DRA-4-OT:RR:CTF:ER H141855 TT
James C. Alberdi, President
A.J. Arango, Inc.
1516 E. 8th Avenue
Tampa, Florida 33605
RE: Modification of HQ H046995; Class 8 Bonded Warehouse
Dear Mr. Alberdi: This letter is in reference to Headquarters Ruling H046995, dated February 2, 2009, concerning the permissibility of adding salt to wine, to create cooking wine, in a Customs and Border Protection (“CBP”) Class 8 bonded warehouse. In that ruling, CBP found the action to be a manufacture and thus, impermissible in a CBP Class 8 bonded warehouse. We have reviewed HQ H046995 and found some of the analysis to be incorrectly applied. However, the error in analysis does not change the holding. For the reasons set forth below, we hereby modify HQ H046995 to reflect the proper analysis.
Pursuant to Section 625(c)(1), Tariff Act of 1930 (19 U.S.C. § 1625(c)(1)), as amended by Section 623 of Title VI, notice proposing to modify HQ 228508 and HQ H046995 was published on January 25, 2012, in Volume 46, Number 5, of the Customs Bulletin. CBP received one comment in response to that notice supporting the modification of that ruling.
FACTS:
In HQ H046995, we described the facts as follows. Vigo proposes to import drinking wine in 1000 liter plastic totes and to add salt to the wine to transform it into cooking wine. Upon the addition of the salt, the wine will contain greater than 1.5 grams of salt per 100 milliliters of wine. This would then make the wine unfit for consumption as a beverage.
Information submitted on January 6, 2009 by email, stated that the value of the drinking wine prior to the addition of the salt is $810.00 per 1000 liter tote. The value of the salt added per 1000 liter tote is $4.25.
The drinking wine is to be imported in 1000 liter plastic totes featuring large screw top openings. The necessary salt would be added to each tote transforming the wine into “cooking wine.” The totes would then be labeled as “cooking wine” and a CBP entry would be made under the appropriate classification for cooking wine. The product would then be moved to Vigo’s warehouse for further packaging.
ISSUE:
Whether the proposed operation of adding and mixing salt to wine to create cooking wine is permissible manipulation for purposes of CBP bonded warehouses under title 19 U.S.C. § 1562.
LAW AND ANALYSIS:
Whether Vigo may add and mix salt to its drinking wine in a CBP bonded warehouse is contingent upon whether the adding and mixing of salt to wine is a permissible manipulation under title 19 U.S.C. § 1562. If the process of adding and mixing constitutes a manufacture, it is not permitted in a CBP bonded warehouse under 19 U.S.C. §1562.
19 U.S.C. §1562 provides that imported “merchandise may [with Customs permission and supervision] be cleaned, sorted, repacked, or otherwise changed in condition, but not manufactured, in bonded warehouses established for that purpose. . . . ” “Manufacture” for purposes of 19 U.S.C. § 1562 does not require a substantial transformation, instead “a low threshold of ‘transformation’” satisfies the meaning of ‘manufactured’ for bonded warehouses purposes. Tropicana Products, Inc. v. U.S., 16 C.I.T. 155, 160 (1992). In Tropicana, the Court of International Trade (“CIT”) looked at the meaning of “manufacture” in 19 U.S.C. § 1562 and distinguished it from the meaning of “manufacture” when used in the context of drawback, classification, and a country of origin analysis. Id. (“the criterion of whether goods have been ‘manufactured’ serves different purposes under different statutes, particularly § 1562 on the one hand and statutes concerned with country-of-origin marking, Generalized System of Preferences and drawback on the other. . .”). The CIT determined that:
To interpret “manufacturing” – an expressly prohibited manipulation under § 1562 – as requiring a high threshold of transformation (viz., a substantial transformation as stringently required in country of
origin and drawback cases), would negate the evident legislative intent of the statute to permit only very minor or rudimentary manipulations in bonded warehouses – akin to the exemplars (cleaning, sorting and repacking).
Id. at 160. Therefore, the analysis to determine whether a procedure constitutes a “manufacture” for purposes of 19 U.S.C. § 1562 is a “low threshold.” Id.
In Tropicana, the CIT held that the process of diluting concentrated orange juice by blending in water to be a manufacture for purposes of 19 U.S.C. § 1562. 16 C.I.T. at 162. The CIT “analyzed the exemplars in the statute” and “blending” was not one of the permissible listed terms. The Court also held that Tropicana’s blending “was not. . . analogous to. . . [§ 1562’s language of] ‘cleaned, sorted, repacked,’ and that therefore, it was “not within the scope of [§ 1562’s] ‘otherwise changed in condition.” Tropicana, 161 C.I.T. at 162. Tropicana’s analysis is applicable to this case as pouring and mixing in salt into drinking wine is not cleaning, sorting or repacking as contemplated by the exemplars.
In HQ 228508 (September 9, 1999), modified in HQ H140895, we held that the mixing of imported broccoli florets and stalks in a CBP bonded warehouse would be considered a manufacture, not a mere manipulation, and thus, impermissible under 19 U.S.C. § 1562. In HQ 228508, the proposed operation involved blending totes of broccoli florets and broccoli stalks. The broccoli florets and stalks were to be blended on a 40/60 percent basis, and then placed in totes containing the blend, for export. There were essentially three steps to the process: 1) the opening of the tote containers; 2) the blending of the florets and the stalks; and 3) the repackaging of the blended mixture. In finding that the mixing of the florets and stalks was a manufacture, we reasoned that although, the broccoli remained broccoli, the nature of the merchandise had changed. The broccoli florets were no longer solely broccoli florets. The broccoli stalks were no longer solely broccoli stalks. After processing, the blend became known in the industry and in the marketplace as “broccoli cuts.” Additionally, the price of the new merchandise became significantly different as well. The new totes of broccoli cuts costs twice as much as totes carrying only stalks and half as much as totes carrying only florets. This substantial difference in price for broccoli cuts indicated that there was a new product, and that it was recognized as such by both the broccoli industry and the public. The broccoli cuts had taken on a new name and price.
In the case of the broccoli, the merchandise changed significantly in its condition. The mixing of the more expensive florets with the less expensive stalks, in a 40-60 percent mix, produced a new product at a new price. The mixing was performed for marketing and profit-related purposes. As evidenced by the price differential, both the company and consumers perceive a difference
in the new product of broccoli cuts and hence, they attach to it a different value. Accordingly, in HQ 228508 we found this processing to be the kind of change in condition 19 U.S.C. § 1562 considered to be a manufacture and not a mere manipulation.
Likewise in the instant case, we find that the addition and mixing of salt to the drinking wine is the kind of change in condition that would be considered a manufacture and not a mere manipulation pursuant to 19 U.S.C. § 1562. Although, the only change to the wine is the addition of salt, it dramatically changes the wine from a beverage to a cooking ingredient. Once the salt is added to the wine, it is no longer fit for drinking and it becomes a cooking wine. While the value of the product does not change significantly, the purpose and marketing of the product changes completely. Therefore, the process of adding salt to the wine is impermissible manufacture pursuant to 19 U.S.C. § 1562.
HOLDING:
Based on the above determinations, we conclude that the addition of approximately 1.5 grams of salt per 100 milliliters of wine to transform drinking wine to cooking wine constitutes a manufacture and therefore, Vigo’s proposed operations go beyond the permissible operations allowed by 19 U.S.C. § 1562.
EFFECT ON OTHER RULINGS:
In accordance with the above analysis, HQ H046995, dated February 2, 2009, is hereby MODIFIED.
In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon
Director
Commercial and Trade Facilitation Division