CLA-2 OT:RR:CTF:TCM H105330 TNA
Ms. Sherri Comeau
Import Export Manager/ Customs Compliance
Barry Callebaut
2950 Nelson Street
St-Hyacinthe, Quebec J2S 1Y7
RE: Revocation of NY N007869; Classification of milk chocolate with hazelnuts
Dear Ms. Comeau:
This letter is in reference to New York Ruling Letter (“NY”) N007869, issued to ROE Logistics on behalf of its client, Barry Callebaut Canada (“Barry Callebaut”) on April 2, 2007, concerning the tariff classification of milk chocolate with hazelnuts. In that ruling, U.S. Customs and Border Protection (“CBP”) classified the merchandise in subheading 1806.20.81, Harmonized Tariff Schedule of the United States (“HTSUS”), as a dairy product containing cocoa. We have reviewed NY N007869 and found it to be in error. For the reasons set forth below, we hereby revoke NY N007869.
Notice of the proposed action was published in the Customs Bulletin, Vol. 49, No. 16, on April 22, 2015. CBP received no comments in response to this notice.
FACTS:
The subject merchandise is Product Number M-6LNPL-N0128, which consists of milk chocolate with hazelnuts that contains 39.0 percent sugar, 20.0 percent hazelnuts, 19.5 percent cocoa butter, 8.5 percent non-fat dry milk, 6.5 percent dry whole milk, 6.5 percent cocoa paste, and traces of soy lecithin and vanilla. The total milk fat is 2.2 percent and the total milk solids are 15.0 percent. The percentage of milk fat is included in the percentage of milk solids. The subject merchandise is imported in 2.5-kilogram bags and is ready to use. It is intended to be used on ice cream or in the molding of cakes, pastries and confectionery.
In NY N007869, CBP classified Product Number M-6LNPL-N0128 in subheading 1806.20.81, HTSUS, as a dairy product containing cocoa. Once the quantitative limits of Additional U.S. Note 10 to Chapter 4, HTSUS, were met it was then classified in subheading 1806.20.82, HTSUS.
ISSUE:
Is the instant merchandise classified under subheadings 1806.20.81 and 1802.20.82, HTSUS, as a dairy product containing cocoa, or under subheadings 1806.20.95 and 1806.20.98, as a food preparation containing cocoa and over ten percent by dry weight of sugar, or under subheading 1806.20.99, HTSUS, as an “other” type of food preparation containing cocoa?
LAW AND ANALYSIS:
Classification 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 of goods 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 GRIs may then be applied. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and, mutatis mutandis, to the GRIs.
The HTSUS provisions under consideration are as follows:
1806 Chocolate and other food preparations containing cocoa:
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
Other:
Other:
Other:
Dairy products described in additional U.S. note 1 to chapter 4:
1806.20.81 Described in additional U.S. note 10 to chapter 4 and
entered pursuant to its provisions
Other:
1806.20.82 Containing less than 21 percent by weight of milk solids
Articles containing over 10 percent of dry weight of sugar described in additional U.S. note 3 to chapter 17:
1806.20.95 Described in additional
U.S. note 8 to Chapter 17 and entered pursuant to its provisions
1806.20.98 Other
1806.20.99 Other
Additional U.S. Note 1 to Chapter 4, HTSUS, provides that:
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. [emphasis added]
Additional U.S. Note 3 to Chapter 17, HTSUS, provides that:
For the purposes of this schedule, the term “articles containing over 10 percent by dry weight of sugar described in additional U.S. note 3 to chapter 17” means articles containing over 10 percent by dry weight of sugars derived from sugar cane or sugar beets, whether or not mixed with other ingredients, except (a) articles not principally of crystalline structure or not in dry amorphous form, the foregoing that are prepared for marketing to the ultimate consumer in the identical form and package in which imported; (b) blended syrups containing sugars derived from sugar cane or sugar beets, capable of being further processed or mixed with similar or other ingredients, and not prepared for marketing to the ultimate consumer in the identical form and package in which imported; (c) articles containing over 65 percent by dry weight of sugars derived from sugar cane or sugar beets, whether or not mixed with other ingredients, capable of being further processed or mixed with similar or other ingredients, and not prepared for marketing to the ultimate consumer in the identical form and package in which imported; or (d) cake decorations and similar products to be used in the same condition as imported without any further processing other than the direct application to individual pastries or confections, finely ground or masticated coconut meat or juice thereof mixed with those sugars, and sauces and preparations therefor. [emphasis added]
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127 (Aug. 23, 1989).
The EN to heading 18.06 of the Harmonized System 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.
There is no dispute that the subject merchandise is classified in heading 1806, HTSUS. NY N007869 classified Product Number M-6LNPL-N0128 in subheading 1806.20.81, HTSUS. In your request for reconsideration, you argue that the percentages of the subject merchandise’s components make it ineligible for this subheading. By its terms, subheading 1806.20.81, HTSUS, covers dairy products containing cocoa. Dairy products are described in Additional U.S. Note 1 to Chapter 4, HTSUS.
To meet the terms of Additional U.S. Note 1 to Chapter 4, HTSUS, the instant merchandise must consist of: (a) 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); (b) 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 (c) dried milk 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. Of all of these items, the instant merchandise most closely resembles the last.
While Product Number M-6LNPL-N0128 contains dried milk which has less than 5.5 percent milk fat and is mixed with other ingredients, it contains less than 16 percent milk solids. As such, we agree that the subject merchandise does not meet the terms of Additional U.S. Note 1 to Chapter 4, HTSUS, and therefore cannot be classified as a dairy product of subheading 1806.20.82, HTSUS.
In your request for reconsideration, you request classification of the subject merchandise in subheading 1806.20.95, HTSUS. This subheading provides for food preparations containing cocoa that consist of more than 10 percent sugar by dry weight and are described by Additional U.S. Note 3 to Chapter 17, HTSUS. Additional U.S. Note 3 to chapter 17, HTSUS, covers merchandise containing more than 10 percent sugar by weight, derived from sugar cane or sugar beets, but excludes certain merchandise, even when such merchandise contains more than 10 percent sugar. One such exclusion is for cake decorations and similar products that are used in the same condition as imported without any further processing other than the direct application to individual pastries or confections. See Additional U.S. Note 3(d) to Chapter 17, HTSUS. This excludes the subject merchandise because it is imported ready to use in the molding of cakes, pastries, and confectionary. As a result, the subject merchandise is excluded from subheading 1806.20.95, HTSUS.
In the alternative, you argue for classification in subheading 1806.20.98, HTSUS. To be classified in this subheading, however, merchandise must still be described by Additional U.S. Note 3 to Chapter 17, HTSUS. Because the subject merchandise is excluded from this note, it cannot be classified in subheading 1806.20.98, HTSUS.
The subject merchandise is a food preparation containing cocoa. As a result, it is classified in subheading 1806.20.99, 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: Other: Other.”
HOLDING:
By application of GRI 1 and GRI 6, Product Number M-6LNPL-N-128 is classified in subheading 1806.20.99, 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: Other: Other.” The 2015 column one, general rate of duty is 8.5% ad valorem.
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 internet at www.usitc.gov/tata/hts/.
EFFECT ON OTHER RULINGS:
NY N007869, dated April 2, 2007, is hereby REVOKED.
In accordance with 19 U.S.C. §1625(c), this action will become effective 60 days after publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division