HQ 555762: Eligibility of orange juice concentrate from Grenada for duty-free treatment under the CBI, 554486, substantial transformation

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                         HQ 555762      

                      February 25, 1991   
CLA-2 CO:R:C:V 555762 SER

CATEGORY: Classification

Mr. Alan Ballweg
EuroJuice
36 Rue de Clichy
75009 Paris, France

RE:  Eligibility of orange juice concentrate from Grenada for
     duty-free treatment under the CBI, 554486, substantial
     transformation

Dear Mr. Ballweg:

     This is in reference to your fax transmission of October 19,
1990, concerning the eligibility of orange juice concentrate from
Grenada for duty-free treatment under the Caribbean Basin
Initiative (CBI) (19 U.S.C. 2701-2706).

FACTS:

     You state that oranges, purchased in Venezuela, will be
processed into orange juice concentrate in Grenada.  In Grenada,
the oranges will be sorted, washed, and prepared for extraction
of the juice.  After extraction, the juice would then be
thermally concentrated, frozen, packed, and shipped to the U.S.

     In the alternative, if this is not considered to be a
"substantial transformation", you inquire as to whether the CBI
requirements may be met by processing oranges from both CBI and
non-CBI countries, in a 35% CBI, to 65% non-CBI proportion.

ISSUE:

     Is the orange juice concentrate eligible for duty-free
treatment under the CBI?

LAW AND ANALYSIS:

     Under the CBI, eligible articles the growth, product or
manufacture of designated beneficiary countries (BC's), may enter
the U.S. free of duty if such articles are imported directly to
the U.S. from the BC, and if the sum of (1) the cost or value of
the materials produced in a BC or BC's, plus (2) the direct cost
of processing operations performed in a BC or BC's, is not less
than 35% of the appraised value of the article at the time it is
entered into the U.S.  See 19 U.S.C. 2703(a).  n


                               -2-




     As stated in General Note 3(c)(v)(A) of the Harmonized
Tariff Schedule of the United States Annotated (HTSUSA), Grenada
is a BC for CBI purposes.  In addition, the orange juice
concentrate is classified in subheading 2009.11.00, HTSUSA, which
is a CBI eligible provision.

     If an article is comprised of materials that are imported
into the BC, the cost or value of those materials may be included
in calculating the 35% value-content requirement only if they
undergo a "double substantial transformation" in the BC.  See
section 10.196(a), Customs Regulations (19 CFR 10.196(a)). 
Azteca Milling Co. v. United States, 703 F.Supp. 949 (CIT 1988),
aff'd 890 F.2d 1150 (Fed. Cir. 1989).  Therefore, the oranges
from Venezuela must undergo a double substantial transformation
for their value to be included in the 35% value-content
calculation.

     The test for determining whether a substantial
transformation occurs is whether an article emerges from a
process with a new name, character, or use different from that
possessed by the article prior to processing.  Texas Instruments,
Inc. v. United States, 69 CCPA 152, 156, 681 F.2d 778, 782
(1982).  

     In Headquarters Ruling Letter (HRL) 554486 dated March 26,
1987, Customs held that a new and different article of commerce
resulted from the processing of oranges into frozen orange juice
concentrate, but that the processing did not constitute the
requisite double substantial transformation.  The facts at issue
here are identical to the facts of HRL 554486 and, thus, your
process would also not meet the double substantial transformation
requirement. Therefore, the cost or value of the oranges from
Venezuela cannot be used in the 35% value-content requirement.

     Since the process you describe creates a new and different
article, the frozen concentrate would be considered a "product
of" Grenada.  Therefore, if the direct costs of processing plus
any BC material costs (e.g., oranges from a BC) represent at
least 35% of the appraised value, the concentrate made in this
manner would be entitled to duty-free treatment under CBI.  The
direct costs of  processing are enumerated in section 10.197,
Customs Regulations (19 CFR 10.197).  Enclosed is a copy of the
Customs Regulations relating to the CBI (19 CFR 10.191-10.198).n

                               -3-




HOLDING:

     The Venezuelan oranges processed in Grenada into frozen
orange juice concentrate do not undergo a double substantial
transformation, and, as a result, their cost or value may not be
included in the CBI 35% value-content calculation.  Since the
production of orange juice concentrate from oranges would render
the concentrate a "product of" Grenada, if the direct costs of
processing plus any BC material costs represent at least 35% of
the appraised value, this product would be entitled to duty-free
treatment under the CBI.

                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division