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April 2026, question 27

Quota · Quota

Bake 4U, Inc.(B4U) imports bulk pastry dough. The dough is subject to a tariff-rate quota, with an annual aggregate limit of 3,500,000 kg. The 2026 quota period runs from April 1, 2026, through March 30, 2027. B4U sources its pastry dough from the Netherlands, and at importation admits the dough into a Foreign Trade Zone (FTZ) in Texas. The dough is admitted in privileged foreigh status. Within its subzone, B4U operates commercial baking machines in temperature controlled facilities wherein the dough is used to create individually portioned baked pastries that are packaged into designer cartons for bulk sale to hotel and restaurant groups across Texas. B4U files the requisite entry for consumption in order to withdraw the baked pastries from the FTZ. Today, an emergency arose in B4U's subzone due to a failure of the temperature controlled refrigerators. To prevent the dough in those refrigerators from becoming unuseable, B4U decided to immediately bake all of the affected dough in its commercial baking machines. Since this will result in B4U producing a greater amount of pastries than it can package into designer cartons for bulk sale to restaurant and hotel groups, B4U has decided to sell its excess pastries at retail on-site to all persons who work at the FTZ. As of today, the annual dough quota has not yet filled. Under these facts, which of the following answer choices is a TRUE statement?

  1. The dough B4U imports is eligible to obtain quota status upon submission of CBP Form 214 in proper form, to achieve admission in privileged foreign status.
  2. Due to the emergency, B4U may elect nonprivileged foreign status for the affected dough, which is baked into pastries for retail sale within the FTZ.
  3. The pastries B4U withdraws from an FTZ for bulk sale are only eligible for the higher non-quota duty rate in effect on the date privileged foreign status was granted.
  4. The pastries B4U withdraws from an FTZ for bulk sale are eligible to obtain a lower in-quota duty rate upon presentation of an entry summary in proper form, and will be dutiable in accordance with their condition at withdrawal from the FTZ.
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CBP's answer: C. C: The pastries B4U withdraws from an FTZ for bulk sale are only eligible for the higher non-quota duty rate in effect on the date privileged foreign status was granted.

Dough admitted to the zone in privileged foreign status keeps that status even after it is baked into pastries (146.41(e)). For privileged foreign merchandise subject to a tariff-rate quota, 146.65(a)(1) allows classification only at the higher non-quota duty rate in effect when privileged status was granted, so C is right. The emergency does not let B4U switch to nonprivileged status, and the in-quota rate in D is not available for privileged foreign merchandise.

Classification of merchandise subject to a tariff-rate import quota will be made only at the higher non-quota duty rate in effect on the date privileged foreign status was granted. 19 CFR 146.65(a)(1)
A status as privileged foreign merchandise cannot be abandoned and remains applicable to the merchandise even if changed in form by manipulation or manufacture 19 CFR 146.41(e)

Search for: higher non-quota duty rate in effect on the date privileged foreign status was granted

CBP's key cites: 19 CFR 132.11(a); 19 CFR 146.14; 19 CFR 146.41(e); 19 CFR 146.65(a)(1)

Question and key from CBP's April 2026 exam and answer key. The walk-through is ours; quotes are from the pinned editions in the reference viewer (HTSUS 2026 Basic, 19 CFR 2025 edition).