OT:RR:CTF:FTM H313780 TJS
Ms. Ami Barone
721 Logistics LLC
399 Market Street, Suite #220
Philadelphia, PA 19106
RE: Tariff Classification of Semi Sweet Chocolate Blend; USMCA; Country of Origin Marking
Dear Ms. Barone,
This is in response to your request, dated March 2, 2020, in which you request a binding ruling, on behalf of The Blommer Chocolate Company (“Blommer”), concerning the tariff classification, country of origin marking, and eligibility of a certain sweetened cocoa powder mixture for preferential tariff treatment under the United States-Mexico-Canada Agreement (“USMCA”). Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for review. Our ruling is set forth below.
FACTS:
The merchandise at issue, described as “Semi Sweet Chocolate Blend,” is a sweetened cocoa powder mixture consisting of 60% by dry weight of sugar, 30% whole milk powder, and 10% cocoa powder. You state that the raw cane sugar (not flavored nor colored) can be of different origins, but that the sugar at issue is not from the United States, Mexico, or Canada. The raw sugar is shipped to Canada where it is refined. The cocoa powder is produced in the United States and the whole milk powder is produced in New Zealand or, in some instances, Canada. The whole milk powder and cocoa powder are sent to Canada, where they are blended with the refined sugar into a homogeneous mixture and packaged in 2,000-pound bags for shipment to the United States. The final product is intended to be used in the manufacture of finished chocolate products and the powder blend will not be put up for retail sale. You further state that the product contains 8.4% butterfat and 30% milk solids.
ISSUES:
What is the tariff classification of the “Semi Sweet Chocolate Blend”?
Whether the “Semi Sweet Chocolate Blend” imported from Canada is eligible for preferential tariff treatment under the USMCA.
What is the country of origin of the “Semi Sweet Chocolate Blend” for marking purposes?
LAW AND ANALYSIS:
Tariff Classification
Classification of goods under the Harmonized Tariff Schedule of the United States (“HTSUS”) is made in accordance with the General Rules of Interpretation (“GRI”). GRI 1 provides that the classification 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 GRI may then be applied.
The 2020 HTSUS provisions under consideration are as follows:
1806: Chocolate and other food preparations containing cocoa:
1806.10: Cocoa powder, containing added sugar or other sweetening matter:
1806.20: Other preparations in blocks, slabs or bars, weighing more than 2 kg or in liquid, paste, powder, granular or other bulk form in containers or immediate packings, of a content exceeding 2 kg:
* * * * *
Note 2 to Chapter 18, HTSUS, provides as follows:
Heading 1806 includes sugar confectionery containing cocoa, and, subject to note 1 to this chapter, other food preparations containing cocoa.
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In understanding the language of the HTSUS, the Explanatory Notes (“EN”) of the Harmonized Commodity Description and Coding System may be utilized. The EN, 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 Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127 (Aug. 23, 1989).
The EN to heading 1806, HTSUS, provides in pertinent part as follows:
Chocolate is composed essentially of cocoa paste and sugar or other sweetening matter, usually with the addition of flavouring and cocoa butter; in some cases, cocoa powder and vegetable oil may be substituted for cocoa paste. Milk, coffee, hazelnuts, almonds, orange-peel, etc., are sometimes also added.
Chocolate and chocolate goods may be put up either as blocks, slabs, tablets, bars, pastilles, croquettes, granules or powder, or in the form of chocolate products filled with creams, fruits, liqueurs, etc.
The heading also includes all sugar confectionery containing cocoa in any proportion (including chocolate nougat), sweetened cocoa powder, chocolate powder, chocolate spreads, and, in general, all food preparations containing cocoa (other than those excluded in the General Explanatory Note to this Chapter).
[. . .]
Subheading 1806.20
Goods presented in “other bulk forms” are covered by subheading 1806.20 if they take the form of pellets, beans, rounds, drops, balls, chips, flakes, sprinkles, shavings and similar. Goods under this subheading are usually intended for the manufacture of chocolate products, bakery products, confectionery, ice creams, etc., or for decoration.
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There is no dispute that the subject merchandise is classified in heading 1806, HTSUS, as a food preparation containing cocoa. You suggest that the “Semi Sweet Chocolate Blend” is classified under subheading 1806.10.10, HTSUS, which provides for “Chocolate and other food preparations containing cocoa: Cocoa powder, containing added sugar or other sweetening matter: Containing less than 65 percent by weight of sugar: Described in additional U.S. note 1 to this chapter and entered pursuant to its provisions.”
As stated above, the “Semi Sweet Chocolate Blend” contains sugar, powdered milk, and cocoa powder. CBP classifies mixtures that only contain cocoa powder and sugar in subheading 1806.10, HTSUS. See, e.g., Headquarters Ruling Letter (“HQ”) 954722 (Mar. 11, 1994); New York Ruling Letter (“NY”) 814755 (Sept. 25, 1995); and NY L88557 (Nov. 25, 2005). The whole milk powder present in the subject chocolate blend precludes classification in subheading 1806.10, HTSUS. Because the “Semi Sweet Chocolate Blend” is shipped in 2,000-pound bags, we find that it meets the requirements of subheading 1806.20, HTSUS, which covers other preparations in powder form in containers exceeding 2 kilograms. We also note that the chocolate blend is used in the manufacture of other foodstuffs, which is consistent with the EN to subheading 1806.20, HTSUS. This is consistent with NY N288870, dated August 23, 2017, in which CBP classified a chocolate preparation consisting of 75% refined cane sugar, 20% skim milk powder, and 5% chocolate powder and shipped in 25 kilogram bags in subheading 1806.20, HTSUS. The chocolate preparation in NY N288870 contains similar ingredients, albeit in different quantities, as the “Semi Sweet Chocolate Blend.”
Subheadings 1806.20.81 and 1806.20.83, HTSUS, cover dairy products described in Additional U.S. Note 1 to Chapter 4, HTSUS, which provides as follows:
For the purposes of this schedule, the term “dairy products described in additional U.S. note 1 to chapter 4” means any of the following goods: malted milk, and articles of milk or cream (except (a) white chocolate and (b) inedible dried milk powders certified to be used for calibrating infrared milk analyzers); articles containing over 5.5 percent by weight of butterfat which are suitable for use as ingredients in the commercial production of edible articles (except articles within the scope of other import quotas provided for in additional U.S. notes 2 and 3 to chapter 18); or, dried milk, whey or buttermilk (of the type provided for in subheadings 0402.10, 0402.21, 0403.90 or 0404.10) which contains not over 5.5 percent by weight of butterfat and which is mixed with other ingredients, including but not limited to sugar, if such mixtures contain over 16 percent milk solids by weight, are capable of being further processed or mixed with similar or other ingredients and are not prepared for marketing to the ultimate consumer in the identical form and package in which imported.
The “Semi Sweet Chocolate Blend” contains over 5.5% butterfat and is an ingredient in the commercial production of edible articles. Furthermore, it does not fall within the scope of other import quotas provided for in Additional U.S. Notes 2 and 3 to Chapter 18, HTSUS. Therefore, the “Semi Sweet Chocolate Blend” meets the second requirement of Additional U.S. Note 1 to Chapter 4, HTSUS, and is considered a dairy product.
The “Semi Sweet Chocolate Blend,” if imported in quantities that fall within the limits described in Additional U.S. Note 10 to Chapter 4, HTSUS, is classified under subheading 1806.20.81, HTSUS, which provides for, “Chocolate and other food preparations containing cocoa: Other preparations in blocks, slabs or bars, weighing more than 2 kg or in liquid, paste, powder, granular or other bulk form in containers or immediate packings, of a content exceeding 2 kg: Other: Other: Other: Dairy products described in additional U.S. note 1 to chapter 4: Described in additional U.S. note 10 to chapter 4 and entered pursuant to its provisions.” If the quantitative limits of Additional U.S. Note 10 to Chapter 4, HTSUS, have been reached, the product will be classified under subheading 1806.20.83, HTSUS, which provides for, “Chocolate and other food preparations containing cocoa: Other preparations in blocks, slabs or bars, weighing more than 2 kg or in liquid, paste, powder, granular or other bulk form in containers or immediate packings, of a content exceeding 2 kg: Other: Other: Other: Dairy products described in additional U.S. note 1 to chapter 4: Other: Other.” In addition, products classified in subheading 1806.20.83, HTSUS, are subject to additional duties based on their value, as described in subheadings 9904.04.50 to 9904.05.01, HTSUS.
USMCA
The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or
…
Since the “Semi Sweet Chocolate Blend” contains non-originating sugar and, in certain instances, non-originating whole milk powder, it is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i), nor is it produced exclusively from originating materials per GN 11(b)(ii). Thus, we must determine whether the chocolate blend qualifies under GN 11(b)(iii). As previously noted, the chocolate blend is classified under subheadings 1806.20.81 or 1806.20.83, HTSUS. The applicable rule of origin for goods classified under subheading 1806.20, HTSUS, is in GN 11(o)/18.4, HTSUS, which provides “[a] change to subheading 1806.20 from any other heading.” Here, the non-originating sugar is classified in subheading 1701.13, HTSUS, and the whole milk powder is classified in subheading 0402.21, HTSUS. Because the non-originating components are classified in headings other than 1806, HTSUS, the tariff shift rule is met. Accordingly, the “Semi Sweet Chocolate Blend” qualifies for preferential tariff treatment under the USMCA.
Country of Origin Marking
To allow for a more seamless transition period, at this time, CBP continues to utilize the marking rules set forth in 19 C.F.R. Part 102, with the exception of 19 C.F.R. § 102.19, for purposes of country of origin marking with respect to goods from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. See 19 C.F.R. § 102.11. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which:
(a)(1) The good is wholly obtained or produced;
The good is produced exclusively from domestic materials; or
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.
…
Since the sugar, cocoa powder, and in some instances, the whole milk powder originate in countries other than Canada, the finished product is neither wholly obtained or produced per section 102.11(a)(1), nor is the finished product produced exclusively from domestic (Canadian, in this case) materials as set forth in section 102.11(a)(2). Because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we must therefore utilize section 102.11(a)(3). “Foreign material” is defined in section 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” The applicable tariff shift requirement in section 102.20 for the chocolate blend of subheading 1806.20, HTSUS, is the following:
A change to subheading 1806.20 from any other heading, except from Chapter 17; or
A change to subheading 1806.20 from Chapter 17, provided that the good contains less than 65 percent by dry weight of sugar.
The foreign material in this case is the sugar, the cocoa powder, and the whole milk powder. The cocoa powder of heading 1805, HTSUS, and the whole milk powder of heading 0402, HTSUS, meet the first tariff shift rule. As the finished chocolate blend contains 60% by dry weight of sugar, which is classified in Chapter 17, HTSUS, the second tariff shift rule is also met. Therefore, the tariff shift requirements of section 102.11(a)(3) is satisfied in Canada and the country of origin for marking purposes of the chocolate blend is Canada. The “Semi Sweet Chocolate Blend” must be marked as a product of Canada.
HOLDING:
Pursuant to GRI 1, the “Semi Sweet Chocolate Blend,” if imported in quantities that fall within the limits described in Additional U.S. Note 10 to Chapter 4, HTSUS, is classified under subheading 1806.20.81, HTSUS, which provides for, “Chocolate and other food preparations containing cocoa: Other preparations in blocks, slabs or bars, weighing more than 2 kg or in liquid, paste, powder, granular or other bulk form in containers or immediate packings, of a content exceeding 2 kg: Other: Other: Other: Dairy products described in additional U.S. note 1 to chapter 4: Described in additional U.S. note 10 to chapter 4 and entered pursuant to its provisions.” The general rate of duty will be 10% ad valorem. If the quantitative limits of Additional U.S. Note 10 to Chapter 4, HTSUS, have been reached, the product will be classified under subheading 1806.20.83, HTSUS, which provides for, “Chocolate and other food preparations containing cocoa: Other preparations in blocks, slabs or bars, weighing more than 2 kg or in liquid, paste, powder, granular or other bulk form in containers or immediate packings, of a content exceeding 2 kg: Other: Other: Other: Dairy products described in additional U.S. note 1 to chapter 4: Other: Other.” The general rate of duty will be 52.8 cents per kilogram plus 8.5% ad valorem. In addition, products classified under subheading 1806.20.83, HTSUS, are subject to additional duties based on their value, as described in subheadings 9904.04.50 to 9904.05.01, HTSUS.
Based on the information provided, the “Semi Sweet Chocolate Blend” is eligible for preferential tariff treatment under the USMCA.
The country of origin of the chocolate blend for marking purposes is Canada.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
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,
Yuliya A. Gulis, Chief
Food, Textiles and Marking Branch