the subject garbanzos undergo more than a mere canning process and thus do not fall within the Chapter 20 Note exclusion to a change in tariff classification. Specifically, Allen believes that the operations entailed in processing the raw beans into a ready-to-eat processed food, which includes rehydration of the beans for softening purposes and thermal processing used to change the structure and chemical properties of the beans exceed a “canning” operation. Therefore, it is Allen’s opinion that the country of origin of the processed beans is the U.S. and thus the beans are excepted from the marking requirements. See 19 CFR 134.35(b).

In Headquarters Ruling Letter (HRL) 560991 (September 21, 1998), artichokes imported from Mexico were canned in the U.S. This process involved putting the artichokes and brine into the cans which were then conveyed into an exhaust box which heated the imported artichokes to a temperature of 190 degrees F. The can lids were double seamed onto the cans, and the cans were cooled. Customs found that this processing did not exceed the preparation by canning “in water, brine or natural juices” described in the Chapter 20 Note. As a result of determining that this was merely a canning process, and thus covered by the Chapter 20 Note, the country of origin of the artichokes was determined to be Mexico.

However, in HRL 561242 dated May 7, 1999, Customs held that a “ripe olive process” by which green olives grown in Mexico were transformed into black ripe olives by a sequential series of caustic soda washes, water washes and oxygen splurges, exceeded the definition of a canning operation. In that case, the pre-canning processing leading to a debittered ripe black olive included a number of caustic soda washes, plain water washes and oxygen splurges. These multiple treatments debittered and colored the olives. After this process was finished, the olives were washed in brine to remove foreign materials such as stones and plant debris. The olives were then filtered and placed into cans for the canning process that included heating once the cans were sealed.

Accordingly, in HRL 561242, as a tariff shift under the applicable section 102.20 rule occurred, and the Chapter 20 Note did not apply, the olives become a product of the U.S. as a result of the processing performed in the U.S. and thus were excepted from the marking requirements. Allen is of the opinion that 12
the processing of the beans in this case is more substantial than the operations involved in the “ripe olive process” and thus exceeds the definition of “canning” as set forth in the Chapter 20 Note. Allen also contends that if Customs were to hold that the processing in the U.S. was merely a canning operation, HRL 561242 must be modified.

This office has sought the opinion of the Customs Office of Laboratories and Scientific Services (Customs Laboratory) in determining whether the processing of the raw beans in the U.S. constitutes a canning operation. That office has responded in part as follows:

In order to determine the processing parameters that may be included in a canning process, we reviewed standard industry
canning operations related to fruits, vegetables and fish products and compared the standard processing operations to those performed by Allen Canning. In its brief, Allen Canning segments its canning process into different operations including “rehydration”, “destoning”, “blanching”, “electronic inspection”, “canning”, and “thermal processing”. It must be noted that the process denoted as “canning” in the brief is the simple process of the sealing of the can and cannot be regarded in the same manner as the true engineering term “canning”. The true term ‘‘canning’’ encompasses a significant number of processes including the can sealing process.

Allen Canning also appears to be stressing such important processing as the blanching and thermal processing portions of manufacture. They indicate that the blanching process inactivates enzymes present in the beans that produce off-flavors and offodors, i.e., retard spoilage. Further, it is indicated that the thermal processing is used to kill pathogenic bacteria and degrade some of the cell wall structure of the beans, i.e. soften the beans. The processing also causes other changes including the solubilization of proteins into the aqueous canning media and some breakdown of the starches present in the food product.

Our review of industry canning practices show that the canning process is not simply the act of placing product in a can and sealing it. Rather, the term canning refers to a number of production steps that lead from the selection and cleaning of the food product through the sealing and cooking/sterilization of the sealed can. In general, the industry standard canning process encompasses the following

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operations: selection, washing, quality check, peeling and cuffing (for fruits and vegetables), placement in cans and filling with liquids, sealing, cooking/sterilization and labeling. The only difference
between the general process and the Allen Canning process is the “rehydration” step, which simply transforms the dried bean somewhat back into its condition at the time of picking. Accordingly, the heating processes used to deactivate enzymes and kill pathogenic bacteria are a part of the normal canning procedure. In fact, these two
processes are the critical portions of canning as the destruction of spoilage enzymes and bacteria provide canned food with its increased shelf life. The sealing process denies the access of the bacteria to the food. However, if bacteria and enzymes are present as the food is canned, the food would spoil in the cans and there
would be no purpose to the canning. Of course, in sacrifice to the longer shelf life that canning provides, the canned food loses characteristics related to “freshness” that are removed during canning. The loss of cell structure and the changes in protein and carbohydrate contents during the canning process, which leads to loss of freshness, is the sacrifice for a longer shelf life.

Allen Canning also points to other “variances” in “normal” canning operations, specifically the addition of calcium chloride and EDTA and heat processing. Allen Canning indicates that the heating process during canning is lower in temperature but longer in time than what it believes is necessary for simple sterilization. With regard to heating we note that each manufacturer adjusts the heating process to best suit its product. Additionally, because canning involves products packed in liquid with the addition of heat, some degree of “cooking” will always occur in a canning process. Whether or not cooking is incidental to the sterilization process the commercial definition of “canning” allows for the cooking of product during the process.

As for the addition of EDTA and calcium chloride, we note that the Condensed Chemical Dictionary, 12th Edition, Hawley and the Handbook of Food Additives, Ash and Ash list these products as typical food additives to canning and other food processes. 14

Accordingly, as these chemicals normally appear as an additive in canned foods we cannot agree with Allen Canning that their addition to the garbanzo beans would place the process outside of the normal canning process.

The Customs Laboratory concludes that all physical and biological changes that take place during the processing in the U.S., including changes in the characteristics of the beans as described by Allen, i.e., moisture, solids, color, starch and protein, are inherent in almost all canning processes.

Furthermore, with respect to the “debittering” process described in HRL 561242 and the warm water washing/soaking operation performed in this case, the Customs Laboratory has analyzed the processes involved as follows:

[w]e must conclude that the warm water soak is a simple washing process that, in addition to hydrating the dried beans to some degree, simply washes away debris and unwanted surface chemical components. Washing and soaking is a simple process and is performed on all agricultural products prior to canning. As compared to the olive pre-canning process, with its vigorous multiple chemical reactive steps of caustic washes and oxygenation, the garbanzo bean pre-canning process is quite simple. It must be further noted that in contrast to the warm washing process of the garbanzo beans, a physical process, the olive pre-canning process involves chemical reactions that take place in the olive. Further, it is our understanding that the soaking and washing step is standard in all agricultural canning processes. Of course, in the case of all dried products, a certain amount of hydration takes place during the washing and soaking process.

Accordingly, we find that the warm water washing/soaking step in this case is part of the standard process of canning the garbanzo beans. HRL 561242 is distinguished from the facts in this situation in that the “debittering” process described in that case is not considered part of or incidental to a canning operation, and thus does not fall under the Chapter Note 20 exclusion.

Consequently, we are of the opinion that the described processes constitute a standard canning operation, including processing incidental thereto, which falls within the Chapter 20 Note exclusion. As the Chapter 20 Note applies, the country of origin of the canned beans is Mexico.

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Exception from the Marking Requirements – 19 CFR 134.32(h)

Assuming Customs finds that the described processing constitutes a canning operation, and that the country of origin of the canned beans is Mexico, Allen contends in the alternative that the exception to the marking requirements under section 134.32(h), Customs Regulations (19 CFR 134.32(h)) applies as the ultimate purchasers reasonably know the country of origin of the canned beans. (Section 134.32(h), Customs Regulations (19 CFR 134.32(h)), provides an exception to the marking requirements in the case of a good of a NAFTA country for which the ultimate purchaser must reasonably know the country of origin by reason of the circumstances of their importation or the character of the articles.)

Allen states that approximately 75% of the beans are grown in Mexico, and the remaining 25% in the U.S., and that 85% of the product is sold by Allen to wholesalers, who in turn sell to parties such as restaurants for use on salad bars, soups and remanufacture into products such as hummus. Allen is of the opinion that the ultimate purchaser of the beans is the wholesaler, and that as sophisticated and knowledgeable purchasers, they “reasonably know” the country of origin of the beans. Further, Allen is of the opinion that as the wholesaler is the ultimate purchaser, and the beans are excepted from marking pursuant to 19 CFR 134.32(h), the certification and notification requirements (19 CFR 134.25) are not applicable.

Section 134.1(d), Customs Regulations (19 CFR 134.1(d)) provides that the “ultimate purchaser” for a good of a NAFTA country is the last person in the U.S. who purchases the good in the form in which it was imported. If the manufacturing process does not result in one of the changes prescribed in the NAFTA Marking Rules as effecting a change in the article’s country of origin, generally the consumer who purchases the article after processing will be regarded as the ultimate purchaser.

In the instant case, Allen sells the beans to food wholesalers who resell the product in the same form to restaurants or other unspecified parties. In this case, the restaurant would be considered the “ultimate purchaser” as this entity and not the wholesaler ”is the last person in the U.S. who purchases the good in the form in which it was imported.” See, e.g., Customs Service Decision (C.S.D.) 90-42, dated January 11, 1990, where Customs determined that the ultimate purchaser of imported shrimp not substantially transformed by the U.S. processing was a restaurant owner, and the carton in which the

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restaurant operator received the shrimp was required to be marked with the country of origin of the shrimp.

Accordingly, as the restaurant and not the wholesaler is the ultimate purchaser under this scenario, 19 CFR 134.32(h) is not applicable and the product must be marked with Mexico as the country of origin.

Further, as the country of origin of the U.S. processed and repacked garbanzo beans under the NAFTA Marking Rules is Mexico, Allen is subject to the repacking requirements of 19 CFR 134.25.

Applicability of NAFTA Marking Rules to Entry Period

Allen maintains that the NAFTA Marking Rules did not go into effect until August 5, 1996, and consequently, these rules are not applicable to entries covered by the pre-penalty notice filed before that date.

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) took effect on January 1, 1994, to coincide with the effective date of the NAFTA. The final rule was published as T.D. 96-48 in the Federal Register on June 6, 1996, effective on August 5, 1996, 61 FR 28932.

Accordingly, as the NAFTA Marking Rules were in effect as interim rules commencing January 1, 1994, the entire entry period covered by the pre-penalty notice, i.e., June 1994 through April 1999, is subject to the NAFTA Marking Rules.

In its brief, Allen also addresses the applicability of 19 U.S.C. 1592 . We believe this issue should be properly addressed only after issuance of the penalty notice, assuming the port decides to take this course of action.

HOLDING:

1) Garbanzo beans grown in Mexico undergo a canning process in the U.S. when subject to the operations described above which include rehydration, destoning, blanching and thermal processing. Therefore, pursuant to the Chapter 20 Note, 19 CFR 102.20(d), the country of origin of the garbanzo beans is Mexico, and the beans must be so marked.

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2) The restaurant which purchases the beans from the wholesaler is considered the “ultimate purchaser” as this party and not the wholesaler ”is the last person in the U.S. who purchases the good in the form in which it was imported.” See 19 CFR 134.1(d). Therefore, Allen’s claim that the marking exception under 19 CFR 134.32(h) is applicable as the wholesalers reasonably know the country of origin of the beans is rejected.

Further, as the country of origin of the U.S. processed and repacked garbanzo beans under the NAFTA Marking Rules is Mexico, Allen is subject to the repacking requirements of 19 CFR 134.25.

Sincerely,

John Durant, Director

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