DR-CAFTA eligibility; Transshipment of sugar

HQ H259036 November 24, 2014 OT:RR:CTF:VS H259036 AJR CATEGORY: Classification Mr. Luis Montes de Oca CHB Intercustoms L.L.C. 14407 Import Rd. Laredo, TX 78045 Re: DR-CAFTA eligibility; Transshipment of sugar Dear Mr. Montes de Oca: This is in response to your letter, dated October 31, 2014, requesting a ruling on behalf of your client, Walrus Trading Inc. (“Walrus”), pursuant to 19 CFR Part 177. This ruling concerns the eligibility of certain imported sugar for preferential tariff treatment under the Dominican Republic – Central America – United States Free Trade Agreement (“DR-CAFTA”). FACTS: Walrus produces sugar in Guatemala and Honduras. You state that this sugar would be packaged in bulk and then shipped to Mexico for re-export to the United States, under a temporary re-export program, IMMEX, that is authorized and regulated by Mexican Customs Authorities. You state that under this IMMEX program the sugar would not be processed or “changed in essence,” but would only be “repacked to a different presentation,” from bulk to 50 pound bags. The 50 pound bags of sugar would then shipped from Mexico to the United States. ISSUE: Whether the imported sugar is considered an originating good pursuant to DR-CAFTA? LAW AND ANALYSIS: DR-CAFTA was signed on August 5, 2004, and includes as parties the United States, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica. The provisions of DR-CAFTA were adopted by the U.S. in the Dominican Republic – Central America – United States Free Trade Agreement Implementation Act, Public Law 109-53 (2005). General Note 29, of the Harmonized Tariff Schedule of the United States ("HTSUS") sets forth the rules of origin for DR-CAFTA. Article 4.12 of DR-CAFTA, which you note, was incorporated into GN 29(c)(iii), HTSUS, and states that “[a] good that has undergone production necessary to qualify as an originating good under this note shall not be considered to be an originating good if, subsequent to that production, the good—(A) undergoes further production or any other operation outside the territories of the parties to the Agreement, other than unloading, reloading or any other operation necessary to preserve the good in good condition or to transport the good to the territory of a party to the Agreement; or (B) does not remain under the control of customs authorities in the territory of a country other than a party to the Agreement.” The regulations for DR-CAFTA are set forth in 19 CFR 10.581 et seq. This requirement is provided for in 19 CFR 10.604. Accordingly, either condition (A) or condition (B) will disqualify a good from DR-CAFTA originating status. In Headquarter Ruling (“HQ”) H076917 dated November 25, 2009, bulk amounts of sugar were shipped from Guatemala to Mexico for filtering and repackaging in 50 pound bags. Such operations were considered further processing, not necessary to preserve the sugar in good condition, and thus disqualified the sugar from DR-CAFTA preferential treatment. Similarly in HQ 563304 dated May 18, 2006, dealing with the transshipment provision from the U.S.-Chile Free Trade Agreement, which uses the same language as GN 29(c)(iii)(A), HTSUS, garments packaged in bulk and shipped to a non-party territory for vacuuming, pressing, and packing individually for retail, exceeded operations necessary to preserve the garments in good condition. In this case, the imported good is shipped to Mexico, which is not a party to DR-CAFTA. Similar to HQ H076917 and HQ 563304, nothing indicates that repacking sugar from bulk to 50 pound bags is necessary to preserve the sugar in good condition. As noted in HQ 563304, such repackaging in Mexico serves to enhance presentation for final sale beyond the condition of the bulk sugar at the time of export from Guatemala or Honduras, and therefore is beyond the processes necessary to preserve the article in good condition permitted under GN 29(c)(iii), HTSUS, and 19 CFR 10.604. As a result, even assuming that the sugar remained under customs’ control in Mexico and thus not disqualified by GN 29(c)(iii)(B), HTSUS, the repackaging in Mexico will disqualify the sugar from DR-CAFTA preferential treatment under GN 29(c)(iii)(A), HTSUS. HOLDING: Sugar repacked in Mexico will be considered to have undergone further production. Pursuant to GN 29(c)(iii)(A) and 19 CFR 10.604(a), the imported sugar would not be eligible for preferential tariff treatment under DR-CAFTA. A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction. Sincerely, Monika R. Brenner Chief, Valuation & Special Programs Branch