CLA-2-20:OT:RR:NC:4:228
Ms. Martha Davila
TCS Brokerage
1900 Billy Mitchell, Suite C
Brownsville, TX 78521
RE: The country of origin and status under the North American Free Trade Agreement (NAFTA) of potato chips from the United States (U.S.) and Mexico; Article 509
Dear Ms. Davila:
In your letter dated June 16, 2016, on behalf of Mexican Snacks, Inc., TX, you requested a ruling on the country of origin labeling of potato chips cultivated and processed in the United States (U.S.) from fresh potatoes, and packaged in Mexico.
You provided samples of two individually packaged bags of potato chips named “Papa Adobada” and “Papa Lisa Sal,” and a “Lunch Pack Bag.” The samples were examined and discarded.
You described three scenarios that start with U.S. produced potato chips exported in bulk to Mexico. In the first scenario, you state that the U.S. potato chips are individually packaged under the name “Papa Adobada” for export back to the U.S. for retail sale. In the second scenario, you state that the U.S. potato chips are individually packaged under the name “Papa Lisa Sal,” and inserted into a “Lunch Pack Bag,” along with other individually packaged bags of potato chips made in Mexico, for export to the U.S. for retail sale. In the third scenario, you state that U.S. potato chips will be exported to Mexico in bulk, commingled with potato chips in bulk of origin Mexico, individually packaged and exported to the U.S. for retail sale. That product will be named “Papa Casera.”
The country of origin marking requirements for a “good of a NAFTA country” are determined in accordance with Annex 311 of the North American Free Trade Agreement (“NAFTA”), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat 2057) (December 8, 1993) and the appropriate Customs Regulations.
The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in Title 19, Code of Federal Regulations (CFR), Part 102. We observe that the appropriate Customs Regulations, 19 CFR Section 134.1 (g) defines a “good of a NAFTA country” as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules. In examining 19 CFR Section 102.20, “Specific Rules by Tariff Classification,” the specific rule by tariff classification for goods ranging from 2001 – 2007 states: “A change to heading 2001 through 2007 from any other chapter.”
19 CFR Section 102.11 sets forth the required hierarchy for determining country of origin for marking purposes. For the “Papa Adobada” potato chips, 19 CFR Sections 102.11 (a) (1), (2) and (3) are not applicable to the merchandise concerned. We note that according to 19 CFR Section 102.17, repackaging and retail packaging of the U.S. potato chips are non-qualifying operations. Further, the foreign potato chips of U.S. origin, classified in subheading 2005.20 Harmonized Tariff Schedule of the United States (HTSUS), do not undergo the requisite change in tariff classification according to 19 CFR Section 102.20, specific rule – 2001-2007, “A change to heading 2001 through 2007 from any other chapter.” Consequently, 19 CFR Section 102.11 (b) (1) is applicable, and as such the country of origin that imparts the essential character to the “Papa Adobada” potato chips is the single material, the potato chips, of U.S. origin. Accordingly, the country of origin of the “Papa Adobada” potato chips is the U.S. Generally, products of the U.S. do not have to be marked with country of origin.
For the “Lunch Pack Bag,” all individually packaged bags of potato chips of origins Mexico and the U.S., 19 CFR Sections 102.11 (a) (1), (2) and (3) are not applicable to the merchandise concerned. Consequently, 19 CFR Section 102.11 (b) (1) is applicable, and as such the county of origin that imparts the essential character to the “Papa Lisa Sal” potato chips is the single material of U.S. origin, the potato chips, and the essential character for the variety of potato chips made in Mexico from domestic or foreign potatoes is the potato chips of origin Mexico. Accordingly, the country of origin of the “Papa Lisa Sal” potato chips is the U.S. and the country of origin of the other variety of individually packaged bags of potato chips is Mexico. We observe that the outer-packaging of the “Lunch Pack Bag” is incorrectly marked with country of origin Mexico only. The ultimate purchaser has the right to know the country of origin of imported goods. Because the individually packaged bags of potato chips are sealed in the “Lunch Pack Bag” for retail, both the U.S. and Mexico bags of potato chips contained within need to be identified with their proper country of origin on the “Lunch Pack Bag.”
Identifying country of origin, “made in the United States” and “product of the United States” falls under the jurisdiction of the Federal Trade Commission. Nevertheless, consistent with Headquarters ruling HQ 735306, dated December 21, 1993, the annotation “made in the USA” was an acceptable marking, whereas marking to the contrary would lead to confusion by the ultimate purchaser.
In your request for a binding ruling you indicate a third scenario as follows.
Because of the falling economy in Mexico, the manufacturing plant in Mexico began packaging potato chips cultivated in Mexico for the Mexican market and the U.S. market, under a different name, “Papa Casera,” and labeled made in Mexico. Currently, Mexican potato chips and U.S. potato chips are sorted and packaged in different batches for the different markets. You state that the cost to completely segregate the production lines for packaging would be detrimental to your revenue since an immense investment would be considered necessary in the manufacturing plant. In addition to the production lines, a stricter quality control must be ensured to maintain the already established quality control that your products undergo for importation into the U.S. You further state that it is your company’s concern that they will not be in compliance with the U.S. marking regulations if at one point in the future the U.S. and Mexican potato chips are commingled and packaged together for importation into the U.S.
In the event that the potato chips of Mexican origin and the potato chips of U.S. origin are commingled, 19 CFR Section 102.11 (b) (2) is applicable setting forth the following:
If the material that imparts the essential character to the good is fungible, has been commingled, and direct physical identification of the origin of the commingled material is not practical, the country or countries of origin may be determined on the basis of an inventory management method provided for under the appendix to part 181 of this chapter.
In following the Appendix to Part 181, Schedule X, Inventory Management Methods, Part II Fungible Goods, General, Section 11, there are four methods provided for country of origin purposes: (a) specific identification method; (b) FIFO method; (c) LIFO methods; and (d) average method.
When in compliance with 19 CFR 102.11 (b) (2) and the Appendix to Part 181, Schedule X, Inventory Management Methods, Part I – Fungible Materials and Part II – Fungible Goods, the country of origin marking for the “Papa Casera” potato chips when commingled would indicate both countries of origin “Made in the USA” and “Made in Mexico” or similar type wording on the bag of potato chips. An alternative marking indicating both countries of origin would be “Made in the USA from potatoes cultivated in America” and “Made in Mexico from potatoes cultivated in Mexico” on the bag of potato chips.
We suggest that you contact the Federal Trade Commission (FTC) who has jurisdiction on the markings “Made in the USA” or “Product of the U.S.A.,” or similar type markings. You can contact the FTC through their website at “https://www.ftc.gov,” or call them at (202) 326-2996, or write to them at:
Division of Enforcement
Bureau of Consumer Protection
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
In the event that an inventory management method cannot differentiate between bags of potato chips of U.S. origin and Mexican origin, truly commingled in one bag with no method of separation, the country of origin of the “Papa Casera” potato chips would be determined by 19 CFR Section 102.11 (d) (3), therefore, the last country in which the good underwent production, other than minor processing and simple assembly, would be the country of origin of the merchandise concerned. The manufacturing of potato chips from cultivated potatoes of Mexican origin when commingled with potato chips from cultivated potatoes of U.S. origin, and placed in a bag together, would be more than minor processing and not of simple assembly, resulting in the country of origin of Mexico for the “Papa Casera” potato chips.
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 ww.fda.gov/oc/bioterrorism/bioact.html.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 CFR Part 181).
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