Tariff classification, country of origin marking, and eligibility for preferential tariff treatment under the United States-Mexico-Canada Agreement (“USMCA”) of certain sugar/vanillin blends

HQ H320969 November 17, 2021 OT:RR:CTF:FTM H320969 TSM CATEGORY: Classification; Origin TARIFF NO.: 1701.91.4800 Mr. Anthony Parlatore Redpath Sugar Ltd. 95 Queen’s Quay East Toronto, ON M5E 1A3 Canada Re: Tariff classification, country of origin marking, and eligibility for preferential tariff treatment under the United States-Mexico-Canada Agreement (“USMCA”) of certain sugar/vanillin blends Dear Mr. Parlatore: This is in response to your letter, dated September 2, 2021, in which you requested a ruling, on behalf of Redpath Sugar Ltd., regarding the tariff classification under the Harmonized Tariff Schedule of the United States (“HTSUS”), country of origin, and preferential tariff treatment under the United States-Mexico-Canada Agreement (“USMCA”) of certain sugar/vanillin blends. Your request was forwarded to this office from the National Commodity Specialist Division for review. FACTS: The subject merchandise consists of five products, which are described as sugar and vanillin blends containing a mixture of raw cane sugar and artificial vanillin powder. Product 1 consists of 99.99 percent sugar (Product of Brazil) and 0.01 percent vanillin powder (Product of USA). Product 2 consists of 99.95 percent sugar (Product of Brazil) and 0.05 percent vanillin powder (Product of USA). Product 3 consists of 99.9 percent sugar (Product of Brazil) and 0.1 percent vanillin powder (Product of USA). Product 4 consists of 99.95 percent sugar (Product of Guatemala) and 0.05 percent vanillin powder (Product of USA). Product 5 consists of 99 percent sugar (Product of Costa Rica) and 1 percent vanillin powder (Product of USA). The raw cane sugar, produced in Brazil, Guatemala, or Costa Rica, is refined in Canada. The vanillin powder is produced in the United States. The refined sugar and vanillin powder are blended in Canada and shipped to the United States in 2200-pound supersacks. The sugar and vanillin products will be further mixed with other ingredients in the United States in manufacture of confectionery products. ISSUE: What is the tariff classification, country of origin marking, and status under the USMCA of the sugar/vanillin products at issue? LAW AND ANALYSIS: 1. Tariff Classification Classification under the HTSUS is determined 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 2021 HTSUS provisions under consideration are as follows: 1701 Cane or beet sugar and chemically pure sucrose, in solid form: Other: 1701.91 Containing added flavoring or coloring matter: Containing added flavoring matter whether or not containing added coloring: Articles containing over 65 percent by dry weight of sugar described in additional U.S. note 2 to Chapter 17: * * * 1701.91.48 Other Additional U.S. Note 2 to Section IV, HTSUS, provides as follows: For the purposes of this section, unless the context otherwise requires— the term “percent by dry weight” means the sugar content as a percentage of the total solids in the product; the term “capable of being further processed or mixed with similar or other ingredients” means that the imported product is in such condition or container as to be subject to any additional preparation, treatment or manufacture or to be blended or combined with any additional ingredient, including water or any other liquid, other than processing or mixing with other ingredients performed by the ultimate consumer prior to consumption of the product; the term “prepared for marketing to the ultimate consumer in the identical form and package in which imported” means that the product is imported in packaging of such sizes and labeling as to be readily identifiable as being intended for retail sale to the ultimate consumer without any alteration in the form of the product or its packaging; and the term “ultimate consumer” does not include institutions such as hospitals, prisons and military establishments or food service establishments such as restaurants, hotels, bars or bakeries. Additional U.S. Note 2 to Chapter 17, HTSUS, reads the following: For the purposes of this schedule, the term “articles containing over 65 percent by dry weight of sugar described in additional U.S. Note 2 to chapter 17” means articles containing over 65 percent by dry weight of sugars derived from sugar cane or sugar beets, whether or not mixed with other ingredients, capable of being further processed or mixed with similar or other ingredients, and not prepared for marketing to the ultimate consumer in the identical form and package in which imported. In addition, the Explanatory Notes (“EN”) to the Harmonized Commodity Description and Coding System represent the official interpretation of the tariff 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 these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989). EN 17.01 states in pertinent part the following: It should be noted that cane and beet sugar fall in this heading only when in the solid form (including powders); such sugar may contain added flavouring or colouring matter. * * * The five sugar/vanillin products at issue contain between 99 percent and 99.99 percent cane sugar and between 0.1 percent and 1 percent vanillin powder. Cane sugar is classified under heading 1701, HTSUS, which provides in relevant part for “Cane or beet sugar …, in solid form.” Moreover, consistent with EN 17.01, cane sugar containing “added flavouring or colouring matter” is also classified under heading 1701, HTSUS. Accordingly, we find that the products at issue, consisting of cane sugar and vanillin, which is a flavouring matter (component), are described by subheading 1701.91, HTSUS. Additional U.S. Note 2 to Chapter 17, HTSUS, covers articles that: (a) contain over 65 percent by dry weight of sugars derived from sugar cane or sugar beets, whether or not mixed with other ingredients; (b) capable of being further processed or mixed with similar or other ingredients, and (c) not prepared for marketing to the ultimate consumer in the identical form and package in which imported. Additional U.S. Note 2 to Section IV, HTSUS, defines the terms “percent by dry weight,” “capable of being further processed or mixed with similar or other ingredients,” and “prepared for marketing to the ultimate consumer in the identical form and package in which imported.” Specifically, Additional U.S. Note 2 to Section IV, HTSUS, provides as follows: (a) the term “percent by dry weight” means the sugar content as a percentage of the total solids in the product; (b) the term “capable of being further processed or mixed with similar or other ingredients” means that the imported product is in such condition or container as to be subject to any additional preparation, treatment or manufacture or to be blended or combined with any additional ingredient, including water or any other liquid, other than processing or mixing with other ingredients performed by the ultimate consumer prior to consumption of the product; and (c) the term “prepared for marketing to the ultimate consumer in the identical form and package in which imported” means that the product is imported in packaging of such sizes and labeling as to be readily identifiable as being intended for retail sale to the ultimate consumer without any alteration in the form of the product or its packaging. Upon review, we find that the five sugar/vanillin products at issue are described by Additional Note 2 to Chapter 17, HTSUS, based on the following: (a) they contain over 65% by dry weight of sugars derived from sugar cane, mixed with vanillin powder; (b) they are capable of being further processed and will be further processed by mixing with additional ingredients in manufacture of confectionary products; and (c) they will not be prepared for marketing to the ultimate consumer in the identical form and package in which imported - while imported in the form of sugar mixed with vanillin powder, upon importation they will be mixed with other ingredients and further processed into confectionary products before being marketed to the ultimate consumer. Consistent with the foregoing, we conclude that the five sugar/vanillin products under consideration are classified under heading 1701, HTSUS, and specifically under subheading 1701.91.4800, HTSUSA (Annotated), which provides for “Cane or beet sugar and chemically pure sucrose, in solid form: Other: Containing added flavoring or coloring matter: Containing added flavoring matter whether or not containing added coloring: Articles containing over 65 percent by dry weight of sugar described in additional U.S. note 2 to Chapter 17: Other.” 2. Country of Origin Marking Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. See 19 C.F.R. § 102.11. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which: (1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied. * * * Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the sugar/vanillin products at issue are neither wholly obtained nor produced exclusively from “domestic” (Canada, in this case) materials. Accordingly, because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we look to section 102.11(a)(3). “Foreign material” is defined in section 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” The applicable tariff shift requirement in section 102.20 for the products of headings 1701 and 1702 is as follows: A change to heading 1701 through 1702 from any other chapter. According to the section 102.20 tariff shift requirement for heading 1701, HTSUS, the foreign ingredients contained in the sugar/vanillin products at issue must undergo a tariff shift from any other chapter. Upon review, we find that the only foreign ingredient contained in each of the five products is sugar (from Brazil, Guatemala, or Costa Rica, depending on the product), which is already classified in heading 1701, HTSUS. Accordingly, we conclude that the tariff shift requirement of section 102.11(a)(3) is not met. Since an analysis of section 102.11(a) has not produced a country of origin determination, we turn to section 102.11(b) of the regulations. Section 102.11(b)(1) provides as follows: (b) Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section: (1) The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good, or . . . The rule of interpretation set forth in 19 C.F.R. § 102.18(b) state, in pertinent part, the following: (b)(1) For purposes of identifying the material that imparts the essential character to a good under §102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the §102.20 specific rule or other requirements applicable to the good. For purposes of this paragraph (b)(1): (i) The materials to be considered must be classified in a tariff provision from which a change in tariff classification is not allowed under the specific rule or other requirements applicable to the good under consideration. In this case, the material in the sugar/vanillin products at issue which is classified in a tariff provision from which a change in tariff classification is not allowed under section 102.20 for heading 1701, HTSUS, is the sugar from Brazil, Guatemala, or Costa Rica, depending on the product. Sugar is already classified in heading 1701, HTSUS. Therefore, it is the sugar that imparts the essential character of the sugar/vanillin products and the country of origin for marking purposes is the country of origin of the sugar. Specifically, the country or origin of products one, two, and three is Brazil, the country of origin of product four is Guatemala, and the country of origin of product five is Costa Rica. 3. Eligibility under the USMCA The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11 of the HTSUS implements the USMCA. GN 11(a) provides: Goods that originate in the territory of Mexico, Canada or the United States (hereinafter referred to as “USMCA country” or “USMCA countries” as further defined in subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury (including Uniform Regulations provided for in the USMCA), and goods enumerated in subdivision (p) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn, followed by the symbol “S” in parentheses, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act; and Goods that originate in the territory of a USMCA country under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn, followed by the symbol “S+” in parentheses, or under a subheading whose article description provides for originating goods of one or more USMCA countries, as the case may be, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states: For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if -- the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries; the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials; the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); * * * Since the sugar/vanillin products at issue contain non-originating sugar, they are not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i). The products at issue are also not produced exclusively from originating materials under GN 11(b)(ii). Thus, we must next determine whether the sugar/vanillin products qualify under GN 11(b)(iii). As determined above, the products at issue are classified under subheading 1701.91.4800, HTSUSA, which provides for “Cane or beet sugar and chemically pure sucrose, in solid form: Other: Containing added flavoring or coloring matter: Containing added flavoring matter whether or not containing added coloring: Articles containing over 65 percent by dry weight of sugar described in additional U.S. note 2 to Chapter 17: Other.” The applicable rule of origin for goods classified under subheading 1701.91.48, HTSUS, is in GN 11(o)/17.1, HTSUS, which provides “[a] change to headings 1701 through 1703 from any other chapter.” Since the non-originating sugar in the sugar/vanillin products is classified in heading 1701, HTSUS, the tariff shift rule is not met. Accordingly, the products at issue, classified under subheading 1701.91.4800, HTSUSA, do not satisfy the tariff shift rule under GN 11(o). However, it should be noted that the special column for subheading 1701.91.4800, HTSUSA, references subheadings 9823.10.01-9823.10.45, HTSUS, for “S+.” U.S. Note 10 to Subchapter XXIII, HTSUS, concerns sugar containing products pursuant to the USMCA. Although U.S. Note 10 pertains to originating goods of the USMCA countries eligible for special tariff treatment under the terms of GN 11, subparagraph (b)(3) of this note applies to products containing non-originating sugar refined in Canada and subparagraph (b)(4) applies to products that last underwent production in Canada. U.S. Note 10 to Subchapter XXIII, HTSUS, provides as follows: This note and subheadings 9823.10.01 through 9823.10.45 are effective as to originating goods of the USMCA countries eligible for special tariff treatment under the terms of general note 11 to the tariff schedule provided for in subheadings 1701.91.48, […] except as provided in subparagraph (b)(3). From July 1, 2020, through December 31, 2020, in 2021 and in successive years thereafter, the rates of duty provided for in subheadings 9823.10.01 through 9823.10.45 in the “Special” subcolumn of rates of duty column 1 followed by the symbol “(S+)” shall apply to goods of such countries in lieu of the duty rates set forth in the special subcolumn in the permanent subheadings enumerated above. * * * Goods of Canada that qualify to be marked as a good of Canada pursuant to U.S. law, without regard to whether the good is marked shall be eligible for USMCA tariff treatment only under subheadings 9823.10.02 through 9823.10.45. The aggregate quantity of originating goods of Canada entered under subheading 9823.10.02 from July 1, 2020 through December 31, 2020 shall not exceed the quantity of 4,800 metric tons. Beginning in 2021 and each year following, the quantitative limitations to originating goods of Canada set forth in this not