OT:RR:CTF:VS H242892 KSG
Mr. Guy Manchuk
TriMarine International Inc.
10500 N.E. 8th Street
Bellevue WA 98004
RE U.S.-Morocco FTA; tuna; canning:
Dear Mr. Manchuk:
This is in response to your letter dated May 1, 2013, forwarded to us by our New York office in which you requested a ruling concerning the eligibility of certain canned tuna for duty-free treatment under the U.S.-Morocco Free Trade Agreement.
FACTS:
You state that vessels of the U.S. catch tuna from the Exclusive Economic Zones of third countries and the U.S. The tuna is frozen on board the ship and delivered to Thailand or another third country. In Thailand or the other third country, the processor will thaw, clean and remove the heads, viscera and fins, and skin the tuna. Then the bones will be removed, the meat will be cut into quarters, frozen and packed. The frozen tuna loins will then be shipped to a cannery in Morocco. In Morocco, the cannery will defrost the tuna loins, cook and cool them, clean, and pack the tuna into cans with either condiments (oil, oregano, parsley, garlic, chili, pepper and spring water) oil, or brine, all of either U.S. or Moroccan origin. The cans will be produced in the U.S. or Morocco. The canned tuna will then be imported into the U.S.
You provided estimated values for the canned tuna. You state that the transaction value will be $55. You estimate that the cost of the tuna will be $33, $4 for the condiments, $6 for the cans and labels, and $7 for the costs of labor, overhead and utilities for the cannery.
ISSUE:
Whether the imported canned tuna is an originating good eligible for duty-free treatment under the U.S.-Morocco FTA?
LAW AND ANALYSIS:
The United States - Morocco Free Trade Agreement (“UMFTA”) was signed on June 15, 2004, and entered into force on January 1, 2006, as approved and implemented by the U.S.-Morocco Free Trade Agreement Implementation Act, Pub. L. 108-302, 118 Stat. 1103, dated August 17, 2004. The provisions of the agreement are set forth in General Note (“GN”) 27 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Pursuant to GN 27(b), a good is eligible for treatment as an originating good under the UMFTA only if—
The good is a good wholly the growth, product or manufacture of Morocco, the United States, or both;
The good is a new or different article of commerce that has been grown, produced or manufactured in the territory of Morocco or the United States, or both, and that falls in a heading or subheading of the tariff schedule that is not covered by the product-specific rules of subdivision (h), [of GN 27]; and the sum of—
The value of each material produced in the territory of Morocco or the United States, or both, and
The direct costs of processing operations performed in the territory of Morocco or the United States, or both, is not less than 35 percent of the appraised value of the good at the time the good is entered into the territory of the United States; or
The good falls in a heading or subheading covered by a product-specific rule in [GN 27(h)]…
and is imported directly into the territory of the United States from the territory of Morocco.
The importer argues that the canned tuna is originating as a good wholly the growth, product or manufacture of Morocco and the U.S. The importer contends that the canned tuna is eligible pursuant to GN 27(d)(L)(2) as …
a good wholly the growth, product or manufacture of Morocco, the United States, or both …produced in the territory of Morocco or the United States, or both, exclusively from—goods referred to in subdivisions (A) through (J) above, inclusive, or the derivatives of goods referred to in such subdivisions, at any stage of production.
It is claimed that the production in Thailand of the tuna loins from tuna is allowed since the tuna loins are derived from the tuna taken from the sea by a U.S. vessel.
We disagree with this interpretation. The whole fish, which is caught by a U.S. flagged vessel and in the EEZ of the U.S. or a third country, is a U.S. good. The U.S.-origin whole tuna is then sent to Thailand for processing into tuna loin. At this point, the country of origin of the tuna loin would be decided based on the application of whether or not the fish was substantially transformed in Thailand. The USMFTA is not applicable to the processing of the tuna loin in Thailand from the whole fish. In Koru North America v. United States, 12 CIT 1120, 701 F. Supp. 229 (CIT 1988), the court held that the country of origin of fish skinned, boned, trimmed, glazed, cut into fillets and refrozen underwent a substantial transformation, creating a new article of commerce. In Headquarters Ruling Letter (“HRL”) 562708, dated June 13, 2003, CBP held that a fish processed into tuna loin was more significant processing than that performed in Koru and clearly a substantial transformation. This case is on point and in this case, the tuna loins are substantially transformed in Thailand and become a product of Thailand. The Thai-origin tuna loins are then shipped to Morocco.
In Morocco, the tuna loins are cooked and canned. We apply the UMFTA to determine if the imported canned tuna would be considered an originating good. The canned tuna classified in heading 1604, is not subject to a product specific rule in GN 27(h). Accordingly, the regulations applicable to the UMFTA set forth in 19 CFR 10.761, et seq., specifically 19 CFR 10.769(i) are applicable. Section 10.769(i) provides that a new or different article of commerce exists when the country of origin of a good which is produced in a Party from foreign materials is determined to be that country under the provisions of sections 102 through 102.21of this chapter (otherwise known as the NAFTA Marking Rules).
The National Import Specialist indicates that the uncooked tuna loins (from Thailand) would be classified in heading 0304 of the Harmonized Tariff Schedule of the United States (“HTSUS”) and the finished canned goods are classified in heading 1604. The applicable rule set forth in 19 CFR 102.20 for goods of heading 1604 is as follows:
A change to heading 1601-1605 from any other chapter, except from smoked products of heading 0306 through 0308.
Since the canned tuna does undergo a chapter change in Morocco from 0304 to 1604, the tariff shift rule would be satisfied. However, for purposes of including the cost or the value of the non-originating tuna loins into the 35% value-content requirement, the tuna loins must undergo a double substantial transformation. In order to achieve a double substantial transformation, the materials imported must be substantially transformed into a new and different intermediate article of commerce, which is substantially transformed a second time into the final article. While the cooking and canning of the tuna satisfy the tariff shift and the tuna undergoes a single substantial transformation, CBP has consistently held that canning of tuna is not a substantial transformation and would not qualify as the second substantial transformation. See HRL 562708, dated June 13, 2003, and N085659, dated December 11, 2009. Based on the values you submitted in this case, the 35% value-content requirement would not be met absent the inclusion of the value of the tuna.
Accordingly, we find that the canned tuna would not be considered a good wholly the growth, product or manufacture of Morocco and/or the U.S. or an originating good under GN 27(b)(2). The imported canned tuna would not be eligible for duty-free treatment under the UMFTA.
HOLDING:
The imported canned tuna, processed as described above, is not an originating good eligible for duty-free treatment under the U.S.-Morocco FTA. The imported canned tuna would satisfy the tariff-shift rule set forth in 19 CFR 102.20 but there has been no showing that the 35% value-content requirement is met.
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 of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch