CLA-2 OT:RR:CTF:TCM H234949 TNA
Gregory Kozak, Vice President
Arbor Foods, Inc.
21010 Trolley Industrial Dr.
Taylor, MI 48180
RE: Tariff Classification and Country of Origin of Blended Sugar Syrup
Dear Mr. Kozak:
This is in reference to your undated request, on behalf of Arbor Foods, Inc. (“Arbor Foods”) for a binding ruling on the tariff classification and country of origin of blended sugar syrup.
FACTS:
The subject merchandise consists of blended syrups. All ingredients of the subject merchandise are imported into a Foreign Trade Zone (“FTZ”) and further manufactured there before being imported into the United States for consumption. Inside the FTZ, the subject blended syrups are obtained by dissolving granular cane sugar of Brazilian origin in water, and then mixing it with corn syrup of U.S.-origin. The resulting blend has a total solids content of between 67% and 75%; the remainder is water. The solids consist of 90% sucrose from cane by weight and 10% glucose from corn by weight. The corn glucose is in the form of 42DE corn syrup. DE is an abbreviation for dextrose equivalent, a measure of the amount of reducing sugars present in a sugar product, relative to glucose and expressed as a percentage on a dry basis. Thus, the corn glucose at issue here has 42 percent of the reducing power of dextrose, as dextrose itself has a DE of 100.
The subject merchandise does not contain fructose. The subject syrup’s sucrose is of Brazilian origin, and its glucose (in the form of corn syrup) is of U.S. origin. The syrup will not have any added flavoring or coloring. It will be imported into the United States from the FTZ in bulk, after which it may be processed or mixed with other ingredients. It is not prepared for marketing to the retail consumer.
Arbor Foods operates in a foreign trade zone (“FTZ”) in Toledo, Ohio and was authorized a quota of 38 million pounds of sugar for processing in the FTZ in 1985. Arbor’s facilities, which began operating before June 1, 1990, have remained in continuous operation since that time. The company has also retained its sugar quota to the present day.
ISSUES:
I. What is the tariff classification of the subject blended sugar syrup?
II. What is the country of origin of the subject blended sugar syrup?
LAW AND ANALYSIS:
I. Classification
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined 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 2 through 6 may then be applied in order. 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 GRIs 1 through 5.
The HTSUS headings under consideration are the following:
1701 Cane or beet sugar and chemically pure sucrose, in solid
form:
1702 Other sugars, including chemically pure lactose, maltose, glucose and fructose, in solid form; sugar syrups not containing added flavoring or coloring matter; artificial honey, whether or not mixed with natural honey; caramel:
1702.30 Glucose and glucose syrup, not containing fructose or containing in the dry state less than 20 percent by weight of fructose:
Blended syrups described in additional U.S. note 4 to chapter 17:
1702.30.22 Described in general note 15 of the tariff schedule and entered pursuant to its provisions.
1702.30.24 Described in additional U.S. note 9 to this chapter and entered pursuant to its provisions
Additional U.S. Note 4 to Chapter 17, HTSUS, provides, in pertinent part, the following:
For the purposes of this schedule, the term “blended syrups described in additional U.S. note 4 to chapter 17” means blended syrups
containing sugars derived from sugar cane or sugar beets, capable of being further processed or mixed with similar or other ingredients,
and not prepared for marketing to the ultimate consumer in the identical form and package in which imported.
Additional U.S. Note 9 to Chapter 17, HTSUS, provides, in pertinent part, the following:
The aggregate quantity of blended syrups described in additional U.S. note 4 to chapter 17, the foregoing goods entered under subheadings 1702.20.24, 1702.30.24, 1702.40.24, 1702.60.24, 1702.90.54, 1806.20.91, 1806.90.35, 2101.12.34, 2101.20.34, 2106.90.68 and 2106.90.89 during the 12-month period from October 1 in any year to the following September 30, inclusive, shall be none and no such articles shall be classifiable therein.
General Note 15 to the HTSUS provides, in relevant part, as follows:
Exclusions. Whenever any agricultural product of chapters 2 through 52, inclusive, is of a type (i) subject to a tariff-rate quota and (ii) subject to the provisions of subchapter IV of chapter 99, entries of such products described in this note shall not be counted against the quantity specified as the in-quota quantity for any such product in such chapters:…
blended syrups containing sugars derived from sugar cane or sugar beets, capable of being further processed or mixed with similar or other ingredients, and not prepared for marketing to the ultimate consumer in the identical form and package in which imported, provided that, subject to approval of the Foreign Trade Zones Board, such syrups are manufactured in and entered from a U.S. foreign trade zone by a foreign trade zone user whose facilities were in operation on June 1, 1990, to the extent that the annual quantity entered into the customs territory from such zone does not contain a quantity of sugar of nondomestic origin greater than that authorized by the Foreign Trade Zones Board for processing in the zones during calendar year 1985;
Section 478 of the Customs and Trade Act of 1990 (101 P.L. 382), provides, in pertinent part, the following:
SEC. 478. PROCESSING OF CERTAIN BLENDED SYRUPS.
(a) IN GENERAL. -- U.S. note 2 to subchapter IV of chapter 99 is amended by adding at the end thereof the following:
“(e) Blended syrups of heading 9904.50.20, if entered from a foreign trade zone by a foreign trade zone user whose facilities were in operation on June 1, 1990, to the extent that the annual quantity entered into the customs territory from such zone does not contain an amount of sugar of nondomestic origin greater than that authorized by the Foreign Trade Zones Board for processing in such zone during calendar year 1985.”
(b) EFFECTIVE DATE. -- The amendment made by this section applies with respect to articles entered, or withdrawn from warehouse for consumption, after December 31, 1988.
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 EN for heading 17.02 states, in pertinent part, the following:
This heading covers other sugars in solid form, sugar syrups and also artificial honey and caramel….
(B) SUGAR SYRUPS
This part covers syrups of all sugars (including lactose syrups and aqueous solutions other than aqueous solutions of chemically pure sugars of heading 29.40), provided they do not contain added flavouring or colouring matter (see Explanatory Note to heading 21.06).
In addition to the syrups referred to in Part (A) above (i.e., glucose (starch) syrup, fructose syrup, syrup of malto-dextrins, inverted sugar syrup as well as sucrose syrup), this heading includes:
Simple syrups obtained by dissolving sugars of this Chapter in
water.
You state that the subject blended syrups will be produced in an FTZ and imported into the United States from that FTZ. You also state that Arbor Foods meets all of the requirements of Section 478 of the Customs and Trade Act of 1990, and, as such, has congressional authority to produce certain blended syrups in the FTZ and later import them into the customs territory of the United States up to the grandfathered limit of 38 million pounds of sugar content. As a result, you argue that the subject merchandise meets all of the requirements of GN 12(d), and should therefore be classified in subheading 1702.30.22, HTSUS, as long as Arbor Foods does not exceed its limit of 38 million pounds of sugar processed and imported annually. In support of this argument, you submitted an annual report from Arbor Foods from 1990, showing that the company’s facilities were in operation on June 1, 1990, and you state that they have been in continuous operation since then. You also submitted a letter from the United States Department of Commerce’s Foreign Trade Zones Board, addressed to CBP’s port in Cleveland, Ohio and dated December 30, 1985, showing that Arbor Foods was authorized a quota of 38 million pounds of sugar for processing in the FTZ in 1985.
The syrups that are imported into the United States from the FTZ are blended syrups, made from glucose and not containing fructose. They are imported in bulk form and do not contain added flavoring or coloring. Heading 1702, HTSUS, provides for sugar syrups not containing added flavoring or coloring matter eo nomine. See heading 1702, HTSUS. Furthermore, the syrups of this heading consist of simple syrups obtained by dissolving sugars of this Chapter in water. See EN 17.02(B)(1). Furthermore, the instant blended syrup contains sugar derived from cane, can be further processed or mixed with similar ingredients, and is not prepared for marketing to the ultimate consumer in the identical form and package in which imported, in accordance with Additional U.S. Note 4 to Chapter 17, HTSUS.
In addition, Arbor Foods has submitted documentation showing that its facilities were in operation on June 1, 1990, and that it was authorized a quota of sugar of 38 million pounds for the calendar year of 1985. As such, the subject merchandise is classified in subheading 1702.30.22, HTSUS, which provides for “Other sugars, including chemically pure lactose, maltose, glucose and fructose, in solid form; sugar syrups not containing added flavoring or coloring matter; artificial honey, whether or not mixed with natural honey; caramel: Glucose and glucose syrup, not containing fructose or containing in the dry state less than 20 percent by weight of fructose: Blended syrups described in additional U.S. note 4 to chapter 17: Described in general note 15 of the tariff schedule and entered pursuant to its provisions.” See GN 15(b).
II. Country of Origin
The sugar in the subject blended syrup is from Brazil, while the corn syrup with which it is mixed is of U.S.-origin. They are combined in an FTZ in the United States and entered as nonprivileged. See 19 C.F.R. §146.65(1)(b).
Section 304 of the Tariff Act of 1930 (19 U.S.C. §1304), provides that, unless excepted, every article of foreign origin imported into the United States 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 United States the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. §1304 was that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods, the country of which the goods is the product. “The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” See United States v. Friedlander & Co., 27 C.C.P.A. 297 at 302 (1940).
Part 134, CBP Regulations (19 CFR Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. §1304. Section 134.1(b), CBP Regulations (19 CFR 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 the meaning of the marking laws and regulations.
The case of United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture that results in an article having a name, character, or use differing from that of the constituent article will be considered substantially transformed and, as a result, the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked. See 19 CFR 134.35(a).
In Arbor Foods, Inc. v. United States, 30 C.I.T. 670 (2006), the court found that blending sugar with gelatin created a new product. The product there consisted of a blend of 98 percent sugar and two percent gelatin. This blend, which had a different solubility and texture than pure sugar, became suitable for use in such products as Rice Krispie Treats and gummy bears, products for which pure sugar alone would not suffice. The court found that the gelatin was not an incidental or immaterial element of the blend but imparted important characteristics to the blend and dictated its use. Id. at 675-676. See also HQ W967896, dated February 5, 2008 and HQ H183474, dated January 27, 2012.
In the present case, by contrast, the subject blended sugar syrup consists only of a mixture of sucrose and glucose. As such, it remains a mixture of sugars and is a sweetener. The mixture of two types of sugar still functions the same as one type of sugar in the food to which it is added. By contrast, gelatin is a gelling agent, and therefore functions differently in the food to which it is added. Furthermore, gelatin and sugar are added to food for different reasons. Thus, the subject sugar syrups can be distinguished from the sugar/gelatin blends of Arbor Foods and subsequent CBP rulings, and we are not bound by them.
As discussed above, the subject sugar syrups retain the same use and character after production- that is, they are still used as sweeteners in the same way that simple sugars are used. In addition, mixing is a simple operation that only substantially transforms something if the ingredients mixed create a commodity that is different in name, character and use from the original ingredients. See, e.g., National Juice Prods. Ass’n v. United States, 10 C.I.T. 48 (1986) (“National Juice”). See also CPC Int’l v. United States, 21 C.I.T. 784; 971 F. Supp. 574; 19 Int’l Trade Rep. (BNA) 1887; 1997 Ct. Intl. Trade LEXIS 106 (Ct. Int’l Trade 1997). We acknowledge that that subject sugar syrups are called by a different name after they are produced than the sugar from which they are derived. However, a change in the name of the product is the weakest evidence of a substantial transformation. National Juice, 10 C.I.T. at 60. As such, we find that the subject sugar syrups do not undergo a substantial transformation.
The statute governing the creation and operation of FTZs is the Foreign Trade Zones Act of 1934, as amended (48 Stat. 998; 19 U.S.C. §81a through §81u). Under 19 U.S.C. §81c(a), foreign and domestic merchandise of every description (except prohibited merchandise) may be brought into an FTZ without being subject to the United States customs laws and may there be, among other things, stored, mixed with foreign or domestic merchandise, or otherwise manipulated and be exported, destroyed, or sent into the United States customs territory. Articles of the United States and articles previously imported on which duty and/or tax has been paid, or which have been admitted free of duty and tax, may be taken into a FTZ from the United States customs territory, placed under the supervision of the appropriate CBP officer, and, whether or not they have been combined with or made part of other articles while in the FTZ, be brought back thereto free of quotas, duty, or tax. If the identity of such articles (i.e., the “domestic status” articles described in the preceding sentence) has been lost, articles not entitled to free entry by reason of noncompliance with the requirements under the authority of this provision are treated as foreign merchandise if they reenter the customs territory.
When foreign merchandise is so sent from an FTZ into United States customs territory, it is subject to the U.S. laws and regulations affecting imported merchandise. Articles of the United States and articles previously imported on which duty and/or tax has been paid, or which have been admitted free of duty and tax, may be taken into an FTZ from U.S. customs territory, placed under the supervision of the appropriate CBP officer, and, whether or not they have been combined with or made part of other articles while in the FTZ, be brought back thereto free of quotas, duty, or tax. If the identity of such articles (i.e., the “domestic status” articles described in the preceding sentence) has been lost, articles not entitled to free entry by reason of noncompliance with the requirements under the authority of this provision are treated as foreign merchandise if they reenter the customs territory.
This allows an enterprise operating within the FTZ to take advantage of favorable differentials in the tariff schedules between the rates of duty for foreign materials used in the manufacturing process in the FTZ and the duty rates for the finished articles. See HQ 556976 (June 9, 1994) (citing Armco Steel Corp. v. Stans, 431 F.2d 779 (2nd Cir. 1970)). CBP has held that when a nonprivileged good is substantially transformed in an FTZ, it becomes a product of the United States. See HQ 735399, dated December 22, 1993; HQ W967896, dated February 5, 2008; and C.S.D. 81-44, dated August 4, 1980. Further, that product upon withdrawal from the FTZ for consumption in the United States is subject to the rate of duty of the finished product. See HQ 560102, dated June 17, 1997; HQ 967222, dated September 3, 2004; HQ W967896, dated February 5, 2008.
In the instant case, however, as discussed above, the subject blended syrups do not undergo a substantial transformation by the processing which they undergo in the FTZ. As such, the country of origin will be Brazil, the country from which the sugar originates and contributes 90% of the finished product in terms of solid weight. As a result, the subject syrups must be marked as a product of Brazil in accordance with 19 U.S.C. §1304 and 19 C.F.R. Part 134.
HOLDING:
The subject blended syrups are classified in heading 1702, HTSUS. Specifically, they are described by the terms of subheading 1702.30.22, HTSUS, which provides for “Other sugars, including chemically pure lactose, maltose, glucose and fructose, in solid form; sugar syrups not containing added flavoring or coloring matter; artificial honey, whether or not mixed with natural honey; caramel: Glucose and glucose syrup, not containing fructose or containing in the dry state less than 20 percent by weight of fructose: Blended syrups described in additional U.S. note 4 to chapter 17: Described in general note 15 of the tariff schedule and entered pursuant to its provisions.” The general, column one, duty rate is 6%.
Furthermore, the subject blended syrups do not undergo a substantial transformation when they are processed in the FTZ. As such, their country of origin is Brazil, where the sugar originates. The subject syrups must be marked as such in accordance with 19 U.S.C. §1304 and 19 C.F.R. Part 134.
Duty rates are provided for your convenience and 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.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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 O’Rourke, Chief
Tariff Classification and Marking Branch