OT:RR:CTF:VS H281296 CMR
TARIFF NO: 2106.90.9897
Daniel E. Waltz, Esq.
Squire Patton Boggs (US) LLP
2550 M Street, N.W.
Washington, D.C. 20037
RE: Request for Reconsideration of New York Ruling Letter (NY) N271090; NAFTA eligibility of flavored sugar syrups
Dear Mr. Waltz:
This is in response to your request, dated November 22, 2016, on behalf of your client, Redpath Sugar, requesting this office reconsider the decision in New York Ruling Letter (NY) N271090, dated July 12, 2016, denying preferential tariff treatment under the North American Free Trade Agreement (NAFTA) to four flavored sugar syrups your client produces in Canada. NY N271090 dealt with the classification of the flavored sugar syrups, as well as the NAFTA eligibility for preferential tariff treatment. We reviewed the decision only with regard to the question of the eligibility of the products for preferential tariff treatment under the NAFTA and are modifying it as set forth herein.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. §1625(c)(1)), as amended by section 623 of Title VI, notice of the proposed modification was published on April 12, 2017, in the Customs Bulletin, Volume 51, No. 15. CBP received no comments in response to the notice.
FACTS:
In NY N271090, Customs and Border Protection (CBP) classified four flavored sugar syrups in subheading 2106.90.9997, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for “Food preparations not elsewhere specified or included: Other . . .: Other, Other: Containing sugar derived from sugar cane and/or sugar beets.” You do not take issue with the classification in the ruling.
The ruling describes the four flavored syrups as follows:
The products are said to be pure cane syrups flavored as caramel, hazelnut, vanilla (higher brix formula), and vanilla (lower brix formula). They are all said to contain liquid sucrose, medium invert syrup, filtered water, and trace amounts of caramel color, Foamdoctor A10FG (anti-foaming agent), potassium sorbate, and citric acid. The syrups will be both of United States and foreign ingredients blended in Canada, and imported into the U.S. in two bottle sizes, 375 ml and 750 ml, net weight, for sale to food service and retail customers. The flavored syrups will be used via pump dispensers to sweeten beverages of consumers’ choice such as coffee, teas, cocktails, etc.
We reviewed your initial ruling request, which contained ingredient breakdowns, product specifications, and a description of the processing to produce the liquid sucrose and invert syrup used in the production of the flavored syrups. You indicate in the request that the liquid sucrose and medium invert syrup contained in these flavored syrups are derived from “world” raw sugar, i.e., sugar sourced from multiple countries, which is refined by your client in Canada. The anti-foaming agent, Foamdoctor A10FG, potassium sorbate and citric acid are sourced from outside the NAFTA parties.
You have submitted additional information with regard to the de minimis value of the Foamdoctor A10FG which is a non-originating ingredient found in the flavored sugar syrups at issue. Also, you have informed us that some, though not all, of the syrups contain more than 65 percent by dry weight of sugar. Finally, you provided arguments as to why the flavored sugar syrups should qualify to be marked as goods of Canada under the NAFTA Marking Regulations.
ISSUE:
Whether the four flavored syrups at issue qualify for preferential tariff treatment under the NAFTA.
LAW AND ANALYSIS:
The NAFTA is implemented in General Note (GN) 12 of the HTSUS. GN 12(a)(i) states that goods are eligible for the NAFTA rate of duty if they originate in the territory of a NAFTA party and qualify to be marked as goods of Canada. GN 12(b) sets forth the various methods for determining whether a good originates in the territory of a NAFTA party. Specifically, these provisions provide, in relevant part, as follows:
Goods originating in the territory of a party to the North American Free Trade Agreement (NAFTA) are subject to duty as provided herein. For the purposes of this note—
Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Canada under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn followed by the symbol "CA" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
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(b) For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if—
(i) they are goods wholly obtained or produced entirely in the territory Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that—
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivision (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; ….
As described in NY N271090, the flavored syrups are produced in Canada from U.S. and foreign (non-NAFTA party) ingredients. As such, the production in Canada must cause the non-originating ingredients to meet the requisite tariff shift rule set forth in GN 12(t). As the flavored syrups at issue are classified in subheading 2106.90.99, HTSUS, the applicable tariff shift rule is “A change to heading 2106 from any other chapter.”
Only the non-originating ingredients, i.e., the raw “world” sugar, Foamdoctor A10FG, potassium sorbate and citric acid need to meet the tariff shift change requirement. Raw sugar is classified in heading 1701, HTSUS, which provides for “Cane or beet sugar and chemically pure sucrose, in solid form.” The potassium sorbate and citric acid are classified in provisions within Chapter 29, HTSUS, which provides for organic chemicals. We do not have sufficient information with regard to the Foamdoctor A10FG to determine whether it may be classifiable in Chapter 21 as an “other food preparation not elsewhere specified or included” or classifiable outside of Chapter 21. However, counsel for the importer submits that the Foamdoctor A10FG falls within the de minimis exception of GN 12. GN 12(f)(i) provides, in relevant part:
. . . a good shall be considered to be an originating good if the value of all non-originating materials used in the production of the good that do not undergo an applicable change in tariff classification set out in subdivision (t) of this note is not more than 7 percent of the transaction value of the good, adjusted to a F.O.B. basis, or, if the transaction value is unacceptable under section 402(b) of the Tariff Act of 1930, as amended, the value of all such non-originating materials is not more than 7 percent of the total cost of the good, provided that—
if the good is subject to a regional value-content requirement, the value of such non-originating materials shall be taken into account in calculating the regional value content of the good; and
the good satisfies all other applicable requirements of this note.
Counsel has submitted information to support the de minimis claim showing that the value of the Foamdoctor A10FG is not more than 7 percent of the transaction value of the flavored syrups. Therefore, we need not determine the classification of the Foamdoctor A10FG because even if it is classifiable within Chapter 21, it is de minimis under GN 12(f).
As the non-originating ingredients make the requisite tariff shift to heading 2106 from outside of chapter 21 due to the processing in Canada, and the Foamdoctor A10FG falls within the de minimis exception, the flavored syrups will qualify for preferential tariff treatment under the NAFTA if they also qualify to be marked as goods of Canada in accordance with GN 12(a)(i).
The NAFTA Marking Rules are contained in 19 CFR Part 102 of the CBP Regulations. Section 102.11 sets forth the General Rules for determining the country of origin of imported merchandise, with the exception of textile goods which are subject to the provisions of § 102.21. Section 102.11(a)(3) provides that the country of origin of a good is the country in which:
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.
“Foreign material” is defined in § 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.” 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 Foamdoctor A10FG, the citric acid and the potassium sorbate, is no more than 7 percent of the value of the flavored sugar syrups. Therefore, these non-originating ingredients are de minimis under § 102.13(a) and may be disregarded in applying the tariff shift requirement of § 102.20. The applicable tariff shift requirements in § 102.20 for the flavored syrups at issue are:
A change to a good of subheading 2106.90, other than to compound alcoholic preparations, from any other subheading, except from Chapter 4, Chapter 17, heading 2009, subheading 1901.90 or subheading 2202.90; or
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A change to subheading 2106.90 from Chapter 17, provided that the good contains less than 65 percent by dry weight of sugar.
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For those flavored sugar syrups containing less than 65 percent by dry weight of sugar, the applicable tariff shift requirement set forth in § 102.20, i.e., a change from Chapter 17 to subheading 2106.90, is met. These flavored sugar syrups are goods of Canada and should be marked as such. For those flavored sugar syrups containing 65 percent or more by dry weight of sugar, we must continue the application of the NAFTA Marking Regulations as those syrups do not meet the applicable alternative rule in
§ 102.20.
Section 102.11(b) provides, 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[.]
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With regard to “essential character,” § 102.18(b) provides:
For purposes of identifying the material that imparts the essential character of 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):
The materials to be considered must be classified in a tariff provision from which a change in tariff classification is not allowed under the specific rule or other requirements applicable to the good under consideration. . . .
As the rule in § 102.20, which is applicable to the flavored sugar syrups containing 65 percent of more by dry weight of sugar, does not allow a change in tariff classification from Chapter 17, the raw sugar is the ingredient that imparts the essential character to the flavored sugar syrups. Therefore, in accordance with § 102.11(b)(1), the countries of origin of the flavored sugar syrups are the countries of origin of the raw sugar.
However, § 102.19(a) provides, in relevant part:
. . . if a good which is originating within the meaning of § 181.1(q) of this chapter is not determined under § 102.11(a) or (b) or § 102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production other than minor processing, provided that a Certificate of Origin . . . has been completed and signed for the good.
Therefore, the flavored sugar syrups containing 65 percent or more by dry weight of sugar are also goods of Canada and should be marked as such.
As we have determined that the flavored sugar syrups qualify as NAFTA originating goods under GN 12(b) of the HTSUS, they meet the definition of originating within the meaning of § 181.1(q). In addition, the processing which occurs in Canada is more than minor processing as defined in § 102.1(m). Therefore, the flavored sugar syrups qualify to be marked as goods of Canada as required by GN 12(a)(i).
HOLDING:
The flavored sugar syrups qualify for preferential tariff treatment under the NAFTA and should be marked as goods of Canada. NY N271090, dated July 12, 2016, is hereby modified in accordance with this decision. In accordance with 19 U.S.C.
§ 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director Commercial and Trade Facilitation Division