OT:RR:CTF:FTM H308798 TJS
Center Director
Agriculture & Prepared Products
Center of Excellence and Expertise
1100 Raymond Blvd
Newark, New Jersey 07102
Attn: Mr. Joel Mascobetto, Import Specialist
RE: Internal Advice Request; Tariff Classification and Country of Origin of Lip Pops®
Dear Center Director,
This is in response to the internal advice request, dated February 7, 2020, initiated by Sandler, Travis & Rosenberg, P.A., on behalf of Imaginings 3, Inc. (“Imaginings”), concerning the tariff classification under the Harmonized Tariff Schedule of the United States (“HTSUS”) and country of origin marking of certain confectionary products known as Lip Pops®. In reviewing your request, we have also considered arguments presented during an April 1, 2020 meeting. Our decision is set forth below.
Imaginings has asked that certain information submitted in connection with this request be treated as confidential, pursuant to 19 C.F.R. § 177.2(b)(7). The request for confidentiality is approved. Information regarding costs and the manufacturing process contained in the request will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
The merchandise at issue is Imaginings’ Lip Pops® and Mini Lip Pops® (collectively referred to as “Lip Pops®”), which are articles comprised of candy attached to a plastic piece designed to look like a mouth. The plastic component of the Lip Pops® includes a plastic “post” onto which the piece of hard candy is deposited. Lip Pops® are available in a variety of animal, creature, and character depictions, including popular Disney characters. The regular-sized Lip Pops® contain 0.8 oz of candy, and the Mini Lip Pops® contain 0.28 oz of candy.
Imaginings provided four samples of regular-sized Lip Pops® and a variety bag of Mini Lip Pops®. The four regular-sized Lip Pops® include a bunny nose and teeth, vampire fangs, monster teeth, and a Disney character’s snout. Each Lip Pops® is attached to a piece of designed paperboard. The product is packaged in a plastic window bag, allowing the consumer to see the product through both sides of the packaging. The front of the packaging reads “Lip Pops® Lollipops” and the back includes the nutrition label and flavor key. The Lip Pops® are available in three flavors: blue raspberry, strawberry, and green apple. The flavor of the candy component is based on the color of the candy, which is visible through the back of the package. Below are images, provided by Imaginings, of regular-sized Lip Pops® in their packaging:
The variety bag of the Mini Lip Pops® contains six individually-wrapped “#selfie” Mini Lip Pops® depicting various animals (#puppy, #bunny, #oink, and #meow). The front of the packaging reads “Lip Pops® Lollipops,” “Artificially flavored assorted fruit flavors,” and encourages users to “Share your #LipPopSelfie with us!” The back of the package lists the nutrition label and flavors, which include watermelon, blue raspberry, strawberry, and green apple. Below is an image of the Mini Lip Pops® variety bag:
According to Imaginings’ submission, the plastic component will be manufactured in China (“Country One”) and combined with a confection of Mexico or Vietnam origin (“Country Two”) in Mexico or Vietnam (“Country Two”). Imaginings has proposed the following country of origin marking: “Toy Product of [Country One], Candy Made in [Country Two].”
ISSUES:
What is the tariff classification of the Lip Pops®?
What is the country of origin for marking purposes of the Lip Pops®?
LAW AND ANALYSIS:
Tariff Classification
Classification of goods under the HTSUS is made in accordance with the General Rules of Interpretation (“GRI”). GRI 1 provides that the classification 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 GRI may then be applied.
The 2019 HTSUS headings under consideration are as follows:
1704: Sugar confectionery (including white chocolate), not containing cocoa:
9503: Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls, other toys; reduced-scale (“scale”) models and similar recreational models, working or not; puzzles of all kinds; parts and accessories thereof:
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GRI 3(a) and (b) provide as follows:
When, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
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The Harmonized Commodity Description and Coding System Explanatory Notes
(“EN”) constitute the “official interpretation of the Harmonized System” at the international level. See 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989). While neither legally binding nor dispositive, the EN “provide a commentary on the scope of each heading” of the HTSUS and are “generally indicative of [the] proper interpretation” of these headings. See id.
The EN to GRI 3(b) state, in pertinent part:
This second method relates only to:
Mixtures.
Composite goods consisting of different materials.
Composite goods consisting of different components.
Goods put up in sets for retail sales.
It applies only if Rule 3(a) fails.
In all these cases the goods are to be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
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 goods.
For the purposes of this Rule, composite goods made up of different components shall be taken to mean not only those in which the components are attached to each other to form a practically inseparable whole but also those with separable components, provided these components are adapted one to the other and are mutually complementary and that together they form a whole which would not normally be offered for sale in separate parts.
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The EN to heading 95.03 provides in pertinent part:
(D) Other toys.
This group covers toys intended essentially for the amusement of persons (children or adults).
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The subject Lip Pops® are composite goods, which are goods that consist of different materials or are made up of different components. The Lip Pops® consist of a plastic component and a candy component that are attached to each other to form a practically inseparable whole. Composite goods consisting of different components cannot be classified by reference to GRI 1 because the components are prima facie classifiable in different headings. GRI 3(b) states in part that “composite goods made up of different components which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character.” In accordance with the EN to GRI 3(b), the essential character of a composite good may 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 goods.
Application of the essential character test is a fact-intensive analysis. Toy Biz, Inc. v. United States, 26 CIT 816, 219 F. Supp. 2d 1289 (2002). In addition to the representative factors set forth in the EN to GRI 3(b), the Court of International Trade has listed other factors to be considered in determining “essential character,” including the respective indispensability of the properties of the components of the merchandise, the respective cost of the components of the merchandise, the basis for a consumer’s decision to purchase the merchandise, and the respective duration and/or frequency of the use of the components. See Better Home Plastics Corp. v. United States, 20 CIT 221, 916 F. Supp. 1265 (1996), aff’d, 119 F.3d 969 (Fed. Cir. 1997). Essential character has traditionally been understood as “that which is indispensable to the structure, core or condition of the article, i.e., what it is” and as “the most outstanding and distinctive characteristic of the article.” Structural Indus. v. United States, 29 CIT 180, 185, 360 F. Supp. 2d 1330, 1336 (2005).
The present issue is whether the candy component or the plastic component imparts the essential character to the subject Lip Pops®. Imaginings asserts that the plastic component imparts the essential character, thereby classifying the Lip Pops® in heading 9503, HTSUS, as toys. Specifically, Imaginings argues that the plastic piece costs more than the candy component and plays the primary role in the use of the Lip Pops®, as evidenced by the product’s design, packaging, and how it is sold at retail. We disagree. Based on our research and examination of the samples, we find that the candy component is the most outstanding and distinctive characteristic of the Lip Pops® and, therefore, imparts the essential character.
A breakdown of the manufacturing costs indicates that the plastic component costs more than the candy component. Imaginings also notes that the Lip Pops® have a retail price comparable to conventional plastic teeth or lip toy pieces, but higher than typical hard candy or lollipops, claiming that consumers will pay the higher price for a durable toy, but not for a hard candy. We recognize that consumers are willing to pay a premium to have the candy attached to a novelty holder rather than a typical lollipop stick because the novelty holder provides additional amusement while the user is consuming the candy. Regardless, we believe the candy serves as the basis for the consumer’s decision to purchase the Lip Pops® because consumers identify and use the product primarily as candy. According to Imaginings, the plastic post is designed so that the user can hold the Lip Pops® in their mouth after the candy dissolves, thereby allowing for long lasting play value without need for the candy component. If a consumer primarily intends to emulate a character or amusing face, they would likely purchase a costume accessory that does not require the consumption of a candy. We also note that many of the Lip Pops® depict animal snouts or character noses that do not align with the user’s nose when placed in their mouth, thus lessening the utility of the products as dress-up or costume accessories. Even if users find amusement in the plastic component without the candy, it is impractical to separate the plastic component without consuming the candy. The consumption of the candy is the indispensable function of the Lip Pops® whereas the plastic component serves the secondary purpose of holding the candy, albeit in an amusing way. Any value of the plastic component as a toy or costume accessory does not outweigh the primary use of the product as a candy.
The Lip Pops® packaging promotes the primary use of the product as lollipops. Imaginings asserts that the packaging enhances the role of the toy, specifically claiming that the Lip Pops® are sold with “face masks”—referring to the paperboard cards that hold the regular-sized Lip Pops®—and noting that the candy piece is not visible through the front of the window bag. This argument applies only to the packaging of the regular-sized Lip Pops® as the Mini Lip Pops® are sold without paperboard cards and the variety bag depicts the candies. Nevertheless, we disagree with Imaginings’ argument. Imaginings mischaracterizes the paperboard cards as “face masks.” The cards are too small to be face masks and not every card depicts an entire face, such as the one holding the vampire fangs Lip Pops® which contains no facial design. As such, we find that the primary purpose of the cards is to hold the product in place rather than contribute to the play value of the Lip Pops®. The Lip Pops® are positioned such that the plastic component is visible through the front and the candy piece is visible through the back window of the package. Notably, the packaging clearly states “Lip Pops Lollipops” on the front to indicate that the product is a confectionary. Thus, consumers identify the product as a lollipop without seeing the actual candy piece on the front packaging. Furthermore, consumers can simply flip the package to see the candy, nutrition label, and flavors on the back. The packaging does not include any reference to the product being a toy.
Imaginings states that Lip Pops® are sold in the toy section of retail stores, noting specifically that Walmart, which accounts for 85% of the Mini Lip Pops® sales, displays the product on a clip strip in the “Toy and Party Goods” section. The appearance of the product in a toy section at a store does not make it a toy for tariff purposes. We also note that “Party Goods” is a broad category of merchandise and may include various candies. Moreover, Lip Pops® are also sold by online candy shops and in candy sections, including on Walmart’s website. See Walmart, https://www.walmart.com/ip/Flix-Candy-6pk-Mini-Lip-Pops/543639795 (last visited Apr. 20, 2020) (categorizing Lip Pops® under “Hard Candy & Lollipops”); Dollar Tree, https://www.dollartree.com/twisted-lip-pop-candies-08oz/118222 (last visited Apr. 20, 2020) (categorizing Lip Pops® under “Hard Candy & Lollipops”); and Nassau Candy, https://www.nassaucandy.com/lip-pops-easter-8oz.html (last visited Apr. 20, 2020) (“Give customers a smile in a fruity sucking candy with Flix Candy Lip Pops lollipops.”). Even Imaginings, which operates as Flix Candy, states on its website that they are known as an “innovative and reliable source of quality candy products” and “Since the early 1990’s Flix Candy has been bringing great candy products to kids all over the world.” Flix, About Us https://www.flixcandy.com/ (last visited Apr. 20, 2020). These channels of trade are consistent with that of other confection items.
The subject Lip Pops® are similar to other products that CBP classified in subheading 1704.90.3550, HTSUS. In Headquarters Ruling Letter (“HQ”) 964004, dated September 20, 2001, CBP addressed the classification of the “BIG STUFF Pacifier with Lollipop”, which was also imported by Imaginings. The product was a pacifier of which the nipple component was replaced with a lollipop confection. CBP determined that the pacifier lollipop was a food and not a toy because there was no toy-like activity in consuming the candy. A pacifier, alone, is not considered a toy for tariff purposes and CBP did not find that an adult or child would want to imitate the behavior of an infant as a means of play. Similarly, in New York Ruling Letter (“NY”) I89052, dated December 23, 2002, CBP classified a pacifier-shaped candy novelty item called “Mega Soother” in subheading 1704.90.3550, HTSUS. The candy, which came in four flavor varieties, was molded onto a 2-inch diameter plastic circle and hung on a ribbon with a bell. Imaginings contends that the pacifiers in HQ 964004 are unlike Lip Pops® in their uses and with respect to their continued use after the candy has been consumed. Imaginings claims that the plastic components of the pacifier products are used only as the candy is consumed, because the candy comprises the “nipple” of the pacifier, and although amusing while in use, consumers do not use the plastic piece of the pacifier after the candy is consumed because the “pacifier” loses its design. Like the candy pacifiers, however, we find that consumers purchase the Lip Pops® primarily to consume the candy. The plastic pieces of both products are novelty holders for the candy, such that they are secondary components to the candy.
Based on review of the samples and documentation provided, we find that the candy component imparts the essential character to the subject Lip Pops®. The candy component plays the primary role in the consumer’s decision to purchase the product, the product’s use, and commercial identity. The amusement value of the plastic component is incidental to consuming the candy. Lip Pops® self-identify as lollipops, are marketed and sold as candy, and are recognized in the industry as novelty candy. Lip Pops® are, first and foremost, lollipops. Therefore, the Lip Pops® are classified according to their characteristics as a confection in heading 1704, specifically in subheading 1704.90.3550, HTSUS, as “Sugar confectionery (including white chocolate), not containing cocoa: Other: Confections or sweetmeats ready for consumption: Other: Other: Put up for retail sale: Other.”
Country of Origin Marking
The marking statute, Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304) 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 a manner as to indicate to the 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 the 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. Inc., 27 C.C.P.A. 297, 302, C.A.D. 104 (1940).
Part 134 of Title 19 of the Code of Federal Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b) (19 C.F.R. § 134.1(b)) provides as follows:
(c) Country of origin. “Country of origin” means 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 country, the NAFTA Marking Rules will determine the country of origin.
The test for determining whether a substantial transformation has occurred is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 C.C.P.A. 151 (1982); see also Belcrest Linens v. United States, 741 F.2d 1368, 1372 (Fed. Cir. 1984). This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
NY N302233, dated March 4, 2019, concerned a product called “Push Pop Candy Tape,” which was described as a belt, gummy tape, and licorice candy imported and sold in a disposable plastic container that acted as a dispenser for the candy, permitting the consumer to pull and clip off a desired length of candy. The candy was manufactured in Spain and the plastic dispenser was manufactured in China. The candy was shipped to China fully manufactured and precut to size and packaged in the plastic dispenser. CBP determined that “Push Pop Candy Tape” was a good of the country in which the candy was manufactured, that is, Spain.
In Imaginings’ proposed manufacturing scenarios, the plastic component is manufactured in China and the candy component is manufactured and attached in Mexico or Vietnam. As discussed above, Lip Pops® are primarily bought, sold, and used as candy. The product self-identifies as lollipops and is named “Lip Pops® Lollipops” after the processing in Mexico or Vietnam. The candy component gives the product its appeal and distinguishes Lip Pops® as a confectionary. Similar to NY N302233, we find that the candy component constitutes the essence of the finished product, and therefore the country of origin is where the candy component is manufactured and deposited onto the Chinese-origin plastic component. Thus, the country of origin of the Lip Pops® is Mexico or Vietnam.
Because the country of origin is Mexico or Vietnam, the Lip Pops® must be marked “Made in [Mexico or Vietnam],” “Product of [Mexico or Vietnam],” or other words of similar meaning. If Imaginings wishes to distinguish the country of origin of the Lip Pops® from the country in which the plastic component is made, then the special requirements set forth in Section 134.46 of the Customs Regulations (19 C.F.R. § 134.46) must be met. Specifically, 19 C.F.R. § 134.46 requires that, in instances where the name of any foreign country or locality other than the name of the country or locality in which the article was manufactured or produced, appears on an imported article or its container, and that name may mislead or deceive the ultimate purchaser as to the actual country of origin of the article, there shall appear legibly and permanently in close proximity to such name, and in at least a comparable size, the name of the country of origin preceded by “Made in,” “Product of,” or other words of similar meaning. Thus, additional reference to other locations will be acceptable as long as they are truthful statements and meet the requirements of 19 C.F.R. § 134.46.
Since Mexico is a NAFTA country, if the candy is manufactured and attached in Mexico, then the NAFTA Marking Rules must be applied to determine the country of origin for purposes of marking. Part 102 of the CBP Regulations (19 C.F.R. Part 102), sets forth the NAFTA Marking Rules. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes. See 19 C.F.R. § 102.11. Applied in sequential order, the hierarchy establishes that the country of origin of a good is the country in which:
(a)(1) The good is wholly obtained or produced;
(a)(2) The good is produced exclusively from domestic materials; or
(a)(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 applicable requirements of these rules are satisfied.
Here, sections 102.11(a)(1) and 102.11(a)(2) do not apply because the Lip Pops® are neither wholly obtained nor produced exclusively from “domestic” (Mexican, in this case) materials. Accordingly, each foreign material must meet the applicable change in tariff classification set out in Section 102.20 in order for the product to qualify to be marked as a product of Mexico.
“Foreign material” is defined in 19 C.F.R. § 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 tariff shift requirement in § 102.20 for a good of heading 1704, HTSUS, requires “[a] change to heading 1704 from any other heading.” Because the non-originating plastic component is classified in a heading other than 1704, HTSUS, we find that the Lip Pops® qualify to be marked as goods of Mexico under the NAFTA Marking Rules.
Effective July 6, 2018, the Office of the United States Trade Representative imposed an additional tariff on certain products of China pursuant to its authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The Section 301 measures apply to products of China classified in the subheadings enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(b), HTSUS, including subheading 1704.90.35, HTSUS. When determining the country of origin for purposes of applying current trade remedies under the Section 301 measures, the substantial transformation analysis is applicable. See HQ 563205 (June 28, 2006); and HQ H301619 (Nov. 6, 2018); see also Belcrest Linens v. United States, 741 F.2d 1368, 1370-71 (Fed. Cir. 1984) (finding that “the term ‘product of’ at the least includes manufactured articles of such country or area” and that substantial transformation “is essentially the test used…in determining whether an article is a manufacture of a given country”). Here, the Lip Pops® are not subject to the additional Section 301 measures because the country of origin is Mexico or Vietnam, where the candy is manufactured and deposited onto the plastic post.
HOLDING:
By application of GRI 3(b), we find that the Lip Pops® at issue are properly classified under heading 1704, HTSUS. Specifically, they are classified under subheading 1704.90.3550, HTSUS, which provides for “Sugar confectionery (including white chocolate), not containing cocoa: Other: Confections or sweetmeats ready for consumption: Other: Other: Put up for retail sale: Other.” The 2019 column one, general rate of duty is 5.6%. 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 online at www.usitc.gov.
Based on the facts of this case, we find that the country of origin of the Lip Pops® is Mexico or Vietnam, where the candy is manufactured and deposited onto the plastic component.
You are to mail this decision to the internal advice requester no later than 60 days from the date of the decision. At that time, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/ and other methods of public distribution.
Sincerely,
Craig T. Clark, Director
Commercial and Trade Facilitation Division