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HQ 956100




February 7, 1995

CLA-2 CO:R:C:F 956100 LPF

CATEGORY: CLASSIFICATION

TARIFF NO.: 1806.20.60; 1806.20.8095; 2106.90.6197

F. Gordon Lee, Esq.
O'Connor & Hannan
Suite 800
1919 Pennsylvania Ave., NW
Washington, D.C. 20006-3483

RE: Classification of yogurt and chocolate flavored confectionery coatings; Heading 2106, food preparations; Heading 1806, food preparations containing cocoa; Wilsey Foods, Inc.; Cake decorations under subheading 9904.60.60; NYRL 890302

Dear Mr. Lee:

This is in response to your as well as your client's letters concerning the classification of yogurt and chocolate flavored confectionery coatings under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

FACTS:

Two of the products at issue, yogurt flavored coatings (Product codes 40901 and 40903) imported as wafers (flat discs measuring approximately 7/8 inch in diameter) or in liquid form were the subject of New York Ruling Letter (NYRL) 890302, issued September 27, 1993. The imported product is used by an industrial manufacturer of candy bars which are sold at retail to grocery stores and the like. The wafers are imported in 50 pound bags on refrigerated trucks, while the liquid products are imported in 45,000 pound tankers. In its condition as imported, the product in liquid form is ready for use as a confection filling or coating, while the wafers need only be melted for such application. Product #40901 consists of granulated sugar, vegetable oil, skim milk solids, whey solids, yogurt powder, titanium dioxide, soy lecithin, and vanilla flavor. Product #40903 consists of sugar, vegetable oil, whey solids, skim milk solids, yogurt powder, titanium dioxide, soy lecithin, and vanilla flavor. As discussed with counsel, we have agreed not to incorporate the breakdown by weight or percent of the products' ingredients in this decision.

In NYRL 890302, supra, product #40901 was classified in subheading 1901.90.3030, HTSUSA, as food preparations of goods of headings 0401 to 0404, other, articles of milk or cream not specially provided for, dairy preparations containing over 10 percent by weight of milk solids, provided for in subheading 9904.10.60. Products classifiable in 1901.90.3030 were dutiable at 17.5 percent ad valorem and subject to an annual quota quantity restriction of 2,721 kilograms pursuant to subheading 9904.10.60. Product #40903 was classified in subheading 1901.90.9095, HTSUSA, as food preparations of goods of heading 0401 to 0404, other, other, other, other, other, dutiable at a rate of 10 percent ad valorem.

In addition, you now request the classification of a new product, a chocolate flavored coating (Product code 40902), which is imported in wafer and liquid form and used, by the industrial manufacturer, in the same manner as the other products. Similarly, in its condition as imported, the product in liquid form is ready for use as a confection filling or coating, while the wafers need only be melted for such application. The product consists of sugar, vegetable oil, cocoa powder, whey solids, skim milk solids, whole milk solids, soya lecithin, salt, and flavor.

For the reasons explained below, we will consider your entire ruling request to involve a prospective transaction in accordance with section 177.1, Customs Regulations (19 CFR 177.1). However, due to the changes in the relevant chapters of the HTSUS, our response will be limited to the provisions applicable through December 31, 1994.

ISSUE:

Whether the yogurt and chocolate flavored confectionery coatings are classifiable within heading 1901 as food preparations of goods of headings 0401 to 0404, heading 1806 as food preparations containing cocoa, or heading 2106 as food preparations not elsewhere specified or included.

LAW AND ANALYSIS:

In Wilsey Foods, Inc. v. United States, Slip Op. 94-46 (Ct. Int'l Trade, decided March 16, 1994), the court addressed the tariff classification of products called "white truffel" and "non-temp white chips" used to coat confections and/or pastries. The white truffel was composed of: vegetable oil (46%), sugar (39%), skim milk powder (15%), and lecithin, vanillin, and BHA (less than 1%). The non-temp white chips were composed of: vegetable oil (46%), sugar (45%), skim milk powder (9%), and lecithin, vanillin, and BHA (less than 1%).

Customs had classified the products in subheading 1901.90.3030, HTSUSA, as food preparations of milk or cream, subject to quota restrictions pursuant to subheading 9904.10.60. The court held that the products were appropriately classified in subheading 2106.90.6097, HTSUSA, as food preparations not elsewhere specified or included, containing sugar derived from sugar cane and/or sugar beets and not subject to quota. The court found that milk or cream was not the essential ingredient, not the ingredient of chief value, nor the preponderant ingredient in the products. In addition, evidence elicited at the court indicated that the coatings were comprised chiefly of vegetable fat and sugar and were not considered milk or cream products in the industry.

The yogurt flavored coatings of NYRL 890302, supra, as well as the chocolate flavored coatings are very similar in form, composition, and use to the Wilsey products. We also note that the coatings contain less milk than the Wilsey white truffel product. Accordingly, pursuant to the Wilsey decision the instant yogurt and chocolate flavored coatings are not classifiable within heading 1901, as food preparations of milk or cream, but rather within heading 2106, as food preparations not elsewhere specified or included and within heading 1806, as food preparations containing cocoa, respectively. The appropriate subheadings at the six digit level for the products are 2106.90 and 1806.20.

With regard to quota treatment for products classifiable within these subheadings, we note that the court did not find the Wilsey products subject to quota in accordance with the import restrictions established pursuant to Section 22 of the Agricultural Adjustment Act ("Section 22"). In particular, we note that the quota provided for in subheading 9904.60.60, covering certain products containing over 10 percent by dry weight of sugars derived from sugar cane or sugar beets, excepts, inter alia, "cake decorations and similar products to be used in the same condition as imported without any further processing other than the direct application to individual pastries or confections."

We have consulted with the Foreign Agricultural Service of the Department of Agriculture, concerning the definition of "cake decorations and similar products" as provided for in subheading 9904.60.60 and, consistent with existing Customs ruling decisions, Customs understands the cake decoration exception to mean the following:

For purposes of subheading 9904.60.60, the phrase "cake decorations and similar products to be used in the same condition as imported without any further processing other than the direct application to individual pastries or confections" means 1) products used in their imported condition to coat or fill pastries or confections, or 2) products used to coat or fill pastries or confections after a change in form (e.g., melting or heating, reduction in size), insofar as the product itself need not undergo a necessary, additional preparation, treatment, or manufacture nor a blending or combining with any ingredients, in order to become a finished product.

Because it is our understanding that the instant products are used in their imported condition, that is, the product in liquid form is ready for use as a confection filling or coating, while the wafers need only be melted for such application, they fit within the parameters of the cake decoration exception as provided above. The products were exempt from the 9904.60.60 quota in 1994.

Accordingly, at the ten digit statistical subdivision, the yogurt flavored coatings are provided for in subheading 2106.90.6197. However, because the inquirer has not provided information concerning the fat content of the cocoa powder, we are unable to determine whether the chocolate flavored coatings are provided for in subheading 1806.20.6000 or 1806.20.8095.

HOLDING:

The yogurt flavored confectionery coatings (Product #40901 and # 40903) are classifiable in subheading 2106.90.6197, HTSUSA, as "Food preparations not elsewhere specified or included: Other: Other: Other: Other: Other: Containing over 10 percent by weight of milk solids, Other: Other: Other: Containing sugar derived from sugar cane and/or sugar beets." The general column one rate of duty was 10 percent ad valorem in 1994. Products classifiable within subheading 2106.90.6197 were not subject to Section 22 import restrictions in 1994.

If the chocolate flavored confectionery coatings (Product # 40902) contain not less than 6.8 percent non-fat solids of the cocoa bean nib, they are classifiable in subheading 1806.20.60, HTSUSA, as "Chocolate and other food preparations containing cocoa: Other preparations...in liquid paste, powder, granular or other bulk form in containers or immediate packings, of a content exceeding 2 kg: Confectioners' coatings and other products (except confectionery) containing by weight not less than 6.8 percent non-fat solids of the cocoa bean nib and not less than 15 percent of vegetable fats other than cocoa butter." The general column one rate of duty was 2.5 percent ad valorem in 1994.

If the chocolate flavored confectionery coatings contain less than 6.8 percent non-fat solids of the cocoa bean nib, they are classifiable in subheading 1806.20.8095, HTSUSA, as "Chocolate and other food preparations containing cocoa: Other preparations...in liquid, paste, powder, granular or other bulk form in containers or immediate packings, of a content exceeding 2 kg: Other: Other, Other. The general column one rate of duty was 10 percent ad valorem in 1994. Products classifiable within either subheading 1806.20.60 or 1806.20.8095 were not subject to Section 22 import restrictions in 1994.

In light of the Wilsey decision rendered by the Court of International Trade, by operation of law NYRL 890302, supra, no longer has any effect for purposes of tariff classification. As such, no action need be taken by this office in this regard. We have considered your entire ruling request to involve a prospective transaction in accordance with section 177.1, Customs Regulations (19 CFR 177.1). We note that in accordance with section 152.16, Customs Regulations (19 CFR 152.16) the Wilsey decision, "shall be applied to unliquidated entries and protested entries which have not been denied in whole or in part and in which the same issue is involved as soon as the time within which an application for a rehearing or review may be filed has expired without such application having been made."

Sincerely,

John Durant, Director
Commercial Rulings Division

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