HQ 087454: Raw, shelled, and split peanuts manufactured into peanut butter in Canada; eligibility under the United States- Canada Free Trade Agreement ("CFTA"), quota requirements

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 087454

                       September 19, 1990

CLA-2 CO:R:C:G  087454  JMH

CATEGORY:  Classification

TARIFF NO.:  1202.20.0040, 2008.11.0020, 9904.20.20

H. Frank Crawford, Esq.
Vandeberg & Johnson
1900 Interstate Plaza
1201 Pacific Avenue
Tacoma, Washington  98402-4391

RE:  Raw, shelled, and split peanuts manufactured into peanut
     butter in Canada; eligibility under the United States-
     Canada Free Trade Agreement ("CFTA"), quota requirements

Dear Mr. Crawford:

     This is in response to your June 11, 1990, request for a
classification ruling under the Harmonized Tariff Schedule of the
United States Annotated ("HTSUSA") on behalf of Nalley's Canada
Limited ("Nalley's Canada") for peanut butter.  The peanut butter
is to be manufactured in Canada and then imported into the United
States.

FACTS:

     Nalley's Canada plans to manufacture natural old-fashioned
peanut butter and homogenized peanut butter at a facility in
Vancouver, British Columbia.  The peanut butter will be made of
peanuts from Argentina, Brazil, the United States and China.  The
peanuts imported into Canada will be raw, shelled and split.  The
peanuts will then be roasted, blanched, sorted, ground, mixed
with salt and/or crunchy bits of peanuts and packed.  The
homogenized peanut butter has dextrose, salt and a stabilizer
(hydrogenated vegetable oil) added during the grinding stage, and
is put through a secondary grinder for a smoother texture.  The
peanut butter will be packed in glass or plastic jars or tubs and
labelled in accordance with applicable Food and Drug
Administration ("FDA") regulations for retail sale.

ISSUE:

Issue 1:  What is the proper classification for the peanuts
imported to Canada, and the peanut butter imported into the
United States under the HTSUSA?  (This office has no authority to
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issue rulings regarding the classification of products imported
into Canada.  The classification of the peanuts, however, is
necessary for the outcome of this ruling.  Thus, this ruling
analyzes the peanuts' classification as if the peanuts were
imported into the United States.)

Issue 2:  Is the peanut butter subject to any quota restrictions
when imported into the United States?

Issue 3:  Is the peanut butter imported into the United States
eligible for treatment under the United States-Canada Free Trade
Agreement ("CFTA")?

LAW AND ANALYSIS:

Issue 1:  What is the proper classification for the peanuts
imported to Canada, and the peanut butter imported into the
United States under the HTSUSA?  (This office has no authority to
issue rulings regarding the classification of products imported
into Canada.  The classification of the peanuts, however, is
necessary for the outcome of this ruling.  Thus, this ruling
analyzes the peanuts' classification as if the peanuts were
imported into the United States.)

     The classification of merchandise occurs under the HTSUSA
(19 U.S.C. 1202).  Omnibus Trade and Competitiveness Act of 1988,
Pub. L. 100-418, Sec. 1204, codified at 19 U.S.C. 3007 (enacted
August 23, 1988). The HTSUSA is governed by the General Rules of
Interpretation (GRI's).  GRI 1, HTSUSA, states in part that "for
legal purposes, classification shall be determined according to
the terms of the headings and any relative section or chapter
notes..."

     Heading 1202, HTSUSA, provides an eo nomine provision for
raw peanuts, whether or not shelled.  Therefore, in accordance
with GRI 1, the classification of the raw, shelled and split
peanuts (if imported to the United States) is subheading
1202.20.00, HTSUSA, as "Peanuts (ground-nuts), not roasted or
otherwise cooked, whether or not shelled or broken...Shelled,
whether or not broken..."

     Peanut butter is a preparation of peanuts.  Prepared peanuts
are provided for in heading 2008, HTSUSA.  In accordance with GRI
1, the proper classification for either natural old-fashioned or
homogenized peanut butter is subheading 2008.11.00, HTSUSA, as
"Fruit, nuts and other edible parts of plants, otherwise prepared
or preserved, whether or not containing added sugar or other
sweetening matter or spirit, not elsewhere specified or
included...Nuts, peanuts...Peanuts..."


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Issue 2:  Is the peanut butter subject to any quota restrictions
when imported into the United States?

     The classification for peanuts, subheading 1202.20.00, is
footnoted for reference to heading 9904.20.20, HTSUSA.  Heading
9904.20.20 provides quota restrictions for peanuts of subheading
1202.20, HTSUSA.  However, heading 9904.20.20 excepts peanut
butter from this quota.  The restriction does not apply to peanut
butter imported into the United States.

Issue 3:  Is the peanut butter imported into the United States
eligible for treatment under the CFTA?

     General Note 3(c)(vii) of the HTSUSA provides the rules
which determine what products imported into the United States
from Canada are entitled to duty treatment under the CFTA.
Eligible goods must be "goods originating in Canada".  General
Note 3(c)(vii)(A), HTSUSA.

     (B)  For the purposes of subdivision (c)(vii) of this
          note, goods imported into the customs territory of
          the United States are eligible for treatment as
          "goods originating in the territory of Canada"
          only if--

          (1)  they are goods wholly obtained or produced in
               the territory of Canada and/or the United
               States, or

          (2)  they have been transformed in the territory
               of Canada and/or the United States, so as to
               be subject--

               (I)  to a change in tariff classification as
                    described in the rules of subdivision
                    (c)(vii)(R) of this note...

          General Note 3(c)(vii)(B), HTSUSA, as amended
          by Presidential Proclamation 6142 of May 25,
          1990.

     The peanut butter in question is not wholly obtained or
produced in Canada and/or the United States since the peanuts
will come from a variety of countries.  Therefore, the peanut
butter does not originate in Canada under General Note
3(c)(vii)(B)(1).

     The peanut butter manufactured in Canada does effect a
change in tariff classification from the classification of the
peanuts.  However, for FTA eligibility the change must be
authorized by General Note 3(c)(vii)(R).  In this case, the
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peanuts are classified in heading 1202 of Chapter 12 and the
peanut butter is classified in heading 2008 of Chapter 20.
Since the product to be imported into the United States is
classified within Chapter 20, the General Note for Chapter 20
must be examined.

     General Note 3(c)(vii)(R)(4)(aa), HTSUSA, states that for
articles classified in chapter 16 to 24 a change from one chapter
to another effects the required transformation.  However, the
note excepts goods of Chapter 20.  General Note
3(c)(vii)(R)(4)(ee), HTSUSA, states that articles of Chapter 20
that have merely been frozen, packed in water, brine or natural
juices, or roasted have not been transformed into "goods
originating in Canada."  The peanuts in question have been
processed further than merely freezing, packing or roasting them.
Thus, the subject peanut butter is a "good originating in the
territory of Canada."

HOLDING:

     Heading 1202, HTSUSA, provides an eo nomine provision for
raw peanuts, whether or not shelled.  Therefore, in accordance
with GRI 1, the classification of the raw, shelled and split
peanuts, if imported into the United States, is subheading
1202.20.00, HTSUSA, as "Peanuts (ground-nuts), not roasted or
otherwise cooked, whether or not shelled or broken...Shelled,
whether or not broken..."

     In accordance with GRI 1, the proper classification for
either natural old-fashioned or homogenized peanut butter is
subheading 2008.11.00, HTSUSA, as "Fruit, nuts and other edible
parts of plants, otherwise prepared or preserved, whether or not
containing added sugar or other sweetening matter or spirit, not
elsewhere specified or included...Nuts, peanuts...Peanuts..."

     The classification for peanuts, subheading 1202.20.00, is
footnoted for reference to heading 9904.20.20, HTSUSA.  Heading
9904.20.20 provides quota restrictions for peanuts of subheading
1202.20, HTSUSA.  However, heading 9904.20.20 excepts peanut
butter from this quota.  The restriction does not apply to peanut
butter imported into the United States.

     The peanuts in question, classified under heading 1202 of
Chapter 12, are processed into peanut butter, classified under
heading 2008 of Chapter 20.  The change in classification which






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occurs is a change authorized by General Note 3(c)(vii)(R) and
implements CFTA eligibility.  Therefore, the peanut butter in
question is entitled to duty treatment under the CFTA.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division