Country of Origin Marking of Chocolate and Other Confectionary Products

HQ H250459 October 7, 2014 CLA-2 OT:RR:CTF:TCM H250459 TNA CATEGORY: MARKING Brett Ian Harris, Esq. Pisani & Roll, LLP Attorneys at Law 1629 K Street NW, Suite 300 Washington, DC 20006 RE: Country of Origin Marking of Chocolate and Other Confectionary Products Dear Mr. Harris: This is in response to your letter dated December 23, 2013, submitted on behalf of your client, The Hershey Company (“Hershey”). In it, you requested a binding ruling on the country of origin marking requirements of chocolate and sugar confectionary products that are imported into the United States and repackaged before being exported back out of the U.S. to non-U.S. markets. FACTS: The subject merchandise consists of chocolate and sugar confectionary products that are imported from Mexico, Brazil, and other countries around the world. While the majority of these products are imported for consumption in the United States, some of these imports are specifically formulated and manufactured for non-U.S. markets. As a result, these products will be imported solely for the purposes of consolidating them with domestically manufactured products for export shipments. These products will be manufactured to order by foreign sellers based on Hershey’s product formulations, specifications, and quality control standards. The packaging for the items destined for re-export will be different from the packaging on the products destined for consumption within the U.S. This will include differences in item numbers, distribution information, and brand names. The products destined for re-export will be entered through the filing of consumption entries with U.S. Customs and Border Protection (“CBP”). They will be labelled in accordance with the requirements of the non-U.S. markets in which they will be sold but will not be marked with their country of origin. ISSUE: Whether chocolate and confectionary goods that are imported into the U.S. for the sole purpose of being repackaged and exported are subject to the country of origin marking requirements of 19 U.S.C. §1304. 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 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 are produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlaender & Co, v. United States, 27 C.C.P.A. 297 at 302 (1940). Part 134, CBP Regulations (19 C.F.R. §134), implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304. 19 C.F.R. §134.41(b) mandates that the ultimate purchaser in the U.S. must be able to find the marking easily and read it without strain. However, CBP has previously ruled that articles may be excepted from the country of origin marking requirements of 19 U.S.C. 1304, under one of the country of origin marking exceptions that is set forth in 19 C.F.R. §134.32. This section sets forth some of the general exceptions to the marking requirements of 19 U.S.C. §1304. 19 C.F.R. §134.32(h), provides an exception to the country of origin marking requirements for “[a]rticles for which the ultimate purchaser must necessarily know, or in the case of a good of a NAFTA country, must reasonably know, the country of origin by reason of the circumstances of their importation or by reason of the character of the articles even though they are not marked to indicate their origin.” Such items are excepted from individual marking under 19 U.S.C. §1304(a)(3)(H) and 19 C.F.R. §134.32(h). 19 C.F.R. §134.1(d) defines the ultimate purchaser as generally the last person in the U.S. who will receive the article in the form in which it was imported. See 19 C.F.R. §134.1(d). CBP rulings have determined the identity of the ultimate purchaser in situations where merchandise is imported solely for the purpose of re-export. For example, in HQ H186975, dated November 28, 2011, J&J Instruments imported Pakistani medical and dental instruments via a consumption entry solely for the purpose of performing inspection and quality control in its warehouse. In the warehouse, the instruments were stored separately from products destined for sale in the U.S. until they were repackaged for export to Europe. The packaging for the items destined for re-export to Europe was also different from the packaging for the items that J&J Instruments sold in the U.S., including differences in item numbers, distribution information, and brand names. There, CBP found that that J&J Instruments was the ultimate purchaser of these items because it was the only entity to handle them in the U.S. See HQ H186975. Similarly, in HQ H015428, dated November 9, 2007, the importer manufactured disposable electrodes used in electro-surgery. Manufacturing was completed in Mexico, and the electrodes were sold to another manufacturer for distribution within Europe. Before shipment to Europe, the electrodes were entered in the U.S. for sterilization; they remained in their original packaging and placed in a secondary over-box. These boxes, both of which were labelled in accordance with FDA standards, were put into bulk containers used for shipping protection and grouping for the sterilization process. After sterilization, the bulk container is removed and the electrodes are exported in the unmarked secondary over-box. There, CBP found that the importer was the ultimate purchaser of the electrodes. See HQ H015428. Lastly, in HQ 732851, dated January 26, 1990, CBP held that when an imported product is to be exported, only the ultimate purchaser in the U.S. of the imported article must be informed of the country of origin of the product. See HQ 732851. In the present case, Hershey imports the subject chocolate and confectionary solely for export to non-U.S. markets. The merchandise has different packaging from merchandise destined for consumption in the U.S. Differences include item numbers, distribution information, and brand names. Furthermore, Hershey repackages the subject merchandise in its warehouse before re-exporting it. As such, Hershey, like the importer in HQ H186975, is the only entity to handle the merchandise in the U.S. As a result, we find that Hershey is the ultimate purchaser of the subject merchandise. In many of the rulings cited above, CBP applied 19 C.F.R. §134.32(d) and determined that marking the outer container with the subject merchandise’s country of origin is sufficient. In the present case, however, we note that 19 C.F.R. §134.32(h), provides an exception to the country of origin marking requirements for “articles for which the ultimate purchaser must necessarily know, or in the case of a good of a NAFTA country, must reasonably know, the country of origin by reason of the circumstances of their importation or by reason of the character of the articles even though they are not marked to indicate their origin.” The special “circumstances of importation” for an exception from marking under this provision generally refers to a situation where the importer is the ultimate purchaser of the imported article and there is a direct contract with the foreign supplier in which the supplier insures that the order will be filled only with articles manufactured in a named country. Informing customers either through advertising or personally or both of the country of origin of imported articles is not sufficient to satisfy the requirements of 19 C.F.R. 134.32(h). See U.S. Wolfson Bros. Corp. v. United States, 52 Cust. Ct. 86, 91 (1964); see also HQ 968083, dated April 10, 2006. The applicability of this exception depends upon the identity of the ultimate purchaser. See HQ 968083. Containers or holders of articles within the exception set forth in 19 C.F.R. §134.32(h) are not required to be marked to indicate the origin of the contents. See 19 C.F.R. §134.22(e)(1). In HQ 968083, for example, CBP examined country of origin marking requirements of three human blood related products, stem cells, Bone Marrow Cells, and T Cells that are used in transplanting into critically ill patients. There, CBP found that the doctor was the ultimate purchaser of these materials, and examined the transaction that results in the patient receiving a transplant. When a match is found, the doctor is advised where the bone marrow donor is located and is put in contact with the medical facility where the bone marrow is collected. The collected material is hand transported by a special courier using the fastest commercial flights available. The courier carries the materials in the passenger compartment of a plane along with several documents that describe the material, its use, and its safety. The documents will contain codes so that the doctor and the hospital staff can verify that the proper materials have been delivered to the patient in the United States. These documents will be seen only by the doctor and/or hospital staff and will contain information indicating from what country the bone marrow is coming. Given the circumstances of the transaction, CBP found that the doctor must necessarily be aware of the materials’ origin. As a result, CBP found that the exception in 19 C.F.R. §134.32(h) applied, and these materials did not have to be marked with their country of origin. See HQ 968083. In the present case, Hershey is the ultimate purchaser of the subject chocolates and confectionary. In addition, the company purchases these products from foreign manufacturers who are producing them for specific orders that are made directly between Hershey and the suppliers. Furthermore, these orders are based on specific formulations and quality control that are conveyed by Hershey to the suppliers. Upon importation, the subject merchandise is also marked differently than the products that are imported for consumption in the U.S.; these marking include different item numbers, distribution information, and brand names. Given these facts, we find that Hershey must necessarily know the country of origin of these products. As a result, the marking exception of 19 C.F.R. §§133.32(h) and 134.22(e)(1) apply; under these provisions, the subject merchandise does not need to be marked with its country of origin. When merchandise is being imported solely for the purpose of repackaging and re-export, prior rulings have required a certification from the importer to the effect, especially when the goods are granted an exception to the country of origin marking rules. See, e.g., HQ H015428; HQ 734409, dated September 25, 1989; HQ 732851, dated January 26, 1990. 19 C.F.R. §134.26 provides the requirements of such a certification. This section states the following: The certification statement may appear as a typed or stamped statement on an appropriate entry document or commercial invoice, or on a preprinted attachment to such entry or invoice; or it may be submitted in blanket form to cover all importations of a particular product for a given period (e.g., calendar year). If the blanket procedure is used, a certification must be filed at each port where the article(s) is entered. See 19 C.F.R. §134.26(a). Under the terms of 19 C.F.R. §134.26(a), a blanket certification for an extended period of time is permitted. Therefore, in the present case, a blanket certification covering all entries of the subject merchandise over a period of time, such as a year, is acceptable. Thus, so long as Hershey certifies to CBP that the subject chocolate and confectionary will be exported, the subject merchandise is exempt from the country of origin marking requirements. HOLDING: The subject chocolates and sugar confectionary imported for exportation to non-U.S. markets are excepted from the marking requirements of 19 U.S.C. §1304, so long as Hershey certifies to CBP that the subject chocolate and confectionary will be re-exported. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction. Sincerely, Ieva K. O’Rourke, Chief Tariff Classification and Marking Branch