CLA-2:CO:R:C:G 085206 SER
Ritchie T. Thomas, Esquire
Squire, Sanders & Dempsey
1201 Pennsylvania Avenue, N.W.
P.O. Box 407
Washington, D.C. 20044
RE: Reconsideration of HRL 083700, dated June 7, 1989; White
Chocolate
Dear Mr. Thomas:
This is in reference to your letters of July 20, 1989, and
September 27, 1989, requesting the reconsideration of
Headquarters Ruling Letter (HRL) 083700, dated June 7, 1989,
concerning the tariff classification of white chocolate from
Belgium, under the Harmonized Tariff Schedule of the United
States Annotated (HTSUSA).
FACTS:
The white chocolate at issue is imported by Callebaut of
Belgium, in blocks of 5 kilograms (11 lbs.). In addition, the
inquirer states that the product might be imported in 500 gram
(1.1 lb.) bars, and that Callebaut has the molds for production
of this size of product. The product at issue is used by the
confectionery industry for a variety of purposes. The inquirer
states that the white chocolate is purchased in the United States
by confectioners, bakers and confectionery distributors. The
inquirer also states that the distributors resell the white
chocolate to candy retailers, bakers and small confectioners.
The white chocolate will be imported in three varieties by
Callebaut. The percentage composition by weight of the three
varieties is as follows:
INGREDIENTS W4NV CW2 WNV
Cocoa Butter 30.59 26.61 27.79
Sugar 54.06 48.52 41.01
Full Milk Powder 14.92 24.43 30.79
Lecithin and Vanillin 0.43 0.44 0.41
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ISSUE:
Is the white chocolate product an article within the
definition of "confections ready for consumption."
LAW AND ANALYSIS:
Classification of goods under the HTSUSA is governed by the
General Rules of Interpretation (GRI), taken in order. The
Harmonized System is a complete product classification system,
and the goal of the Harmonized System is to place all goods that
are imported into the specific classifications. In this context
the word "goods" is used in its broadest sense to include all
merchandise. The systematic detail is such that virtually all
goods are classifiable by application of GRI 1, that is,
according to the terms of the Headings and any relative Section
or Chapter Notes. After the proper classification subheading has
been determined, the rate of duty and quota restrictions, if any,
will then be determined.
The product at issue is covered in Heading 1704, which
provides for "sugar confectionery (including white chocolate)."
The Explanatory Notes, which constitute the official
interpretation of the tariff at the international level, provide
for Heading 17.04 that "(t)his 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." The main
categorization of this Heading, as concerns the merchandise at
issue, is between the subheading which provides for: "other:
confections or sweetmeats ready for consumption", and "other."
The main issue to be resolved is whether the merchandise is "a
confection ready for consumption."
Customs position is that "confections ready for consumption"
means that a product, as it is marketed, and in its condition as
imported, must be ready for immediate consumption at retail as a
confectionery, and is not, for example, merchandise which will be
used as an ingredient in the baking industry. This is the
pervasive concern in Leaf Brands, Inc. v. United States, 70
Cust. Ct. 66 (1973). That case was decided under the TSUS, but
is instructive in the classification of confections in the
HTSUSA. Leaf Brands provided that whether an article is a
confectionery is determined by its chief use, not by the fact
that it is edible, which would include numerous articles. Use
as a confection, said the Leaf court, may be evidenced by its
manner of sale and its character and design. The Court utilizes
the standard, and cites several cases which hold, in part, that
confectionery articles are usually sold in confectionery outlets.
The Court considered favorably the fact that the product at issue
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was distributed through "candy brokers." Although the importer
indicates that broken pieces of the white chocolate are sold at
retail candy outlets, the information submitted indicates that
such sales do not comprise the chief use of the imported white
chocolate. Moreover, the form of the product, in 5 kilogram
blocks or 500 gram bars, suggests that the use of this product is
that of a material which is used as an ingredient in the
manufacture of other items by bakers and confectioners. These
findings are indicative of the condition of the product at
importation.
It was noted by the inquirer, at the meeting between Customs
and the inquirer, that under the provision in subheading
1704.90.20, HTSUS, for confections or sweetmeats ready for
consumption other than candied meats, there are further
subheadings which provide for "put up for retail sale" and
"other." As stated at that meeting, and reiterated in this
ruling, the "put up for retail sale" subheading is for packaged
articles. The "other" subheading is for those articles which are
imported and then to be immediately packaged. Again, the
condition of the article is the dispositive factor. Since the
white chocolate at issue is not confections ready for
consumption, it cannot be classified within this subheading.
Subheading 1704.90.40, HTSUS, provides for sugar
confectionery other than confections or sweetmeats ready for
consumption. The Explanatory Notes allow for products which are
not "confectionery" to fall within this subheading even though
"confectionery" is stated in the heading. Thus, it is clear from
the tariff and the Explanatory Notes that white chocolate (having
not more than trace amounts of cocoa) is classified under heading
1704, HTSUS. It is equally clear that the white chocolate need
not necessarily be confections ready for consumption.
Subheading 1704.90.40, HTSUS, provides for other than
confections or sweetmeats ready for consumption: articles of milk
or cream. This is the most accurate subheading for the product
at issue. The drafters of the HTSUSA clearly included this
provision for an article such as the product at issue. There are
virtually no other products other than white chocolate which can
be placed under this subheading. The ingredient which
distinguishes this product from other articles is imparted by the
full milk powder, because this is the ingredient which provides
the dominant characteristic. An industry source: Chocolate
Production and Use, by Russell Cook (Harcourt, Brace &
Jovanovich, Inc., 1982) page 251, discusses various products
known as "white chocolate," and states:
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The formulating problems encountered in
making white cocoa butter coatings center
around giving them some flavor other than
just sweetness, [emphasis added]. This is
customarily accomplished by using high
quantities of good quality milk and well
balanced flavors such as vanilla . . .
In summary, most confectionery products of the nature of the
white chocolate consist of sugar and cocoa butter, it is the milk
which sets this product apart.
HOLDING:
The white chocolate at issue is properly classified under
subheading 1704.90.40, HTSUS, which provides for sugar
confectionery other than confections or sweetmeats ready for
consumption: other: articles of milk or cream. The rate of duty
is 17.5 percent ad valorem. Goods classified under this
subheading are also subject to quota restraints under subheading
9904.10.60, HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division