June 7, 2006 CBP Bulletin Notice on NAFTA Eligibility of Sugar and Gelatin Blended in FTZ
In the June 7, 2006 issue of the U.S. Customs and Border Protection Bulletin (CBPBulletin) (Vol. 40, No. 24), CBP issued a notice proposing to modify a rate of duty and NAFTA eligibility ruling on a sugar and gelatin blended in a foreign trade zone (FTZ). CBP states that it is also proposing to revoke any treatment it has previously accorded to substantially identical transactions.
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CBP states that any party who has received a contrary ruling or decision on the merchandise that is subject to the proposed ruling, or any party involved with a substantially identical transaction, should advise CBP by July 7, 2006, the date that written comments on the proposed ruling are due. Furthermore, CBP states that an importer's failure to advise CBP of such rulings, decisions, or substantially identical transactions may raise issues of reasonable care on the part of the importer or its agent for importations subsequent to the effective date of the final decision in this notice.
In addition, CBP states that this notice covers any rulings on the subject merchandise that may exist but have not been specifically identified.
Proposed Modification of a Rate of NAFTA Eligibility Ruling
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 proposing to issue 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.
CBP is proposing these changes because 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.).
Therefore, the sugar and gelatin blend should be 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.
proposed: HTS 2106.90.5870, 4.8% (previously duty-free under NAFTA).
June 7, 2006 CBP Bulletin (Vol. 40, No. 24) available at http://www.cbp.gov/xp/cgov/toolbox/legal/bulletins_decisions/bulletins_2006/vol40_06072006_no24/