OT:RR:CTF:FTM H303093 TJS
Mr. Kevin Zheng
Sirio Pharma Company, Ltd.
No. 83 Taishin Road
RE: Revocation of NY N287514; Country of Origin Marking; Encapsulated Fish Oil.
Dear Mr. Zheng:
This letter is to inform you that U.S. Customs and Border Protection ("CBP") has reconsidered New York Ruling Letter ("NY") N287514 issued to you on July 20, 2017. In NY N287514, CBP found that the processing performed in China effected a substantial transformation, and therefore, determined that the encapsulated fish oil was a product of China. We have reviewed NY N287514 and determined it to be in error. For the reasons set forth below, we are revoking the ruling.
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 (Customs Modernization) of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057), a notice of the proposed action was published in the Customs Bulletin, Volume 53, No. 24, on July 17, 2019. One comment, which will be addressed below, was received in response to this notice.
In NY N287514, CBP described the encapsulated fish oil as follows:
...oil derived from Peruvian anchoveta (Engraulis ringens) is refined, bleached, cold filtrated, deodorized and blended with sunflower oil and d-alpha tocopherol (vitamin E) then shipped to China. In China, the fish oil is filled into soft gelatin capsules. The encapsulated fish oil is imported into the United States in retail sized bottles containing 60 capsules or 200 capsules, respectively.
In NY N287514, CBP found that the processing undertaken at the facility in China substantially transformed the fish oil. CBP determined the encapsulated fish oil to be a product of China for CBP marking purposes.
What is the country of origin of encapsulated fish oil for country of origin marking purposes?
LAW AND ANALYSIS:
The marking statute, Section 304, 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 (or its container) 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. Congressional intent in enacting 19 U.S.C. 1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." See United States v. Friedlander & Co., 27 C.C.P.A. 297, 302; C.A.D. 104 (1940).
Part 134, Customs Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Pursuant to 19 C.F.R. 134.1(b), the "country of origin" means the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 the marking laws and regulations.
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. A substantial transformation will not result from a minor manufacturing or combining process that leaves the identity of the article intact. See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940); and National Juice Products Association v. United States, 628 F. Supp. 978 (Ct. Int'l Trade 1986).
In determining whether a substantial transformation occurs in the manufacture of chemical products such as pharmaceuticals, CBP has consistently examined the complexity of the processing and whether the final article retains the essential identity and character of the raw material. To that end, CBP has generally held that the processing of pharmaceutical products from bulk form into measured doses does not result in a substantial transformation of the product. See, e.g., Headquarters Ruling Letter ("HQ") H284694, dated August 22, 2017; HQ H233356, dated December 26, 2012; NY N017772, dated October 26, 2007; and, HQ H735146, dated November 15, 1993.
For example, in HQ H284694, CBP held that the processing of bulk imported pharmaceuticals into dosage form did not result in a substantial transformation. In that case, the processing began with Dutch-origin bulk calcium acetate and, after being combined with inactive ingredients in India, resulted in calcium acetate capsules in individual doses of 667 milligrams. CBP determined that the process in India did not change the name, character, or use of the calcium acetate, and therefore, the country of origin was the Netherlands.
Similarly, in HQ H233356, CBP held that the processing and packaging of imported mefenamic acid into dosage form in the United States did not constitute substantial transformation. CBP found that the specific U.S. processing, which involved blending the active ingredients with inactive ingredients in a tumbler and then encapsulating and packaging the product, did not substantially transform the mefenamic acid because its chemical character remained the same. Accordingly, CBP held that the country of origin of the final product was India, where the mefenamic acid was produced.
In HQ H735146, 100 percent pure acetaminophen imported from China was blended with excipients in the United States, granulated and sold to pharmaceutical companies to process into tablets for retail sale under private labels. CBP found that the process in the United States did not substantially transform the imported product because the product was referred to as acetaminophen before importation and after U.S. processing, its use was for medicinal purposes and continued to be so used after U.S. processing, and the granulating process minimally affected the chemical and physical properties of the acetaminophen.
Here, as in the cases cited above, the processing of the fish oil into dosage form as soft gel capsules will not result in a substantial transformation. The fish oil originates from Peru and is encapsulated in China. No change in name occurs in China because the product is referred to as "fish oil" both before and after encapsulation. Furthermore, the fish oil retains its chemical and physical properties and is merely put into a dosage form in China. Finally, no change in use occurs in China because the fish oil has the same predetermined medicinal use both as bulk and as soft gel capsules. Therefore, in accordance with prior CBP rulings, we find that no substantial transformation occurred during the encapsulation process in China and therefore the country of origin of the final product is Peru.
One comment was received in support of the proposed ruling. The commenter requested clarification regarding the applicable tariff rate of the fish oil and the application of the ruling to similar products. In particular, the commenter inquired whether the subject fish oil should be assessed the tariff rate based on the duty rate for fish oil products from Peru. Please note that even though the country of origin of the fish oil is Peru, this product is not eligible for preferential tariff treatment under the United States-Peru Trade Promotion Agreement ("Peru FTA"), as addressed in HQ H078175, dated December 15, 2009. In HQ H078175, CBP held that fish oil derived from Peru and shipped to China for encapsulation was not considered an originating good under General Note 32(c)(iii), implementing the transit and transshipment provision of the Peru FTA. When no preferential tariff rate applies, then the applicable duty rate is provided for under the general duty rate in column one of the Harmonized Tariff Schedule of the United States.
Additionally, the commenter inquired whether the subject fish oil can be declared a product of Peru if it is packed in other dosage forms such as sachets, bottles, and liquid-filled hard-shell capsules. We note that packaging bulk product into dosage or individual sizing generally does not effect a substantial transformation. We also note that while the subject fish oil is derived from Peruvian anchoveta, the analysis in this ruling will apply to other fish oil products such as Cod Liver Oil or Krill Oil, provided these products undergo similar processing.
Based on the facts provided, encapsulation of fish oil performed in China does not substantially transform the fish oil from Peru. Accordingly, the country of origin of encapsulated fish oil in NY N287514 is Peru.
EFFECT ON OTHER RULINGS:
NY N287514, dated July 20, 2017, is hereby REVOKED in accordance with the above analysis.
In accordance with 19 U.S.C. 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Myles B. Harmon, Director
Commercial and Trade Facilitation Division