OT:RR:CTF:VS H320038 CMR
Antonio Rivera, Jr.
Parker & Company
7801 South Jackson Road
Pharr, TX 78577
RE: DR-CAFTA qualifying frozen broccoli shipped through Mexico
Dear Mr. Rivera:
This is in response to your request, dated June 10, 2021, submitted on behalf of your client, Marbran USA, Ltd., for a prospective ruling of the eligibility for preferential tariff treatment under the Dominican Republic – Central America – United States Free Trade Agreement (DR-CAFTA) of frozen broccoli wholly grown, packaged and frozen in Guatemala and shipped to the United States through Mexico as described below.
FACTS:
You indicate that broccoli is grown in Guatemala where it is packaged and frozen at a Marbran plant in Guatemala. At the plant in Guatemala, the packaged frozen broccoli is packed in cartons which are packed on skids for delivery to the ultimate U.S. customer. The packaged, frozen broccoli is sold to Marbran USA and shipped to one of Marbran’s plants in Mexico. The product is entered into Mexico under a temporary import permit (Mexican Document Customs Code IN - Pedimento de lmportacion Temporal (Clave IN)).
The packed product entered into Mexico under a temporary import permit, which requires a bond, never enters the commerce of Mexico and must be exported. The imported product, under bond, does not remain in Mexican customs custody, but is delivered to a Marbran related plant. Under the applicable Mexican regulation, the packaged product “must be maintained and preserved in the exact state as it will be exported into the United States.” While at the Mexican plant, the packaged product “will not be manipulated at all” and ‘[t]he skids will not be broken down or altered.”
A shipping label indicating the purchase order number will be placed on the skid and then loaded (along with other items produced in Marbran's plant in Mexico and destined for the same U.S. customer) to ship via truck to the Mexican border ports of either Reynosa, Tamaulipas, Mexico for importation into Pharr/Hidalgo, TX, or Nuevo Laredo, Nuevo Leon, Mexico for importation into Laredo, TX. The packaged product will be exported under Mexican Customs Document Code RT- Pedimento de Exportacion (Clave RT). The shipped products will be entered into the United States as an entry for consumption.
In your request, you emphasize that “[i]t is very important to note that this material will never go into the commerce of the country of Mexico at any time nor will a Mexican Customs document for consumption be done for this material.”
You submitted an invoice from the Guatemalan plant showing the sale of frozen broccoli to Marbran USA. The invoice indicates the price is FOB from Guatemala and the place of delivery is McAllen, Texas.
ISSUE:
Whether the packaged frozen broccoli, grown, processed and packaged in Guatemala, and shipped through Mexico as described above, qualifies for preferential tariff treatment under the DR-CAFTA.
LAW AND ANALYSIS:
The DR-CAFTA was signed by the governments of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States on August 5, 2004. It was approved by the U.S. Congress with the enactment on August 2, 2005, of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act (the Act), Pub. L. 109-53, 119 Stat. 462 (19 U.S.C. 4001 et seq.).
General Note (GN) 29, HTSUS, implements the DR-CAFTA. GN 29(b), subject to the provisions of subdivisions (c), (d), (m) and (n) of GN 29, sets forth the criteria for determining whether a good (other than agricultural goods provided for in GN 29(a)(ii)) is an originating good for purposes of the DR-CAFTA.
As you indicate that the frozen broccoli at issue is grown, processed and packaged in Guatemala, it qualifies for preferential tariff treatment under the DR-CAFTA pursuant to GN 29(b)(i) as it is wholly obtained or produced in the territory of Guatemala. However, as the packaged frozen broccoli is shipped to Mexico prior to shipping to the United States, we must consider GN 29(c)(iii), which provides:
A good that has undergone production necessary to qualify as an originating good under this note shall not be considered to be an originating good if, subsequent to that production, the good—
undergoes further production or any other operation outside the territories of
the parties to the Agreement, other than unloading, reloading or any other operation necessary to preserve the good in good condition or to transport the good to the territory of a party to the Agreement; or
does not remain under the control of customs authorities in the territory of a
country other than a party to the Agreement.
In addition, § 10.604, entitled, Transit and transshipment (19 CFR § 10.604) provides:
(a) General. A good that has undergone production necessary to qualify as an originating good under § 10.594 of this subpart will not be considered an originating good if, subsequent to that production, the good:
(1) Undergoes further production or any other operation outside the territories of the Parties, other than unloading, reloading, or any other operation necessary to preserve the good in good condition or to transport the good to the territory of a Party; or
(2) Does not remain under the control of customs authorities in the territory of a non-Party.
(b) Documentary evidence. An importer making a claim that a good is originating may be required to demonstrate, to CBP's satisfaction, that the conditions and requirements set forth in paragraph (a) of this section were met. An importer may demonstrate compliance with this section by submitting documentary evidence. Such evidence may include, but is not limited to, bills of lading, airway bills, packing lists, commercial invoices, receiving and inventory records, and customs entry and exit documents.
In Headquarters Ruling Letter (HQ) 560950, dated September 22, 1999, Customs and Border Protection’s predecessor agency, the U.S. Customs Service, addressed a similar question under the North American Free Trade Agreement (NAFTA). In that ruling, crude iodine claimed to be an originating material of U.S. origin was shipped to Germany where it was stored in a warehouse for transit material and was not altered in any way from the time it was purchased from the U.S. supplier to the time it was shipped to Canada. Information was submitted to show that the crude iodine remained in a “freihafen” (free port) until it was exported from Hamburg to Canada.
HQ 560950 relied upon the language in the Part 181 Appendix to the NAFTA Regulations (19 CFR Part 181 Appendix) with regard to transshipment. Section 16, entitled “Transshipment” provides as follows:
Effect of subsequent processing outside the territory of a NAFTA country; loss of originating good status
(1) A good is not an originating good by reason of having undergone production that occurs entirely in the territory of one or more of the NAFTA countries that would enable the good to qualify as an originating good if subsequent to that production
(a) the good is withdrawn from customs control outside the territories of the NAFTA countries; or
b) the good undergoes further production or any other operation outside the territories of the NAFTA countries, other than unloading, reloading or any other operation necessary to preserve the good in good condition, such as inspection, removal of dust that accumulates during shipment, ventilation, spreading out or drying, chilling, replacing salt, sulphur dioxide or other aqueous solutions, replacing damaged packing materials and containers and removal of units of the good that are spoiled or damaged and present a danger to the remaining units of the good, or to transport the good to the territory of a NAFTA country.
In HQ 560950, Customs stated:
Based on the Appendix to Part 181, Customs Regulations (Section 16, Part VI), it is clear that in order not to lose originating status, the good may not leave customs control outside the territories of the NAFTA countries, and even if within customs control outside the territories of the NAFTA countries, may only be subjected to certain operations.
See also, HQ 958053, dated September 20, 1995 (“Paragraph (1)(a) of PART VI, SECTION 16. TRANSSHIPMENT, states in relevant part that a good otherwise qualifying as an originating good loses that status if the good is withdrawn from customs control outside the territories of the NAFTA countries.”).
As the language of 19 CFR § 10.604 is substantially similar to the language of Part VI, Section 16, Part 181 Appendix, the same interpretation should be applied. Based upon the interpretation of substantially similar language in HQ 560950 and HQ 958063, we find that the storage of the packaged frozen broccoli at a plant in Mexico, outside of customs control, causes the originating packaged frozen broccoli to lose its originating status.
HOLDING:
The packaged frozen broccoli which is entered into Mexico and delivered to a Marbran plant, outside of customs control, loses its originating status under the DR-CAFTA and cannot be entered into the United States claiming preferential treatment under the DR-CAFTA.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch