August 13, 2008 CBP Bulletin Notice on Classification of Milk Chocolate Chips

Proposed revocation of ruling; proposed revocation of treatment. CBP is proposing to revoke a ruling on the classification of milk chocolate chips. Additionally, CBP proposes that this notice covers any rulings on this merchandise which may exist but have not been specifically identified. CBP is also proposing to revoke any treatment it has previously accorded to substantially identical transactions.

CBP states that any party who has received a contrary written ruling or decision on the merchandise that is subject to the proposed revocations, or any party involved with a substantially identical transaction, should advise CBP by September 12, 2008, the date that written comments on the proposed ruling are due. Furthermore, CBP states that an importer's failure to advise CBP of such rulings, decisions, or substantially identical transactions may raise issues of reasonable care on the part of the importer or its agent for importations subsequent to the effective date of the final decision in this notice.

Milk chocolate chips. The product is described as a milk chocolate chip product intended for use as "decoration on cakes/pastries, in home baking and ready-to-eat." The product was to be shipped in two forms: packaged for retail sale in 300-gram retail bags and packaged in 25-pound cases to be repackaged after importation. The chocolate chips were further described as being composed of 47.21 percent sugar, 22 percent cocoa paste, 12.59 percent (non-fat) milk powder, 11.07 percent cocoa butter, 0.008 percent vanillin, and 7.10 percent milk fat. The total milk solids content of the chocolate was 19.69 percent, and the total milk fat content of the chocolate was 7.14 percent.

CBP is proposing to issue (HQ) H009857 in order to revoke NY N007481 and reclassify the milk chocolate chips in 25-pound cases under HTS 1806.90.1800 as "Chocolate and other food preparations containing cocoa: Other: Other: Other: Containing butterfat or other milk solids (excluding articles for consumption at retail a candy or confection): Containing over 5.5 percent by weight of butterfat: Other: Containing less than 21 percent by weight of milk solids" rather than under HTS 1806.20.3600, as "Chocolate and other food preparations containing cocoa: Other preparations in blocks, slabs or bars, weighing more than 2 kg or in liquid, paste, powder, granular or other bulk form in containers or immediate packings, of a content exceeding 2 kg: Preparations consisting wholly of ground cocoa beans, with or without added cocoa fat, flavoring or emulsifying agents, and containing not more than 32 percent by weight of butterfat or other milk solids and not more than 60 percent by weight of sugar: Other: Containing butterfat or other milk solids (excluding articles for consumption at retail as candy or confection): Other: Other: "Containing less than 21 percent by weight of milk solids."

For the milk chocolate chips shipped in 300-gram retail bags, CBP is also proposing classification in HTS 1806.90.1800, rather than under HTS 1806.90.2800 as: "Chocolate and other food preparations containing cocoa: Other: Other: Other: Containing butterfat or other milk solids (excluding articles for consumption at retail as candy or confection): Other: Other: Containing less than 21 percent by weight of milk solids."

CBP proposes this change as a correction based on Chapter Notes and prior rulings. (See bulletin for specific ruling numbers.)

Regarding the 25-pound case chocolate chips, CBP states that it has long been their position that the expression "bulk form" in HTS 1806.20 refers to food preparations that will undergo material change into a finished article after importation. Although the chocolate chips are shipped in bulk quantities (25-pound cases), they are not in "bulk form" as required by HTS 1806.20.

Regarding the chocolate chips in 300-gram retail bags, CBP states that it has been their long-standing position that "chocolate chips are commonly and commercially known as baking ingredients, and the fact that they may be eaten without any additional preparation does not make them candy." Further, to the extent that chocolate chips are not usually specifically packaged and marketed as candy, they are not "articles for consumption at retail as candy or confection."

CBP further notes that although the chocolate chips contain over 10 percent by dry weight of sugar, as a "cake decoration," they are an exception under U.S. Note 3 to Chapter 17 which governs classification for HTS 1806.90.5500/5900, and precludes them from classification therein. CBP now proposes that HTS 1806.90.1800 is the correct classification because the chocolate chips contain over 5.5 percent by weight of butterfat. Also it is noted that the text superior to HTS 1806.90.1800, which governs classification under that subheading, excludes "articles for consumption at retail as candy or confection."

CBP now proposes that by application of GRI 1, the milk chocolate chips (the 25-pound cases and the 300-gram bags) are properly classified in heading 1806, and are specifically provided for under HTS 1806.90.1800, as: "Chocolate and other food preparations containing cocoa: Other: Other: Other: Containing butterfat or other milk solids (excluding articles for consumption at retail a candy or confection): Containing over 5.5 percent by weight of butterfat: Other: Containing less than 21 percent by weight of milk solids."

Proposed: 1806.90.1800, 37.2c/kg 6%, subject to quota under Chapter 99

Current: 1806.20.3600, 37.2c/kg 4.3%, subject to quota under Chapter 99, and 1806.90.2800, 37.2c/kg 6%, subject to quota under Chapter 99.

August 13, 2008 CBP Bulletin (Vol. 42, No. 34) available athttp://www.cbp.gov/xp/cgov/trade/legal/bulletins_decisions/bulletins_2008/