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HQ 563129




November 26, 2004

MAR-2 RR:CR:SM 563129 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 subheading 9801.00.10

Dear Ms. Staats:

Your September 7, 2004, request for reconsideration of New York Ruling Letter (“NY”) K81490, dated December 19, 2003, was forwarded to this office from the National Commodity Specialist Division in New York for a response. NY K81490 concerned the tariff classification of several different coffee toppings/flavorings. You ask that we also address the eligibility of two of the coffee toppings for duty-free entry under subheading 9801.00.10, HTSUS. Since you are asking an additional question rather than challenging any of the conclusions as to tariff classification set forth in NY K81490, we will treat this as a prospective binding ruling request rather than as a reconsideration.

FACTS:

This case involves two coffee toppings: a vanilla topping, and a mocha powder topping.

The vanilla topping is manufactured by Cook Flavoring in California. It consists of approximately 97% dextrose, 1.5% vanilla bean and 1.5% vanillin. The dextrose and vanillin are of U.S. origin. Cook Flavoring imports vanilla bean, extracts the vanilla in the U.S. and combines it with the dextrose and vanillin.

The mocha powder topping is made by ADM Cocoa in Milwaukee, Wisconsin. It consists of cocoa powder, granulated crystalline sugar and vanillin. The sugar and vanillin are of U.S. origin. The cocoa powder is imported from the Netherlands. In the U.S., the cocoa powder, sugar and vanillin are blended together.

The two 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 two coffee toppings described above eligible for duty-free status 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 can be entered duty free provided the documentary requirements of 19 CFR 10.1 are satisfied.

Substantial Transformation

The first question presented is whether the two 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, 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.

The vanilla topping in this case is principally a sugar with vanilla flavoring that is classified in Chapter 17, HTSUS. The U.S.-origin sugar provides the essential character of the product. Also, in addition to blending the ingredients, vanilla is being extracted from the imported vanilla bean, a product that has many potential uses. Once the vanilla is extracted, and mixed with dextrose and vanillin, it is a sweetener. Based on the above, we find that the imported vanilla bean is substantially transformed in the U.S. Accordingly, the vanilla coffee topping would be considered a product of the U.S.

Similarly, the mocha topping in large part contains sugar and has a different appearance, consistency, taste, and use as plain cocoa powder. Accordingly, we find that the cocoa powder is substantially transformed in the U.S. and the mocha powder topping would be considered a product of the U.S.

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, both 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 both eligible for duty-free treatment under subheading 98901.00.10, HTSUS, upon importation into the U.S., provided the applicable documentary requirements are satisfied.

HOLDING:

The vanilla coffee topping and the mocha powder topping 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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