OT:RR:CTF:VS H256785 AJR
Mr. Steve DeCastro
All-Ways Forwarding International, Inc.
701 Newark Avenue, Suite 300
Elizabeth, NJ 07208
RE: Modification of NY H82352; NAFTA; GN 12, HTSUS - Duty Preference; Mixed Nuts Roasted and Salted in Canada
Dear Mr. DeCastro:
This is in reference to New York Ruling Letter (“NY”) H82352, dated August 10, 2001, issued to you on behalf of your client, Star Snacks, of Jersey City, New Jersey. At issue was the tariff classification of mixed nuts and their eligibility for preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”). In NY H82352, U.S. Customs and Border Protection (“CBP”) determined, in relevant part, that various raw nuts of U.S., Canadian, Indian, and Brazilian origin imported into Canada, where they were roasted, salted, and mixed with other nuts, qualified for preferential tariff treatment under the NAFTA when imported into the United States. It is now our position that the roasted and salted mixed nuts do not qualify for preferential tariff treatment under the NAFTA. For the reasons described in this ruling, we hereby modify NY H82352.
This modification does not affect CBP’s decision in NY H82352 that various roasted nuts imported into Canada, where they undergo a process similar to the raw nuts, do not qualify for preferential tariff treatment under the NAFTA. The tariff classification of the roasted and salted nuts under subheading 2008.19.85 under the Harmonized Tariff Schedule of the United States (“HTSUS”) when imported from Canada is also unaffected.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. §1625(c)(1)), notice proposing to modify six ruling letters, including H82352, concerning the preferential tariff treatment of certain prepared nuts under the NAFTA was published on July 29, 2015, in Vol. 49, No. 30, of the Customs Bulletin. CBP received one comment in response to this notice.
FACTS:
NY H82352 stated, in relevant part:
The merchandise is described as 16 ounce, retail pack tins of “Mixed Nuts,” consisting of 26.4 percent by weight of peanuts and 21.55 percent red skin peanuts (country of origin, Canada or the U.S.A.), 16.46 percent cashews (origin, India), 13.21 percent Brazil nuts (origin, Brazil) and 11.97 percent unbleached almonds, 5.98 percent unbleached filberts and 4.49 percent pecans (origin, all U.S.A.).
In your correspondence you indicate that the country of exportation will be Canada. The condition of the nuts when they are imported into Canada is sometimes raw and at other times roasted. The nuts are brought into the country of exportation both in bags and boxes. When the nuts enter Canada in a raw condition, they are roasted, salted, and mixed with other ingredients (salt, oil, and other nuts). When the nuts enter Canada in a roasted condition, Star Snacks will re-salt, re-oil and pack the product in its final export container.
CBP found that the non-originating nuts, when imported raw into Canada, satisfied the changes in tariff classification required under General Note (“GN”) 12(t)/20.4, HTSUS, and that, upon compliance with all applicable laws, regulations, and agreements under the NAFTA, the nut mixture would be subject to a free tariff rate when imported into the United States.
ISSUE:
Whether the roasted and salted mixed nuts described in NY H82352 qualifies for preferential tariff treatment under the NAFTA?
LAW AND ANALYSIS:
Pursuant to GN 12, HTSUS, for an article to be eligible for NAFTA preference, two requirements must be satisfied. First, the article in question must be “originating” under the terms of GN 12, HTSUS, and second, the article must qualify to be marked as a good of a NAFTA country under the NAFTA Marking Rules contained in 19 CFR § 102.20.
With regard to the first requirement, GN 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 –
….
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 subdivision (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note[.]
Raw nuts are classified under various headings of Chapter 8, HTSUS. In understanding the language of the HTSUS, the Explanatory Notes (“ENs”) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989). The ENs to Chapter 8, HTSUS, explain that nuts prepared according to Chapter 20, HTSUS, are excluded from Chapter 8, HTSUS. Mixed nut preparations are classified under subheading 2008.19, HTSUS. The ENs to heading 2008, HTSUS, explain that this heading includes oil-roasted nuts whether or not containing or coated with salt. In this case, various raw nuts were imported from non-NAFTA countries into Canada, where they were mixed with other nuts and oil, and roasted and salted, and thus correctly classified under subheading 2008.19.85, HTSUS.
The applicable rule in subdivision (t) provides for “a change to subheadings 2008.19 through 2008.99 from any other chapter.” See GN 12(t)/20.4, HTSUS. However, GN 12(s), Exceptions to Change in Tariff Classification Rules, HTSUS, provides, in relevant part:
(ii) Fruit, nut and vegetable preparations of chapter 20 that have been prepared or preserved merely by freezing, by packing (including canning) in water, brine or natural juices, or by roasting, either dry or in oil (including processing incidental to freezing, packing, or roasting), shall be treated as an originating good only if the fresh good were wholly produced or obtained entirely in the territory of one or more NAFTA parties.
Accordingly, though the non-originating nuts appear to undergo the requisite tariff shift from Chapter 8, HTSUS, to subheading 2008.19.85, HTSUS, it remains to be determined whether they meet the additional test imposed by GN 12(s)(ii), HTSUS. Under this provision, when nut preparations are prepared “merely” by roasting or processing “incidental” to roasting, then the origin of the nuts in their “fresh” state determines the origin of the good. The “fresh” state refers to the state of the nuts before they were roasted or processed in a manner incidental to roasting. Thus, for such nut preparations to be originating, the “fresh” nuts used to make the good must be wholly obtained or produced entirely in the territory of one or more of NAFTA parties (Mexico, Canada, or the United States). That is, non-originating nuts that, while in a NAFTA territory, are merely roasted, or processed in a manner incidental to roasting, will not be treated as originating nuts.
The term “merely” is not specifically defined in GN 12, HTSUS, but per its dictionary definition means “only (what is referred to) and nothing more.” Read in the context of GN 12, HTSUS, the term “merely” means that the processes listed in GN 12(s)(ii), HTSUS, by themselves, are insufficient to qualify non-originating nuts for preferential tariff treatment under the NAFTA, despite changing tariff classifications per GN 12(b)(ii), HTSUS, and GN 12(t)/20.4, HTSUS. Thus, we find that the effect of GN 12(s)(ii), HTSUS, is to ensure that goods undergo sufficient processing in a NAFTA country, beyond the listed processes, in order to be considered originating for purposes of GN 12(b)(ii), HTSUS.
The term “incidental” is also not specifically defined in GN 12, HTSUS, but per its dictionary definition means “occurring or liable to occur in fortuitous or subordinate conjunction with something else of which it forms no essential part.” Applying this definition to GN 12(s)(ii), HTSUS, the term “incidental” indicates a process that may happen with or as a result of roasting, but is secondary to, or of lesser importance than, the process of roasting.
We find that “salting” is precisely the type of lesser process contemplated by the note as incidental. Salting often occurs in connection not only with roasting, as in this case, but also with canning or freezing. It is the roasting, canning, or freezing processes which are the means by which the products are principally prepared. By contrast, salting has far less consequences to the essential character of the product. Moreover, the addition of salt like other flavors, spices, or other ingredients is a relatively simply process and does not require a prescribed amount to be added.
Given that roasting by itself would not be sufficient to make a nut an originating good per GN 12(s)(ii), HTSUS, it would be inconsistent with that note to conclude that “salting” would provide otherwise. Furthermore, the ENs to Chapter 20, HTSUS, state, in relevant part:
This heading covers fruits, nuts and other edible parts of plants, whether whole, in pieces or crushed, including mixtures thereof, prepared or preserved otherwise than by any of the processes specified in other Chapters or in the preceding headings of this Chapter.
It includes, inter alia:
(1) Almonds, ground-nuts, areca (or betel) nuts and other nuts, dry-roasted, oil roasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavours, spices or other additives. (Emphasis added).
…
(9) Fruit, nuts, fruit-peel and other edible parts of plants (other than vegetables), preserved by sugar and put in syrup (e.g. marrons glacés or giner), whatever the packing.
Moreover, while the ENs to Chapter 20, HTSUS, mention “salt,” the references to “dry-roasted, oil-roasted or fat-roasted” and “preserved by sugar and put in syrup” indicate the principal processes of preparation or preservation that would change the classification of nuts from Chapter 8, HTSUS, to Chapter 20, HTSUS. The fact that “salt” is mentioned with reference to the types of roasting, but is not specifically mentioned as a process of preparation or preservation, suggests that “salting” is something that may happen with or as a result of roasting nuts, but whether the nuts are salted, or not, is not essential to the preparation; what is essential to the preparation is the roasting. For all of the foregoing reasons, we find that for purposes of GN 12(s)(ii), HTSUS, the term “processing incidental to freezing, packing, or roasting,” includes the process of “salting.”
This interpretation of GN 12(s)(ii), HTSUS, is further supported by Headquarters Ruling Letter (“HQ”) H243328, dated August 19, 2013, which considered “salting” to be a process incidental to roasting with regard to a provision from the United States-Korea Free Trade Agreement (“UKFTA”) that is parallel to GN 12(s)(ii), HTSUS. HQ H243328 affirms the decision in HQ H240383, dated May 3, 2013, determining the origin of the nuts from their “fresh” state on the basis that “salting and roasting […] qualify as ‘processing incidental’ to roasting.”
CBP received one comment in response to the notice to modify six ruling letters addressing nuts. The commenter states that the rules and in particular, the note to Chapter 20, indicate a two-step process in deciding whether the goods are deemed originating and entitled to preferential treatment as follows: (1) determining whether the nuts have been prepared beyond mere roasting in oil including processes incidental to roasting; and (2) if the nuts were prepared beyond mere roasting, then determining whether the non-originating materials satisfy the tariff shift rule. The commenter defines “merely” as “just” or “only,” or “nothing more,” and defines “incidental” as “being likely to ensue as a chance or minor consequence” and “occurring merely by chance or without intention or calculation.” The commenter argues that the nuts considered in NY E87234, were prepared beyond mere roasting in oil because, after their importation to Canada, they underwent multiple processes, which are not incidental to roasting, including “salting, mixing with other ingredients, screening, aspiration, cooling, and packaging in usually small packaging.” The commenter concludes, by applying the second step, that the non-originating materials satisfy the tariff shift rule. The commenter supports this conclusion by citing Canadian International Trade Tribunal Case no. AP-2003-003, and NY N228118, dated August 8, 2012.
In response, we note that GN 12(s)(ii), HTSUS, (or the note to Chapter 20, as described by the commenter) must be read within the context of the provision that initiates its application, GN 12(b)(ii), HTSUS, which together ensure that such goods undergo sufficient processing in a NAFTA country to be considered originating goods. Accepting the commenter’s interpretation would mean that the processes of “salting, mixing with other ingredients, screening, aspiration, cooling, and packaging in usually small packaging” are sufficient to qualify non-originating nuts for preferential treatment under NAFTA because such processes performed together are not considered incidental to roasting, freezing, or packing. This would accord differing treatments to the same non-originating nuts, both roasted in NAFTA territories, on the basis that some were treated with salt plus other additives, and quality checked, while others were not, despite the fact that the essential character of the treated and untreated roasted nuts is the same. We find the commenter’s interpretation inconsistent with the proper interpretation of GN 12(s)(ii), HTSUS, which should instead be interpreted to include “salting” as a process incidental to roasting for the reasons discussed above. The other processes listed by the commenter should be interpreted similarly. “Mixing with other ingredients” should be treated the same way as “salting” because the ENs to Chapter 20, HTSUS, reference “flavours, spices or other additives” in the same manner as “salt.” Further, the mixture in NY E87234 concerns various nut varieties, which would mean that if we were to agree with the commenter, mixing various types of nuts would be accorded preferential treatment, whereas using only one type of nut would not. We do not agree that the use of more non-originating materials should accord preferential treatment. “Cooling” is incidental to roasting because after roasting, the nuts automatically will need to cool down below the temperature at which they were roasted. Likewise, “screening” and “aspiration” are incidental to roasting because they are performed to check the quality of the roasted nuts as a result of their roasting. Lastly, we note that we are not bound by cases from the Canadian International Trade Tribunal, and NY N228118 is being modified along with the NY ruling letter at issue, NY H82352.
Accordingly, we find that salting is a process incidental to roasting and does not render the product originating. Rather, the origin of the product as imported is determined by the origin of the nuts in the “fresh” state per GN 12(s)(ii), HTSUS. Given the foregoing, the prepared mixed nuts may not be treated as originating because they do not meet the requirements of GN 12(s)(ii), HTSUS; that is, they were not wholly obtained or produced entirely in Mexico, Canada, or the United States as fresh nuts. Therefore, the prepared mixed nuts imported from Canada do not qualify for preferential tariff treatment under the NAFTA.
HOLDING:
NY H82352 is modified to reflect that, by application of GN 12(s)(ii), HTSUS, the prepared nut mixture imported from Canada is not eligible for preferential tariff treatment under the NAFTA. This modification does not change CBP’s decision in NY H82352 that various roasted nuts imported into Canada, where they undergo a process similar to the raw nuts, do not qualify for preferential tariff treatment under the NAFTA. The tariff classification of the prepared nut mixture, subheading 2008.19.85, HTSUS, is also unchanged.
EFFECT ON OTHER RULINGS:
NY H82352, dated August 10, 2001, 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