CLA-2-08:OT:RR:NC:N2:228
Mr. Adam Cunningham
MacFarms, LLC
89-406 Mamalahoa Hwy
Captain Cook, HI 96704
RE: The country of origin, and the application of a Trade Program or Trade Agreement pertaining to macadamia nuts from the United States
Dear Mr. Cunningham:
In your letter dated October 28, 2018, you requested a country of origin determination, and the application of a Trade Program or Trade Agreement ruling.
You have outlined a scenario in which raw, dried, in-shell macadamia nuts grown and harvested in the United States are shipped in bulk format by your supplier either in 1,333 lb. sacks or lined inside 40-foot shipping containers to a processor in China. In China, the processor unloads the bulk in-shell macadamia nuts where there are shelled and packed into a foil liner inside 25 lb. cardboard cartons, net weight. The repackaged shelled raw macadamia nuts are sold to your company and then returned to the United States where they are either sold to other food manufacturers or used as an input into retail products produced by your company. You state that there are no other ingredients added to the shelled macadamia nuts, nor any other processing completed in China other than the shelling and repacking steps outlined. You refer to a ruling written by this office, N245725, dated September 24, 2013, as containing similar shelling and repackaging of nuts in China where a substantial transformation had not been effected and the goods retained their initial country of origin status as U.S. products for CBP purposes.
We concur that the scenario you outlined in your ruling request is similar to the one ruled on in New York Ruling N245725. The shelling and repackaging of the nuts did not effect a substantial transformation, therefore, the country of origin of your shelled macadamia nuts is the U.S. for CBP purposes.
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. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993). However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983)”
We note for your information that, as in similar situations previously ruled upon by CBP, heading 9801, “U.S. goods returned” (or the application of a Trade Program or Trade Agreement) will not apply because the goods undergo advancement in value or improvement in condition while abroad. Heading 9802 (“repairs and alterations”) will not apply as well because the Chinese processing represents an intermediate step in the production of a finished good as opposed to a repair or alteration.
This further supports the determination that the origin of the shelled macadamia nuts being from the U.S. exempts them from the purview of Section 301 of the Tariff Act of 1974 with regard to the additional duties assessed on merchandise imported from China.
The applicable subheading for the shelled macadamia nuts will be 0802.62.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for other nuts, fresh or dried, whether or not shelled or peeled . . . macadamia nuts . . . shelled. The general rate of duty will be 5 cents per kilogram. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at https://hts.usitc.gov/current.
This merchandise is subject to The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (The Bioterrorism Act), which is regulated by the Food and Drug Administration (FDA). Information on the Bioterrorism Act can be obtained by calling FDA at 301-575-0156, or at the Web site www.fda.gov/oc/bioterrorism/bioact.html.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Bruce N. Hadley, Jr. at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division