In ruling NY N323535 (February 24, 2022), Customs and Border Protection (CBP) discussed the classification and country of origin of sugar-coated krill oil gummies.

The product, known as “Krill Oil Gummy (Sugar Coated),” has the following ingredients from the following countries:

In China, the ingredients are all mixed and cooked together to form a syrup. The bovine gelatin is then liquified and added to the syrup, which is further processed by blending the solution with the U.S. krill oil and the remaining ingredients from the U.S., France, and Denmark. Afterwards, the blended liquid is poured into a mold and dried under a controlled environment until the desired moisture content is reached. Finally, the gummy is demolded and polished with caster sugar before being packed into a sealed container. The gummies are intended to be marketed as dietary supplemental products, which may be imported in bulk or retail. As noted by CBP, the product is packaged in bags of 1,000 gummies, 4 bags per carton.

CBP determined that there would be two different types of subheadings for the product, depending on how it is imported. If the krill oil gummies are imported in non-retail containers – falling within the quantity limit described in additional U.S. note 8 to chapter 17 – CBP determined the applicable subheading to be 2106.90.9500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “food preparations not elsewhere specified or included … other … other … articles containing over 10 percent by dry weight of sugar described in additional U.S. note 3 to chapter 17… described in additional U.S. note 8 to chapter 17 and entered pursuant to its provisions.” The general rate of duty is 10% ad valorem. If the quantitative limits of additional note 8 to chapter 17 are reached

In addition, in its determination for the product’s country of origin, CBP noted that, as defined under 19 CFR 134.1(b), the country of origin is 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 change the country of origin of the article.” CBP also established that “substantial transformation” takes place when a particular product “when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing.” The agency determined that the krill oil of from the U.S. had undergone a substantial transformation and that the operations performed in China resulted in a product with a different name, character, or use.  As such, the essential character of the krill oil changed, making the country of origin China.

Additionally, pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, Chinese products under subheadings 2106.90.95 or 2106.90.97, HTSUS, unless specifically excluded, are subject to an additional 7.5% ad valorem duty rate. As such, the chapter subheading 9903.88.15 must be reported in addition to subheading 2106.90.95 or 2106.90.97, HTSUS.