CLA-2-18:OT:RR:NC:N2:N232

Ms. Marie-Helene Roy
Concept Gourmet du Village ULC
539 Chemin du Village
Morin-Heights, QC J0R 1H0
Canada

RE: The Classification, Marking and Eligibility of the United States-Mexico-Canada Trade Agreement (USMCA) for Double Truffle Hot Chocolate Drink Mix and No Sugar Added Hot Chocolate Drink Mix

Dear Ms. Roy:

This is in response to your letter dated June 10, 2021, requesting a ruling on classification, marking and the eligibility of the USMCA on Double Truffle Hot Chocolate Drink Mix and No Sugar Added Hot Chocolate Drink Mix.

Double Truffle Hot Chocolate Drink Mix is said to contain 55 percent sugar (Product of Brazil), 10 percent creamer (Product of USA), 10 percent cocoa (Product of Netherlands), 20 percent modified milk (Product of Canada), 2 percent modified cellulose gum (Product of USA), 2 percent salt (Product of Canada), and1 percent flavor (Product of Canada). You state that the finished product contains less than 1 percent butterfat and 18 to 28 percent milk solids. All ingredients are received, mixed, weighed and packaged in Canada. The Double Truffle Hot Chocolate Drink Mix will be imported for retail sale in 35 grams pouches. Package instructions state that the product is consumed after being dissolved in boiling water or very hot milk.

No Sugar Added Hot Chocolate Drink Mix is said to contain 40 percent cocoa (Product of Netherlands), 35 percent chicory root fiber (Product of Belgium), 20 percent modified milk (Product of Canada), 2 percent salt (Product of Canada), 2 percent sucralose (Product of China), and percent flavor (Product of Canada). You state that the finished product contains 0.71 to 1.92 percent butterfat and 18 to 28 percent of milk solids. All ingredients are received, mixed, weighed and packaged in Canada. The No Sugar Added Hot Chocolate Drink Mix will be imported for retail sale in 15 grams pouches. Package instructions direct the consumer to add hot milk to make the product.

Classification:

The applicable subheading for Double Truffle Hot Chocolate Drink Mix will be 1806.90.5500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Chocolate and other food preparations containing cocoa: Other: Other: Other: Articles containing over 10 percent by dry weight of sugar described in additional U.S. note 3 to chapter 17: Described in additional U.S. note 8 to chapter 17 and entered pursuant to its provisions. The general rate of duty will be 3.5 percent ad valorem.

If the quantitative limits of additional U.S. note 8 to chapter 17 have been reached, the product will be classified in subheading 1806.90.5900, HTSUS, and dutiable at the rate of 37.2 cents per kilo plus 6 percent ad valorem. In addition, products classified in subheading 1806.90.5900, HTSUS, may be subject to additional duties based on their value, as described in subheadings 9904.17.49 to 9904.17.65, HTSUS.

The applicable subheading for No Sugar Added Hot Chocolate Drink Mix will be 1806.90.9090, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Chocolate and other food preparations containing cocoa: Other: Other: Other: Other: Other: Other. The general rate of duty will be 6 percent ad valorem.

Country of Origin Marking

The marking statute, Section 304(a), Tariff Act of 1930, as amended (19 U.S.C. 1304(a)), 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 manner as to indicate to an 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 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., 27 C.C.P.A. 297, 302 (1940).

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. Applied in sequential order, the required 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 requirements of these rules are satisfied.

Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because both drink mixes are neither wholly obtained nor produced exclusively from "domestic" (Canada, in this case) materials. Accordingly, we look to section 102.11(a)(3). The applicable tariff shift requirement in section 102.20 for the drink mixes of subheading 1806.90, HTSUS, consist of the following: A change to subheading 1806.90 from any other subheading.

Because the foreign materials contained in the Double Truffle Hot Chocolate Drink Mix (sugar, creamer, cocoa powder and modified cellulose gum) and the No Sugar Added Hot Chocolate Drink Mix (cocoa, chicory root fiber and sucralose) are classified in subheadings outside of subheading 1806.90, the tariff shift rule in 19 C.F.R. 102.20 is met. Therefore, in accordance with 19 C.F.R. 102.11(a)(3), the country of origin for marking purposes of both products is Canada.

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, 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, in relevant part:

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-

i) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;

ii) the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;

iii) the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or

...

Since both the Double Truffle Hot Chocolate Drink Mix and No Sugar Added Hot Chocolate Drink Mix contain non-originating materials, they are not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i) and (ii). We must next determine whether the Double Truffle Hot Chocolate Drink Mix and No Sugar Added Hot Chocolate Drink Mix qualify under GN 11(b)(iii). Both the Double Truffle Hot Chocolate Drink Mix and No Sugar Added Hot Chocolate Drink Mix are classified in subheading 1806.90, HTSUS. The applicable rule of origin for merchandise under subheading 1806.90, HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:

Chapter 18 (5) "A change to subheadings 1806.31 through 1806.90 from any other subheading, including another subheading within that group".

The Double Truffle Hot Chocolate Drink Mix contains two ingredients which are non-originating: sugar from Brazil (heading 1701) and cocoa powder from the Netherlands (heading 1805). Since all two non-originating ingredients are classified in chapters other than chapter 18, the tariff shift rule is met. Accordingly, the Double Truffle Hot Chocolate Drink Mix classified under subheading 1806.90, HTSUS, is an originating goods pursuant to GN 11(o).

The No Sugar Added Hot Chocolate Drink Mix contain three ingredients which are non-originating: cocoa powder from the Netherlands (heading 1805), chicory root fiber from Belgium (subheading 1108), and sucralose from China (heading 2932). Since all three non-originating ingredients are classified in chapters other than chapter 18, the tariff shift rule is met. Accordingly, the No Sugar Added Hot Chocolate Drink Mix classified under subheading 1806.90, HTSUS, is an originating goods pursuant to GN 11(o).

Thus, the Double Truffle Hot Chocolate Drink Mix classified under subheading 1806.90.55 and the No Sugar Added Hot Chocolate Drink Mix, classified under both subheading 1806.90.90, HTSUS, are eligible for preferential tariff treatment under the USMCA. However, if the Double Truffle Hot Chocolate Drink Mix is classified under subheading 1806.90.59, HTSUS, we note that the special column for subheading 1806.90.59, HTSUS, references subheadings 9823.10.01-9823.10.45, HTSUS. U.S. Note 10 to Subchapter XXII, which concerns sugar containing products pursuant to the USMCA, provides that:

This note and subheadings 9823.10.01 through 9823.10.45 are effective as to originating goods of the USMCA countries eligible for special tariff treatment under the terms of general note 11 to the tariff schedule provided for in subheadings ... 1806.90.59 ... From July 1, 2020, through December 31, 2020, in 2021 and in successive years thereafter, the rates of duty provided for in subheadings 9823.10.01 through 9823.10.45 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.

U.S. Note 10(b) states that "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 9823.10.02 through 9823.10.45." U.S. Note 10(b)(4) provides an exception to the marking requirement for goods entered under subheading 9823.10.02, HTSUS. Thus, originating goods that last underwent production in Canada shall be eligible for entry under subheading 9823.10.02 regardless of whether they qualify to be marked as a good of Canada pursuant to U.S. law. Therefore, with respect to the Double Truffle Hot Chocolate Drink Mix at issue, the "S+" rates are applicable for goods classified under subheading 1806.90.59, HTSUS.

The applicable subheading for the Double Truffle Hot Chocolate Drink Mix will be 9823.10.02, HTSUS, which provides for Goods entered under the provisions of the US-Mexico-Canada Agreement under general note 11 to the tariff schedule: (con.) Goods provided for in subheading ...1806.90.59 ...: Goods provided for in note 10(b) to this subchapter: Subject to the quantitative limits specified in note 10(b)(1) to this subchapter. The special rate of duty will be free (S+).

If the quantitative limits of note 10(b)(1) to chapter 98 have been reached, the product will be classified in subheading 9823.10.24, HTSUS, and dutiable at the rate of 37.2 cents per kilo plus 6 percent ad valorem, only if these products qualify to be marked as goods of Canada. Since the country of origin for marking purposes of these products at issue here is Canada, the "S+" rates are applicable.

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 World Wide Web at https://hts.usitc.gov/current.

This merchandise is subject to The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (The Bioterrorism Act), which is regulated by the Food and Drug Administration (FDA). Information on the Bioterrorism Act can be obtained by calling FDA at 301-575-0156, or at the Web site www.fda.gov/oc/bioterrorism/bioact.html.

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 frank.l.troise.cbp.dhs.gov.


Sincerely,

Steven A. Mack
Director
National Commodity Specialist Division