CLA-2-18:OT:RR:NC:N2:N232
Mr. Graeme Honeyfield Glinso Foods LLC 3800 SW Cedar Hills Blvd
Beaverton, OR 97005
RE: The Classification, Country of Origin Marking and Eligibility of the United States-
Mexico-Canada Trade Agreement (USMCA) for a Sweetened Cocoa Blend from Mexico (“SCB 199 Blend”)
Dear Mr. Honeyfield:
This is in response to your letter dated November 10, 2021, requesting a ruling on classification,
country of origin marking and the eligibility of the USMCA on a Sweetened Cocoa Blend.
The subject merchandise is a Sweetened Cocoa Blend (“SCB 199 Blend”) which is described as a dry blend of 99 percent refined cane sugar and 1 percent cocoa powder. The sugar in the blend is grown and refined in Mexico. The cocoa powder is produced in the United States from cocoa beans sourced from non-USMCA countries. The ingredients are processed, blended and packed in Mexico. The SCB 199 Blend will be imported in railcars where moist air is removed and desiccant bags are installed in the headspace of the railcar to maintain a low humidity to ensure microbiologic stability. Alternately, the SCB 199 Blend may be packed into bulk 1000-1500 kg supersacks. The finished product will used in making chocolate and confectionery products.
Classification:
The applicable subheading for the SCB 199 Blend will be 1806.10.4500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Chocolate and other food preparations containing cocoa: Cocoa powder, containing added sugar or other sweetening matter: Containing 90 percent or more by dry weight of sugar: Articles containing over 65 percent by dry weight of sugar described in additional U.S. note 2 to chapter 17: Described in additional U.S. note 7 to chapter 17 and entered pursuant to its provisions. The general rate of duty will be 10 percent ad valorem.
If the quantitative limits of additional U.S. note 7 to chapter 17 have been reached, the product will be classified in subheading 1806.10.5500, HTSUS, and dutiable at the rate of 33.6 cents per kilogram. In addition, products classified in subheading 1806.10.5500, HTSUS, will be subject to additional duties based on their value, as described in subheadings 9904.17.17 to 9904.17.48, 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).
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported 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: (a) The country of origin of a good is the country in which: (1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic materials; or (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 the SCB 199 Blend is neither wholly obtained nor produced exclusively from “domestic” (Mexico, in this case) materials. Accordingly, we look to section 102.11(a)(3). The applicable tariff shift requirement in section 102.20 for the SCB 199 Blend of subheading 1806.10, HTSUS, consist of the following:
A change to subheading 1806.10 from any other heading, except from heading 1805 or from Chapter 17; or
A change to subheading 1806.10 from Chapter 17, provided that the good contains less than 65 percent by dry weight of sugar.
Because the foreign material (cocoa powder) contained in the SCB 199 Blend is classified in subheading 1805.00.0000 within the heading 1805, the tariff shift rule is not satisfied. We note that Section 102.13 provides for a de minimis exception for foreign materials that do not undergo the applicable change in tariff classification required in § 102.20. Section 102.13(a) provides:
Except as otherwise provided in paragraphs (b) and (c) of this section, foreign materials that do not undergo the applicable change in tariff classification set out in § 102.20 or satisfy the other applicable requirements of that section when incorporated into a good shall be disregarded in determining the country of origin of the good if the value of those materials is no more than 7 percent of the value of the good or 10 percent of the value of a good of Chapter 22, Harmonized System.
Based on the information provided, the value of the cocoa powder contained in the SCB 199 Blend is no more than 7 percent of the value of the product. Therefore, the cocoa powder is de minimis under § 102.13(a) and shall be disregarded in applying the tariff shift requirement of § 102.20.
Consequently, the sugar of Mexican origin will be the only ingredient to be considered in the SCB 199 Blend and determine the country of origin of the SCB 199 Blend. Therefore, the country of origin for marking purposes of the SCB 199 Blend is Mexico.
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 all of the ingredients in the SCB 199 Blend are USMCA originating, the product is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials under GN 11(b)(ii). Accordingly, the SCB 199 Blend classified under subheading 1806.10.4500, HTSUS, is eligible for preferential tariff treatment under the USMCA.
However, if the SCB 199 Blend is classified under subheading 1806.10.5500, HTSUS, we note that the special column for subheading 1806.10.5500, 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 … 1806.10.55 … 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(a) states that “Goods of Mexico that qualify to be marked as a good of Mexico pursuant to U.S. law, without regard to whether the good is marked, and goods of the United States shall be eligible for USMCA tariff treatment only under subheading 9823.10.01.” Therefore, with respect to the SCB 199 Blend, the “S+” rates are applicable for goods classified under subheading 1806.10.55, HTSUS.
The applicable subheading for the SCB 199 Blend will be 9823.10.01, 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 …1806.10.01 …: Goods provided for in note 10(a) to this subchapter. The special rate of duty will be free (S+).
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 https://hts.usitc.gov/current.
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