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:

China United States France Demark
·        glucose syrup

·        sucrose

·        water

·        caster sugar

·        bovine gelatin

·        orange juice concentrate

·        apple juice concentrate

·        citric acid

·        L-ascorbic acid

·        lactic acid

·        two types of natural orange flavoring, lecithin, and natural flavoring (eucalyptus/mint flavoring)

·        krill oil,

·        natural lemon flavoring

·        natural grapefruit flavoring

·        wheat starch

·        acacia gum

·        black carrot juice concentrate

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.

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Photo of Frances P. Hadfield Frances P. Hadfield

Frances P. Hadfield is a counsel in Crowell & Moring’s International Trade Group in the firm’s New York office. Her practice focuses on forced labor and withhold release orders (WRO), import regulatory compliance, and customs litigation. She regularly advises corporations on matters involving…

Frances P. Hadfield is a counsel in Crowell & Moring’s International Trade Group in the firm’s New York office. Her practice focuses on forced labor and withhold release orders (WRO), import regulatory compliance, and customs litigation. She regularly advises corporations on matters involving customs compliance, audits, customs enforcement, as well as import penalties.

Frances represents clients before the U.S. Court of International Trade and the U.S. Court of Appeals for the Federal Circuit, as well as in proceedings at the administrative level. She advises corporations on both substantive federal and state regulatory issues that involve U.S. Customs and Border Protection, the Federal Trade Commission, Food and Drug Administration, and U.S. Fish & Wildlife in matters pertaining to product admissibility, audits, classification, import restrictions, investigations, marking, licenses, origin, penalties, and tariff preference programs.

Photo of Martín Yerovi Martín Yerovi

Martín Yerovi is an international trade analyst in Crowell & Moring’s Washington, D.C. office. He provides practice support to the International Trade Group on import regulatory matters pending before the Office of the U.S. Trade Representative (USTR) and U.S. Customs and Border Protection…

Martín Yerovi is an international trade analyst in Crowell & Moring’s Washington, D.C. office. He provides practice support to the International Trade Group on import regulatory matters pending before the Office of the U.S. Trade Representative (USTR) and U.S. Customs and Border Protection (CBP). He works closely with attorneys developing courses of action for clients impacted by investigations under Section 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962. He also supports unfair trade investigations, including antidumping (AD) and countervailing duty (CVD) investigations, sunset reviews, and changed circumstance reviews before the Department of Commerce and the International Trade Commission (ITC).