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HQ 562170





May 23, 2002

MAR-05 RR:CR:SM 562170 NL

CATEGORY: MARKING

Law Offices
George R. Tuttle
Three Embarcadero Center, Suite 1160
San Francisco, CA 94111

RE : Andean Trade Preference Act Eligibility for Canned Mushrooms; Country of Origin Marking; Substantial Transformation

Dear Sirs:

This is in reply to your letter dated June 7, 2001, requesting a binding ruling. Supplementary information was submitted to this office on March 5, 2002. A telephone conference was held on May 10, 2002.

FACTS:

Canned mushrooms, now held in warehouse, are to be entered for consumption by Horley Trading Company, Limited (Horley). The mushrooms were debrined, sliced and canned in Colombia by Compania Envasadora del Atlantico (CEA) using mushrooms grown in Taiwan and shipped to Colombia bulk packed in brine. The Taiwanese mushrooms in brine are proposed to be classified in subheading 07011.90.40, HTSUS. The mushrooms after canning in Colombia are proposed to be classified in subheading 2003.10.0047, HTSUS. No samples were submitted for examination; it is assumed for the purposes of this rulings that these tariff classifications are correct.

The importer has provided an Andean Trade Preference Act Certificate of Origin (Combined Declaration and Certificate, FORM A) issued by the Colombian Ministry of External Commerce. The Certificate attests that the canned brined mushrooms were produced in Colombia and comply with the origin requirements specified in the ATPA for goods exported to the U.S.

The importer seeks a ruling that the mushrooms processed and canned in Colombia are eligible for the duty treatment prescribed for the product under the ATPA by reason of having undergone substantial transformation so as to become a “product of” Colombia, and by otherwise having satisfied the ATPA eligibility requirements.

The cans containing the mushrooms are marked “Product of Colombia”. The importer asserts that this marking satisfies the country of origin marking requirements of 19 U.S.C. §1304 and 19 CFR Part 134 because the canned mushrooms are a product of Colombia.

ISSUES:

Are the mushrooms eligible for the duty treatment prescribed under APTA? What is the country of origin for the purposes of country of origin marking under 19 U.S.C. §1304?

LAW & ANALYSIS:

ATPA Eligibility

The Andean Trade Preference Act (ATPA)(codified at 19 U.S.C. §3201 et seq.) authorizes the President to grant duty-free treatment to imports of eligible articles from countries designated as beneficiaries according to criteria set forth in the Act.

Authority to extend preferential duty treatment under ATPA expired on December 4, 2001. By a temporary rule effective February 15, 2002, the Customs Service allowed importers of eligible articles to defer payment of estimated duties and fees until May 16, 2002, in anticipation that preferential duty treatment would be restored and made retroactive. See 36 Cust. B. & Dec. 9 (February 27, 2002). Colombia is a beneficiary country (BC) for purposes of the ATPA.

The relevant provisions of the ATPA provide that any article which is the growth, product, or manufacture of a beneficiary country will receive duty-free treatment provided that (1) the article is imported directly from a BC into the customs territory of the U.S.; and (2) the sum of (i) the cost or value of the materials produced in a BC or two or more BC's under the Act, or a BC under the Caribbean Basin Economic Recovery Act of 1983, as amended (CBERA) (19 U.S.C. 2701 et seq. ), or two or more such countries, plus (ii) the direct costs of processing operations performed in a BC or countries (under the ATPA or the CBERA, as amended) is not less than 35% of the appraised value of such article at the time it is entered.

As indicated above, the instant transaction is supported by a document issued by the Colombian Ministry of External Commerce styled as a “Combined Declaration and Certificate – Form A”. It is to be noted that the ATPA and corresponding Customs Regulations (19 CFR §§10.201 – 10.208) make no reference to certificates of origin. For purposes of claiming ATPA eligibility for goods, the U.S. statute and regulations do not contemplate or require that a governmental entity or agent attest that the good satisfies eligibility requirements. Instead, the regulations call for “the exporter or other appropriate party having knowledge of the relevant facts in the beneficiary country to be prepared to submitupon requesta declaration setting forth all pertinent detailed information concerning the production or manufacture of the article”. 19 CFR 10.207(b)(1). In the instant case the document may serve, as Customs may require, as a declaration by a party having knowledge of the relevant facts, but Customs is not obligated to accept it as proof of eligibility.

In this instance it is represented for the purposes of review that the direct importation and 35% value added requirements are met. With regard to the 35% value added requirement, no information has been offered beyond the Declaration/Certificate discussed above. Under the circumstances, this ruling will not address whether the requirement that the direct costs of processing incurred in Colombia and materials produced in Colombia amount to not less than 35% of the appraised value of the mushrooms.

In any case, satisfaction of the direct importation and value added requirements will not suffice for ATPA duty treatment unless the canned sliced mushrooms are a “product of” Colombia. This is the issue principally raised in the ruling request.

Merchandise is considered the "product of" a BC if is it either wholly the growth, product or manufacture of a BC or has been substantially transformed there into a new or different article of commerce. A substantial transformation occurs when an article emerges from a process with a new name, character, or use different from that possessed by the article prior to processing. Texas Instruments Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982).

Given that the canned sliced mushrooms were grown in Taiwan before processing in Colombia, they are not wholly the product of Colombia. The determinative inquiry is whether the Taiwanese mushrooms undergo substantial transformation in Colombia so as to become the product of that country.

Generally speaking, the Customs Service’s position with respect to goods in the category of fruits, vegetables and legumes is that the process of canning a single variety with associated steps does not result in substantial transformation of the input material. Customs recently ruled, for example, that various beans and chickpeas (not mixed), grown in the U.S. and exported to the Dominican Republic in the dry state, did not undergo substantial transformation by reason of canning for the purposes of preferential duty treatment under the Generalized System of Preferences (GSP) and Caribbean Basin Economic Recovery Act (CBERA). Processing in the Dominican Republic included rehydration, blanching, filling into cans, covering with hot (180 [degrees] F) brine, sealing, cooking in a rotary cooker for over 15 minutes at 260 [degrees] F, cooling, labeling and packing for export. NY G89921 (June 12, 2001).

Customs has ruled with specific reference to the country of origin of canned mushrooms for the purposes of country of origin marking. NY A83698 (June 11, 1996). In that ruling it was held that mushrooms grown in China, and exported to Canada in brine, did not become goods of Canada by reason of debrining, screening, grading, cutting into pieces and stems, and packing in cans in water, salt and citric acid. It was noted that the operations in Canada caused the specific tariff shift requirement in Part 102, Customs Regulations (the NAFTA Marking Rules) applicable to goods of subheading 2003.10, HTSUS, to be satisfied. Nevertheless, pursuant to Chapter 20 Note the mushrooms were to be treated as goods of the country in which the fresh goods were produced – China - because the change in tariff classification resulted solely from a canning process.

Customs Headquarters also considered a nearly identical fact pattern in HQ 561749 (November 8, 2000) and reached the same conclusion. It was determined that mushrooms grown in Chile do not become products of Canada for the purposes of NAFTA country of origin marking when converted there from a good provisionally preserved in brine to a canned product cut into pieces and stems. Again the Chapter 20 Note dictated that the canned preparation be treated as a good of the country in which the fresh good was produced, i.e., Chile.

In our opinion, these precedents reflect Customs’ general position that packing produce in cans does not result in substantial transformation. It is noted in regard to NY A83698 and HQ 561749 that T.D. 94-4 (published in the Federal Register on January 3, 1994 59 FR 110)), which implemented interim regulations establishing the NAFTA Marking Rules, stated that the tariff classification changes and/or other operations set forth in 19 CFR 102.20 “codify the current ‘substantial transformation’ standard”. In the present inquiry, consistent with this position, the canned mushrooms do not become products of Colombia for the purposes of ATPA eligibility.

Country of Origin Marking

The applicable law, regulations and precedents point to a parallel conclusion with regard to marking of the appropriate country of origin for the canned mushrooms. The underlying inquiry is the same: whether the mushrooms in brine undergo substantial transformation by reason of packing in cans.

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.

You urge that marking the mushrooms as “product of Colombia” is consistent with a Customs Internal Memorandum released to the public as 060272 (March 14, 1979). In that memorandum it was stated that mushrooms grown in China and there preserved in brine, underwent substantial transformation by reason of processing and canning in Hong Kong, and could be regarded as products of Hong Kong.

Congress has clearly addressed the precise question of marking for canned mushrooms in section 1907(b) of the Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418. That section provides:

Imported preserved mushrooms shall not be considered to be in compliance with section 304 of the Tariff Act of 1930 or any other law relating to the marking of imported merchandise unless the containers thereof indicate in English the country in which the mushrooms were grown.

It is therefore beyond doubt that the statutory enactment is entirely controlling Counsel has noted that section 1907(b) does not appear to have been codified either in Title 19 or elsewhere. This apparent irregularity does not diminish the binding character of its substantive requirements, which effectively overrule 060272. , with the effect that the mushrooms in question are required to be marked as products of Taiwan, and not as products of Colombia. Customs applied section 1907(b) in HQ 734281 (February 13, 1992) in finding that mushrooms grown in China and canned in Hong Kong were to be marked under section 304 as products of China. The statue reflects the determination of Congress that preserving mushrooms does not effect a substantial transformation.

Alleged §625 Requirement

Counsel argues that pursuant to §625 of the Tariff Act of 1930, as amended (19 U.S.C. §1625), any decision that deviates from the tariff treatment for mushrooms set out in Internal Memorandum 060272 is subject to publication and comment procedures for modification and revocation before becoming effective.

For several reasons this claim is without merit. First, Internal Memorandum 060272 is not a prior ruling or interpretive decision within the meaning of §625. Also, 060272, even if it were in the nature of an interpretive ruling, does not reflect Customs treatment of the subject merchandise, which has been controlled since 1988 by the legislative enactment in section 1907(b) of the Omnibus Trade and Competitiveness Act. The Customs Service therefore does not agree that the requirements of §625 are triggered under the instant circumstances.

HOLDING:

The canned mushrooms are not eligible for duty treatment under ATPA as products of Colombia;

The mushrooms must be marked as products of Taiwan for the purposes of country of origin marking.

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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