MAR-2 RR:CR:SM 561208 KSG
Kristen Fletcher
Mississippi- Alabama Sea Grant Legal Program
518 Law Center
University, Mississippi 38655
RE: Country of origin marking of imported crab meat; NAFTA; blending; substantial transformation; 134.46
Dear Ms. Fletcher:
This is in response to your letter dated November 2, 1998, requesting a country of origin ruling regarding the marking of imported blue crab meat.
FACTS:
This case involves imported blue crab meat that may be sold either unblended or blended with U.S. or foreign crab meat. The distributor wishes to blend some of the imported crab meat, which may come from Venezuela, Mexico, or another country, with domestic and/or other foreign crab meat for sale in one pound tubs. The distributor has suggested three different options for the country of origin marking of both the unblended and the blended crab meat.
The first option is an adhesive label on the tub which has four lines, each preceded by a box, that read:
Product of Mexico
Product of Venezuela
Product of United States
Blended Product of __________ and __________.
This is followed by the name of the distributor and a U.S. address.
The second option involves using two separate labels. The first label, which is used for blended crab meat, has four lines, each preceded by a box, that read :
Blended Crabmeat Product of
Mexico
Venezuela
United States
Other: _________
This is followed by the name of the distributor and a U.S. address.
The label used for tubs of crab meat sourced from a single country would contain three lines, each preceded by a box, that would read:
Product of Mexico
Product of Venezuela
Product of United States
This is followed by the name of the distributor and a U.S. address.
The third option is to have a paper disk that fits into the top of the container on which is printed the countries of origin, instead of a label (e.g., similar to that used for “Cool Whip” packaging). The language on the disk would be either the option 1 or option 2 language.
ISSUE:
What is the proper country of origin marking for the imported crab meat which is processed as described above.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930 (19 U.S.C. 1304), as amended, 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 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 of 19 U.S.C. 1304. Pursuant to
19 CFR 134.1(b), the country of origin is 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 this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
Section 134.35(a), Customs Regulations (19 CFR 134.35(a)), provides that for articles other than goods of a NAFTA country, used in manufacture which are substantially transformed in the U.S., the manufacturer or processor in the U.S. who converts or combines the imported article will be considered the “ultimate purchaser” of the imported article and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked in accord with Part 134, Customs Regulations (19 CFR Part 134) (“Part 134").
Section 134.35(b), Customs Regulations (19 CFR 134.35(b)), provides that a good of a NAFTA country which is to be processed in the U.S. in a manner that would result in the good becoming a good of the U.S. 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 Part 134.
I. Non-NAFTA Origin Determination
The issue to be considered here is whether the imported crab meat that is sourced from a non-NAFTA country and that is blended with crab meat from another country (U.S. or foreign) in the U.S. becomes a good of the U.S. as a result of the blending operation. Pursuant to 19 CFR 134.35(a), this issue would turn on whether the crab meat is substantially transformed by being blended. In National Juice Products Association v. United States, 628 F. Supp. 978 (CIT 1986), the court considered whether foreign manufacturing concentrate processed into frozen concentrated orange juice in the U.S. and reconstituted orange juice was considered substantially transformed. The U.S. processing involved blending the manufacturing concentrate with other ingredients to create the end product; the manufacturing concentrate was mixed with purified and dechlorinated water, orange essences, orange oil, and in some cases, fresh juice. The foreign manufacturing concentrate was blended with domestic concentrate, with ratios of 50/50 or 30/70 (foreign/ domestic).
The court considered that the U.S. processing added relatively minor value to the product and that the manufacturing concentrate imparts the essential character to the juice and makes it orange juice. The court concluded that the foreign manufacturing juice concentrate was not substantially transformed in the U.S. when it was processed into retail orange juice products.
In HRL 559965, dated January 24, 1997, Customs ruled that imported peanut slurry was not substantially transformed in the U.S. under 19 CFR 134.35(a) by being processed into peanut butter because the essential character of the finished peanut butter was imparted by the peanut slurry. The processing done in the U.S. included heating the peanut slurry, mixing, blending the imported slurry with U.S.- processed slurry, injecting additives, adding ingredients such as salt, sweeteners, peanut oil, stabilizers and sometimes, speciality flavors. The product is then pumped through heat exchangers and two reduction mills, cooled and packaged in jars.
In that ruling, Customs cited to National Juice in concluding that “the blending together of peanut slurry of U.S. and foreign origin along with other minor ingredients does not result in a substantial transformation of these materials.” Customs also cited to Coastal States Marketing, Inc. v. United States, 646 F. Supp. 255 (CIT 1986), aff’d 818 F.2d 860 (Fed. Cir. 1987), in which the court held that the blending of 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.
Based on the above case law, we find that the imported crab meat would not be substantially transformed by being blended with domestic and/or other foreign crab meat in the U.S. because the essential character of the crab meat is unchanged by the blending operation. Therefore, pursuant to 19 CFR 134.35(a), the country or countries of origin of the foreign crab meat remain unchanged as a result of the blending operation in the U.S.
The country or countries of origin of the foreign crab meat must appear on the crab meat tubs in which it is sold to the ultimate purchaser. In HRL 734403, dated March 11, 1992, Customs ruled that checking off a box to indicate the country of origin of imported produce was acceptable provided the requirements of permanence, legibility, and conspicuousness are satisfied. We find that any of the three options presented would satisfy 19 U.S.C. 1304 if the box or boxes reflecting the proper country or countries of origin are marked.
We note that the question of whether the crab meat may be marked as a product of the U.S. is not within the jurisdiction of the Customs Service and should be referred to the Federal Trade Commission for their consideration.
II. NAFTA country of origin determination
With regard to the crab meat that is sourced from Mexico, the North American Free Trade Agreement (“NAFTA”) Marking Rules apply. Pursuant to 19 CFR 134.1(g), an article for which the country of origin is Canada, Mexico, or the U.S., as determined under the NAFTA Marking Rules is a good of a NAFTA country. The NAFTA Marking Rules are set forth at 19 CFR 102.
The issue to be addressed here is whether Mexican crab meat that is blended in the U.S. with crab meat from another country (foreign or U.S.) becomes a good of the U.S. under the NAFTA Marking Rules. 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 an 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.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the blended crab meat, because it is neither wholly obtained or produced, nor produced exclusively from domestic materials. Since an analysis of sections 102.11(a)(1) and 102.11(a)(2) will not yield a country of origin determination for the blended crab meat, we look to section 102.11(a)(3).
Section 102.11(a)(3) provides that the country of origin is the country in which “each foreign material incorporated in that good undergoes an applicable change in tariff classification as set forth in 19 CFR 102.20....”
Crab meat is classified in either subheading 0306.24.20 of the Harmonized Tariff Schedule of the United States (“HTSUS”) (fresh) or in subheading 0306.14.20, HTSUS (frozen). The applicable tariff shift rule found in section 102.20(a) provides as follows:
HTSUS Tariff Shift and/or other requirements
0306 ........A change to heading 0306 from any other chapter.
Since the crab meat does not change from another chapter when blended, the requisite tariff shift is not met in this case. Accordingly, the country of origin of the products cannot be determined pursuant to 19 CFR 102.11(a)(3). Therefore, for purposes of determining the country of origin of the products, 19 CFR 102.11(b) of the hierarchial rules must be applied.
The rule set forth at 19 CFR 102.11(b) provides that: “[e]xcept 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.”
In this case, the crab meat clearly is the single material that imparts the essential character to the good. Accordingly, pursuant to 19 CFR 102.11(b), the Mexican crab meat that is blended in the U.S. with crab meat from one or more other countries retains its Mexican origin. Therefore, each tub containing crab meat sourced from Mexico, must be marked to indicate its Mexican content. As discussed infra, all of the options presented would satisfy 19 U.S.C. 1304 if the proper box or boxes are checked and the marking meets the requirements of permanence, legibility and conspicuousness.
III. Potentially misleading or deceptive marking raised by the U.S. address of the distributor
Section 134.46, Customs Regulations (19 CFR 134.46), as amended by T.D. 97-72 (published in the Federal Register on August 20, 1997, (62 FR 44211)), provides:
In any case in which the words “United States,” or “American,” the letters “U.S.A.,” any variation of such words or letters, or the name of any city or location in the United States, or the name of any foreign country or locality other than the country or locality in which the article was manufactured or produced appear on an imported article or its container, and those words, letters or names may mislead or deceive the ultimate purchaser as to the actual country of origin of the article, there shall appear legibly and permanently in close proximity to such words, letters or name, and in at least a comparable size,
the name of the country of origin preceded by “Made in,” “Product of,” or other words of similar meaning.
Customs has specifically ruled that in order to satisfy the close proximity requirement, the country of origin marking must generally appear on the same side(s) or surfaces(s) in which the name of the geographical reference other than the country of origin appears.
The language of section 134.46 provides that its special marking requirements are triggered only when Customs determines that the non-origin marking may mislead or deceive the ultimate purchaser as to the actual country of origin of the article. This is determined on a case-by-case basis.
With regard to the sample markings submitted, we believe that the marking on all the samples bear potentially misleading or deceptive references by listing a distribution company followed by a U.S. address. Customs has consistently held that non-origin geographical references made in the context of a statement relating to any aspect of the production or distribution of the product are misleading to the ultimate purchaser. See T.D. 97-72 supra. Therefore, with regard to the samples, we find that the special marking requirements of 19 CFR 134.46 are triggered. In regard to the specific marking options submitted, because the actual country or countries of origin appear in close proximity to the U.S. address in each instance and the country of origin is preceded by the words “Product of,” we find that all the options satisfy the requirements of 19 CFR 134.46.
HOLDING:
Pursuant to 19 CFR 134.35(a), the non-NAFTA foreign crab meat that is blended in the U.S. with crab meat from another country (U.S. or foreign) is not substantially transformed and therefore, retains its origin. Pursuant to 19 CFR 102.11(b), the Mexican crab meat blended in the U.S. retains its Mexican origin. All of the marking options presented would satisfy 19 U.S.C. 1304 if the proper country or countries of origin are checked and the marking meets the requirements of permanence, legibility and conspicuousness. The requirements of 19 CFR 134.46 are satisfied so long as the actual country or countries of origin appear in close proximity to the U.S. address in each instance and the country of origin is preceded by the words “Product of.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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