CLA-2 RR:CR:GC 966931ptl
Category: Classification
Tariff No.: 2106.90.9500/2106.90.9700
David Dunbar, Esq.
Katten Munchin Zavis Rosenman
525 West Monroe Street
Suite 3693
Chicago, IL 60661-3693
Re: Tariff Classification and NAFTA Eligibility of a Yeast-Based Leavening
Concentrate from Canada; Article 509; Further Consideration of HQ 562838
Dear Mr. Dunbar:
This is in response to your submissions regarding the classification under the Harmonized Tariff Schedule of the United States (HTSUS), of a product identified as a "yeast-based leavening product." In the initial submission to Customs and Border Protection (CBP) on May 28, 2003, you requested a ruling on both the classification of the product and a determination on the treatment the product would receive under the North American Free Trade Agreement (NAFTA). On June 24, 2003, you made another submission to CBP in which you expanded some of the arguments that had been raised in the initial request. After a meeting in CBP offices on December 11, 2003, you requested and received permission to provide further arguments to CBP on your client's behalf. You subsequently sought and received permission to withdraw your initial ruling request and submit a new presentation which would be treated as a new ruling request. This latest submission was received by CBP on January 11, 2004. Because this submission relates to the identical product which was the subject of both of your earlier submissions, in preparing this ruling, we consider and discuss all arguments you have raised in all submissions you have made to CBP, as well as issues regarding that product raised and discussed during the meeting at CBP.
FACTS:
The merchandise under consideration is described by the importer as a yeast-based leavening concentrate. It is to be "manufactured" in Canada by dry blending to evenly disperse a variety of ingredients from a variety of source countries throughout the final product. The product will be imported in 1, 6, or 9 lb. packages, or 50 lb. bags, or 2000 lb. totes. The product will be used as a leavening agent for pizza dough after importation. In descending order, the ingredients of the leavening concentrate are: sugar, salt, active yeast, sodium aluminum phosphate, sodium bicarbonate, and soybean oil [you have requested and been granted confidential treatment for the actual ingredient composition]. In submissions dated May 28, 2003, June 24, 2003, and January 11, 2004, counsel for the importer has advanced several alternative arguments that the product should be classified in various subheadings of heading 2102, HTSUS, which provides for: Yeasts (active or inactive); … prepared baking powders.
ISSUES:
I. What is the classification of each of the ingredients of the yeast-based leavening concentrate?
II. What is the classification of the manufactured, imported product?
III. Is the imported product eligible for preferential treatment under the NAFTA?
IV. Will the imported product qualify to be marked as a good of Canada under the NAFTA marking rules?
LAW AND ANALYSIS:
Merchandise is classifiable under the Harmonized Tariff Schedule of the United States (HTSUS) in accordance with the General Rules of Interpretation (GRIs). The systematic detail of the HTSUS is such that most goods are classified by application of GRI 1, that is, according to the terms of the headings of the tariff schedule 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 GRIs may then be applied in order.
In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes may be utilized. The Explanatory Notes (ENs), although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The HTSUS subheadings under consideration are as follows:
2102 Yeasts (active or inactive); other single-cell microorganisms, dead (but not including vaccines of heading 3002); prepared baking powders:
2102.10.0000 Active yeasts
2102.20 Inactive yeasts; other single-cell microorganisms, dead:
2102.20.2000 Yeasts (except dried brewers' yeast)
2102.20.4000 Dried brewers' yeast, crude
2102.20.6000 Other
2102.30.0000 Prepared baking powders.
2106 Food preparations not elsewhere specified or included:
Other:
Other:
Other:
Other:
Other:
Articles containing over 10 percent by dry weight of sugar described in additional U.S. note 3 to chapter 17:
2106.90.9500 Described in additional U.S. note 8 to chapter 17 and entered pursuant to its provisions
2106.90.9700 Other 3/
3/ See subheadings 9904.17.49-9904.17.65.
I. Classification of each ingredient of the yeast-based leavening concentrate,
The subject product has been manufactured by mixing exact proportions of specific ingredients to create a new product for a specific use. As is the case with many manufactured products, the leavening concentrate is composed of different ingredients which are each classified in different headings.
The ingredients of the leavening concentrate, in declining order, and their respective headings, are as follows:
Sugar – Heading 1701
Salt – Heading 2501
Active yeast – Heading 2102
Sodium Aluminum Phosphate – Heading 2842
Sodium Bicarbonate – Heading 2836
Soybean Oil – Heading 1507
II. Classification of the manufactured, imported product.
Counsel makes several arguments concerning the classification of the leavening concentrate. He initially contends that the product should be classified by GRI 1, which provides that tariff classification shall be determined according to the terms of the headings and any relative section and chapter notes. The first classification counsel proposes for the leavening concentrate is in subheading 2102.10, HTSUS, as an active yeast. Should CBP not find that subheading correct, in a subsequent submission, counsel proposes classification of the product in subheading 2102.30, HTSUS, which provides for prepared baking powders, again using GRI 1. Because the leavening concentrate is a mixture of ingredients, counsel offers an alternative classification argument based on GRI 3(b) which states, in relevant part, that "mixtures, 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… ." Counsel argues that one of the ingredients, specifically, the yeast, provides the product with its "essential character" for classification purposes again resulting in classification in subheading 2102.10, HTSUS.
We can begin by rejecting possible classification in subheading 2102.30, HTSUS, which provides for prepared baking powders. The ENs to heading 2102, provide in paragraph (C) that: "The 'prepared baking powders' classified in this heading consist of mixtures of chemical products (e.g. sodium bicarbonate, tartaric acid, ammonium carbonate, phosphates), with or without added starch. Under suitable conditions they evolve carbon dioxide and are therefore used in baking for leavening dough. They are usually sold in retail packings (sachets, tins, etc.) under various names (baking powder, Alsatian leaven, etc.)." The leavening concentrate under consideration contains less than 11 percent of the chemical products referred to in the note. It does not contain any starch. However, it does contain yeast, which is not a chemical product. It also contains sugar and salt. These ingredients remove the subject leavening concentrate from classification in subheading 2102.30, HTSUS.
Heading 2102, HTSUS, provides for: Yeasts (active or inactive); other single-cell microorganisms, dead (but not including vaccines of heading 3002); prepared baking powders". Counsel focuses on language in the ENs to heading 2102 which state that the yeasts of the heading "consist essentially of certain micro-organisms …, which multiply during alcoholic fermentation." Counsel cites several CBP rulings which are said to support the various arguments he proposes. To support the essential character argument Counsel refers to New York Ruling Letters NY J80147 ,dated January 24, 2003, NY I89774, dated January 21, 2003, and NY E82263, dated October 1, 1999. These rulings classified products which contained comparatively small percentages of fungal ingredients in heading 3002, HTSUS, which provides, in relevant part, for "cultures of microorganisms (excluding yeasts) and similar products." However, we can distinguish the situation in these rulings from that of the subject leavening concentrate. In the cited rulings, the "active" microorganisms were determined to provide the essential character to the product although they did not predominate in weight or volume. However, the other ingredients in the products were mere carriers for the microorganisms. They would not be acted upon by the organism like the leavening concentrate's sugar would be, nor would they react as the sodium bicarbonate and sodium aluminum phosphate would. Counsel, also refers to NY 893573, dated January 11, 1994, which classified "a tan-colored powder composed of baker's yeast (Saccharomyces cerevisiae) and a food-grade emulsifier" in subheading 2102.10, HTSUS. However, again, the subject leavening concentrate differs from the product of NY 893573 which was a general yeast product with the yeast in a carrier, not a specially formulated, carefully measured preparation.
CBP does not disagree with counsel's assertion that products classified in heading 2102, HTSUS, can contain ingredients in addition to yeast. However, CBP has consistently ruled (as illustrated in NY 893573, cited above) that such additional ingredients must not change the essential character of the product from that of a yeast to that of a preparation specifically designed and manufactured for a particular purpose. The ENs to heading 2102 describe non-formulated types of yeasts which are produced for general rather than specific uses. The subject leavening concentrate is a formulated preparation which is not properly classified in heading 2102, HTSUS.
Counsel engages in lengthy arguments in which he contends that heading 2102, HTSUS, is a "use provision" and that all products used as yeasts or baking powders should be classified therein. However, as stated above, goods of that heading, irrespective of how they are used, are goods of limited ingredients. Neither the yeasts nor the baking powders of heading 2102, HTSUS, have additional ingredients such as salt, soybean oil and sugar added to them. The addition of these constituents removes the product from something with the character of a yeast or a baking powder to something that has been specifically prepared as a food preparation.
Counsel argues that the subject leavening concentrate cannot be considered an article of heading 2106, HTSUS, which provides for food preparations not elsewhere specified or included, because the key active ingredient of the leavening concentrate, the yeast, as well as the sodium bicarbonate and the sodium aluminum phosphate, will be destroyed in the baking process. Thus, they will not become a part of the food product. Counsel refers to the decision in Arthur L. Franklin v. United States, 289 F. 3d 753 (2002), which held that coral sand (coral calcium) packaged in fiber bags that was used to purify drinking water was not a food preparation within the meaning of heading 2106, HTSUS. The court noted that although the coral sand imparted hardness and alkalinity to the water, the majority of the coral sand was not ingested by the consumer with the water but remained in the fiber bags on the bottom of the glass. The court determined that the product was not a food preparation. Counsel analogizes that, because the majority of its product is "destroyed" in the baking of the pizza crusts and is not available for consumption, it also is not a food preparation of heading 2106. However, counsel has missed the distinction made by the court in Franklin. In Franklin, the court classified the coral sand in heading 8421, HTSUS, as a product for filtering or purifying water, not because it was not consumed, but because "the purification heading 8421.21.00 is more specific than the food preparation heading 2106.90.99." Further, counsel refutes some of its own argument elsewhere in its submission when it states that, while some of the sugar in the leavening concentrate will be consumed by the yeast, the "remainder of the sugar will contribute to browning the [pizza] crust." Counsel claims that the salt which accounts for more than 20 percent of the product is present merely to as a dispersant to prevent premature activation of the yeast and sugar ingredients. However, at such a concentration, it must be present to impart some flavor to the crust. Counsel's argument that the tariff does not recognize the possibility of chemical reactions which occur during the cooking process ignores the language of the ENs to heading 2106 which provide, in part, that:
(B) … The heading includes preparations consisting of mixtures of chemicals (organic acids, calcium salts, etc.) with foodstuffs (flour, sugar, milk powder, etc.) for incorporation in food either as ingredients or to improve some of their characteristics (appearance, keeping qualities, etc.)."
Clearly, a preparation with chemicals, salt and sugar such as the subject leavening concentrate which is to be used in the preparation of pizza crust is described by the language of the above EN.
Based on the above discussion, we have determined that the subject leavening concentrate is not a product of heading 2102, HTSUS, but is described by the language of the ENs to heading 2106, HTSUS.
III. The leavening concentrate is eligible for preferential tariff treatment under the NAFTA.
The ingredients used to make the leavening concentrate may be products of Canada and the United States. Some of the ingredients, however, may be obtained from other countries. The sugar may be a product of Australia, Brazil or Mexico and the sodium aluminum phosphate and sodium bicarbonate may be goods of Germany, Israel or Mexico.
When produced entirely of ingredients made in Canada, the United States and/or Mexico, the leavening concentrate will meet the requirements of HTSUSA General Note 12(b)(i), and will therefore be eligible for preferential tariff treatment under the NAFTA upon compliance with all applicable laws, regulations, and agreements.
When produced with one or more ingredients from non-NAFTA countries (i.e., sugar from Australia or Brazil, sodium aluminum phosphate and sodium bicarbonate from Germany or Israel), each non-originating material used to make the leavening concentrate will have satisfied the changes in tariff classification required under HTSUSA General Note 12(t)/21.14 (i.e., change in chapter). The leavening concentrate will be eligible for preferential tariff treatment under the NAFTA upon compliance with all applicable laws, regulations, and agreements.
IV. The leavening concentrate qualifies to be marked as a good of Canada under the NAFTA marking rules.
The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides 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 a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.
The country of origin marking requirements for a "good of a NAFTA country" are also determined in accordance with Annex 311 of the North American Free Trade Agreement ("NAFTA"), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat 2057) (December 8, 1993) and the appropriate Customs Regulations. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in Part 102, Customs Regulations. The marking requirements of these goods are set forth in Part 134, Customs Regulations. Section 134.1(b) of the regulations, defines "country of origin" as:
the country of manufacture, production, or growth of any article of foreign origin entering the U.S. 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) of the regulations, 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) of the regulations, 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. Section 134.45(a)(2) of the regulations, provides that a "good of a NAFTA country" may be marked with the name of the country of origin in English, French or Spanish.
Part 102 of the regulations, sets forth the "NAFTA Marking Rules" for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Applying the NAFTA Marking Rules set forth in Part 102 of the regulations to the facts of this case, we find that the imported leavening concentrate is a good of Canada for marking purposes. When all ingredients are of Canadian origin, Canada is the country of origin, pursuant to Section 102.11(a)(1) of the Customs Regulations. When non-Canadian ingredients are used, the country of origin is Canada, pursuant to Section 102.11(a)(3) and 102.20(d) of the Customs Regulations.
HOLDING:
By application of GRI 1, the subject leavening concentrate is classified in heading 2106, HTSUS. Because the subject leavening concentrate contains over 10 percent, but not over 65 percent, by dry weight, cane or beet sugar, the subject leavening concentrate will fall in the tariff rate quota subheading 2106.90.9500, HTSUSA, which provides for food preparations not elsewhere specified or included: other, other, other, other, other, articles containing over 10 percent by dry weight of sugar described in additional U.S. note 3 to chapter 17: described in additional U.S. note 8 to chapter 17 and entered pursuant to its provisions. Goods classified under this subheading which are products of Canada are eligible for preferential treatment under the NAFTA and can be entered free of duty. If the quota provided for by that subheading is filled, the product will be classified in the over-quota subheading 2106.90.9700, HTSUSA. Duty rates under this subheading are 28.8¢/kg plus 8.5% ad valorem, plus any additional duties imposed by subheadings 9904.17.49 - 9904.17.65.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division