Application for Further Review of Protest No. 2704-06-102375; Coated Peanuts

HQ H233137 March 18, 2013 CLA-2 OT:RR:CTF:TCM H233137 MG CATEGORY: Classification TARIFF NO.: 2008.11.4500 Port Director U.S. Customs and Border Protection Los Angeles/Long Beach Seaport 301 East Ocean Boulevard Suite 1400 Long Beach, California 90802 Re: Application for Further Review of Protest No. 2704-06-102375; Coated Peanuts Dear Port Director: This is our decision regarding the Application for Further Review (“AFR”) of Protest Number 2704-06-102375, timely filed by counsel Elon A. Pollack, on behalf of Chia I Foods Company, Ltd., concerning the classification of coated peanuts from China under the Harmonized Tariff Schedule of the United States (“HTSUS”). In reaching our decision we have taken into consideration arguments made by counsel in the memorandum in support of protest and application for further review, filed on December 6, 2006, as well as an amendment to protest and application for further review, dated December 11, 2006. Samples were submitted to this office for examination and were considered in conjunction with this request. We have also considered arguments presented by protestant during a teleconference held on February 14, 2013. FACTS: According to the submitted information, the protest covers a single entry of merchandise described on the invoice as “nut snacks,” products of China. The memorandum accompanying the protest describes the merchandise as “coated peanut snacks” consisting of a whole peanut encased in a flour-based, baked coating. The entry was made on March 28, 2006, and the merchandise classified under subheading 1905.90.10, HTSUS, which provides for: “Bread, pastry, cakes, biscuits and other bakers’ wares, whether or not containing cocoa; communion wafers, empty capsules of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products: Other: Bread, pastry, cakes, biscuits and similar baked products, and puddings, whether or not containing chocolate, fruit, nuts or confectionery.” On June 16, 2006, CBP liquidated the entry under subheading 2008.11.45, HTSUS, which provides for: “Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included: Nuts, peanuts (ground-nuts) and other seeds, whether or not mixed together: Peanuts (ground-nuts): Other: Described in additional U.S. note 2 to chapter 12 and entered pursuant to its provisions. . . .” A protest and application for further review was timely filed on December 6, 2006, in which Protestant asserted that the appropriate classification for the subject merchandise was in subheading 1905.90.10, HTSUS, as a baked product. ISSUE: Whether merchandise is classified as prepared peanuts of heading 2008, HTSUS, or as a biscuit, under heading 1905, HTSUS. LAW AND ANALYSIS: Initially, we note that the matter protested is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification. The protest was timely filed on December 6, 2006, within 180 days of liquidation of the entry. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006))). Further Review of Protest No. 1601-07-100279 was properly accorded to protestant pursuant to 19 C.F.R. § 174.24 because the decision against which the protest was filed is alleged to involve facts and legal arguments different from those considered in previous CBP rulings. Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined 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 2 through 6 may then be applied in order. The 2006 HTSUS provisions under consideration are as follows: 1905 Bread, pastry, cakes, biscuits and other bakers’ wares, whether or not containing cocoa; communion wafers, empty capsules of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products: * * * Other: 1905.90.10 Bread, pastry, cakes, biscuits and similar baked products, and puddings, whether or not containing chocolate, fruit, nuts or confectionery. . . . * * * 2008 Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included: Nuts, peanuts (ground-nuts) and other seeds, whether or not mixed together: Peanuts (ground-nuts): * * * Other: * * * 2008.11.45 Described in additional U.S. note 2 to chapter 12 and entered pursuant to its provisions. .... The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the headings. It is Customs and Border Protection (CBP) practice to follow, whenever possible, the terms of the ENs when interpreting the HTSUS. See, T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). The Explanatory Notes to chapter 19 state, in pertinent part, the following: (A)  Bread, pastry, cakes, biscuits and other bakers’ wares, whether or not containing cocoa.           This heading covers all bakers’ wares.  The most common ingredients of such wares are cereal flours, leavens and salt but they may also contain other ingredients such as : gluten, starch, flour of leguminous vegetables, malt extract or milk, seeds such as poppy, caraway or anise, sugar, honey, eggs, fats, cheese, fruit, cocoa in any proportion, meat, fish, bakery “ improvers ”, etc.  Bakery “ improvers ” serve mainly to facilitate the working of the dough, hasten fermentation, improve the characteristics and appearance of the products and give them better keeping qualities.  The products of this heading may also be obtained from a dough based on flour, meal or powder of potatoes.           The heading includes the following products :     (7)   “ Pretzels ”, i.e., brittle, glazed and salted crackers made of cylindrical length of dough often twisted into a form resembling the letter “ B ”.   (8)   Biscuits. These are usually made from flour and fat to which may have been added sugar or certain of the substances mentioned in Item (10) below. They are baked for a long time to improve the keeping qualities and are generally put up in closed packages. There are various types of biscuits including :           (a)    Plain biscuits containing little or no sweetening matter but a relatively high proportion of fat; this type includes cream crackers and water biscuits.           (b)   Sweet biscuits, which are fine bakers’ wares with longkeeping qualities and a base of flour, sugar or other sweetening matter and fat (these ingredients constituting at least 50 % of the product by weight), whether or not containing added salt, almonds, hazelnuts, flavouring, chocolate, coffee, etc. The water content of the finished product must be 12 % or less by weight and the maximum fat content 35 % by weight (fillings and coatings are not to be taken into consideration in determining these contents). Commercial biscuits are not usually filled, but they may sometimes contain a solid or other filling (sugar, vegetable fat, chocolate, etc.). They are almost always industrially manufactured products.           (c)    Savoury and salted biscuits, which usually have a low sucrose content. The Explanatory Notes to chapter 20 indicate, in pertinent part, that: This heading covers fruit, nuts and other edible parts of plants, whether whole, in pieces or crushed, including mixtures thereof, prepared or preserved otherwise than by any of the processes specified in other Chapters or in the preceding headings of this Chapter. It includes, inter alia : (1)   Almonds, groundnuts, areca (or betel) nuts and other nuts, dryroasted, oilroasted or fatroasted, whether or not containing or coated with vegetable oil, salt, flavours, spices or other additives. (Emphasis supplied) * * * Protestant states that the coated peanuts are classified in subheading 1905.90.10, HTSUS, the provision for biscuits and similar baked products, whether or not containing chocolate, fruit, nuts, or confectionery, free of duty. Protestant further asserts that products consisting of more than one material or substance may not be classified using General Rule of Interpretation (GRI) 1. Protestant contends that heading 1905, HTSUS, more specifically describes the products, by application of GRIs 2 and 3a, because heading 2008 only describes the peanut in the center. Protestant further claims that heading 1905, HTSUS, applies because the snacks have the essential character of a baked good rather than a peanut. Finally, protestant argues that CBP has departed from and incorrectly applied the decision in Hilo Rice Mill Co. v. United States, 52 CCPA 106, CAD 866 (1965), by basing its classification decision on the thickness of the coating and not using a holistic test that looks to the nature of the product. Protestant argues that GRI 3b applies and that an essential character analysis should be done in arriving to the proper classification of the coated peanuts. The fact that prepared peanuts or peanut-filled biscuits may consist of several ingredients does not convert them into the “mixed or composite goods”, triggering the essential character analysis of GRI 3b. GRI 3b can only be utilized if the goods cannot be classified by reference to GRI 3(a). Protestant argues that, because the snacks have the essential character of a baked good of heading 1905, HTSUS, heading 2008, HTSUS, is inapplicable to this merchandise as it only describes the peanut in the center. We find this assertion to be inaccurate. Heading 2008, HTSUS, provides for peanuts which have been prepared or preserved including any coating, flavoring or seasoning, which is applied to the peanut. The language of the above cited EN includes this merchandise, as well as nuts and other nuts, dryroasted, oilroasted or fatroasted, whether or not containing or coated with vegetable oil, salt, flavours, spices or other additives. (Emphasis supplied) CBP has classified dough-covered peanuts, similar to the merchandise at issue, in heading 2008. For instance, in HQ 089650, dated July 31, 1991, a product referred to as “Cracker Nut" peanuts cooked with a coating of wheat flour, glucose, salt and sugar and “growers” peanuts prepared with salt, garlic and coconut oil was classified in subheading 2008.11.00, HTSUS.  Protestant further argues that CBP has failed to follow the guidelines set forth in Hilo Rice Mill, which requires a “holistic approach” to determining the nature of the good and that measuring the coating’s diameter alone is inexact, as peanuts vary in size and shape. We disagree. On the issue of coating thickness, first articulated in Hilo Rice Mill, the court stated: “The Iso peanuts are composed of a peanut coated with dough, such as rice dough, which is rolled around the peanut, oven-cooked for 20 minutes and thereafter glazed to a brownish color with soy sauce. From specimens of the goods in evidence it appears that the coating is on the order of thickness of the diameter of the peanut.” See, Hilo Rice Mill, 52 C.C.P.A. 106. CBP has taken into account factors such as size, shape and coating thickness first articulated in Hilo Rice Mill in making a classification determination for the instant coated peanuts, as well as other similar merchandise. The fact that the court in Hilo Rice Mill ruled that the Iso peanuts had a coating that was “on the order of the thickness of the diameter of the peanut” proves that CBP has not been using a test that is “in direct conflict” with Hilo Rice Mill. CBP has a long-standing practice of considering the physical properties of the coating and comparing its thickness to the diameter of the peanut. In instances where we have found that the coating is substantial (adhering to the peanut, significantly altering the shape and character of the peanut, and equal to or greater than the diameter of the peanut) the product is considered to be a peanut-filled biscuit, a good of heading 1905, HTSUS. See, NY L 85373, dated July 5, 2005; NY N013265, dated July 10, 2007; N075717, dated October 9, 2009; and NY N009121, dated April 13, 2007. Where the coating is insubstantial (brittle, not appreciably altering the shape and character of the peanut, and less than the diameter of the peanut) the merchandise is considered to be a prepared peanut of heading 2008, HTSUS. See NY L85373; NY M82893, dated April 28, 2006; N043600, dated November 26, 2008; and NY N009684, dated May 8, 2007. With regard to Protestant’s argument that because peanuts vary in size and shape, a test that measures the diameter of the coating is at best inexact, we note that coating thickness is the least subjective of all these coating-related factors as it can be applied most consistently and uniformly. Therefore, a uniform standard of coating thickness provides guidance and removes subjectivity from the classification process. The instant sample of coated peanuts was examined by the import specialist, Long Beach/Los Angeles, counsel for the importer, and the National Commodity Specialist Division. Regarding the instant merchandise, CBP has found and Protestant has also conceded that the diameter of the peanut is greater than the thickness of the coating. We are satisfied that the coating is not substantial as it does not equal or exceed the diameter of the peanut. Furthermore, we note that the coating is brittle and the size and shape of the good is recognizable as a coated peanut. The instant merchandise consists, therefore, of coated peanuts of heading 2008 rather than peanut-filled biscuits of heading 1905. Protestant argues that Carborundum is applicable to the instant case and that a determination of the class or kind of merchandise to which the instant merchandise belongs is, therefore, required. We further note that the competing headings at issue, 1905 and 2008, HTSUS, are not use provisions, but rather provisions of general description which apply, eo nomine, to the goods at issue. In this regard, we find that Protestant’s introduction of Carborundum is not applicable, as the Carborundum factors are used to determine the class or kind of merchandise to which a good belongs, in the context of a use provision. Protestant further argues that the court in Hilo Rice Mill likened the Iso peanuts to crackers and pretzels, which in turn were deemed to be kinds of biscuits of what is now heading 1905, HTSUS. The court in Hilo Rice Mill determined that “the goods are an edible snack-type preparation eaten with a beverage, such as tea, or as a beer snack.” We note that peanuts (whether coated and/or flavored or not) are typically “used” as snack foods, the same as crackers and pretzels. In any event, the use of these products as snacks (a Carborundum factor) lacks relevance and applicability for purposes of classification in considering either one of the competing headings at issue, 1905 and 2008. Accordingly, by application of GRI 1, the instant merchandise is classified in heading 2008, HTSUS. The instant coated peanuts are specifically provided for in subheading 2008.11.45, HTSUS, which provides for: “Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included: Nuts, peanuts (ground-nuts) and other seeds, whether or not mixed together: Peanuts (ground-nuts): Other: Described in additional U.S. note 2 to chapter 12 and entered pursuant to its provisions. . . .” The 2006 column one, general rate of duty is 6.6 cents per kilogram. HOLDING: By application of GRI 1, the instant merchandise is classified in heading 2008, HTSUS. The instant coated peanuts are specifically provided for in subheading 2008.11.45, HTSUS, which provides for: “Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included: Nuts, peanuts (ground-nuts) and other seeds, whether or not mixed together: Peanuts (ground-nuts): Other: Described in additional U.S. note 2 to chapter 12 and entered pursuant to its provisions. . . .” The 2006 column one, general rate of duty is 6.6 cents per kilogram. You are instructed to deny the protest in full. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision, Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division