Modification of NY N016004, dated September 7, 2007; U.S.-Australia Free Trade Agreement; meal replacement soups from Australia

HQ H044090 March 31, 2009 CLA-2 OT:RR:CTF:VS H044090 EE CATEGORY: Classification Mariana Pascaru OBM International Trade Services Pty Ltd Level 2, 1 Breakfast Creek Road Newstead Brisbane Qld 4006 Australia RE: Modification of NY N016004, dated September 7, 2007; U.S.-Australia Free Trade Agreement; meal replacement soups from Australia Dear Ms. Pascaru: This is in reference to New York Ruling Letter (“NY”) N016004, dated September 7, 2007, issued on behalf of your client Jalco Food & Beverage (“Jalco”). That ruling concerned the tariff classification under the Harmonized Tariff Schedule of the United States (“HTSUS”), country of origin marking requirements, and eligibility for preferential tariff treatment under the U.S.-Australia Free Trade Agreement (“UAFTA”), of certain meal replacement soups from Australia. We have reviewed NY N016004 and determined that while the country of origin marking requirements in that ruling are correct, the conclusion that the Chicken Flavored Meal Replacement Soup and the Tomato Flavored Meal Replacement Soup do not qualify for preferential treatment under the UAFTA is incorrect. Therefore, NY N016004 is modified for the reasons set forth in this ruling. Pursuant to section 625(c), Tariff Act of 1930 (19 U.S.C. § 1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), notice of the proposed modification of NY N016004, as described below, was published in the Customs Bulletin on February 19, 2009. No comments were received in response to the notice. FACTS: NY N016004, dated September 7, 2007, provided, in pertinent part, the following facts: The products are described as meal replacement soups put up for retail sale in single serving packets. The powdered chicken flavored and tomato flavored soups each contain milk solids, maltodextrin, thickeners, glucose syrup solids, flavor enhancers, salt, milk minerals, emulsifiers, vitamins, and silicon dioxide. The chicken flavor also contains vegetable fat, chicken flavor, food acid, vegetable powder, dehydrated chicken, animal fat, spice extract, potassium chloride, and color. The tomato flavor also contains tomato powder, palm oil, onion powder, yeast extract, artificial tomato flavor, ground coriander, parmesan cheese powder, garlic powder, dill, basil, and parsley. The purchaser of the dried mixes adds boiling water to make the soups. All but thirteen ingredients used to make the soups originate in either the United States or Australia. In Australia, the ingredients of the chicken flavored and tomato flavored soups are blended, weighed, and packed for retail sale in 54 gram sachets. In NY N016004, U.S. Customs and Border Protection (“CBP”) determined that the dried Chicken Flavored Meal Replacement Soup and Tomato Flavored Meal Replacement Soup are classified in subheading 2104.10.00, HTSUS. In that ruling, CBP held that the Chicken Flavored Meal Replacement Soup and Tomato Flavored Meal Replacement Soup do not qualify for preferential treatment under the UAFTA. In support of this conclusion, CBP stated that the beverage whitener ingredient contained in both products, and the yeast extract ingredient contained in the Tomato Flavored Meal Replacement Soup do not satisfy the requirements of HTSUS General Note ("GN") 28(b)(ii)(A) or 28(n)/21.8(F), noting GN 28(e)(ii)(H). The National Import Specialist has classified the beverage whitener and the yeast extract ingredients in subheading 2106.90, HTSUS. The value of the beverage whitener and the yeast extract ingredients were provided by Jalco. ISSUE: Whether the Chicken Flavored Meal Replacement Soup and Tomato Flavored Meal Replacement Soup are eligible for preferential tariff treatment under the UAFTA. LAW AND ANALYSIS: The UAFTA was signed on May 18, 2004, and entered into force on January 1, 2005, as approved and implemented by the UAFTA Implementation Act, Pub. L. 108-286, 118 Stat. 919 (August 3, 2004), and set forth in GN 28, HTSUS. GN 28(b), HTSUS, provides, in pertinent part: For the purposes of this note, subject to the provisions of subdivisions (c), (d), (m), and (n) thereof, a good imported into the customs territory of the United States is eligible for treatment as an originating good of a UAFTA country under the terms of this note only if -- the good is a good wholly obtained or produced entirely in the territory of Australia or of the United States, or both; the good was produced entirely in the territory of Australia or of the United States, or both, and -- each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in subdivision (n) of this note… In the instant case, since thirteen ingredients used to make the Chicken Flavored Meal Replacement Soup and the Tomato Flavored Meal Replacement Soup originate in countries other than Australia or the United States, the soups at issue would not be considered "wholly obtained or produced" as set forth in GN 28(b)(i), HTSUS. Therefore, we must determine whether the soups at issue would satisfy the applicable change in tariff classification. The Chicken Flavored Meal Replacement Soup and the Tomato Flavored Meal Replacement Soup are classified in subheading 2104.10.00, HTSUS. The applicable rule set forth in GN 28(n)/21.6, HTSUS, provides as follows: A change to heading 2104 from any other chapter. In this case, of the thirteen nonoriginating ingredients, eleven nonoriginating ingredients are classified in chapters other than Chapter 21, HTSUS. However, the beverage whitener contained in both products and the yeast extract contained in the Tomato Flavored Meal Replacement Soup are classified in Chapter 21, HTSUS. Since these two ingredients are classified in the same chapter as the meal replacement products at issue, the tariff shift rule set forth in GN 28(n)/21.6, HTSUS, is not met. Failure to satisfy the required tariff change is not necessarily fatal to a product’s UAFTA eligibility. GN 28(e)(i), HTSUS, in relevant part, provides as follows: Except as provided in subdivision (e)(ii) below, a good (other than a textile or apparel good described in subdivision (d) above) that does not undergo a change in tariff classification pursuant to subdivision (n) of this note shall nonetheless be considered an originating good if – the value of all nonoriginating materials that are used in the production of the good, and do not undergo the applicable change in tariff classification, does not exceed 10 percent of the adjusted value of the good; the value of such nonoriginating materials is included in calculating the value of nonoriginating materials for any applicable regional value content requirement for the good; and the good meets all other applicable requirements of this note. There are limitations to the de minimis principle. Relevant here is GN 28(e)(ii)(H), HTSUS, which provides that the de minimis principle does not apply to: A nonoriginating material used in the production of a good provided for in chapters 1 through 21, inclusive, unless the nonoriginating material is provided for in a different subheading than the good for which origin is being determined under this note. In your submission dated July 30, 2007, you stated that the two nonoriginating ingredients that do not undergo the applicable change in tariff classification, the beverage whitener and yeast extract ingredients, make up less than 10 percent of the meal replacement products’ value. The beverage whitener and yeast extract ingredients are goods classified in subheading 2106.90, HTSUS. Since both ingredients are classified in a different subheading than the meal replacement soups (subheading 2104.10, HTSUS), GN 28(e)(i) and GN 28(e)(ii)(H), HTSUS, are satisfied. In accordance with the above discussion, the soup mixes described in NY N016004 meet the requirements of GN 28(b)(ii)(A) and 28(n)/21.6, noting GN 28(e)(i) and 28(e)(ii)(H), HTSUS. Accordingly, the Chicken Flavored Meal Replacement Soup and the Tomato Flavored Meal Replacement Soup are eligible for preferential treatment under the UAFTA. HOLDING: Based upon the information before us, we find that the Chicken Flavored Meal Replacement Soup and the Tomato Flavored Meal Replacement Soup are eligible for preferential treatment under the UAFTA. EFFECT ON OTHER RULINGS: NY N016004, dated September 7, 2007, is hereby modified consistent with the foregoing. In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after publication in the Customs Bulletin. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division