Classification and country of origin of certain sugars

HQ 085216 October 27,1989 CLA-2 CO:R:C:G 085216 SS CATEGORY: Classification, Country of Origin TARIFF NO.: 9802.00.50 Mr. Paul G. Saam Wessex Corporation P.O. Box 307 Flint, Michigan 48501 RE: Classification and country of origin of certain sugars Dear Mr. Saam: We are in receipt of your letter dated June 19, 1989, and your additional submission dated August 10, 1989, concerning the country of origin of certain sugars, and the applicability of Section 22 fees. This ruling letter, as set forth below, is in response to submissions 1(a), 2(a), 3(a), 4(a) of your request. Due to insufficient information, we are unable to issue a ruling for the syrups (1(b-d), 2(b-d), 3(b-d), 4(b-d) of your submissions) which are produced in Canada from the imported sugars. If you are still interested in obtaining a ruling for the remaining products, please submit the following information: 1. All steps, from beginning to end, involved in the processing of the dry sugar into syrup. 2. The cost, time involved, condition and use of the sugar at each step of the process. 3. The total cost and time needed for the processing. FACTS: The merchandise in issue is stated to consist of the following: 1.(a) Raw cane sugar in solid form, wholly the growth, product, and manufacture of India, and having a polarity of 99.3, is transhipped to Windsor, Ontario, Canada, in 100 kilogram bags. The bags are subsequently opened and the - 2 - sugar is sifted and magnetically treated to remove tramp iron, then repacked in various sized paper bags. This sugar is not further refined or improved in quality after importation into the United States. This process converts the sugar from a non-food grade to food grade by U.S. Food and Drug Administration (USFDA) standards. 2.(a) Sugar in solid form, wholly the growth and product of India, and having a polarity above 99.5, i.e., refined, is transshipped to Windsor, Ontario, Canada, where it is sifted and magnetically treated to remove tramp iron, then repacked into paper bags of various sizes. This sugar is not further refined or improved in quality after importation into the United States. 3.(a) Raw cane sugar in solid form, wholly the growth, product and manufacture of the United States, and having a polarity less than 99.5, is transshipped to Windsor, Ontario, Canada, in 100 kilogram bags, where it is sifted and magnetically treated to remove tramp iron, then repacked in various sized paper bags. This sugar in not refined or improved in quality after importation into the United States. This process converts the sugar from a non-food grade to food grade by USFDA standards. 4.(a) Sugar in solid form, wholly the growth and product of the United States, and having a polarity of above 99.5, i.e., refined, is transshipped to Windsor, Ontario, Canada, where it is sifted and magnetically treated to remove tramp iron, then repacked into paper bags of various sizes. This sugar is not further refined or improved in quality after importation into the United States. ISSUE: What is the country of origin for marking and quota purposes of the sugars described above? LAW AND ANALYSIS: Section 134.1(b), Customs Regulations (19 CFR 134.1(b)) provides that the "Country of origin" means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material - 3 - 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 Part 134, Customs Regulations (19 CFR Part 134). Substantial transformation requires that there must be a transformation; a new and different article must emerge, having a distinctive name, character, or use as a result of the processing. See, United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267, C.A.D. 98 (1940). This test remains the fundamental test for substantial transformation, and has been applied to cases involving a variety of issues including marking issues. In the four situations described above, raw and refined sugar grown in and a product of India and raw and refined sugar grown in and a product of the United States, are shipped to Canada where they undergo sifting, magnetic removal of tramp iron, and repackaging, then exported to the United States where they are not further refined or improved in quality. Therefore, the question presented in the instant case is whether the sifting, magnetic removal of tramp iron, and repackaging, is of such a nature to justify the conclusion that the resulting product has undergone a substantial transformation. The sifting, magnetic removal of tramp iron and the repackaging do not result in a new and different article having a distinctive name, character, or use. The sugar, whether raw or refined, remains raw or refined. It retains its crystalline form and polarity, and has not undergone any changed characteristics. Although the processes performed in Canada result in converting the sugars in the above situations 1(a) and 3(a) from non-food grade sugar to food grade sugar under USFDA standards, it is the same article except that impurities have been removed by the sifting and the magnetic process. Further, in a recent ruling, Headquarters Ruling Letter 082033, dated September 5, 1989, we ruled that the refining of raw sugar was not a substantial transformation for quota purposes. In the instant case, the processes involved are less than refining; they are merely "cleanup". In view of the foregoing, the subject sugars have not undergone a substantial transformation. - 4 - Subheading 9802.00.50 HTSUS, provides for a partial duty exemption for articles returned to the United Stated after having been exported for alterations. The product must be completely finished when exported from the United States, and not undergo any intermediate processing operations to finish them while abroad. This provision allows the duty to be assessed only on the cost of the foreign processing. However, its application is precluded where the processing results in commercially different articles. Dolliff & Company, Inc. v. U.S., 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979). The cleaning process performed on the exported U.S. raw and refined sugar in Canada merely removes impurities by mechanical means. The subject sugars remain the same chemically and physically. The removal of unwanted substances by a mechanical process which does not physically or chemically change the exported product is an operation within the scope of an alteration. Wilbur G. Hallauer v. U.S., 40 CCPA 197, C.A.D. 518 (1953). Accordingly, the sifting, magnetic removal of tramp iron and repackaging in Canada of the U.S. exported sugar in above situations 3(a) and 4(a), constitutes an alteration under the provision of subheading 9802.00.50, HTSUS, upon compliance of section 10.8, Customs Regulations (19 CFR 10.8). The solid sugar which is imported from Canada, and is a product of India, is subject to Section 22 fees under subheading 9904.40.20, HTSUS. This subheading requires a 2.2 cents per kilogram fee on sugar principally of crystalline structure or in dry amorphous form, not to be further refined or improved in quality as defined in Chapter 99, U.S. Note 4(b). The solid sugar which remains a product of the United States is also subject to Section 22 fees when imported into the United States. However, the applicability of Section 22 fees and the quota status of the subject sugar are questions which should be addressed to the Foreign Agricultural Service Sugar Group. HOLDING: For marking and quota purposes: The sugar grown in India and transhipped to Canada where it is sifted, magnetically treated to remove the tramp iron, and repackaged, is a product of India. - 5 - The sugar grown in the United States and transhipped to Canada where it is sifted, magnetically treated to remove the tramp iron, and repackaged, is a product of the United States. The process of sifting, magnetic removal of tramp iron, and repackaging in Canada on U.S. exported raw and refined sugar constitutes an alteration within the scope of subheading 9802.00.50, HTSUS. Sincerely, John Durant, Director Commercial Rulings Division singh library 085216 6cc: Area Director, New York Seaport SSingh:jaj:10/27/89