MAR-05 RR:TC:SM 560944 BLS

Port Director
New York Seaport

RE: Country of origin marking of olive oil; Internal Advice Request (I/A) 9/98

Dear Sir:

This is in refeference to the memorandum dated March 25, 1998, from the Director, Trade Compliance Division, requesting internal advice in connection with country of origin marking of olive oil imported from Italy.

FACTS:

The Director, Trade Compliance, reports that certain imports of olive oil from Italy have been marked with the designations "Imported From Italy", Shipped From Italy", and "Packed In Italy". These products may consist of either 100% Spanish olive oil refined in Italy, or Spanish olive oil and Italian olive oil blended in Italy. The Director also reports that olives similarly marked and imported from Italy may in fact be a product of Spain.

ISSUE:

What are the proper country of origin marking requirements for the olive oil and olives imported from Italy?

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or 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. As defined in 19 CFR 134.1(b), "country of origin" means the country of manufacture, production, or growth of

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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 change the country of origin of the article. A substantial transformation is said to occur when, after further processing or manufacture, an article emerges having a new name, character, or use different from that possessed by the article prior to processing. See Texas Instruments, Inc. v. United States, 69 CCPA 152, 681 F. 2d 778 (1982).19 CFR 134.35.

The primary issue for resolution in this matter is whether the Spanish olive oil is substantially transformed into an article having a new name, character, or use when it undergoes a refining process in Italy, or when it is blended with Italian olive oil in Italy.

Refined Olive Oil

Customs has held on numerous occasions that the mere refining or purification of a crude substance does not result in a substantial transformation of the substance into a new and different article of commerce with a new name, character or use. In Headquarters Ruling Letter (HRL) 554644 dated October 29, 1987, we held that the processing of crude linseed oil into a fully refined oil did not result in a substantial transformation. The refining process in this case involved the dry caustic neutralization of the fatty acids which was achieved through heating and mixing the oil with sodium hydroxide. The fatty acids were dispersed converting the acids and oil into water and soapy matter. The oil was moved to centrifugal washers and separators, removing the soaps. After centrifuging, all of the remaining water was removed from the oil by vacuum drying. We held in HRL 554644 that:

While it is clear that the processing of the crude linseed oil into a refined product results in a purified, higher grade oil with less contaminants and odor, the essential character is not altered and it does not become a new and different article of commerce. The removal of impurities and ultimate refinement is not sufficient to effect any major change in the product. In HRL 556143 dated March 2, 1992, Customs held that the purification of Crude Octamine (85-87 percent purity) into Octamine R (97 percent purity) does not result in a substantial transformation. In this case we stated that:

While it is clear that the processing of the Crude Octamine into a refined product described as Octamine R, results in a refined, higher grade aviation lubricant, the essential - 3 - character is not altered and the resulting product does not become a new and different article of commerce. The resulting product has the same chemical structure as the material from which it is made, the same Chemical Abstract Service Number, and the same tariff heading. See also HRL 554637 dated July 13, 1987 (processing of raw sugar into a refined product results in purified sugar with less contaminants, which is not a new and different article of commerce; HRL 082033 dated September 5, 1989 (refining cane sugar upgrades and purifies the sugar, but it does not change the essential character of the product); C.S.D. 84-112 dated July 2, 1984 (HRL 724640) (imported honey which was purified by heating and filtering did not undergo a substantial transformation); HRL 555982 dated August 2, 1991 (evaporation of water from orange juice and subsequent freezing in a CBERA BC does not change the fundamental character of the imported juice).

These cases stand for the proposition that the crude (or raw) and refined products are the same articles of commerce at different stages of production. In Superior Wire v. United States, 11 CIT 608, 669 F. Supp. 472 (CIT 1987), aff'd, 867 F.2d 1409 (Fed. Cir. 1989), the court held that for VRA purposes, wire rod drawn into wire was not substantially transformed into a product of Canada. In determining that there was no significant change in use or character, the court concluded that the "wire rod and wire may be viewed as different stages of the same product." Id., 867 F.2d 1414.

Similarly, we find in this case that the essential character of the crude olive oil is not altered by the refining process and thus the product does not become a new article of commerce. Rather, the refined olive oil retains the fundamental character as well as the name and use of the crude product. As in Superior Wire, we find that the imported product in the instant case merely refers to olive oil at the final stage of production. Accordingly, it is our opinion that the refining process in Italy does not result in a substantial transformation of the crude olive oil imported into Italy from Spain.

Blending of Olive Oils

Customs has consistently held that blending a product from one country with the same product of another country does not constitute a substantial transformation. In HRL 732260 dated June 20, 1989, whiskey was imported from Scotland and Ireland and blended In the U.S., adding about 2 1/2 percent blenders by volume. In that case, we noted that both single type whiskeys and blended whiskeys are alcoholic beverages, and that there was no change in use of the product. As a result, we found

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that the blending of the whiskeys did not result in a substantial transformation and that the marking had to reflect the country of origin of each of the constituent whiskeys. See also C.S.D. 84-112 dated July 2, 1984 (blending of foreign honey with domestic honey) and HRL 724872 dated March 1, 1984 (blending of Canadian maple syrup with domestic syrup), where we found that blending of foreign and domestic products in the U.S. did not result in a substantial transformation. The Court of International Trade has also held that the blending of imported orange juice concentrate with domestic concentrate did not result in a substantial transformation. (National Juice Products v. United States, 10 CIT 48, 628 F. Supp. 978 (1986).) This position is further supported by the court in Coastal States Marketing, Inc. v. United States, 10 CIT 613, 646 F. Supp. 255 (1986), aff'd, 818 F.2d 860 (Fed. Cir. 1987). In Coastal States, the court held that the process of blending Russian No. 2 gas oil with Italian No. 5 fuel oil in Italy did not substantially transform the Russian oil into a product of Italy. In finding that the blended product was not a new and different article, the court stated that "[t]he imported components are each simply variant grade of the same product identified as fuel oil, with the resulting blend also identified as fuel oil." Id. at 618.

Therefore, it is our opinion that the blending of Spanish olive oil with Italian olive oil in Italy does not result in a substantial transformation of the Spanish product.

Marking Requirements

Since the Spanish origin olive oil is not substantially transformed as a result of the refining and/or blending process in Italy, when the product is imported into the U.S. the marking must reflect Spain as the country of origin when it consists only of Spanish olive oil refined in Italy, and Spain and Italy as the countries of origin when it consists of a blend of both Spanish and Italian oils. Olives of Spanish origin packed in Italy must also reflect Spain as the country of origin. Markings such as "Produced in Spain, Packed in Italy"; or "Olive Oil Produced in Italy and Spain, Packed in Italy", as applicable, are examples of acceptable country of origin markings in this case.

HOLDING:

Spanish origin olive oil which undergoes a refining operation in Italy, or when blended with Italian olive oil in Italy, does not undergo a substantial transformation. Therefore, when imported into the U.S. from Italy, the product must be marked to indicate Spain as the country of origin when it consists solely of Spanish olive oil refined in Italy, and Spain and Italy as the countries of origin when it is a blend of

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Spanish and Italian olive oils. if the product consists solely of Spanish olives packed in Italy, the marking must indicate Spain as the country of origin.


Sincerely,


John
Durant, Director

Commercial Rulings Division