H304539

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H304539 April 20, 2020 OT:RR:CTF:VS H304539 TMF CATEGORY: Valuation Sandra Liss Friedman, Esq. Barnes/Richardson & Colburn, LLP 100 William Street, Suite 305 New York, NY 10038 RE: Country of Origin of U.S. origin perfume oil base processed with various fragrances imported from China; Marking; Section 301 Measures Dear Ms. Friedman: This is in response to your correspondence dated June 28, 2019, on behalf of your client, Desire Fragrances, Inc., a U.S. company with offices in New York City, and with a wholly-owned subsidiary in the Netherlands. In your letter, you requested a ruling concerning the country of origin of certain fragrances which will be imported from China. These fragrances are processed with U.S. origin perfume oil base. You are seeking confirmation of the country of origin of these products as products of the United States. If determined to be products of China, these products would be subject to Section 301 duties. Your request, along with various samples, was submitted as an electronic ruling request on January 29, 2019, and forwarded to this office from the National Commodity Specialist Division for this office’s review. Our ruling is set forth below. In addition, you requested on behalf of your client that certain information related to the supplier name and submitted in connection with this request be treated as confidential because disclosure would impair the competitive position of your client with regard to these products. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. FACTS: Your client will send bulk shipments of various perfume oil bases to China. These bases are composed of a number of chemical ingredients and are distinguishable by smell, which provides the perfume essence its distinct character. You claim these bases are produced in the United States as indicated in the North America Free Trade Agreement Certificate of Origin from your client. You state that these fragrance essences are recognized by the industry as the essential component of the finished perfume products, which has only to be diluted to usable strength to be ready for use by the consumer. You mentioned the perfume oil base will be blended with ethyl alcohol and water, both sourced in China, for dilution to the desired strength that will allow the consumer to apply it by use of a spraying mechanism that serves as the closure to the bottle in which the finished product is packaged in China. You describe the processing that the perfume oil base will undergo in China. The bulk perfume oil base is poured into vats where it is diluted with water and ethyl alcohol to achieve a composition of 12% perfume oil base, 88% water and ethyl alcohol content. This dilution results in a mixture of decreased viscosity without any chemical reaction at any time in this process. You state the mixture retains the same chemical identity and character as the precursor perfume oil base. You state that the subject bottled perfumes are classified under subheading 3303.90.50, Harmonized Tariff Schedule of the United States (“HTSUS). You are seeking a binding ruling from our office, confirming that the subject fragrances which are processed with U.S. origin perfume base are considered to be products of the United States and not subject to Section 301 duties when imported from the People’s Republic of China. ISSUE: What is the country of origin of the subject fragrances imported from China for purposes of marking and for purposes of application of Section 301 trade remedies? LAW AND ANALYSIS: The subject perfume is classified under subheading 3303.00.30, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides, in pertinent part, for perfumes containing alcohol. The United States Trade Representative (“USTR” has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to its authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Notes 20(e) and (f), HTSUS. The products of China that are subject to an additional 25 percent ad valorem rate of duty under heading 9903.88.03 are products of China that are classified in the subheadings enumerated in U.S. note 20(f) to subchapter III. Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the United States 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 an ultimate purchaser in the United States the English name of the country of origin of the article. The regulations implementing the requirements and exceptions to 19 U.S.C. § 1304 are set forth in Part 134, U.S. Customs and Border Protection Regulations (19 C.F.R. Part 134). 19 C.F.R. § 134.1(b) provides as follows: “Country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 this part; …” When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable. The test for determining whether a substantial transformation will occur 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. See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940); see also Belcrest Linens v. United States, 741 F.2d 1368, 1372 (Fed. Cir 1984). If the manufacturing process is a minor one, which leaves the identity of the imported article intact, a substantial transformation has not occurred. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d per curiam, 702 F.2d 1022 (Fed. Cir. 1983). In order to determine whether a substantial transformation has occurred, CBP looks at the totality of the circumstances and makes such decisions on a case-by-case basis. The country of origin of the article’s components, the extent of the processing that occurs within a given country, and whether such processing renders a product with a new name, character, and use are primary considerations. In addition, facts such as resources expended on product design and development, extent and nature of post-assembly inspection procedures, and worker skill required during the actual manufacturing process are considered when analyzing whether a substantial transformation has occurred and no one factor is determinative. You mentioned that CBP has issued prior rulings finding fragrances made using U.S. origin perfume oil base to be considered products of the U.S. since the processing was not found to constitute a substantial transformation. The cited decisions are: Headquarters Ruling Letter (HQ) H175959, dated September 9, 2011; New York Ruling Letter (NY) 220473, dated June 28, 2012, and NY N300784, dated October 16, 2018. You argue that the fragrance mixed in the vats does not undergo a substantial transformation for purpose of country of origin within 19 U.S.C. §1304, because the finished fragrance to be used by consumers retains the chemical identity and character as the precursor perfume oil base. In HQ H175959 and NY N220473 supra, the U.S. perfume oil base’s dilution process occurred in Taiwan by mixing the perfume base with ethyl alcohol and water to create an eau de toilette strength at a ratio of 80% ethyl alcohol/12% water/8% perfume oil base. The mixt

The subject perfume is classified under subheading 3303.00.30, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides, in pertinent part, for perfumes containing alcohol. The United States Trade Representative (“USTR” has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to its authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Notes 20(e) and (f), HTSUS. The products of China that are subject to an additional 25 percent ad valorem rate of duty under heading 9903.88.03 are products of China that are classified in the subheadings enumerated in U.S. note 20(f) to subchapter III.Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the United States 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 an ultimate purchaser in the United States the English name of the country of origin of the article. The regulations implementing the requirements and exceptions to 19 U.S.C. § 1304 are set forth in Part 134, U.S. Customs and Border Protection Regulations (19 C.F.R. Part 134).19 C.F.R. § 134.1(b) provides as follows:“Country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 this part; …”When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable. The test for determi