CLA-2-18:OT:RR:NC:N2:N232
Mr. Michael Dahm
Cole International USA Inc.
1775 Baseline Rd
Grand Island, NY 14072
RE: The Classification and Eligibility of the United States-Mexico-Canada Trade Agreement
(USMCA) for a Hot Chocolate Drink Mix and Dunkaccino Drink Mix
Dear Mr. Dahm,
This is in response to your letter dated February 3, 2021, on behalf of Mother Parker Tea & Coffee Inc., requesting a ruling on classification and the eligibility of the USMCA on a Hot Chocolate Drink Mix and Dunkaccino Drink Mix.
Hot Chocolate Drink Mix is said to contain 56 percent sugar (Product of Brazil and Refined in Canada), 32 percent coconut oil (Product of USA), 7 percent cocoa powder (Product of Malaysia), 3 percent skim milk powder (Product of Canada), 1 percent carboxymethyl cellulose (Product of Italy), 1 percent salt (Product of Canada) and trace amounts of natural and artificial chocolate flavor (Product of USA). All ingredients are mixed, homogenized, weighed and packaged in Canada.
Dunkaccino Drink Mix is said to contain 44 percent sugar (Product of Brazil and Refined in Canada), 33 percent coconut oil (Product of USA), 2 percent cocoa powder (Product of Malaysia), 2 percent skim milk powder (Product of Canada), 1 percent carboxymethyl cellulose (Product of Italy), 1 percent salt (Product of Canada), 5 percent natural and artificial chocolate flavor (Product of USA), 6 percent sweet cream (Product of USA), 4 percent coffee (Product of Canada), 3 percent milk replacer (Product of Canada). All ingredients are mixed, homogenized, weighed and packaged in Canada.
Both Hot Chocolate Drink Mix and Dunkaccino Drink Mix will each be packed in plastic bags with a net weight of 2 pounds per bag and will be imported for sale specifically to the food service chain Dunkin Donuts. You provide additional information stating that both products do not contain any milk fat or non-fat milk solids.
Classification:
The applicable subheading for both the Hot Chocolate Drink Mix and Dunkaccino Drink Mix will be 1806.90.5500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Chocolate and other food preparations containing cocoa: 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. The general rate of duty will be 3.5 percent ad valorem.
If the quantitative limits of additional U.S. note 8 to chapter 17 have been reached, the product will be classified in subheading 1806.90.5900, HTSUS, and dutiable at the rate of 37.2 cents per kilo plus 6 percent ad valorem. In addition, products classified in subheading 1806.90.5900, HTSUS, may be subject to additional duties based on their value, as described in subheadings 9904.17.49 to 9904.17.65, HTSUS.
Country of Origin The marking statute, Section 304(a), Tariff Act of 1930, as amended (19 U.S.C. § 1304(a)), 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 container) will permit in such manner as to indicate to an 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 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.” United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940).
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. 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;
(a)(2) The good is produced exclusively from domestic materials; or
(a)(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because both drink mixes are neither wholly obtained nor produced exclusively from “domestic” (Canada, in this case) materials. Accordingly, we look to section 102.11(a)(3). The applicable tariff shift requirement in section 102.20 for the drink mixes of subheading 1806.90, HTSUS, consist of the following:
A change to subheading 1806.90 from any other subheading.
Because the foreign materials (sugar, cocoa powder and carboxymethyl cellulose) are classified in subheadings outside of subheading 1806.90, the tariff shift rule in 19 C.F.R. § 102.20 is met. Therefore, in accordance with 19 C.F.R. § 102.11(a)(3), the country of origin for marking purposes of both products is Canada.
USMCA:
The 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, 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, in relevant part:
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 both the Hot Chocolate Drink Mix and Dunkaccino Drink Mix contain non-originating materials, they are not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i) and (ii). We must next determine whether the Hot Chocolate Drink Mix and Dunkaccino Drink Mix qualify under GN 11(b)(iii). Both the Hot Chocolate Drink Mix and Dunkaccino Drink Mix are classified in subheading 1806.90, HTSUS. The applicable rule of origin for merchandise under subheading 1806.90, HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:
Chapter 18 (5) “A change to subheadings 1806.31 through 1806.90 from any other subheading,
including another subheading within that group”.
Both the Hot Chocolate Drink Mix and Dunkaccino Drink Mix contain three ingredients which are non-originating: sugar from Brazil, classified under subheading 1701.99, HTSUS; cocoa powder from Malaysia, classified under subheading 1805.00, HTSUS; and carboxymethyl cellulose from Italy, classified under subheading 3912.31, HTSUS. Since all three non-originating ingredients are classified in chapters other than chapter 18, the tariff shift rule is met. Accordingly, the Hot Chocolate Drink Mix and Dunkaccino Drink Mix classified under subheading 1806.90, HTSUS, are originating goods pursuant to GN 11(o). Thus, the Hot Chocolate Drink Mix and Dunkaccino Drink Mix, classified under subheading 1806.90.55, HTSUS, are eligible for preferential tariff treatment under the USMCA. However, if the Hot Chocolate Drink Mix and Dunkaccino Drink Mix are classified under subheading 1806.90.59, HTSUS, we note that the special column for subheading 1806.90.59, HTSUS, references subheadings 9823.10.01-9823.10.45, HTSUS. U.S. Note 10 to Subchapter XXII, which concerns sugar containing products pursuant to the USMCA, provides that:
This note and subheadings 9823.10.01 through 9823.10.45 are effective as to originating goods of the USMCA countries eligible for special tariff treatment under the terms of general note 11 to the tariff schedule provided for in subheadings … 1806.90.59 … From July 1, 2020, through December 31, 2020, in 2021 and in successive years thereafter, the rates of duty provided for in subheadings 9823.10.01 through 9823.10.45 in the “Special” subcolumn of rates of duty column 1 followed by the symbol “(S+)” shall apply to goods of such countries in lieu of the duty rates set forth in the special subcolumn in the permanent subheadings enumerated above.
U.S. Note 10(b) states that “Goods of Canada that qualify to be marked as a good of Canada pursuant to U.S. law, without regard to whether the good is marked shall be eligible for USMCA tariff treatment only under subheadings 9823.10.02 through 9823.10.45.” Since the country of origin for marking purposes of both the Hot Chocolate Drink Mix and Dunkaccino Drink Mix at issue here is Canada, the “S+” rates are applicable for goods classified under subheading 1806.90.59, HTSUS, and such goods also qualify for preferential tariff treatment under the USMCA.
The applicable subheading for both the Hot Chocolate Drink Mix and Dunkaccino Drink Mix will be 9823.10.02, HTSUS, which provides for Goods entered under the provisions of the US-Mexico-Canada Agreement under general note 11 to the tariff schedule: (con.) Goods provided for in subheading …1806.90.59 …: Goods provided for in note 10(b) to this subchapter: Subject to the quantitative limits specified in note 10(b)(1) to this subchapter. The special rate of duty will be free (S+).
If the quantitative limits of note 10(b)(1) to chapter 98 have been reached, the product will be classified in subheading 9823.10.24, HTSUS, and dutiable at the rate of 37.2 cents per kilo plus 6 percent ad valorem.
This merchandise is subject to The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (The Bioterrorism Act), which is regulated by the Food and Drug Administration (FDA). Information on the Bioterrorism Act can be obtained by calling FDA at 301-575-0156, or at the Web site www.fda.gov/oc/bioterrorism/bioact.html.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Frank Troise at frank.l.troise.cbp.dhs.gov.
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division