CLA-2-17:OT:RR:NC:N2:232
Mr. Jason Cetel
Crook & Marker LLC
1 N. Johnston Avenue
Hamilton, NJ 08609
RE: The tariff classification, country of origin and eligibility of the United States-Mexico-Canada Agreement (USMCA) of Fermentation Starters from Canada
Dear Mr. Cetel:
In your letter dated April 25, 2022, you requested a binding ruling on the classification, country of origin and eligibility of Fermentation Staters under the United States-Mexico-Canada Agreement (USMCA). An ingredients breakdown, manufacturing flowchart and descriptive literature were included with your request.
The subject merchandise is described as two Fermentation Starters.
FermGo™ FG-01 is said to contain 99 percent granulated sugar (with a polarity greater than or equal to 99.5) and 1 percent active yeast.
FermGo™ FG-02 is said to contain 99.98 percent granulated sugar (with a polarity greater than or equal to 99.5), 0.1 percent active yeast and 0.1 percent inactive yeast cell hulls.
The granulated sugar (product of Brazil or Columbia) and yeast (product of the European Union) are blended, homogenized and packed in Canada. The finished product will be shipped to the United States in approximately 2,100-2,400-pound supersacks or 44-pound bags. The Fermentation Starter products will be used in the commercial manufacturing of alcoholic beverages.
Classification:
In your request, you suggest that the correct classification for the Fermentation Starters is 2102.10.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provide for “Yeasts (active or inactive); other single-cell microorganisms, dead (but not including vaccines of heading 3002); prepared baking powders: Active yeasts. We disagree.
Classification under the Harmonized Tariff Schedule of the United States (HTSUS) is made in accordance with the General Rules of Interpretation (GRI). GRI 3(b) provides that mixtures and composite goods consisting of different materials or components shall be classified as if the consisted solely of the material or component that which gives them their essential character. Explanatory Note VIII to GRI 3(b) states that the factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the good.
The Fermentation Starters consist of 99-99.98 percent sugar and 0.2-1 percent yeast and are used as sugar to start the fermentation process in the manufacture of alcoholic beverages. Thus, the sugar imparts the essential character of the Fermentation Starters. CBP has consistently classified mixtures of sugar and other ingredients in heading 1701, HTSUS, when an analysis of the mixture indicated that the sugar gave the mixture its essential character. CBP has consistently classified such blends in heading 1701, HTSUS. For example, see NY G86340, dated January 29, 2001, 99% sugar, 1% gelatin; NY G86384, dated February 8, 2001, 95% sugar, 5% gelatin; NY G86512, dated February 12, 2001, 99% sugar, 1% dried apple juice; NY H82796, dated July 12, 2001, 99.5% sugar, .5% cocoa; and NY I86961, dated October 30, 2002, cinnamon sugar and vanilla sugar blends.
Therefore, in accordance with GRI 3(b), the applicable subheading for Fermentation Starters will be 1701.99.1050, HTSUS, which provides for “Cane or beet sugar and chemically pure sucrose, in solid form: Other: Other: Described in additional U.S. note 5 to this chapter and entered pursuant to its provisions: Other: Other.” The rate of duty will be 3.6606 cents per kilogram less 0.020668 cents per kilogram for each degree under 100 degrees (and fractions of a degree in proportion) but not less than 3.143854 cents per kilogram. If not described in additional U.S. note 5 to chapter 17 and not entered pursuant to its provisions, the applicable subheading will be 1701.99.5050, HTSUS. The rate of duty will be 35.74 cents per kilogram.
Country of Origin:
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.
The “country of origin” is defined in 19 C.F.R. § 134.1(b) 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 this part; however, for a good of a NAFTA or USMCA country, the marking rules set forth in part 102 of this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin.”
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. See 19 C.F.R. § 102.11.
Applied in sequential order, 19 C.F.R. § 102.11(a) provides that 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 Part 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
The Fermentation Starters are neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin of the Fermentation Starters, and paragraph (a)(3) must be applied next to determine the origin of the finished article.
The Fermentation Starters are classified under heading 1701, Harmonized Tariff Schedule of the United States (HTSUS).
The tariff shift requirement in Part 102.20 for the heading 1701 at issue states:
A change to heading 1701 through 1702 from any other Chapter.
The Fermentation Starters do not meet the tariff shift because the foreign material, granulated sugar (Product of Brazil or Columbia) is also classified under heading 1701. As a result, Part 102.11(a) does not apply.
Section 102.11(b) states, in relevant part:
Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section:
The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good….
In determining the “essential character” of the finished good, Section 102.18(b)(1) provides, in relevant part:
(b)(1) For purposes of identifying the material that imparts the essential character to a good under § 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good. For purposes of this paragraph (b)(1):
…
(ii) Materials that may be considered include materials produced by the producer of the good and incorporated in the good. For example, if a producer of a good purchases raw materials and converts those raw materials into a component that is incorporated in the good, that component is a material that may be considered for purposes of identifying the materials that impart the essential character to the good, provided that the component is classified in a tariff provision from which a change in tariff classification is not allowed under the specific rule…
The granulated sugar from Brazil or Columbia is the single component classified in a tariff provision from which a change in tariff classification is not allowed. Accordingly, the country of origin of the Fermentation Starters for marking purposes is Brazil or Columbia.
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 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 non-originating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o));
Since the Fermentation Starters contain non-originating ingredients, they are not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i), nor are the products produced exclusively from originating materials per GN 11(b)(ii). Thus, we must determine whether the product qualifies under GN 11(b)(iii). As previously noted, the Fermentation Starters are classified under heading 1701, HTSUS. The applicable rule of origin for goods classified under heading 1701, HTSUS, is in GN 11(o), HTSUS, which provides in relevant part:
A change to headings 1701 through 1703 from any other chapter.
The Fermentation Starters contain granulated sugar (heading 1701) which is non-originating from Brazil or Columbia and is already classified in Chapter 17, HTSUS. Therefore, the tariff shift rule is not met. Accordingly, the Fermentation Starters classified under subheading 1701.99.1050, HTSUS, do not satisfy the tariff shift rule under GN 11(o).
However, we note that the special column for subheading 1701.99.5050, HTSUS, references subheadings 9823.09.01- 9823.09.09, HTSUS, for “S+”. U.S. Note 9 to Subchapter XXII, which concerns sugar pursuant to the USMCA, provides that:
This note and subheadings 9823.09.01 through 9823.09.09 are effective as to originating goods of the USMCA countries eligible for special tariff treatment under the terms of general note 11, except as provided in subparagraph (b)(3) to the tariff schedule classified in the permanent subheadings of …1701.99.50…. From July 1, 2020 through December 31, 2020, in 2021 and in successive years thereafter, the rates of duty provided for in subheadings 9823.09.01 through 9823.09.09 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.
…
(b) 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 9823.09.02 through 9823.09.09.
The aggregate quantity of originating goods of Canada entered under subheading 9823.09.02 from July 1, 2020 through December 31, 2020 shall not exceed the quantity of 4,800 metric tons. Beginning in 2021 and each year following, the quantitative limitations to originating goods of Canada set forth in this note shall be 9,600 metric tons. Only originating goods of Canada that are wholly obtained from sugar beets produced in Canada may enter under subheading 9823.09.02.
If the aggregate quantity of originating goods of Canada entered under subheading 9823.09.02 has exceeded the quantity specified in note 9(B)(1) for such year or if the originating good of Canada is not wholly obtained from sugar beets produced in Canada, such originating goods of Canada shall be entered under subheadings 9823.09.03 through 9823.09.08.
An additional quantity of goods of Canada shall be allowed entry under subheading 9823.09.09 in any calendar year in which the United States Secretary of Agriculture makes a determination to permit importation into the United States at in-quota tariff rates of additional quantities of refined sugar, other than specialty sugar, above the quantities made available at those rates pursuant to its commitments under the WTO Agreement and other trade agreements. The Office of the United States Trade Representative shall publish in the Federal Register a determination of this additional quantity for that year. Goods may not be entered under subheading 9823.09.09 in any calendar year before the date indicated in such Federal Register Notice. Goods entered under subheading 9823.09.09 may be made from nonoriginating raw sugar but shall meet other applicable conditions for preferential tariff treatment under general note 11 to this tariff schedule.
As determined above, the Fermentation Starters at issue are not originating pursuant to GN 11. Furthermore, the granulated sugar used in Fermentation Starters is refined sugar from Brazil or Columbia. Since the Fermentation Starters are not originating goods of Canada, nor do they qualify to be marked as a good of Canada, U.S. Note (b)(1) and (2) are inapplicable. However, paragraph (b)(3) allows for an additional quantity of goods, which may be made from nonoriginating raw sugar, to be entered under subheading 9823.09.09, HTSUS, provided other applicable conditions for preferential tariff treatment under GN 11 are met. Accordingly, the Fermentation Starters may be entered under subheading 9823.09.09, HTSUS, if they meet the additional quantitative limitations as determined by the U.S. Secretary of Agriculture. The Fermentation Starters that exceed the quantitative limitations will not be eligible under subheading 9823.09.09, HTSUS, and are subject to the column one general duty rate. The rate of duty will be 35.74 cents per kilogram.
This merchandise may be subject to the Federal Food, Drug, and Cosmetic Act and/or The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (The Bioterrorism Act), which are administered by the U.S. Food and Drug Administration (FDA). Information on the Federal Food, Drug, and Cosmetic Act, as well as The Bioterrorism Act, can be obtained by calling the FDA at 1-888-463-6332, or by visiting their website at www.fda.gov.
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 [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division