Kenneth M. Carmon, Branch Manager

HQ 733908

April 11, 1991

MAR 2-05 CO:R:C:V 733908 RSD

CATEGORY: Marking

Kenneth M. Carmon, Branch Manager F.W. Meyers & Co, Inc. R.F.D. Wellesley Island Alexandria Bay, New York 13607

RE: Country of origin marking of breakfast cereals, grains, sugar coating, vitamin fortification, substantial transformation; 19 CFR 134.35

Dear Mr. Carmon:

This is in response to your letter dated October 31, 1990, forwarding the letter of The Weetabix Company, dated October 16, 1991, requesting a ruling on the country of origin marking requirements for breakfast cereals imported from Canada. The Weetabix Company submitted a second letter dated December 17, 1990.

FACTS:

The Weetabix Company imports several different types of breakfast cereals from Canada, which will be further processed in the U.S. (Fruit Circles, Fruit Dots, Cocoa Dots & Toasted Grain Circles) The following manufacturing operations are represented to occur in Canada:

1) Dry ingredients are pneumatically conveyed to a batch mixer. Each of the cereals includes either corn flour or corn meal from the U.S. which comprises approximately 50% or more by weight of the finished product and one or more of the following grains and other products from Canada (wheat flour, oat flour, wheat gluten, cocoa powder).

2) After being thoroughly mixed, the batch is pneumatically conveyed to a storage hopper, and then is conveyed, at a controlled rate to the extruder.

3) In a twin screw extruder the blended dry mix is mixed with water and a liquid solution containing sugar (Denmark), salt (Canada), food coloring (USA), vitamins and minerals (USA), if required. The total mixture is subjected to shear and high temperature for the short time it travels the distance of the barrel of the extruder. The pressurized material molten puffs as it exits the extruder, at which time it is cut into small pieces. 4) The small pieces of extruded, puffed intermediate cereal are fed into a three stage fluid bed dryer. The first two stages are heating processes and the final stage a cooling process.

5) The partially completed cereal is screened for fine and oversized pieces, each being removed, and the remaining accepted pieces are packed into bulk containers for shipment to the U.S.

You indicate that after being processed in Canada, the cereal while edible, is mostly tasteless and/or bland and lacks full vitamin fortification to meet advertised specifications. Additionally, it is noted that proper packaging is an essential part of the product because it must meet the standards of the Food Drug Administration. The cereal is then further processed in the U.S., where the following processing is completed:

1) Multi-colored cereal, specifically Fruit circles and Fruit Dots, are blended equally by color.

2) The cereal is introduced into a coating reel where a sugar or sugar substitute coating and flavoring, and vitamin fortification is applied in two separate operations.

3) The coated cereal leaves the coating reel and is conveyed to and through a dryer.

4) The dried finished cereal is passed over screens to remove fines and then stored in holding tanks.

5) The holding tanks of finished cereal are fed into hoppers of packaging machines for packaging into commercially accepted sized packages.

6) At the end of each packaging line the retail size cartons are packed into a shipping carton, palletized and overwrapped with film into a shipping unit on a slipsheet.

ISSUE:

Does the processing of breakfast cereal in the U.S. which includes sugar coating, vitamin fortification, and packaging constitute a substantial transformation?

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. 1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender & Co. 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines "country of origin" as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material 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 the marking laws and regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed. In such circumstances the U.S. manufacturer is the ultimate purchaser. The imported article is excepted from individual marking and only the outermost container is required to be marked. (see 19 CFR 134.35).

In National Juice Products Association v. United States, 10 C.I.T. 48, 628 F. Supp. 978 (1986), the Court of International Trade upheld Customs' determination that imported orange juice concentrate is not substantially transformed when it is processed in the U.S. into retail orange juice products. Although the orange juice concentrate at issue in that case underwent significant processing, was mixed with orange essences and oils, purified and dechlorinated water, and was either packaged in cans and frozen or pasteurized and packaged in liquid form, Customs found that such processing did not change the fundamental character of the orange juice concentrate. Customs further determined, and the court agreed, that it was the orange juice concentrate that imparted the essential character to the final product.

In HQ 724640, July 2, 1984, C.S.D. 84-112, Customs found that notwithstanding the complex domestic processing of imported crude honey into refined honey, the product remained honey-in a more refined state than imported, but not fundamentally changed. In HQ 729256, May 23, 1988, Customs noted that the processing of smoked salmon was not a substantial transformation even though the taste may be changed.

In this case, various ingredients are combined and processed in Canada to make breakfast cereals. Each of the ingredients used is substantially transformed in Canada and becomes an integral part of the cereal. The cereal that is imported to the U.S. is a product of Canada. The subsequent processing done in the U.S. involving sugar coating, vitamin fortification, packaging, and other miscellaneous processing does not alter the fundamental character of the breakfast cereal. Although this processing may be necessary for the product to be marketable and may add some value, it does not transform the imported product into an article with a different name, character, or use. As in the cases cited above, the product has its fundamental character at the time it enters the U.S. and it is not changed by the U.S. processing. Before it enters the U.S. the product looks like breakfast cereal, and has the consistency of puffed grains. In addition, it already contains all the main ingredients, and even contains sugar and vitamins which are already added to the cereal in Canada. In other words, the product before the U.S. processing is breakfast cereal and remains breakfast cereal after the U.S. processing. Accordingly, we find that the domestic processing does not constitute a substantial transformation and the containers for breakfast cereal must be marked with the country of origin, which in this case, is Canada.

Under the provisions of section 134.25, Customs Regulations (19 CFR 134.25) if an article which is incapable of being marked is intended to the repacked in new containers for sale to an ultimate purchaser after it release from Customs custody, the importer shall certify to the district director that the new container shall be marked to indicate the country of origin of the article in accordance with 19 CFR Part 134 or if the article is intended to be sold or transferred to a subsequent purchaser or repacker, the importer shall notify such purchaser or transferee, in writing, at the time of sale or transfer, that any repacking of the article must conform to these requirements. The importer or his authorized agent shall sign a statement to this effect. In this case, because the imported breakfast cereal cannot be marked and the product will be repackaged before it reaches the ultimate purchaser, the certification procedures should be followed.

HOLDING:

The processing of breakfast cereal in the U.S. by sugar coating, vitamin fortification, packaging, and other miscellaneous processing does not constitute a substantial transformation. The product remains an article of foreign origin which must be marked with its country of origin. The importer must follow the certification procedures for repacking in 19 CFR 134.25.

Sincerely,

John Durant, Director Commercial Ruling Division