Introduction
A trading company in Importing Country A is planning to import sugar confectionery from FTA Contracting Country B. The sugar confectionery is manufactured in FTA Contracting Country B using sugar and glucose syrup sourced from within B, and additives such as acidulants, flavorings, colorants, and water from Non-Contracting Countries. Will this manufacturing process allow the sugar confectionery to meet the FTA origin rules and qualify for reduced tariffs?
Customs Ruling Details
Issuance Date
December 28, 2021
Product Name
Sugar Confectionery
HS Code
1704.90
Origin Rule
CTH (Change to Tariff Heading)
List of Raw Materials
| Raw Material | HS Code | Origin |
|---|---|---|
| Sugar | 1701 | FTA Contracting Country |
| Glucose Syrup | 1702 | FTA Contracting Country |
| Acidulant | 2918 | Non-Contracting Country |
| Flavoring | 3302 | Non-Contracting Country |
| Colorant | 3203 | Non-Contracting Country |
| Water | 2201 | Non-Contracting Country |
Manufacturing Process
| Preparation of raw materials |
| Passing through magnet |
| Passing through filter |
| Boiling |
| Adding raw materials |
| Cooling and mixing |
| Laminating candy base |
| Stretching candy base |
| Cutting candy base |
| Shaping and inserting sticks |
| Cooling |
| Inspection with metal detector |
| Individual packaging and tagging |
| Re-inspection with metal detector |
| Inspection with X-ray machine |
| Temporary storage |
| Packing in decorative boxes |
| Packing in cardboard boxes |
| Pallet stacking |
| Shipping |
Reason for Approval
The HS code for the sugar confectionery is 1704.90, and the product-specific rule of origin is *CTH. Upon reviewing the details of the raw materials, the acidulants, flavorings, colorants, and water sourced from non-FTA countries meet the criteria set by the product-specific rule of origin. Therefore, the sugar confectionery is recognized as an originating product under the FTA and is eligible for tariff reduction.
*“CTH” stands for Change to Tariff Heading, which requires that non-originating materials used in a product must undergo a change at the 4-digit HS code level during the final production process.
Conclusion
In this case study, we see a strategic approach to importing sugar confectionery that not only reduces tariffs but also lowers raw material costs. The main ingredients of the sugar confectionery, sugar and glucose syrup, are sourced from an FTA signatory country, ensuring that the final product is largely considered to be of FTA origin. This high purity level of the product underscores its compliance with FTA rules.
While the primary ingredients are procured from the FTA signatory country, supplementary materials such as acidulants, flavorings, colorants, and water are sourced from non-FTA countries at lower costs. This strategy allows the company to maintain the product’s high quality and purity while significantly reducing procurement costs.
By adhering to the product-specific rules of origin and strategically sourcing non-originating materials, the company qualifies for preferential tariff rates under the FTA. This dual approach of cost optimization and tariff reduction showcases the company’s effective use of FTAs to enhance profitability.
Understanding and leveraging FTAs strategically can lead to substantial business opportunities. This case demonstrates how knowledge of FTA rules and smart sourcing decisions can create a competitive edge in international trade.
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