CLA-2 RR:CR:GC 964379 AM
Port Director
U.S. Customs Service
477 Michigan Avenue
Detroit, MI 48226
Re: Protest 3801-00-100309; Select Foods sugar/gelatin blend
Dear Port Director:
This is in regard to protest 3801-00-100309, filed by counsel against your classification of Select Foods sugar/gelatin blend (hereinafter "blend") under the Harmonized Tariff Schedule of the United States (HTSUS), and against your liquidation and rate advance for thirteen entries.
FACTS:
The sugar/gelatin blend is imported from Canada. Customs Lab Report 2-1996-21164, dated February 20, 1996 states that all the sugar passed through a no. 14 sieve (aperture of approximately 1.168 millimeters), but 99.7 percent of the gelatin did not pass through the sieve. The scoop sample used for this laboratory analysis revealed 9% gelatin and 91% sugar in the blend. However, agents of Select Foods stated, on separate occasions, that the blend consists of only 3-5% gelatin. The discrepancy can be accounted for by settlement and shifting of the widely differing sizes and weights of the dry sugar and gelatin particles creating dubious results in a random scoop sample. Agents of Select Foods have also stated that almost all of the gelatin was separated after importation and shipped back to Canada for addition to other sugar shipments. Counsel states, in a letter dated December 11, 2000, that all entries included in the above referenced protest contain the same percentages of sugar and gelatin. For purposes of this protest, we will assume 95-97% sugar content.
The merchandise was entered from January through March of 1996, under subheading 2106.90.58, HTSUS, as an "other food preparation." The entries were liquidated on January 28, 2000, under subheading 1701.99.50, HTSUS, as "sugar." A protest was timely filed on April 27, 2000.
ISSUE:
Whether the blend is classified in subheading 2106.90.58, HTSUS, as an "other food preparation." or in subheading 1701.99.50, HTSUS, as "Cane or beet sugar and chemically pure sucrose, in solid form."
LAW AND ANALYSIS:
CLASSIFICATION
Merchandise imported into the U.S. is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context that requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law.
GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in order. GRI 3 requires that when goods are prima facie classifiable under two or more headings, the most specific description is preferred, and if neither is more specific, that heading which describes the essential character of the merchandise or, if none, occurs last in numerical order is used. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and mutatis mutandis, to the GRIs. In interpreting the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89 80, 54 Fed. Reg. 35127 (August 23, 1989).
GRI 2(b) requires that goods consisting of different materials be classified according to the principles of GRI 3. GRI 3(a) requires that amongst competing headings, the most specific heading be used, but headings which refer to part only of the goods are equally specific. GRI 3(b), provides that composite goods consisting of different materials or made up of different components, shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. Explanatory Note 3(b)(VIII) to GRI 3(b) states that essential character may be determined by "the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods."
The following HTSUS headings are relevant to the classification of this product:
1701: Cane or beet sugar and chemically pure sucrose, in solid form:
* * * * * * * * * * * * *
2106: Food preparations not elsewhere specified or included:
The ENs to Chapter 21, HTSUS, state, in pertinent part, the following:
…this heading covers:
Preparations for use, either directly or after processing…for human consumption
Preparations consisting wholly or partly of foodstuffs, used in the making of beverages or food preparations for human consumption. (emphasis added)
Hence, heading 2106 is a “principal use” provision which generally prevails over an eo nomine provision (Orlando Food Corp. v. United States, 140 F3d 1437 (Fed. Cir. 1998)). When applying a "principal use" provision, Customs must ascertain the class or kind of goods which are involved and decide whether the subject merchandise is a member of that class. See supra Additional US Rule of Interpretation 1 to the HTSUS. E. M. Chemicals v. United States, 20 C.I.T. 382, 923 F. Supp. 202 (1996 Ct. Intl. Trade).
Food preparations consisting of a sugar and gelatin blend are used as ingredients in the manufacture of a variety of foods: desserts, dessert mixes, confections, etc. These are generally imported in bulk and used by manufacturers of foods for human consumption, in the condition as imported, as the principle sweetening and stabilizing ingredient in food products. Their composition varies, but sugar is always the primary component by weight, most often between 90 and 93% for blends used in gelatin dessert mixes. Characteristic of this class or kind of merchandise is the uniformity of the blend. The sugar and gelatin are virtually indistinguishable. They are of a similar particle size and, owing to that similarity, separation of the two components is difficult and economically unfeasible.
In the instant case, the gelatin particle is much larger than the sugar particle, thereby making separation not only feasible, but separation actually occurred on previous imports after entry. Furthermore, the blend here contains much less gelatin (3-5%) than in blends used as an ingredient in food products. While an importer may fashion its merchandise in any manner it sees fit to take advantage of a lower duty rate, (see Heartland By-Products, Inc. v. U. S., 74 F. Supp. 2d 1324 (Ct. Intl. Trade, 1999)), for the reasons stated above, the sugar/gelatin blend here is not fashioned as a member of the class or kind of goods used as food preparations.
Instead, classification proceeds according to the components of the product: sugar of heading 1701, HTSUS, and gelatin, of heading 3503, HTSUS. Using GRI 3(b), the sugar imparts the essential character of the product because it comprises a much larger percentage of the product. Furthermore, the role of the sugar is far greater in relation to the role of the product than is the gelatin. The product is used for its sugar content as a sweetener and most of the gelatin is removed before final sale to the ultimate purchaser. Hence, in the instant blend, as well as in several other cases, the sugar imparts the essential character to the blend as imported. (See Headquarters rulings 082230, 085105, 087088,and 087089).
Using GRI 6, the blend is classified under subheading 1701.99.50, HTSUS, the provision for "[C]ane or beet sugar and chemically pure sucrose, in solid form: [O]ther: [O]ther."
LIQUIDATION, DUTY AND REFUND
Additionally, protestant raises the following issues regarding liquidation, duty and refund determination:
“The entries were deemed liquidated one year after entry pursuant to 19 USC § 1504.”
Section 504 of the Tariff Act, as amended (19 USC § 1504) provides, in pertinent part, an entry of merchandise not liquidated within 1 year from the date of entry of such merchandise shall be deemed liquidated (19 USC § 1504(a)). Subsection (b) of § 1504 provides an exception: the period in which to liquidate an entry may be extended for an additional period not to exceed 1 year by giving notice of such extension to the importer, if, (among other reasons) information needed for the proper classification of the merchandise is not available to the appropriate customs officer (19 USC § 1504(b)). “The total time for which extensions may be granted by the port director may not exceed 3 years.” (19 CFR § 159.12(e)).
Therefore, pursuant to 19 USC § 1504, Select’s protested entries which were not liquidated within 1 year from the date of entry are deemed liquidated unless this 1-year period for liquidation was extended for a statutorily valid reason (19 USC §§ 1504(a) and (b); see 19 CFR § 159.11). According to Customs’ electronic entry data collection system (ACS), liquidation of the 13 protested entries was extended 3 times. Notices of extension of liquidation for the protested entries were timely sent to the protestant (and its surety) as required by 19 CFR § 159.12(b). The second notice was sent within 24 months and the third and final notice of extension was sent within 36 months of the entry dates. All the protested entries were liquidated on January 28, 2000. The table on page 3 shows the specific details of each entry. All information shown was taken from ACS except the entry dates.
The entry dates are listed as they appear on box 4 of the entry summaries (CF 7501s) because the entry dates listed in ACS are actually the dates of importation of the goods. However, pursuant to 19 USC § 1504 the operative date provided by subsection (a) is §1504(a)(1), “the date of entry of such merchandise” which is not necessarily the date of importation of the merchandise.
Entry
Entry date
Statutory liq. Period
1st
Extension
Extended liq. to:
2nd
Extension
Extended liq. To:
3rd
Extension
Extended liq. To
4165
3/29/96
3/29/97
12/7/96
3/29/98
10/18/97
3/29/99
1/2/99
3/29/00
3266
3/27/96
3/27/97
12/7/96
3/27/98
10/18/97
3/27/99
1/2/99
3/27/00
3415
3/27/96
3/27/97
12/7/96
3/27/98
10/18/97
3/27/99
1/2/99
3/27/00
4108
3/29/96
3/29/97
12/7/96
3/29/98
10/18/97
3/29/99
1/2/99
3/29/00
3282
3/27/96
3/27/97
12/7/96
3/27/98
1/18/97
3/27/99
1/2/99
3/27/00
4611
4/2/96
4/2/97
12/7/96
4/2/98
10/18/97
4/2/99
1/2/99
4/2/00
8383
2/12/96
2/12/97
10/5/96
2/12/98
10/18/97
2/12/99
10/24/98
2/12/00
8326
2/12/96
2/12/97
10/5/96
2/12/98
10/18/97
2/12/99
10/24/98
2/12/00
8623
2/13/96
2/13/97
11/9/96
2/13/98
10/18/97
2/13/99
11/14/98
2/13/00
8060
2/9/96
2/9/97
10/5/96
2/9/98
10/18/97
2/9/99
10/24/98
2/9/00
8029
2/9/96
2/9/97
10/5/96
2/9/98
10/18/97
2/9/99
10/24/98
2/9/00
7187
2/7/96
2/7/97
1/5/96
2/7/98
10/18/97
2/7/99
11/14/98
2/7/00
4744
4/2/96
4/2/97
12/7/96
4/2/98
10/18/97
4/2/99
1/2/99
4/2/00
Section 1504(b) sets out the reasons for which liquidation may be extended, including the circumstance when information needed for the proper classification of the merchandise is not available. Liquidation for the subject protested entries was extended because the classification of the subject merchandise was in question. The merchandise was entered by Select under subheading 2106.90.5870 (HTSUS); however, the correct subheading for the entered merchandise is 1701.99.50 (HTSUS). Hence, the protested entries were not deemed liquidated after one year but liquidation was extended in accordance with the statute for a statutorily valid reason.
“Two of the entries were exported back to Canada with no sifting or other treatment in the U.S. and thus, since the imported product did not enter the commerce of the United States, Customs is not entitled to any increase in duty on those two entries.”
Select’s above statement is baseless and completely unsupported by the law. General Note 1, Harmonized Tariff Schedule of the United States (“HTSUS”), dictates that all merchandise imported into the United States is subject to duty unless specifically exempted therefrom. There is no evidence whatsoever that the sugar / gelatin blend entered by the Protestant is exempt from duty. Therefore, Select is liable for the entire amount of duty payable for the entered merchandise under subheading 1701.99.50 (HTSUS).
Further, 19 USC § 1558(a) specifically disallows abatement or remission of duty because the merchandise was exported: “no remission, abatement, refund, or drawback of estimated or liquidated duty shall be allowed because of the exportation . . . of any merchandise after its release from the custody of the Government, . . . .” Exceptions to § 1558(a) are provided for: exported articles which qualify for drawback (§ 1558(a)(1)); prohibited articles, entered in good faith and subsequently exported or destroyed (§ 1558(a)(2)); and articles entered under bond which are destroyed as provided for by law (§ 1558(a)(3)).
There is no evidence that the sugar / gelatin blend entered by the Protestant was a prohibited article nor was it entered under bond. Thus, the only provision under which the Protestant might be eligible for a partial refund of duty – not relief from the increased duty – is unused merchandise drawback under 19 USC § 1313(j)(1). However, there is no evidence that Select has made a claim under this section and therefore no such claim can be evaluated here.
“Customs cannot double collect for the same duty of which they claim to have been deprived.”
“The importer believes that the increased duty computation on some of the entries is not correct.”
The requirements of 19 USC § 1514(c)(1)(C), that the “nature of each objection and the reasons therefor” be provided in a protest notwithstanding, Select supplied no details nor explanation for the above assertions. Further, during a telephone conversation, Select’s counsel could offer no details or explanations. Therefore, the following conclusions are based on an examination of the subject entry summaries and data available from ACS.
The protested entries were entered in January, February and March in 1996. Thus, the 1996 Harmonized Tariff Schedule of the United States (HTSUS, 19 USC § 1202) applies to these entries. Per the entry summaries, Select entered the merchandise under subheading 2106.90.5870 with a duty rate of 1.2 percent ad valorem. According to the entry summaries the country of origin for the goods is Canada. Select deposited estimated duties at entry based on this subheading.
However, the correct classification for the merchandise entered by Select is subheading 1701.99.50, HTSUS. According to the 1996 HTSUS, the general rate of duty for entries from Canada under this subheading is 39.95 cents per kilogram. The thirteen protested entries consist of an average of 20922 kilograms of the sugar / gelatin mixture. At 39.95 cents per kilogram the protested entries require an average additional $8,358.34 in duty per entry. In total, Select owes $106,207.89 in additional duties on these protested entries. Please see the table on page 5 for the actual amount of duty deposited at entry, additional duty owed, and total duty owed by Select for each entry. The actual duty payable for all thirteen entries is $108,046.79. Select deposited $1,838.90 in duty at entry. Hence, Select owes an additional $106,207.89 in duty for the protested entries. The Protestant has paid $38,723.54 toward this duty.
Moreover, Select owes interest on the additional duties. Per 19 USC § 1505(b),
The Customs Service shall collect any increased or additional duties and fees due, together with interest thereon, . . . as determined on a liquidation . . . . Duties, fees, and interest determined to be due upon liquidation . . . are due 30 days after issuance of the bill for such payment.
Further, according to 19 USC § 1505(c),
Interest assessed due to an underpayment of duties, fees, or interest shall accrue, at a rate determined by the Secretary, from the date the importer of record is required to deposit estimated duties, fees, and interest to the date of liquidation or reliquidation of the applicable entry or reconciliation.
Thus, interest on additional duties owing is calculated from the date of entry until the liquidation date on each of the protested entries. (See also 19 CFR § 24.3a). Please see table on page 5 for the interest payable on each entry. Select owes $41,104.22 in interest in addition to the $106,207.89 in additional duty owed. Select has tendered $38,723.54. Therefore, Select still owes $108,888.57 in duty and interest for the thirteen protested entries.
Entry #
duty deposited at entry
additional duty owed
interest
total duty plus interest payable on entry
4165
$140.30
$7606.41
$2879.08
$10485.49
3266
$140.30
$7606.41
$2889.11
$10495.52
3415
$140.30
$7606.41
$2889.11
$10495.52
4108
$140.30
$7606.41
$2879.08
$10485.49
3282
$140.30
$7606.41
$2889.11
$10495.52
4611
$140.30
$7606.41
$2874.49
$10480.90
8383
$142.80
$8827.17
$3485.26
$12312.43
8326
$142.80
$8827.17
$3485.26
$12312.43
8623
$142.80
$8827.17
$3482.24
$12309.41
8060
$142.80
$8827.17
$3488.29
$12315.46
8029
$142.80
$8827.17
$3488.29
$12315.46
7187
$142.80
$8827.17
$3500.41
$12327.58
4744
$140.30
$7606.41
$2874.49
$10480.90
$106207.89
$41104.22
$147312.11
Additional amount tendered by Select:
$38723.54
Interest and duty balance owed U.S. Customs:
$108888.57
HOLDING:
The protest is DENIED in all respects. Select Foods sugar/gelatin blend is classified under subheading 1701.99.50, HTSUS, the provision for "[C]ane or beet sugar and chemically pure sucrose, in solid form: [O]ther: [O]ther." Furthermore, Select owes $41,104.22 in interest in addition to the $106,207.89 in additional duty owed. Select has tendered $38,723.54. Therefore, Select still owes $108,888.57 in duty and interest for the thirteen protested entries.
In accordance with Section 3A(11)(b) of Customs Directive 099 3550 065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
John Durant, Director
Commercial Rulings Division