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HQ 563130




December 3, 2004

CLA-02 RR:CR:SM 563130 KSG

CLASSIFICATION: 9801.00.10

Susanne Staats
Starbucks Coffee Company
P.O. Box 34067
Seattle, WA 98124-1067

RE: Eligibility of coffee toppings for a duty exemption under HTSUS subheading 9801.00.10

Dear Ms. Staats:

Your September 7, 2004, request for reconsideration of New York Ruling Letter (“NY”) K87813, dated July 30, 2004, was forwarded to this office from the National Commodity Specialist Division in New York for a response. NY K87813 concerned the tariff classification of several different coffee toppings/flavorings. You ask that we also address the eligibility of three coffee toppings for duty-free entry under subheading 9801.00.10, of the Harmonized Tariff Schedule of the United States (“HTSUS”). Since you are asking an additional question rather than challenging any of the conclusions as to tariff classification set forth in NY K87813, we will treat this as a prospective binding ruling request rather than as a request for reconsideration.

FACTS:

This case involves three coffee toppings: a chocolate almond topping, a chocolate raspberry topping and a masala spice (chai spice) topping.

The chocolate almond topping contains sugar, cocoa powder, fructose, cane juice solids, corn syrup solids, partially hydrogenated soybean and cottonseed oil, maltodextrin, and traces of flavors and stabilizers.

The chocolate raspberry topping contains sugar, cocoa powder, fructose, cane juice solids, corn syrup solids, partially hydrogenated soybean and cottonseed oil, citric acid, and traces of flavors and stabilizers.

Both the chocolate almond topping and the chocolate raspberry topping are classified in subheading 1806.90.55, HTSUS. The masala spice topping contains sugar, fructose, cane juice solids, corn syrup solids, partially hydrogenated soybean and cottonseed oil, maltodextrin, cinnamon, corn starch, and traces of flavors and stabilizers.

The cocoa powder, sugar, cane juice solids and cinnamon (in the masala spice topping) are of foreign origin, and mixed with the other ingredients in the U.S.

The coffee toppings are then exported to China where they are packaged into glass bottles. The glass bottles are placed into a metal rack and the retail labels are applied. The coffee toppings are imported into the U.S.

ISSUE:

Are the three coffee toppings described above eligible for duty-free treatment under subheading 9801.00.10, HTSUS, upon importation into the U.S.?

LAW AND ANALYSIS:

Subheading 9801.00.10, HTSUS, provides that products of the United States when 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 may be entered duty free provided the documentary requirements of 19 CFR 10.1 are satisfied.

Substantial Transformation

The first question presented is whether the coffee toppings are considered products of the United States.

Pursuant to 19 CFR 134.1(b), country of origin means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of this part.

A substantial transformation occurs when a new and different article of commerce emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940).

In National Juice Products Association v. United States, 628 F. Supp. 978 (CIT 1986), the court considered whether foreign manufacturing concentrate processed into frozen concentrated orange juice in the U.S. and reconstituted orange juice was considered substantially transformed. The U.S. processing involved blending the manufacturing concentrate with other ingredients to create the end product; the manufacturing concentrate was mixed with purified and dechlorinated water, orange essences, orange oil, and in some cases, fresh juice. The foreign manufacturing concentrate was blended with domestic concentrate, with ratios of 50/50 or 30/70 (foreign/domestic).

The court considered that the U.S. processing added relatively minor value to the product and that the manufacturing concentrate imparted the essential character to the juice and made it orange juice. The court concluded that the foreign manufacturing juice concentrate was not substantially transformed in the U.S. when it was processed into retail orange juice products.

In Headquarters Ruling Letter (“HRL”) 559841, dated July 25, 1996, Customs & Border Protection (“CBP”) held that tomato paste concentrate, various spices, modified corn starch, beet powder and water were substantially transformed when made into a finished product called “tomato sauce, Spanish style.” CBP determined that mixing the ingredients together according to a specific formula, cooking, filtering, pasteurizing, canning and cooling made the finished product a different product distinct from the ingredients from which it was made.

In HRL 560612, dated May 1, 1998, CBP concluded that peppers, washed, blanched, de-stemmed, de-seeded, and cut into pieces and then mixed with spices and placed in a solution containing water, vinegar, oils, garlic, calcium chloride, benzoate of soda, coloring and preservatives were substantially transformed into pepper salad. Customs noted that the finished product has a longer shelf life, a different appearance, consistency and different uses and taste.

In HRL 561867, dated March 2, 2001, CBP determined that the production of vegetable juice from tomato base, vegetable base, salt, ascorbic acid, and water substantially transformed the various ingredients. CBP noted that the various ingredients mixed together based on a specific formula resulted in a finished product that differs from any of the individual ingredients. Unlike National Juice, none of the individual ingredients alone, imparted the essential character of the finished product.

Similar to the rulings cited above, all the coffee toppings involved in this case are mixed together based on a specific recipe to make a different product from any of the individual ingredients. Alone, the ingredients may be used for many purposes, while once mixed together, the final product is only used as a flavoring. Based on the above, we find that the foreign ingredients in the coffee toppings are substantially transformed in the United States and the coffee toppings would be considered products of the United States.

Application of subheading 9801.00.10

The court held in Border Brokerage Company, Inc. v. United States, 314 F. Supp. 788 (1970), that tomatoes of American origin were entitled to duty free entry under item 800.00, Tariff Schedules of the United States (TSUS) (the predecessor to subheading 9801.00.10, HTSUS). The tomatoes were shipped to Canada where they were unloaded, unpacked, sorted, graded by color and size, and repacked. The court stated that the test to be applied in item 800.00 cases is whether the merchandise of American origin has itself (apart from its container) been the object of advancement in value or improvement in condition while abroad.

Customs held in HRL 557322, dated August 31, 1993, that U.S. dental floss sent abroad to be inserted into plastic dispensers and packaged in blister packaging was not advanced in value or improved in condition. In NY J80104, dated January 17, 2003, CBP held that flavored cappuccino mixes packaged in foil packets were not advanced in value or improved in condition when packaged by hand into tins in China.

In this case, the U.S.-origin toppings are sent abroad to China for packaging into glass bottles. The glass bottles are then placed into a metal rack and the retail labels are applied. Mere packaging and the application of retail labels does not advance the value or improve in condition the coffee toppings. Therefore, we find that the coffee toppings are eligible for duty-free treatment under subheading 9801.00.10, HTSUS, upon importation into the U.S., provided the applicable documentary requirements are satisfied.

HOLDING:

The coffee toppings described above are eligible for duty free entry under subheading 9801.00.10, HTSUS, upon importation into the U.S. provided the documentary requirements of 19 CFR 10.1 are satisfied.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

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