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HQ 562928




December 17, 2003

MAR-2 RR:CR:SM 562928 KSG

CATEGORY: MARKING

Cheryl Ellsworth
Harris Ellsworth & Levin
2600 Virginia Avenue, N.W.
Suite 1113
Washington, D.C. 20037-1905

RE: NAFTA Preferential tariff treatment for collagen sausage casings; modification of NY J87501

Dear Ms. Ellsworth:

This is in response to your letter of July 15, 2003, requesting a binding ruling on behalf of Nitta Casings, Inc., concerning the eligibility of collagen sausage casings for preferential treatment under the North America Free Trade Agreement ("NAFTA") and the proper country of origin marking for the sausage casings. We have reconsidered New York Ruling Letter (NY) J87501, dated November 20, 2003.

Pursuant to section 625(c), Tariff Act of 1930 (19 U.S.C. 1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), notice of proposed modification of NY J87501 is not necessary as it has not been in effect for at least 60 days.

FACTS:

This ruling request involves edible collagen sausage casings. All materials used in the United States are of U.S. origin exclusively. In the United States, bovine hides are washed, treated, and ground into small particles. Then, the particles are mixed with solutions to form a collagen gel and, in some instances, a coloring agent such as annatto is added. The gel is extruded into a coagulation chamber, which results in a continuous tube of extruded collagen. The extruded collagen is then washed in a series of baths. The extruded collagen is dried in a tunnel that carefully controls the temperature and humidity. The dried extruded collagen is spooled onto large reels typically containing approximately 50,000 feet of ribbon. The reels are then covered in plastic bags, placed in corrugated cases and shipped to Canada.

In Canada, the extruded collagen is unreeled, inflated and passed through a moisture chamber that exclusively adds water of Canadian origin so as to impart greater pliability to the casings. At this point, the collagen tubing is passed through a set of rollers where it is pleated or compressed into shorter segments of approximately 50-60 feet by 11 inches in length and then cut. While the collagen tubing passes through the rollers, a very thin film of food grade vegetable oil coating of U.S. origin is applied to ease the rollers and the pleating process. These 11-inch pieces, which are referred to as sticks or strands, are easily handled and used lengths of collagen sausage casing. A quantity of approximately 40 to 60 sticks or strands are packaged into fluted cardboard boxes and hermetically sealed. Typically, the boxes are shipped in quantities of four to six per case. The collagen sausage casings are imported into the United States and sold for use in the production of a variety of sausages.

The vegetable oil is classified in subheading 2710.19, HTSUS. You state that the extruded collagen and the collagen sausage casings are classified in subheading 3504.00.50, HTSUS.

ISSUES:

I. Whether the imported sausage casings qualify as an "originating good" for the purposes of NAFTA.

II. What is the proper country of origin marking for the imported sausage casings?

LAW AND ANALYSIS:

I. Originating good

General Note 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUS. General Note 12(a)(i) provides, in pertinent part:

(i) Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Canada under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn followed by the symbol “CA” in parentheses, are eligible for such duty rate, in accordance with section 201 of the NAFTA Implementation Act.

Accordingly, the sausage casings will be eligible for the special “CA” rate of duty provided it is a NAFTA “originating” good under General Note 12(b), HTSUS, and qualifies to be marked as a product of Canada under the NAFTA Marking Rules. General Note 12(b), HTSUS, provides, in pertinent part:

For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if—

(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or

(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that—

(A) 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, or

(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or

(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials;

Because the sausage casings are produced entirely in Canada and/or the United States exclusively from originating materials, pursuant to GN 12(b)(iii), they will qualify as an originating good.

II. NAFTA Marking Rules

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 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. Congressional intent in enacting 19 U.S.C. 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlaender & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940). Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

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 the purposes of country of origin marking and determining the rate of duty and staging category applicable to a NAFTA originating good as set out in Annex 302.2. Paragraph (a) of this section states 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

(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 applicable requirements of these rules are satisfied.

Since the sausage casings are not wholly obtained or produced or produced exclusively from domestic materials, we proceed to 102.11(a)(3). Pursuant to 19 CFR 102.20(f), the tariff shift rule for subheading 3504.00.50, HTSUS, is as follows:

3503-3504.A change to heading 3503 through 3504 from any other heading, including another heading within that group

Since the extruded collagen is classified in heading 3504, it does not meet the tariff shift rule under 19 CFR 102.11(a)(3). Pursuant to the hierarchical rules, we proceed to 19 CFR 102.11(b). Section 102.11(b) provides:

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) of this section, (1)the country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good....

Pursuant to 19 CFR 102.18(b)(1), only those domestic and foreign origin materials that do not meet the tariff shift rule are considered in determining the material that imparts the essential character to a good. In this case only the U.S.-origin extruded collagen does not meet the tariff shift requirement and therefore, may be considered in determining the single material that imparts the essential character to the good.

Pursuant to 19 CFR 102.18(b)(1)(iii), if there is only one material that does not meet the tariff shift requirement, that one material is considered the single material that imparts the essential character to the good. In this case, the extruded collagen would be the single material that imparts the essential character to the good. Accordingly, the country of origin of the sausage casings would be the United States.

Because the country of origin of the sausage casings is the United States, 19 CFR 102.19(b) is applicable.

Section 102.19(b) provides as follows:

If under any other provision of this part, the country of origin of a good which is originating within the meaning of section 181.1(q) of this chapter is determined to be the United States and that good has been exported from, and returned to the United States after having been advanced in value or improved in condition in another NAFTA country, the country of origin of such good for Customs duty purposes is the last NAFTA country in which that good was advanced in value or improved in condition before its return to the United States.

Accordingly, in this case, the country of origin for marking purposes for the sausage casings is the United States and pursuant to 19 CFR 102.19(b), the country of origin for Customs duty purposes would be Canada.

Since the country of origin for marking purposes for the sausage casings is the United States, they are not subject to the country of origin marking requirement set forth in 19 U.S.C. 1304.

HOLDING:

Based on the information provided, the imported sausage casings are originating for the purposes of NAFTA. The country of origin for Customs duty purposes is Canada. The sausage casings are not subject to the marking requirements of 19 U.S.C. 1304. NY J87501 is hereby modified.

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,

Myles B. Harmon, Director
Commercial Rulings Division

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