HQ 953675: Classification of Chocolate-Flavored Chips and Real Milk Chocolate Chips under the Harmonized Tariff Schedule of the United States (HTSUS).

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                              HQ 953675

                              September 15,1993

CLA-2 CO:R:C:F 953675  JGH

CATEGORY:  Classification

TARIFF NO.:  1806.90.0073

William J. Maloney, Esq.
Rode & Qualey
295 Madison Ave.
New York, New York  10017

RE:  Classification of Chocolate-Flavored Chips and Real Milk
     Chocolate Chips under the Harmonized Tariff Schedule of the
     United States (HTSUS).  

Dear Mr. Maloney:

     Your letter of March 25, 1993, in behalf of Kraft General
Foods, Inc., concerns the classification of two different types
of  Baker's chocolate chips made in Canada.

FACTS:

     The two types of chocolate chips are Baker's Chocolate
Flavored Chips and Baker's Real Chocolate (Milk Chocolate) Chips. 
Samples of the domestically produced, retail packaged products
were submitted. 

     The chocolate flavored chips are said to be made from sugar
(less than 60% by weight), partially hydrogenated palm kernel oil
with 1% palm stearate, whey solids from mozzarella, cocoa,
lecithin, and natural and artificial vanilla flavor.  The
butterfat content, present in the whey (which can not as a
practical matter be removed), is said to be 0.11 to 0.14% by
weight.  The chocolate flavored chips are said to contain neither
cocoa butter nor chocolate liquor.

     The milk chocolate chips are said to contain sugar (less
than 60% by weight), cocoa butter, dried whole milk, chocolate
liquor, non-fat dried milk, lecithin, salt and natural and
artificial vanilla flavor, with approximately 3.9% by weight
butterfat.

     The wrappings for both sample packages contain recipes for
different types of chocolate chip cookies. - 2 -

ISSUE:

     Classification and quota status of chocolate flavored chips
and milk chocolate chips under the HTSUS.

LAW & ANALYSIS:

     Although it is acknowledged that classification as other
Chocolate and other food preparations containing cocoa in
subheading 1806.90.00, HTSUS, may subject the products to quota
restraints, it is argued that as the chocolate flavored chips do
not contain over 5.5 percent by weight butterfat and are retail
packaged, they are exempt from quota.  Also as they do not
contain chocolate and are not produced from chocolate crumb, it
is claimed that for tariff purposes they can not be considered
chocolate.  The subheadings listed in the quota provision
9904.10.66, HTSUS, apply to "Chocolate, provided for in
subheadings 1806.20.40, 1806.32.20, and 1806.90, and low fat
chocolate crumb, provided for in subheadings 1806.20.80 and
1806.90, containing 5.5 percent or less by weight of butterfat
(except articles for consumption at retail as candy or
confection):..."  Also the preparations listed in the subheadings
subject to quota are those "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."

     Since the chocolate flavored chips contain partially 
hydrogenated palm kernel oil, they are not chocolate for the
purposes of the quota.  Thus, the de minimis issue raised on the
amount of milk solids present is not pertinent to the
classification of this product.  Of course, as conceded, the real
milk chocolate chips would be considered chocolate, based on
their composition, for quota purposes.

     The other issue for consideration is whether both the
chocolate flavored chips and the real milk chocolate chips are
exempt from quota because they are candy or confections.  It is
argued that because the chips are retail packaged and ready to
eat, they are exempt from quota as candy confections.  However,
the test applied by Customs is whether the product is chiefly or
predominantly used as a candy or confection.  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.  The examples given of candy bars and
chocolate "kisses" convincingly makes this point: both of these
chocolate products are packaged and marketed as candy, which
chocolate chips are not; they, just as the bars of baking
chocolate, are not "articles for consumption at retail as candy
or confection".               - 3 -

     As the court noted in Leaf Brands Inc. v. United States 70
Cust. Ct. 66, (C.D. 4409), it is the use of the article, rather
than the shape or texture which determines its classification. 
Thus, a product which the court acknowledged chemically was
flavored sugar was, primarily because of its use and also its
merchandising, a candy or confection.

HOLDING:

     Baker's Chocolate flavored Chips are classifiable as other
food preparations containing cocoa, put up for retail sale, in
subheading 1806.90.0073, HTSUS, and if a product of Canada,
dutiable at 3.5 percent ad valorem.

     Baker's Real Milk Chocolate Chips are chocolate for the
purposes of the quota, and as they contain 3.9 percent butter
fat, would be classifiable in subheading 1806.90.0020, HTSUS, and
subject to the quota restraints of subheading 9904.10.66, HTSUS. 

                              Sincerely,




                              John Durant, Director