HQ 082033

September 5, 1989

CLA‑2 CO:R:C:G 082033 JGH

CATEGORY: Classification

TARIFF: 155.20

District Director of Customs

Patrick V. McNamara Building

477 Michigan Avenue

Detroit, Michigan 48226‑2568

RE: Decision on application for further review of Protest No.
3801‑8‑000386, classification and quota standing of raw sugar from
Australia refined in Canada

Dear Sir:

This protest concerns the question of whether the refining of sugar is a
substantial transformation.

FACTS:

In July 1987, Customs issued a ruling letter (079630) which stated that
the refining of raw cane sugar did not result in a substantial
transformation, since the essential character of the sugar did not
change, and, thus, a new and difference article of commerce did not
emerge.

In November 1987, Redpath Sugars, a Canadian sugar refiner, attempted to
enter at the port of Detroit, \"Canadian refined sugars refined from raw
sugar of Queensland, Australia.\" The entry was denied on the basis
that, while the sugar was refined in Canada, it was not of Canadian
origin and the refining process did not effect a substantial transforma
tion and make it Canadian sugar for quota purposes.

ISSUE:

Whether the refining in Canada of raw sugar from Australia substantially
transformed the sugar into a Canadian product for quota purposes.

‑ 2 ‑

LAW AND ANALYSIS:

It is contended that the refining process in Canada of raw sugar from
Australia creates a new product, making the refined sugar a product of
Canada. During the refining, it is claimed that the raw sugar crystals
are broken down and that, ultimately, a new and different product
emerges. The new and different product is said to be the result of a
series of treatments and filtrations, which alter the physical
composition of the sugar.

The refining process was described in some detail. Raw sugar was said to
be poured into a mingler and an affination syrup (molasses and other
products) is added; the mingler heats the raw sugar and syrup, mixing
the two together; the mixture is then transferred to a centrifuge which
spins off the syrup along with the molasses and other substances, and
the raw sugar crystals are then placed in a vat which is heated, with
the raw crystals being dissolved in a refining sweet water and broken
down into a mixture of sucrose and nonsucrose molecules. The liquor then
undergoes carbonation, through the addition of lime and carbon dioxide
to the liquor. The lime‑carbonated liquor is then press filtered under
pressure, removing the precipitated calcium carbonates. The liquor is
then piped through a char cistern to remove the coloring agents. An
ion‑exchange resin removes more colorants.

The water‑white liquor is then piped to the vacuum pans for
crystallization in an operation designed to prevent caramelization of
the sugar. Next, the material is

centrifuged, separating the massecuite syrup from the sugar crystals,
which are then washed. The moist, refined crystals are then conveyed to
a metal drum, where the crystals are

dried and separated in hot air as the drum revolves. The dried,
granulated sugar is then screened, sized, and packaged. Two new products
are said to result: refined sugar and molasses.

In behalf of the protestant, it is claimed that the refining process
meets the criteria set out for achieving a substantial transformation,
in that there has been:

\(a\) A change in use ‑ Raw sugar cannot be used as food

for humans. While the raw sugar may be used in the production

of ethanol, or in cement manufacturing, only refined sugar can

be used as a human food.

\(b\) A change in commercial identity ‑ In the marketplace

raw sugar is consistently distinguished from refined;

‑ 3 ‑

\(c\) A change in character ‑ The raw sugar crystal is

different from the refined crystal.

\(d\) A change in value ‑ It is estimated that refining

adds 40 to 50 percent to the value of the sugar.

As noted in a court decision involving the issue of substantial
transformation, the question is whether the operations performed on the
products in the country of exportation are of such a substantial nature
as to justify the conclusion that the resulting product is a manufacture
of that country. There must be transformation; a new and different
article must emerge having a distinctive name, character, or use.
Superior Wire v. U.S., 669 F. Supp. 472, (CT. Int\'l

Trade 1987), aff\'d 867 F.2d 1409 (1989).

In this case, it is contended that refining of raw sugar, described as
an inedible, sticky, contaminated product, to an edible free flowing
crystalline, nonperishable, high value product \"with a completely
different use mandated by law,\" amounts to a substantial
transformation.

However, the facts are otherwise. Although it is contended that raw
sugar is not fit for human food and that it is illegal to sell it for
human consumption, raw sugar is in fact produced with sufficient purity
to be used as a human food. Although the petitioner\'s exhibit (9), a
Food and Drug Administration Compliance Policy Guide, states that, in
general, raw sugar is unsuitable for food because it contains extraneous
impurities which are removed by refining, it goes on to state that the
\"agency has taken action against raw sugar intended for food use
without further refinement which was found to contain impurities
rendering it unsuitable for

food use,\" and subsequently that \"legal action will be taken against
raw sugar intended for food use without further refinement which
contains impurities making it unsuitable for food use.\" It is apparent,
therefore, that it is not the raw sugar per se that is banned as food
for humans, but the impure forms of raw sugar. That this view is widely
held and generally accepted is shown by the comments in the Explanatory
Notes to the Harmonized Tariff Schedule of the United States,

where in Chapter 17 it is stated that raw sugar may be of such high
degree of purity that it is suitable for human consumption without
refining.

Whether a substantial transformation has occurred depends upon a
comparison of the article before the processing which is claimed to
effect such transformation and the article after

processing. The Summaries of Trade and Tariff Information, Schedule 1,
volume 9, p. 5, states that raw sugar of crystalline structure is
generally 97‑99 degree sugar in dry form. Refined crystalline sugar is
almost 100‑degree sugar. The purpose of refining cane sugar is to
upgrade or purify it. The fundamental ingredient in the refined cane
sugar is sucrose. Refining cane sugar is a cleaning process intended to
concentrate the sucrose by removing the undesirable

by products and impurities. The qualities which give sucrose its chief
value (sweetness and nutritional value) exist at the molecular level and
are not products of the refining process.

In fact, in the refining process the sucrose molecule is not altered.
The raw sugar, it is argued,

-4-

is composed of sucrose and other materials which are completely broken
down to their

molecular level, with the refined sugar crystals which emerge being a
new and different product. However, what is actually done in the
refining process is to remove the impurities. The

sugar molecule is not changed. The desired qualities of the sugar
molecule are present in the raw sugar to the same degree that they were
present in the refined sugar.

While the protestant\'s argument emphasizes the refining of the raw
sugar, in comparing the refining process with the manufacture of the raw
sugar from the cane, it is this latter

process which provides the sugar with its essential character. This view
is supported by a recent appellate decision in which the court affirmed
the lower court\'s conclusion that the

transformation of wire rod into wire was minor rather than substantial,
since there was no significant change in the character or use of the
product, the wire rod and wire being

viewed as different stages of the same product. It was the properties of
the wire rod which determined the properties of the wire, said the
court, adding that the changes resulting in

the wire were primarily cosmetic. Superior Wire v. United States, supra.
The refining process does not change the product\'s intended use, which
is dictated by the very nature

of the product‑‑the raw sugar with its desired sucrose. The raw sugar
already possesses the qualities sought after in sugar (its sweetness and
nutriousness). These are not the

result of the refining process. While the refining of sugar changes its
color and increases its purity, as stated before, the refining process
is not necessary to obtain its essential qualities. Refining cane sugar
upgrades and purifies the sugar but it does not change the essential
character of the product.

An example of a substantial transformation involving raw sugar would be
the process which breaks down the sucrose molecule by chemical reaction
into two different molecules:

fructose and glucose. The end product there would be two different
sugars with different sweetening capabilities.

In sum, the refining of cane sugar does not create a new article with a
new name, character or use. The product remains sucrose which, while
upgraded by refining, retains the

same use as with the raw sugar: to provide a product with a sweet taste
and nutrient value. To paraphrase the court in National Juice Products
Assn. v. the United States, 10 CIT 49,

628 F. Supp. 978 (1986), while refining may make raw sugar more suitable
for retail sale, the processing of the cane into raw sugar imparted the
essential character of the sugar.

HOLDING:

Raw sugar from Australia which is refined in Canada is not substantially
transformed into a Canadian product, since the refining process does not
change the essential character

of the raw sugar and make it into a new article with a new name,
character or use.

The protest is denied. A copy of this decision should be furnished to
the protestant with the Form 19 Notice of Action.

Sincerely

John Durant, Director

Commercial Rulings Division