HQ 0089858 - Mixture of Pretzel Sticks and Roasted Split-Blanched Peanuts - United States International Trade Commision Rulings

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HQ 089858

October 1, 1991

CLA-2 CO:R:C:F 089858 ALS

CATEGORY: CLASSIFICATION

TARIFF NO.: 2008.11.00 9904.20.20

Ms. Sandra L. Marshanke
C. J. Tower Inc.
Customs Brokers
128 Dearborn Street
Buffalo, New York 14207-3198

RE: Mixture of Pretzel Sticks and Roasted Split-Blanched Peanuts

Dear Ms. Marshanke:

This is in reference to your request of May 3, 1991, requesting a tariff classification ruling as to a mixture of pretzels and peanuts. You submitted a supplementary letter dated June 3, 1991, pursuant to a request by the Area Director, New York Seaport, as to the nature of the processing which takes place in Canada. A sample of the mixture was submitted with the supplementary letter.

FACTS:

The article under consideration is a mixture of 62 percent pretzels sticks and 38 percent roasted split blanched peanuts. The pretzels sticks are approximately 1 inch long and 1/4 inch in diameter, shiny golden brown in color with a nutty, salty flavor. They are produced in Canada with ingredients, as we understand, of Canadian origin. The peanuts, which are from Argentina or China (PRC), imported into Canada as raw, shelled, red skinned peanuts, are roasted, split-blanched, cleaned and boxed in Canada. Each box, which contains 40-50 pounds of the pretzel and peanut mixture, is labeled with the supplier's name, plant of manufacture or lot number, product name, ingredient statements,
code name, new weight and country of origin.

ISSUE:

1. What is the proper classification for the pretzel and peanut mixture?

2. Is the mixture subject to the quota restrictions applicable to peanuts when imported into the United States?

3. Is the mixture eligible for treatment under the United States - Canada Free Trade Agreement (CFTA)?

LAW AND ANALYSIS:

Classification of merchandise under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is governed by the General Rules of Interpretation (GRI's) taken in order. GRI 1 provides that the classification is determined first in accordance with the terms of the heading and any relative section and chapter notes. If GRI 1 fails to classify the goods, and if the heading and legal notes do not otherwise require, the remaining GRI's are applied, taken in order.

ISSUE 1:

In considering the classification matter we noted that the mixture is composed of pretzels, which are classifiable under heading 1905, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), and peanuts, prepared or preserved, which are classifiable under heading 2008, HTSUSA. These two commodities, although mixed together in the article under consideration, maintain their original identity.

Each commodity remains complete and recognizable and is not subordinated into a new product merely by the act of mixing with the other. The final product remains a pretzels/peanut mixture and will be marketed as such.

Since the article is classifiable under two headings because it consists of more than one substance, it is pursuant to GRI 2(b), to be classified according to the principles of GRI 3, we referred to that GRI. Since the two possible headings are equally specific, we found that the mixture is not classifiable in accordance with GRI 3(a). Although the article is composed of mixed or combined materials, pursuant to GRI 3(b), that GRI is
not applicable since neither commodity gives the mixture its essential character. We, therefore, turned to GRI 3(c) which provides:

(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

Based thereon, we believe that the article should be classified under the provisions for peanuts rather than the provisions for pretzels.

ISSUE 2:

The classification for peanuts, prepared or preserved, subheading 2008.11.00, HTSUSA, is footnoted for reference to subheading 9904.20.20, HTSUSA, which provides for an absolute quantitative limitation for peanuts classifiable under subheading 2008.11, HTSUSA, and other subheadings.

ISSUE 3:

General Note 3(c)(vii) of the HTSUSA provides the rules which determine what products imported into the United States from Canada are entitled to special duty treatment under the CFTA. Eligible goods must be "goods originating in Canada", as stated in General Note 3(c)(vii)(A), HTSUSA.

Pursuant to General Note 3(c)(vii)(B), HTSUSA, goods imported into the Customs territory of the United States are eligible for treatment as "goods originating in the territory of Canada" only if--

(1) they are goods wholly obtained or produced in the territory of Canada and/or the United States,

(2) they have been transformed in the territory of Canada and/or the United States, so as to be subject--

(I) to a change in tariff classification as described in the rules of subdivision (c)(vii)(R) of this note...

The pretzels, manufactured in Canada with Canadian origin ingredients, are considered Canadian origin goods pursuant to General Note 3(c)(vii)(B)(1), HTSUSA. The peanuts in question are not wholly obtained or produced in Canada and/or the United States since the peanuts will come from Argentina or China (PRC). Therefore, they do not originate in Canada under General Note

The question then arises as to whether they are transformed in Canada, as described in General Note 3(c)(vii)(B)(2), HTSUSA. We noted that the peanuts are roasted, split-blanched, cleaned and packaged in Canada. They are, based on that processing, classifiable under heading 2008, in the condition as exported to the United States, rather than heading 1202, in the condition at the time of the importation into Canada.

We next considered whether the peanuts are eligible for treatment under the CFTA in accordance with General Note (c)(vii)(R), HTSUSA. In this regard we noted that General Note 3(c)(vii)(R)(4), HTSUSA, provides that preparations of chapter 20, HTSUSA, which:

"have been prepared or preserved merely by freezing, by packing (including canning) in water, brine, or in natural juices, or by roasting, either dry or in oil (including processing incidental to freezing, packing, or roasting), shall be treated as a good of the country in which the fresh good was produced."

The peanuts in question have been processed further than merely freezing, packing or roasting. Thus, they are considered "goods originating in Canada."

HOLDING:

A mixture of pretzels of subheading 1905.90, HTSUSA, and peanuts, prepared or preserved, of subheading 2008.11, HTSUSA, are, pursuant to GRI 3(c), classifiable under the latter occurring subheading. The article is subject to a general rate of duty of 6.6/kg.

The article, classifiable under subheading 2008.11, HTSUSA, is subject to the quantitative restrictions specified by subheading 9904.20.20, HTSUSA.

The article, goods originating in Canada in accordance with General Note 3(c)(vii)(B), HTSUSA, may be eligible for a reduced rate of duty upon compliance with the provisions of the CFTA and section 10.301 et seq., Customs Regulations (19 CFR 10.301 et seq.).

Sincerely,

John Durant, Director
Commercial Rulings Division

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