N351636

N351636 August 22, 2025 CLA-2-18:OT:RR:NC:N5:232 CATEGORY: Classification; Country of Origin; Marking; Trade Program or Trade Agreement TARIFF NO.: 1806.10.4500; 1806.10.5500; 9903.01.14; 9903.01.26 Mr. Abel Medina Parkerco, Inc. 4694 Jaime J. Zapata Avenue Brownsville, TX 78521 RE: The tariff classification, country of origin and eligibility under the United States-Mexico-Canada Agreement (USMCA) for a Sugar Lactose Cocoa Powder Blend (SLCBP) from Mexico Dear Mr. Medina: In your letter dated July 23, 2025, you requested a ruling on the tariff classification, country of origin, and eligibility under the USMCA of a Sugar Lactose Cocoa Powder Blend on behalf of your client, Santos USA Corp. (Houston, TX). An ingredients breakdown, production description, and product specifications accompanied your inquiry. The subject merchandise is described as a Sugar Lactose Cocoa Powder Blend (hereinafter SLCBP) composed of a dry mixture of 94.9 percent refined sugar, 4.1 percent lactose powder, and 1 percent cocoa powder. The sugar in the SLCBP is stated to be grown and refined in Mexico and have a polarity of 99.9 degrees. The lactose is described as a product of the United States. The cocoa powder is said to be produced in the Netherlands from cocoa beans sourced from non-USMCA countries that include Ivory Coast, Ghana, Nigeria, and Cameroon. The ingredients are processed, blended, and packed in Mexico. The finished SLCBP will be imported in railcars and used to make chocolate candy and candy bars. Classification: The applicable subheading for the SLCBP will be 1806.10.4500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for: “Chocolate and other food preparations containing cocoa: Cocoa powder, containing added sugar or other sweetening matter: Containing 90 percent or more by dry weight of sugar: Articles containing over 65 percent by dry weight of sugar described in additional U.S. note 2 to chapter 17: Described in additional U.S. note 7 to chapter 17 and entered pursuant to its provisions.” The general rate of duty will be 10 percent ad valorem. If the quantitative limits of additional U.S. note 7 to chapter 17 have been reached, the SLCBP will be classified in subheading 1806.10.5500, HTSUS, and dutiable at the rate of 33.6 cents per kilogram. In addition, products classified in subheading 1806.10.5500, HTSUS, will be subject to additional duties based on their value, as described in subheadings 9904.17.17 to 9904.17.48, HTSUS. Products of Mexico as provided by heading 9903.01.01 in Section XXII, Chapter 99, Subchapter III, U.S. Note 2(a), HTSUS, other than products classifiable under headings 9903.01.02, 9903.01.03, 9903.01.04, and 9903.01.05, HTSUS, will be subject to an additional 25 percent ad valorem rate of duty. At the time of entry, you must report the applicable Chapter 99 heading, i.e. 9903.01.01, in addition to subheading 1806.10.4500, HTSUS, listed above. Articles that are entered free of duty under the terms of general note 11 to the HTSUS (U.S.-Mexico-Canada Agreement (USMCA)), including any treatment set forth in subchapter XXIII of Chapter 98 and subchapter XXII of chapter 99 of the HTSUS, will not be subject to the additional ad valorem duties provided for in heading 9903.01.01. If your product is entered duty free as originating under the USMCA, you must report heading 9903.01.04, HTSUS, in addition to subheading 1806.10.4500, HTSUS. Effective April 5, 2025, Executive Orders implemented “Reciprocal Tariffs.” All imported merchandise must be reported with either the Chapter 99 provision under which the reciprocal tariff applies or one of the Chapter 99 provisions covering exceptions to the reciprocal tariffs. At this time, products of Mexico are not subject to reciprocal tariffs. At the time of entry, you must report the Chapter 99 heading applicable to your product classification, i.e. 9903.01.26, in addition to subheading 1806.10.4500, HTSUS, listed above. The tariffs and additional duties cited herein are current as of this ruling’s issuance. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided at https://hts.usitc.gov/. Country of Origin Marking: The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. The “country of origin” is defined in 19 CFR 134.1(b) as “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; however, for a good of a NAFTA or USMCA country, the marking rules set forth in part 102 of this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin.” 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. Applied in sequential order, the required hierarchy establishes that: (a) 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 section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied. The subject merchandise is neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the SLCBP is neither wholly obtained nor produced exclusively from “domestic” (Mexico, in this case) materials. Accordingly, we look to section 102.11(a)(3). The applicable tariff shift requirement in section 102.20 for the SLCBP of subheading 1806.10, HTSUS, consists of the following: A change to subheading 1806.10 from any other heading, except from heading 1805 or from Chapter 17; or A change to subheading 1806.10 from Chapter 17, provided that the good contains less than 65 percent by dry weight of sugar. Because the foreign materials, cocoa powder and lactose, contained in the SLCBP are classified in subheading 1805.00 and 1702.11 within the heading 1805 and Chapter 17, the tariff shift rule is not satisfied. We note that Section 102.13 provides for a de minimis exception for foreign materials that do not undergo the applicable change in tariff classification required in §102.20. Section 102.13(a) provides: Except as otherwise provided in paragraphs (b) and (c) of this section, foreign materials that do not undergo the applicable change in tariff classification set out in §102.20 or satisfy the other applicable requirements of that section when incorporated into a good shall be disregarded in determining the country of origin of the good if the value of those materials is no more than 7 percent of the value of the good or 10 percent of the value of a good of Chapter 22, Harmonized System. Based on the inform

of section 102.11(a)(3) has not produced a country of origin determination, we turn to section 102.11(b) of the regulations. Section 102.11(b) states, in relevant part: 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… When determining the essential character of a good under 19 C.F.R. §102.11, 19 C.F.R. §102.18(b)(1) provides that only domestic and 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 shall be taken into consideration. In this case, the domestic material, sugar of Mexican origin, is classified in heading 1701 within Chapter 17, which is a provision from which a change in tariff classification is not allowed under the tariff shift rule. Therefore, neither the foreign materials, namely, lactose of U.S. origin, nor the domestic materials, namely, sugar of Mexican origin, undergo the applicable tariff shift. Therefore, both materials merit equal consideration for determining the essential character of the product. Section 102.18(b)(2) provides, in relevant part: 

For purposes of determining which one of two or more materials described in paragraph (b)(1) of this section imparts the essential character to a good under §102.11, various factors may be examined depending upon the type of good involved. These factors include, but are not limited to, the following: (i) The nature of each material, such as its bulk, quantity, weight or value; and (ii) The role of each material in relation to the use of the good. In this instance we find that the Mexican sugar provides the essentia