HQ 0088823 - Reconsideration and modification of New York Ruling Letter (NYRL) 854369 - United States International Trade Commision Rulings

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HQ 088823

September 5, 1991

CLA-2 CO:R:C:F 088823 EAB

CATEGORY: CLASSIFICATION

TARIFF NO.: 1806.90.0030; 1806.90.0060; 9904.10.75; 9904.60.60

Mr. David M. Blake
C.J. Tower, Inc.
128 Dearborn Street
Buffalo, NY 14207-3198

RE: Reconsideration and modification of New York Ruling Letter (NYRL) 854369

Dear Mr. Blake:

This is in reply to your letter dated March 1, 1991, in which you request on behalf of Kingsmill Foods Company Limited, reconsideration of NYRL 854369 (August 2, 1990), concerning the classification under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) of several cocoa powder mixes.

FACTS:

At issue are three dry, powdered hot chocolate mixes packaged in three ways, resulting in five combinations. "Gourmet Hot Chocolate" is composed of 43 percent sugar, 10 percent cocoa, 45 percent creamer and less than 2 percent salt and flavor. It is packaged in 12-ounce retail cans. "Vending Hot Chocolate" is composed of 59 percent sugar, 10 percent cocoa, 28 percent whey powder, 2 percent creamer and less than one percent salt and flavor. It is sold in either 250 pound drums or two-pound pouches for use in vending machines dispensing hot chocolate. "Regular Hot Chocolate Mix", we assume for purposes of this ruling, is of identical composition as "Vending Hot Chocolate." It is sold in one-ounce pouches out of countertop displays in restaurants and cafeterias. The "Vending" and "Gourmet", and for purposes of this ruling we assume the "Regular", hot chocolate contain over 10 percent by weight sugar and are principally of crystalline structure or in dry amorphous form. "Lo-Cal Hot Chocolate Mix" is composed of 20 percent cocoa, 40 percent skim milk, 35 percent whey solids, 4 percent sodium caseinate and less than one percent salt, aspartame and flavor. It is sold in two- pound pouches for use in vending machines dispensing hot chocolate and in 14-gram pouches out of countertop displays in restaurants and cafeterias. All mixes contain less than 5.5 percent by weight of butterfat.

In NYRL 854369, Customs determined that the applicable HTSUSA subheading for the Gourmet Hot Chocolate would be 1806.90.0060, subject to quota set out in 9904.60.60; the applicable subheading for the Lo-Cal Hot Chocolate Mix and the two-pound size Vending Hot Chocolate would be 1806.90.0030, subject to quota set out in 9904.10.75; and, the applicable subheading for the Vending Hot Chocolate in 250 pound drums would be 1806.20.8030, subject to quota in 9904.10.75; goods covered by 9904.10.75 would not be permitted entry into the U.S. because there was no quota allocation thereunder. "Regular Hot Chocolate Mix" was not a part of your original classification request.

By your letter dated October 24, 1990, with exhibits, you requested the District (Buffalo) Director of Customs to "review" NYRL 854369. As set out in various of the "exhibits": 1) the request for classification of the 250 pound sack was withdrawn; and, 2) the butter fat in the subject products was not dairy butter fat, but cocoa butter fat. In response to another request for additional information, Kingsmill, through you, advised us that the Lo-Cal mix (14 g. pouches) and the "regular" mix (1 oz. pouches) were to be packed 200 pouches per case, some cases containing small display boxes. The display boxes would enable a given restaurant/cafeteria to show the product, from which display a consumer could select a pouch, open it and mix it with hot water.

ISSUE:

What is the proper classification of powdered cocoa mixes to which hot water is added to make hot chocolate drink, where such powdered mixes are packaged in 14 gram, one ounce and two pound pouches, and 12-ounce cans?

LAW AND ANALYSIS:

Merchandise imported into the U.S. is classified under the HTSUSA. The tariff classification of merchandise under the HTSUSA is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which otherwise requires, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUSA and are to be considered statutory provisions of law for all purposes.

GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRI's taken in order.

Chapter notes are part of the legal text of the HTSUSA and are to be considered statutory provisions of law for all purposes. Moreover, as indicated above, chapter notes, together with the terms of the headings and section notes, are the principal authority by which merchandise is to be classified under the schedule. See GRI 1. Therefore, chapter notes are to be considered mandatory authority for the classification of merchandise under the HTSUSA.

Whereas General Note 2, Chapter 18, provides that heading 1806 includes other food preparations containing cocoa, it is clear that all of the subject cocoa powder mixes are properly classifiable under heading 1806, HTSUSA.

The request for classification of the 250-pound sacks of product having been withdrawn, we concern ourselves with the proper classification of the following food preparations:

Lo-Cal in two-pound pouches, used in vending machines;

Lo-Cal in 14-gram pouches, sold out of display cases;

Gourmet in 12-ounce cans, sold at retail;

Vending in two-pound pouches, used in vending machines;

Regular in one-ounce pouches, sold out of display cases.

In view of the ingredients, either sugar or dairy quotas, set forth in Chapter 99, are applicable, as follows.

As you know from our Headquarters Ruling Letter (HRL) 065964, dated August 26,1981 and addressed to Mrs. Helen Sugar of your office, Customs regularly has made a particularly fine distinction between the classification of food preparations subject to sugar quotas and food preparations subject to dairy quotas, and necessarily so due to the fact that each quota provision excepts products that are not capable of being further processed or mixed with similar or other ingredients and are prepared for marketing to the retail consumer in the identical form and package in which imported. We stress here, as we have stated in the past, that the issue is twofold: at the time of importation, are the articles capable of further processing, and how are they packaged? For food preparations subject to sugar quotas, the necessary addition of water to a dried mixture is not a further processing that is relevant to quota determinations. For food preparations subject to dairy quotas, the necessary addition of water to a dried mixture must be considered in determining the applicability of any quota. See, HRL 078626 (September 12, 1986).

In synopsis, goods are subject to the sugar quota depending upon the amount of sugar contained therein and packaging is irrelevant; goods may be exempt from the dairy quota because of their packaging, ingredients notwithstanding.

We find that the sugar content of the "Gourmet," "Vending" and "Regular" cocoa mixes renders them properly classifiable under subheading 1806.90.0060, HTSUSA, subject to the sugar quota set forth in subheading 9904.60.60 thereof.

We find that the "Lo-Cal" two-pound mixed packages are properly classifiable under subheading 1806.90.0030, HTSUSA and are subject to the dairy quota set forth in subheading 9904.10.75 thereof, by reason of the fact that the necessary addition of water is further processing, such that the goods cannot be considered imported in retail packaging.

We find that the "Lo-Cal" 14g. mixed packages are properly classifiable under subheading 1806.90.0030 and not subject to the dairy quota because they are packaged for retail sale.

HOLDING:

"Gourmet Hot Chocolate Mix" composed of 43 percent sugar, 10 percent cocoa, 45 percent creamer and less than 2 percent salt and flavor, is properly classifiable under subheading 1806.90.0060, HTSUSA, and is subject to the sugar quota set forth in subheading 9904.60.60 thereof.

"Vending Hot Chocolate Mix" composed of 59 percent sugar, 10 percent cocoa, 28 percent whey powder, 2 percent creamer and less than one percent salt and flavor, is properly classifiable under subheading 1806.90.0060, HTSUSA, and is subject to the sugar quota set forth in subheading 9904.60.60 thereof, and not under subheading 1806.90.0030 of the Schedule, subject to the dairy quota in subheading 9904.10.75 thereof. NYRL 854369 is hereby modified.

"Regular Hot Chocolate Mix" composed of 59 percent sugar, 10 percent cocoa, 28 percent whey powder, 2 percent creamer and less than one percent salt and flavor, is properly classifiable under subheading 1806.90.0060, HTSUSA, and is subject to the sugar quota set forth in subheading 9904.60.60 thereof.

"Lo-Cal Hot Chocolate Mix" composed of 20 percent cocoa, 40 percent skim milk, 35 percent whey solids, 4 percent sodium caseinate and less than one percent salt, aspartame and flavor, sold in 14-gram pouches presented in counter top display cases, is properly classifiable under subheading 1806.90.0030, HTSUSA, and is not subject to the dairy quota set forth in subheading 9904.10.75 thereof; such cocoa mix packaged in two-pound pouches to be sold out of vending machines that further process it by mixing with water, is subject to the dairy quota in subheading 9904.10.75 of the HTSUSA.

NYRL 854369 is modified in accordance with the foregoing.

Sincerely,

John Durant, Director
Commercial Rulings Division

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