OT:RR:CTF:VS H296462 EGJ
TARIFF NO: 2106.90.98
Deissy Rincon
Customs Compliance Specialist
Gay Lea Foods Limited
5200 Orbitor Drive
Mississauga, Ontario, L4W 5B4
RE: NAFTA Eligibility of Non-Dairy Whipped Topping
Dear Ms. Rincon:
This is in response to your request for a ruling from U.S. Customs and Border Protection (CBP), dated April 4, 2018, regarding whether a non-dairy whipped topping is eligible for preferential treatment under the North American Free Trade Agreement (NAFTA).
FACTS:
The non-dairy whipped topping will be manufactured at the Gay Lea facility in Ontario, Canada. The product’s intended use is as a topping on desserts or fruit. The whipped topping has a vanilla flavor. The ingredients will be sourced from Canada, the United States, and from countries which are not parties to NAFTA. The following ingredients do not originate in Canada: hydrogenated coconut oil, sodium caseinate, sodium stearoyl – 2- lactylate (USA), annatto color (USA), salt (USA), artificial vanilla flavor, polysorbate 60 and 80 (USA), a combination monoglyceride and diglyceride product (USA), and carrageenan gum.
At the manufacturing facility, the ingredients are homogenized using a colloid mill which changes the chemical and physical properties of the product. The resulting emulsion is then heat treated using a UHT (ultra-high temperature) line. Then the manufacturer adds nitrogen oxide to the product, which is then packed to be sold at retail sale in 225 gram aerosol cans. The finished aerosol cans of non-dairy whipped topping will then be exported to the U.S.
ISSUE:
Whether the non-dairy whipped topping will qualify for preferential tariff treatment under the NAFTA.
LAW AND ANALYSIS:
The NAFTA is implemented in General Note (GN) 12 of the Harmonized Tariff Schedule of the United States (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 above, the whipped topping is produced in Canada from Canadian, U.S. and foreign (non-NAFTA party) ingredients. As such, the production in Canada must cause the nonoriginating ingredients to meet the requisite tariff shift rule set forth in GN 12(t). The whipped topping product at issue is classified in subheading 2106.90, HTSUS, as “Food preparations, not elsewhere specified or included: other.” Under GN 12(t), the applicable tariff shift rule is “A change to heading 2106 from any other chapter.”
Only the four nonoriginating ingredients, i.e., the hydrogenated coconut oil, the sodium caseinate, the artificial vanilla flavor and the carrageenan gum need to meet the tariff shift rule. The classification of these four products is as follows:
The hydrogenated coconut oil is classified in heading 1516, HTSUS, which provides, in pertinent part, for “[V]egetable fats and oils and their fractions, partly or wholly hydrogenated.”
The sodium caseinate is classified in heading 3501, HTSUS, which provides for “Casein, caseinates and other casein derivatives; casein glues.” See New York Ruling Letter (“NY”) 877726, dated September 2, 1992.
The artificial vanilla flavor is classified in heading 3302, HTSUS, which provides, in pertinent part, for “Mixtures of odoriferous substances and mixtures (including alcoholic solutions) with a basis of one or more of these substances, of a kind used as raw materials in industry.” See NY 889315, dated September 10, 1993; and NY 888541, dated August 3, 1993.
The carrageenan gum is classified in heading 1302, HTSUS, which provides for “Vegetable saps and extracts; pectic substances, pectinates and pectates; agar-agar and other mucilages and thickeners, whether or not modified, derived from vegetable products.” See NY R04592, dated August 29, 2006.
Per GN 12(t), the tariff shift rule for the whipped topping of heading 2106, HTSUS, is “A change to heading 2106 from any other chapter.” Each of the four nonoriginating products are classified in Chapters outside of Chapter 21. After importation into Canada, they will be combined with other ingredients and processed into a whipped topping of heading 2106, HTSUS. Therefore, we find that these four nonoriginating ingredients meet the applicable tariff shift rule.
As the nonoriginating ingredients undergo the requisite tariff shift, the whipped topping will qualify for preferential tariff treatment under the NAFTA if it also qualifies to be marked as a good of Canada in accordance with GN 12(a)(i). The NAFTA Marking Rules are contained in 19 CFR Part 102 of the Federal 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.” The applicable tariff shift requirement in § 102.20 for the whipped topping at issue is:
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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As stated above, the four ingredients which originate outside of the NAFTA parties are classified as follows: hydrogenated coconut oil in heading 1516, HTSUS, the sodium caseinate in heading 3501, HTSUS, the artificial vanilla flavor in heading 3302, HTSUS, and the carrageenan gum in heading 1302, HTSUS. Therefore, for these ingredients, the requisite tariff shift rule has been met. For the U.S. ingredients, their classification is as follows:
The Polysorbate 60 and the Polysorbate 80 are both classified in heading 3402, HTSUS, which provides, in pertinent part, for “Organic surface-active agents (other than soap); surface-active preparations … whether or not containing soap, other than those of heading 3401.” See NY I87541, dated December 6, 2002; and NY N130897, dated November 30, 2010.
The annatto color is classified in heading 3203, HTSUS, which provides, in pertinent part, for “Coloring matter of vegetable or animal origin (including dyeing extracts but excluding animal black), whether or not chemically defined.” See NY M83996, dated June 13, 2006.
The salt is classified in heading 2501, HTSUS, which provides, in pertinent part, for “Salt (including table salt and denatured salt) and pure sodium chloride, whether or not in aqueous solution or containing added anti-caking or free-flowing agents.”
The sodium stearoyl – 2- lactylate is classified in heading 2918, HTSUS, which provides for “Carboxylic acids with additional oxygen function and their anhydrides, halides, peroxides and peroxyacids; their halogenated, sulfonated, nitrated or nitrosated derivatives.”
The applicable tariff shift rule requires a shift to subheading 2106.90, HTSUS, from any other subheading – subject to certain exceptions. We note that all of the above ingredients are classifiable in headings other than heading 2106, HTSUS. Further, none of the above ingredients are classified in the excepted provisions of Chapter 4, Chapter 17, heading 2009, subheading 1901.90 or subheading 2202.90, HTSUS. Therefore, all of the above ingredients undergo the requisite tariff shift to be marked as a product of Canada.
We do not have enough information to classify one of the U.S. ingredients – the combination monoglyceride and diglyceride product. However, 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 monoglyceride and diglyceride product is no more than 7 percent of the transaction value of the finished whipped topping. Therefore, this ingredient is de minimis under § 102.13(a) and may be disregarded in applying the tariff shift requirement of § 102.20.
As we have determined that the whipped topping qualifies as a NAFTA originating good under GN 12(b) of the HTSUS, and qualifies to be marked as a good of Canada per GN 12(a)(i), the topping qualifies for preferential tariff treatment under NAFTA.
HOLDING:
The non-dairy whipped topping qualifies for preferential tariff treatment under the NAFTA and should be marked as a product of Canada.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch