United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1994 HQ Rulings > HQ 0954054 - HQ 0954208 > HQ 0954120

Previous Ruling Next Ruling


HQ 954120


July 27, 1994

CLA-2 CO:R:C:F 954120 GGD

CATEGORY: CLASSIFICATION

TARIFF NO.: 2008.11.0020

Mr. Mark Barras
Kraft General Foods Canada, Inc.
C.P./P.O. Box 6118
Montreal, Quebec H3C 3J3

RE: "Handi-Snack;" Peanut Butter and Crackers Set

Dear Mr. Barras:

This letter is in response to your inquiry of April 8, 1993, concerning the classification under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA), of an article identified as "Handi-Snack," to be imported from Canada. A sample article was submitted with your inquiry.

FACTS:

The sample article is a retail package consisting of three clear plastic molded trays that may be separated from each other by tearing along perforated dividers. Each tray has two compartments, the smaller of which contains 32 grams of peanut butter, and the larger of which contains four crackers (weighing 18.4 grams) and a rectangular plastic wand (weight unknown) for spreading the peanut butter. The crackers and wand are of U.S.- origin. The trays are blow-molded in Canada from flat plastic sheets of U.S.-origin. The printed sealing film is of Canadian origin. In Canada, raw peanuts that are the product of either China or the United States, or a combination of both, will be processed into peanut butter, which will then be put up and sealed in the trays with the crackers and wand.

ISSUES:

1) Whether the article is classifiable as crackers under heading 1905, HTSUSA; or as peanut butter under heading 2008, HTSUSA.

2) Whether the molded trays and the U.S.-origin crackers and plastic wands are entitled to a duty exemption under subheading 9801.00.10, HTSUSA.

LAW AND ANALYSIS:

Classification under the HTSUSA is made in accordance with the General Rules of Interpretation (GRIs). The systematic detail of the harmonized system is such that virtually all goods are classified by application of GRI 1, that is, 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 GRIs may then be applied. The Explanatory Notes (ENs) to the Harmonized Commodity Description and Coding System, which represent the official interpretation of the tariff at the international level, facilitate classification under the HTSUSA by offering guidance in understanding the scope of the headings and GRIs.

For classification purposes, the "Handi-Snack" essentially consists of 2 components, crackers and peanut butter. The article cannot be classified by reference to GRI 1 because each component is classifiable in a different heading. The crackers are classifiable under heading 1905, HTSUSA, which covers "Bread, pastry, cakes, biscuits and other bakers' wares...and similar products." The peanut butter is classifiable in heading 2008, HTSUSA, as prepared or preserved peanuts (ground-nuts). Since the article cannot be classified by reference to GRI 1, we look to GRI 2(b), which in pertinent part states that:

[t]he classification of goods consisting of more than one material or substance shall be according to the principles of rule 3.

GRI 3(a) directs that the headings are regarded as equally specific when each heading refers to only part of the items in a set put up for retail sale. Therefore, to determine under which provision the article will be classified, we look to GRI 3(b), which states in pertinent part that:
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.

With respect to whether the "Handi-Snack" article comprises goods put up in sets, we look to Explanatory Note X to GRI 3(b), which indicates that for purposes of the rule, the term "goods put up in sets for retail sale" means goods which:

(a) consist of at least two different articles which are prima facie, classifiable in different headings;

(b) consist of products or articles put up together to meet a particular need or carry out a specific activity; and

(c) are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards).

Since the crackers and peanut butter meet the above criteria, the whole article is considered goods put up in sets for retail sale.

In order to determine the essential character of the set, we next view Explanatory Note VIII to GRI 3(b), which provides the following guidance:

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.

Although both the crackers and peanut butter are edible components of the set, we note that the peanut butter is the component of greater weight and provides the more significant portion of the taste and nutritional value of the whole article. The crackers are a more neutral component, providing a tasty, flat surface upon which to spread the desired amount of peanut butter. Therefore, the "Handi-Snack" article is properly classified in subheading 2008.11.0020, HTSUSA.

Heading 1202, HTSUSA, covers peanuts (ground-nuts), not roasted or otherwise cooked. In this case, the processing in Canada of raw peanuts (whether the product of China, the U.S., or both) into peanut butter, results in a change of tariff classification as provided for in General Note 3(c)(vii)(B)(2)(I), and transforms the peanuts into goods originating in the territory of Canada.

Subheading 9801.00.10, HTSUSA, provides for the duty-free entry of products of the U.S. that are returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided there has been compliance with the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1).

In this case, because the U.S.-origin crackers and plastic wands are merely placed inside the plastic trays and sealed, they are not advanced in value or improved in condition while abroad. Therefore, when the complete "Handi-Snack" article is imported, the crackers and wands will be entitled to duty-free treatment under subheading 9801.00.10, HTSUSA, assuming compliance with the documentation requirements of 19 CFR 10.1.

In regard to the plastic trays, however, we note that the U.S.-origin, flat plastic sheets are molded into trays in Canada by a process involving both heat and pressure. The U.S.-origin plastic is improved in condition abroad, returning to the U.S. as the container for the imported snacks. Therefore, the molded trays are not entitled to a duty exemption under subheading 9801.00.10, HTSUSA.

HOLDING:

The "Handi-Snack" article is properly classified in subheading 2008.11.0020, HTSUSA, the provision for "Fruit, nuts and other edible parts of plants otherwise prepared or preserved...not elsewhere specified or included: Nuts, peanuts (ground-nuts) and other seeds, whether or not mixed together: Peanuts (ground-nuts), Peanut butter." The merchandise is a qualifying good from Canada, that is, either wholly obtained or produced in the territory of Canada and/or the United States so as to be subject to a change in tariff classification from one chapter to another, thus meeting the requirements of General Note 3(c)(vii)(B), HTSUSA. As such, merchandise imported on or before

December 31, 1993, will enjoy preferences under the United States-Canada Free Trade Agreement (FTA), upon compliance with applicable regulations. The rate of duty under the FTA for this subheading is 2.6 cents per kilogram. Effective January 1, 1994, with the implementation of the North American Free Trade Agreement (NAFTA), preferential treatment for goods under the FTA was discontinued. If you would like a ruling under the NAFTA, you should follow the procedures set forth in Subpart I, Section 181.91, et seq., Customs Regulations (19 CFR Part I). These provisions were published in the Federal Register on December 30, 1993 (58 Fed. Reg. 69460, 69489). A copy is attached for your information.

The U.S.-origin crackers and plastic wands are entitled to a duty exemption under subheading 9801.00.10, HTSUSA, assuming compliance with the documentation requirements for this tariff provision. The plastic molded trays are not entitled to a duty exemption under subheading 9801.00.10, HTSUSA.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling

See also: