February 27, 2008 CBP Bulletin Notice on Sugar and Gelatin Blended in FTZ
In the February 27, 2008 issue of the U.S. Customs and Border Protection Bulletin (CBP Bulletin) (Vol. 42, No. 10), CBP published a notice modifying a ruling and revoking treatment as follows:
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Modification of ruling, revocation of treatment relating to rate of duty and country of origin.CBP is modifying a ruling on the rate of duty and country of origin of a sugar and gelatin blend. CBP is also revoking any treatment it has previously accorded to substantially identical transactions.
According to CBP, the modification and revocation are effective for merchandise entered or withdrawn from warehouse for consumption on or after April 27, 2008.
Sugar and gelatin blend. At issue are goods described as a blend of 94% sugar and 6% gelatin. The sugar used to create the blend is imported directly from Costa Rica, Guatemala, or other countries eligible for treatment under the Generalized System of Preferences (GSP) or the Caribbean Basin Economic Recovery Act (CBERA). The gelatin used to make the blend may be a product of the U.S. or Brazil. Furthermore, the sugar and gelatin are imported directly into a FTZ in Toledo, Ohio, where they are blended. After leaving the FTZ, the sugar and gelatin blend is used by food processors, who will add flavoring, coloring, preservatives, salt, and sodium citrate to make a gelatin dessert mix for retail sale.
CBP is issuing HQ 967896 in order to modify NY K80306, to reflect the proper classification and NAFTA analysis for the sugar and gelatin blend.
In NY K80306, CBP found that the sugar and gelatin blend qualified under the NAFTA column one, special rate of duty. CBP has reviewed the matter and determined that although the classification and country of origin determinations were correct, the sugar and gelatin blend does not qualify for duty-free treatment pursuant to NAFTA. None of the sugar or gelatin is from Canada or Mexico, and the processing is performed in a FTZ in the U.S.-thus, NAFTA is not applicable.
CBP states that blending the sugar and the gelatin creates a new product (a food preparation), which satisfies the substantial transformation requirement of 19 CFR 134.35(a). Since there is a substantial transformation of the component ingredients, the country of origin of the sugar and gelatin blend is the country where the blending process occurred (in this case, the U.S.). In previous rulings, CBP has held that when a nonprivileged good is substantially transformed in an FTZ, it becomes a product of the U.S. See HQ 735399 (December 22, 1993) and C.S.D. 81-44 (August 4, 1980). Further, that product upon withdrawal from the FTZ for consumption in the U.S. is subject to the rate of duty of the finished product. See HQ 560102 (June 17, 1997), and HQ 967222 (September 3, 2004).
Therefore, the sugar and gelatin blend is a good of the U.S. for duty, quota and country of origin marking purposes. As such, the sugar/gelatin blend is exempt from country of origin marking.
new: 2106.90.5870, 4.8%; previous: 2106.90.5870, duty-free under NAFTA
(See ITT's Online Archives or 06/19/06 news, 06061935, for BP summary of proposed HQ 967896.)
February 27, 2008 CBP Bulletin (Vol. 42, No. 10) available athttp://www.cbp.gov/xp/cgov/toolbox/legal/bulletins_decisions/bulletins_2008/