HQ 954120: "Handi-Snack;" Peanut Butter and Crackers Set

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 954120

                          July 27, 1994


CLA-2  CO:R:C:F  954120  GGD

CATEGORY:  Classification

TARIFF NO.:  2008.11.0020

Mr. Mark Barras
Kraft General Foods Canada, Inc.
C.P./P.O. Box 6118
Montreal, Quebec H3C 3J3

RE:  "Handi-Snack;" Peanut Butter and Crackers Set

Dear Mr. Barras:

     This letter is in response to your inquiry of April 8, 1993,
concerning the classification under the Harmonized Tariff
Schedule of the United States Annotated (HTSUSA), of an article
identified as "Handi-Snack," to be imported from Canada.  A
sample article was submitted with your inquiry. 

FACTS:

     The sample article is a retail package consisting of three
clear plastic molded trays that may be separated from each other
by tearing along perforated dividers.  Each tray has two
compartments, the smaller of which contains 32 grams of peanut
butter, and the larger of which contains four crackers (weighing
18.4 grams) and a rectangular plastic wand (weight unknown) for
spreading the peanut butter.  The crackers and wand are of U.S.-
origin.  The trays are blow-molded in Canada from flat plastic
sheets of U.S.-origin.  The printed sealing film is of Canadian
origin.  In Canada, raw peanuts that are the product of either
China or the United States, or a combination of both, will be
processed into peanut butter, which will then be put up and
sealed in the trays with the crackers and wand.   
                               -2-

ISSUES:

     1) Whether the article is classifiable as crackers under
heading 1905, HTSUSA; or as peanut butter under heading 2008,
HTSUSA.

     2) Whether the molded trays and the U.S.-origin crackers and
plastic wands are entitled to a duty exemption under subheading
9801.00.10, HTSUSA.

LAW AND ANALYSIS:

     Classification under the HTSUSA is made in accordance with
the General Rules of Interpretation (GRIs).  The systematic
detail of the harmonized system is such that virtually all goods
are classified by application of GRI 1, that is, according to the
terms of the headings of the tariff schedule and any relative
Section or Chapter Notes.  In the event that the goods cannot be
classified solely on the basis of GRI 1, and if the headings and
legal notes do not otherwise require, the remaining GRIs may then
be applied.  The Explanatory Notes (ENs) to the Harmonized
Commodity Description and Coding System, which represent the
official interpretation of the tariff at the international level,
facilitate classification under the HTSUSA by offering guidance
in understanding the scope of the headings and GRIs.

     For classification purposes, the "Handi-Snack" essentially
consists of 2 components, crackers and peanut butter.  The
article cannot be classified by reference to GRI 1 because each
component is classifiable in a different heading.  The crackers
are classifiable under heading 1905, HTSUSA, which covers "Bread,
pastry, cakes, biscuits and other bakers' wares...and similar
products."  The peanut butter is classifiable in heading 2008,
HTSUSA, as prepared or preserved peanuts (ground-nuts).  Since
the article cannot be classified by reference to GRI 1, we look
to GRI 2(b), which in pertinent part states that:

          [t]he classification of goods consisting of more than
          one material or substance shall be according to the
          principles of rule 3.    

     GRI 3(a) directs that the headings are regarded as equally
specific when each heading refers to only part of the items in a
set put up for retail sale.  Therefore, to determine under which
provision the article will be classified, we look to GRI 3(b),
which states in pertinent part that: 
                               -3-

          goods put up in sets for retail sale, which cannot be
          classified by reference to 3(a), shall be classified as
          if they consisted of the material or component which
          gives them their essential character, insofar as this
          criterion is applicable.

     With respect to whether the "Handi-Snack" article comprises
goods put up in sets, we look to Explanatory Note X to GRI 3(b),
which indicates that for purposes of the rule, the term "goods
put up in sets for retail sale" means goods which:

     (a)  consist of at least two different articles which are
          prima facie, classifiable in different headings;

     (b)  consist of products or articles put up together to meet
          a particular need or carry out a specific activity; and

     (c)  are put up in a manner suitable for sale directly to
          users without repacking (e.g., in boxes or cases or on
          boards).

Since the crackers and peanut butter meet the above criteria, the
whole article is considered goods put up in sets for retail sale. 

     In order to determine the essential character of the set, we
next view Explanatory Note VIII to GRI 3(b), which provides the
following guidance:

          The factor which determines essential character
          will vary as between different kinds of goods.  It
          may, for example, be determined by the nature of
          the material or component, its bulk, quantity,
          weight or value, or by the role of a constituent
          material in relation to the use of the goods.

     Although both the crackers and peanut butter are edible
components of the set, we note that the peanut butter is the
component of greater weight and provides the more significant
portion of the taste and nutritional value of the whole article. 
The crackers are a more neutral component, providing a tasty,
flat surface upon which to spread the desired amount of peanut
butter.  Therefore, the "Handi-Snack" article is properly
classified in subheading 2008.11.0020, HTSUSA. 
                               -4-

     Heading 1202, HTSUSA, covers peanuts (ground-nuts), not
roasted or otherwise cooked.  In this case, the processing in
Canada of raw peanuts (whether the product of China, the U.S., or
both) into peanut butter, results in a change of tariff
classification as provided for in General Note
3(c)(vii)(B)(2)(I), and transforms the peanuts into goods
originating in the territory of Canada.

     Subheading 9801.00.10, HTSUSA, provides for the duty-free
entry of products of the U.S. that are returned after having been
exported, without having been advanced in value or improved in
condition by any process of manufacture or other means while
abroad, provided there has been compliance with the documentary
requirements of section 10.1, Customs Regulations (19 CFR 10.1).

     In this case, because the U.S.-origin crackers and plastic
wands are merely placed inside the plastic trays and sealed, they
are not advanced in value or improved in condition while abroad. 
Therefore, when the complete "Handi-Snack" article is imported,
the crackers and wands will be entitled to duty-free treatment
under subheading 9801.00.10, HTSUSA, assuming compliance with the
documentation requirements of 19 CFR 10.1.

     In regard to the plastic trays, however, we note that the
U.S.-origin, flat plastic sheets are molded into trays in Canada
by a process involving both heat and pressure.  The U.S.-origin
plastic is improved in condition abroad, returning to the U.S. as
the container for the imported snacks.  Therefore, the molded
trays are not entitled to a duty exemption under subheading
9801.00.10, HTSUSA.

HOLDING:

     The "Handi-Snack" article is properly classified in
subheading 2008.11.0020, HTSUSA, the provision for "Fruit, nuts
and other edible parts of plants otherwise prepared or
preserved...not elsewhere specified or included: Nuts, peanuts
(ground-nuts) and other seeds, whether or not mixed together:
Peanuts (ground-nuts), Peanut butter."   The merchandise is a
qualifying good from Canada, that is, either wholly obtained or
produced in the territory of Canada and/or the United States so
as to be subject to a change in tariff classification from one
chapter to another, thus meeting the requirements of General Note
3(c)(vii)(B), HTSUSA.  As such, merchandise imported on or before 
                               -5-

December 31, 1993, will enjoy preferences under the United
States-Canada Free Trade Agreement (FTA), upon compliance with
applicable regulations.  The rate of duty under the FTA for this
subheading is 2.6 cents per kilogram.  Effective January 1, 1994,
with the implementation of the North American Free Trade
Agreement (NAFTA), preferential treatment for goods under the FTA
was discontinued.  If you would like a ruling under the NAFTA,
you should follow the procedures set forth in Subpart I, Section
181.91, et seq., Customs Regulations (19 CFR Part I).  These
provisions were published in the Federal Register on December 30,
1993 (58 Fed. Reg. 69460, 69489).  A copy is attached for your
information.

     The U.S.-origin crackers and plastic wands are entitled to a
duty exemption under subheading 9801.00.10, HTSUSA, assuming
compliance with the documentation requirements for this tariff
provision.  The plastic molded trays are not entitled to a duty
exemption under subheading 9801.00.10, HTSUSA.  

     
                               Sincerely,




                               John Durant, Director