CLA-2 OT:RR:CTF:TCM H200575 RES
Pamala Sturhan
U.S. Foreign Trade Compliance Manager
Kellogg Company
67 W. Michigan Avenue
Battle Creek, MI 49016
RE: Classification of Kellogg’s Rice Krispies Treats® from Mexico.
Dear Ms. Sturhan:
This is in reply to your request of June 16, 2011, on behalf of Kellogg Company, to the National Commodity Specialist Division in New York, regarding the classification and NAFTA eligibility of Kellogg’s Rice Krispies Treats®, under the Harmonized Tariff Schedule of the United States (HTSUS). Your request was forwarded to this office for direct reply. A sample was included with your request.
FACTS:
The articles at issue, Kellogg’s Rice Krispies Treats® (“Treats”), are a snack made from Rice Krispies® cereal, butter or margarine, and marshmallows. They are wholly manufactured in Mexico and sold to consumers in the United States in multi-pack boxes and as individual bars through various retail outlets such as grocery stores, drug stores, etc. According to Kellogg, Rice Krispies Treats contain approximately 35% of medium grained milled rice and a combined sugar content over 50%, which includes corn syrup, fructose, fine granulated sugar, corn syrup solids, dextrose and high fructose corn syrup. A complete listing of ingredients is as follows:
Toasted Rice Cereal (rice, sugar, salt, malt flavoring, Niacinamide, reduced iron, riboflavin [vitamin B2], folic acid)
Marshmallow (corn syrup, sugar, gelatin, natural and artificial flavors)
Fructose
Margarine (vegetable oil [soybean and palm oil with TBHQ for freshness])
Water
Natural and Artificial Butter Flavor [contains milk]
Datem (Panodan™)
Acetylated Monoglycerides (Myvacet™)
BHT for freshness
Vitamin A Palmitate
Vitamin D
Corn Syrup Solids
Two percent or less of dextrose
Glycerin
Salt
Niacinamide
Pyridoxine Hydrochloride (Vitamin B6)
Thiamin Hydrochloride (Vitamin B1)
Riboflavin (Vitamin B2)
Soy Lecithin
Kellogg attached a spreadsheet with their memorandum of the ingredients with a note indicating each ingredient is either from Mexico or imported from the United States. The ingredients imported from the United States that are used to produce the Rice Krispies Treats are as follows: dry fructose powder, bloom gelatin, butter flavor, vitamin premix, Panodan™, Myvacet™, BHT emulsion, and glycerin.
The Rice Krispies Treats have been classified by Kellogg’s Mexican affiliate under subheading 1704.90.3590, HTSUSA (annotated), which provides for “[s]ugar confectionery (including white chocolate), not containing cocoa: [o]ther: [c]onfections or sweetmeats ready for consumption: [o]ther: [o]ther: [o]ther.” Kellogg now claims that the proper classification is under subheading 1904.10.0040, HTSUSA, which provides for “[p]repared foods obtained by the swelling or roasting of cereals or cereal products (for example, cornflakes); cereals (other than corn (maize)) in grain form or in the form of flakes or other worked grains (except flour, groats and meal), pre-cooked or otherwise prepared, not elsewhere specified or included: [p]repared foods obtained by the swelling or roasting of cereals or cereal products: [c]ontaining cane and/or beet sugar.”
ISSUE:
Whether the Rice Krispies Treats are classified under heading 1704, HTSUS, as a sugar confectionery or under heading 1904, HTSUS, as a prepared food?
Are the Rice Krispies Treats eligible for preferential treatment under NAFTA?
What is the proper country of origin marking under NAFTA?
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that the classification of goods shall be “determined according to the terms of the headings and any relative section or chapter notes.” In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI 2 through 6 may be applied in order.
The HTSUS headings under consideration in this case are as follows:
1704 Sugar confectionery (including white chocolate), not containing cocoa:
1904 Prepared foods obtained by the swelling or roasting of cereals or cereal products (for example, cornflakes); cereals (other than corn (maize)) in grain form or in the form of flakes or other worked grains (except flour, groats and meal), pre-cooked or otherwise prepared, not elsewhere specified or included:
In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System, which constitute the official interpretation of the Harmonized System at the international level, 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). The ENs to heading 1704 state in relevant part:
This heading covers most of the sugar preparations which are marketed in a solid or semi-solid form, generally suitable for immediate consumption and collectively referred to as sweetmeats, confectionery or candies.
(emphases in original)
* * * * *
The ENs to heading 1904 state in relevant part:
The heading also excludes:
(a) Prepared cereals coated or otherwise containing sugar in a proportion which gives them the character of sugar confectionery (heading 17.04).
(emphases in original)
* * * * *
CBP notes at the outset that if the instant merchandise is a confectionery of heading 1704, it is excluded from classification as a sweetened food preparation of Chapter 19. Heading 1704, HTSUS, provides for sugar confectionery. The HTSUS does not contain a statutory definition for the term “confectionery.” However CBP has adopted the meaning of the term given by the Court of International Trade’s predecessor, the United States Customs Court, in Leaf Brands, Inc. v. United States, 70 Cust. Ct. 66 (1973). The court defined “confectionery” as the “many kinds of sweet-tasting articles which are eaten as such for their taste and flavor without further preparation and which are usually sold in confectionery outlets.” Id. at 71. Further, the court found that whether an article is confectionery is determined by its chief use as a confection, which may be evidenced by its character and design and the manner in which it is sold (i.e., through candy brokers, in confectionery outlets), rather than by its shape and texture. Id. at 72. Similarly, the contemporary definition of “confectionery” is a sweet food such as candy or pastry. Following Leaf Brands, CBP has consistently taken the position that a confection is a product that, in its condition as imported, is ready for consumption at retail as a confectionery, is marketed as such, and is not an ingredient of another food. See HQ 086101, dated February 27, 1990 (peanut flavored chips); HQ 085206, dated February 23, 1990 (white chocolate in 5 kg blocks); HQ 955580, dated July 30, 2002 and HQ 965211, dated August 1, 2002 (chocolate fish); HQ H027857, dated August 8, 2008 (small marshmallows); and HQ H047555, dated March 19, 2010 (goat milk caramel lollipop).
An examination of the texture, taste, and other physical properties of a Rice Krispies Treat sample reveals that it is moist, gooey, sticky, easily malleable, and very sweet like a marshmallow. Based on the ingredients of the Rice Krispies Treat, sugar composes greater than fifty percent of each bar. In their condition as imported, the Treats are ready for consumption without further preparation and they are not sold as an ingredient of another food. Furthermore, in the trademark records for the Rice Krispies Treats mark at the United States Patent and Trademark Office, trademark registration number 2233186, the goods and services that Kellogg listed for the Treats is that of “cereal-based snack food bars and confectionery” (emphasis added). Also, on the packaging are the words “Crispy Marshmallow Squares”, which emphasizes that the Treats are a marshmallow snack as opposed to a rice cereal snack. Marshmallow articles are classified as confectioneries under heading 1704, HTSUS. See HQ H027857 (classifying small marshmallows under heading 1704, HTSUS); NY 817015, dated December 8, 1995 (classifying marshmallows imported from Canada as confectioneries under heading 1704). Finally, the Treats are sold as multi-packs in grocery stores and drug stores in the aisles for other snack bars and, in some cases, in the same aisles as general candy. CBP has consistently classified snack bars as confectioneries under heading 1704, HTSUS. See NY 870413, dated January 16, 1992 (muesli dried fruit snack bar); NY 816202, dated November 22, 1995 (marshmallow rice krispie bar); NY A80525, dated March 7, 1996 (raisin and almond chewy granola bar); NY H83165, dated July 17, 2001 (marshmallow crispy square bar); NY N017527, dated October 3, 2007 (black cherry/almond nougat snack bars); NY N042407, dated November 19, 2008 (natural nut bars and harvest chews bars).
In summary, because the Rice Krispies Treats are sweet-tasting articles eaten for their sweetness, composed mostly of sugar, are ready for consumption, are viewed by Kellogg as a confectionery, and are marketed and sold as snacks, the Treats belong to the class or kind of goods that are considered confectioneries. In addition, because the Treats are a cereal which is coated with sugar in a proportion that gives it the character of a sugar confectionery of heading 1704, HTSUS, pursuant to EN 19.04(a), the Rice Krispies Treats are excluded from heading 1904, HTSUS. Therefore, the classification of Kellogg’s Rice Krispies Treats® is in heading 1704, HTSUS, as “[s]ugar confectionery (including white chocolate), not containing cocoa.”
The 1997 Canadian Customs HTS Classification cited in Kellogg’s memorandum classifying Rice Krispies Treats is not applicable or dispositive to the classification of the Treats in the United States.
* * *
NAFTA Eligibility
General Note 12, HTSUS, incorporates Article 401 of the NAFTA into the HTSUS. General Note 12(a)(ii), HTSUS, provides, in pertinent part, that:
Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "MX" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
Accordingly, the Rice Krispies Treats will be eligible for the “Special” “MX” rate of duty if they are deemed to be NAFTA originating under the provisions of General Note 12(b), HTSUS, and they qualify to be marked as a product of Mexico under the NAFTA Marking Rules that are set forth in Part 102 of the Code of Federal Regulations (19 C.F.R. § 102).
General Note 12(b), HTSUS, provides, in pertinent part, as follows:
For the purposes of this note, goods imported into the Customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if—
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
they have been transformed in the territory of Canada, Mexico and/or the United States so that—
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; or
* * * * *
The Rice Krispies Treats are produced in Mexico from ingredients that are originating material from Mexico or are imported from the United States. If the ingredients imported from the United States originate there, the instant merchandise is a good originating in the territory of a NAFTA country under GN 12(b)(iii). However, according to the ingredients list provided by the importer, the emulsifier, glycerin, fructose powder, vitamin premix, butter flavor, Myvacet, and gelatin ingredients are first imported into the United States and then exported to Mexico and thus would not be considered manufactured in the United States. Accordingly, General Note 12(b)(i) and (b)(iii), HTSUS, would not apply because such ingredients would not be considered originating materials. Rather, the production of the Rice Krispies Treats in Mexico must satisfy the tariff shift rules and meet other applicable requirements as prescribed in GN 12(b)(ii).
The specific rules of origin of NAFTA Annex 401 are set forth at GN 12(t). The tariff shift requirement for merchandise classifiable in heading 1704 is a change to heading 1704 from any other heading. The non-originating materials consisting of emulsifier, glycerin, fructose powder, vitamin premix, butter flavor, Myvacet, and gelatin are classified in the following HTSUS headings: 1516, 1520, 1702, 2106, 2915, and 3503, respectively. As the requisite tariff rule is met, the Rice Krispies Treats are eligible for preferential duty treatment under NAFTA.
General Note 12(a)(ii), HTSUS, establishes that NAFTA-originating goods must also qualify to be marked as goods of Mexico under the NAFTA Marking Rules before preferential treatment is granted. (See Annex 311, NAFTA). In this regard, section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), requires that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit in such manner as to indicate to the ultimate purchaser 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, CBP Regulations (19 C.F.R. Part 134).
Title 19 C.F.R. § 134.1(b) defines “country of origin” as:
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 this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
Section 134.1(j) provides that the “NAFTA Marking Rules” are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) defines a “good of a NAFTA country” as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.
Part 102 of the CBP Regulations sets forth the NAFTA Marking Rules. Section 102.11 sets forth the required hierarchy for determining country of origin for marking purposes:
The following rules shall apply for purposes of determining the country of origin of imported goods other than textile and apparel products covered by § 102.21.
(a) The country of origin of a good is the country in which:
(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
If some of the ingredients used to make the Rice Krispies Treats are of non-Mexican origin, §§ 102.11(a)(1) or (a)(2) are not applicable. Thus, we must analyze whether the articles would undergo the tariff shift required under § 102.11(a)(3) for country of origin marking purposes. The Rice Krispies Treats as imported from Mexico are classified under subheading 1704.90.35, HTSUS. The tariff shift rule set forth in § 102.20 for articles classified in heading 1704, HTSUS, requires “[a] change to heading 1704 from any other heading.”
The non-Mexican origin materials are classified in the following HTSUS headings: 1516, 1520, 1702, 2106, 2915, and 3503. Accordingly, each foreign material meets the required tariff shift and the Rice Krispies Treats qualify to be marked as goods of Mexico under the NAFTA Marking Rules.
Therefore, the Rice Krispies Treats meet the requirements for preferential duty treatment under NAFTA and should be marked as products of Mexico.
HOLDING:
Pursuant to GRI 1, Kellogg’s Rice Krispies Treats® are classified under subheading 1704.90.3550, HTSUSA, which provides for “[s]ugar confectionery (including white chocolate), not containing cocoa: [o]ther: [c]onfections or sweetmeats ready for consumption: [o]ther: [o]ther: [p]ut up for retail sale: [o]ther.”
The special sub-column preferential duty treatment under NAFTA is duty-free.
The merchandise should be marked as a product of Mexico in accordance with 19 CFR § 134.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Ieva K. O’Rourke, Chief
Tariff Classification and Marking Branch