CLA-02 RR:CR:SM 562468 EAC

Mr. William B. Schreiber
Wormser, Kiely, Galef & Jacobs, LLP
825 Third Avenue
New York, NY 10022-7519

RE: Country of origin marking requirements applicable to vodka manufactured in Sweden from various ingredients imported from abroad; substantial transformation

Dear Mr. Schreiber:

This is in response to your letter dated July 16, 2002, on behalf of Spirits Marque One LLC, in which you request a country of origin determination for two varieties of vodka that will be imported into the United States from Sweden.


You assert that Spirits Marque One LLC is contemplating importing two products, vodka and flavored vodka, into the U.S. The producer of both varieties of vodka is J&J Nordic AB of Sweden. Subsequent to production, the vodka will be imported into various U.S. ports of entry, to include New York/ New Jersey, Oakland, Miami, Chicago, Savannah and Minneapolis.

The vodka is produced from grain neutral alcohol that is 192 proof. J&J Nordic AB obtains the grain neutral alcohol on the “international market (outside Sweden)”. Similarly, the flavoring product, which is utilized primarily in the flavored vodka, is also purchased on the "international market”. Upon completion of the initial sale transactions, the products are imported into Sweden and transported to the company’s distillery, located in Kallby, Sweden.

You state that the distillation process occurs entirely within Sweden. The first step in the process entails filtering the grain neutral alcohol through a charcoal filter system to give the alcohol its final characteristics. Upon completion of the filtration process, the imported flavoring ingredient is added to the blend which will ultimately become flavored vodka. In order to reduce the alcohol content of both varieties of vodka to 70 proof, the filtered alcohol is blended with Swedish spring water, which has been filtered through an osmosis system. The products are then subjected to a 24-hour stabilization process, upon the completion of which the vodka is labeled and packaged to await shipment.

You set forth the corresponding cost of each component utilized in the vodka as well as it’s actual physical percentage of the vodka, respectively, as follows:

Value (% cost of each component) Grain neutral alcohol 28%

Flavoring product 7%

Dry Materials 32.5%

Preparation, bottling and packaging 32.5%

Actual percentage of vodka (% by component) Flavoring 1%

Alcohol 35%

Water 64%

Accordingly, you state that, upon importation into the United States, the products will be classified as vodka and flavored vodka, respectively, in accordance with the Federal Alcohol Administration Act.


Whether ingredients utilized in the manufacture of two varieties of vodka, primarily flavoring product and grain neutral alcohol, both of which are imported into Sweden, are substantially transformed during the distillation process such that Sweden is considered to be the country of origin of the vodka pursuant to 19 U.S.C. §1304 and 19 C.F.R. §134.35(a).


Section 304 of the Tariff Act of 1930 (19 U.S.C. §1304), provides that, unless excepted, every article of foreign origin 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 purposes 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.” United States v. Friedlander & Co., 27 C.C.P.A. 297 at 302 (1940).

Part 134, Customs Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. §1304. Section 134.1(b), Customs Regulations (19 C.F.R. §134.1(b)), defines “country of origin” as 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. An article used in manufacture which results in an article having a name, character, or use differing from that of the constituent article will be considered substantially transformed. U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)(1940).

In Headquarters Ruling Letter (HRL) 555062, dated February 23, 1990, Customs considered whether the manufacture of peanuts into peanut butter constituted a substantial transformation. Customs held that:

In addition to the name change, the character and use for the two products are entirely different. Although peanut butter is made from peanuts and has the taste of peanuts, the similarity ends there. The products look different, have different consistencies and are used for different purposes; peanut butter as a spread and peanuts as food to “munch” on. These are clearly different articles of commerce. Accordingly, the country of origin of the imported product is the country where the peanut butter is made.

Similarly, in HRL 558733, dated December 28, 1994, Customs held that avocados imported into the U.S. are substantially transformed when they are manufactured into guacamole, because the two items have different names, characters and uses.

However, in HRL 554644, dated October 29, 1987, Customs held that the processing of crude linseed oil into a fully refined oil did not result in a substantial transformation because the “essential character of the product was not altered” and the refined oil was not a “new and different article of commerce”. Essentially, the refined oil was purer but still possessed the same basic characteristics of the crude linseed oil. See also HRL 554637, dated July 13, 1987 (processing raw sugar into a purer, refined product did not constitute a substantial transformation because the refined product was not a new and different article of commerce).

In the case under consideration, it must be determined whether the imported products (grain neutral alcohol and flavoring product) undergo a substantial transformation during the distillation process such that a “new and different article of commerce” results with a “new name, character and use”, or if the imported products have merely been “diluted” or “refined” thereby failing to effect a substantial transformation of the constituent products.

We believe that, in the case at bar, the Court of International Trade’s (CIT) analysis in National Juice Products Ass’n v. United States, 10 CIT 48, 628 F. Supp. 978 (1986), is applicable. In National Juice, the CIT upheld Custom’s ruling in HRL 728557, dated September 4, 1985, in which we held that imported orange juice concentrate was not substantially transformed when it was mixed with water, essential oils, flavoring ingredients and domestic fresh juice in order to produce frozen concentrated orange juice and reconstituted orange juice. Customs found that the manufacturing process did not create an article with a new name, character or use. Customs held, and the CIT agreed, that the manufacturing process did not change the “fundamental character of the product” as “it was still essentially the juice of oranges”. In other words, a substantial transformation did not occur because the resulting product did not possess a new name, character or use.

In contrast, however, Customs held in HRL 731685, dated March 15, 1990, that converting imported fruit juice concentrates and other imported ingredients into fruit drinks in Mexico constituted a substantial transformation. The manufacturing process involved mixing the juice concentrates with other ingredients including water, artificial flavor, sodium benzoate, and food coloring. We held that, considering the totality of the circumstances, a substantial transformation of the foreign ingredients had occurred because “[t]he juice concentrates are subsumed into a product that is no longer considered a juice”. Essentially, there had been a substantial transformation because the raw ingredients had been converted into a different article of commerce through a process beyond simple combining, packaging or mere diluting.

Based upon our independent research pertaining to the qualities of grain neutral alcohol, it is our understanding that prior to the distillation process grain neutral alcohol (also known as ethyl alcohol, ethanol) is a potent liquid, in this case 192 proof, that may be used in either alcoholic beverages or in various products not intended for human consumption. The determinative factor, with respect to ultimate use, is whether the ethyl alcohol has been “denatured”, or rendered undrinkable by the addition of denaturants.

The Alcohol, Tobacco Products and Firearms (hereafter BATF) regulations serve as a guide to clarify this point. Section 21.11, BATF Regulations (27 C.F.R. §21.11), defines the following terms as such:

Alcohol. Those spirits known as ethyl alcohol, ethanol, or spirits of wine, from whatever source or by whatever process produced; the term does not include such sprits as whisky, brandy, rum, gin, or vodka.

Denaturant. A material authorized by this part to be added to spirits in order to make those spirits unfit for beverage or internal human medicinal use.

Denatured spirits. Alcohol or rum to which denaturants have been added as provided in this part.

Accordingly, sections 21.31 – 21.81, BATF Regulations (27 C.F.R. §§31-81), provide a comprehensive list of denatured alcohol formulas and their respective uses. Upon examination of the mentioned provisions, it is clear that denatured alcohol has a multitude of potential uses. To name only a few, denatured alcohol is used (in various forms and quantities) as a vital component in polishes, dyes, fuels (automotive and jet), industrial solvents, mouthwashes, shampoo, hairspray, vinegar, brake fluid and radiator coolant.

However, assuming that grain neutral alcohol is not denatured, it is equally suited for use as an ingredient in various “distilled spirits” which are intended for human consumption. Section 1.10, BATF Regulations (27 C.F.R. §1.10), defines “distilled spirits” as ethyl alcohol, hydrated oxide of ethyl, spirits of wine, whiskey, rum, brandy, gin, and other distilled spirits, including all dilutions and mixtures thereof for non-industrial use. Clearly, vodka satisfies the criteria established in this provision. More importantly, however, the aforementioned provisions effectively illustrate the adaptability of grain neutral alcohol to a multitude of potential uses from its initial state. This is an adaptability that is, in most cases, sacrificed when grain neutral alcohol is subsumed into various distilled spirits and industrial or household products.

In consideration of the aforementioned facts and applicable Customs and BATF provisions, we find that this case is similar to HRL’s 555062, 558733 and 731685, in that the component ingredients at issue are substantially transformed into a product that has a new name (vodka and flavored vodka), character (comprised of 64 percent water, 35 percent alcohol and 1 percent flavoring), and use (alcoholic beverage intended purely for human consumption). The distillation process, described above, is sufficiently complex to alter the component product’s fundamental characteristics to the extent that they lose much of their original identity and thereby become subsumed into new and distinct items of commerce: vodka and flavored vodka.

For all the foregoing reasons, we conclude that the grain neutral alcohol and flavoring product, which is imported into Sweden, is substantially transformed into new items of commerce as a result of the distillation process. Accordingly, the vodka and flavored vodka will be considered a product of Sweden for purposes of 19 U.S.C. §1304.


Grain neutral alcohol and flavoring product imported into Sweden and converted into vodka in the manner described above will result in a substantial transformation of the imported products into different articles of commerce. Therefore, vodka (and flavored vodka) manufactured in Sweden for exportation to the U.S. is a product of Sweden for purposes of compliance with 19 U.S.C. §1304. 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 Customs officer handling the transaction.


Myles B. Harmon
Acting Director, Commercial
Rulings Division