OT:RR:CTF:FTM H303137 PJG
Mr. John Peterson
Neville Peterson LLP
One Exchange Plaza
55 Broadway, Suite 2602
New York, New York 10006
RE: Modification of NY N301921 and NY N301923; tariff classification of thickened beverages
Dear Mr. Peterson:
On February 7, 2019, U.S. Customs and Border Protection (“CBP”) issued New York Ruling Letter (“NY”) N301923 to you. The ruling pertains to the tariff classification under the Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”) of four flavors of thickened beverages that are imported in two consistencies, which are identified as “nectar” and “honey,” and numbers 2 and 3, respectively. The flavors at issue are Lemon Water Hydra+, Cranberry Cocktail Hydra+, Apple Hydra+, and Orange Hydra+. We have reviewed NY N301923 and determined it to be in error with respect to the classification of the merchandise in heading 2106, HTSUS.
Similarly, we have reviewed NY N301921, dated February 5, 2019, which was also issued to you, and determined it to be in error with respect to the classification of the nectar and honey consistencies of the “Milk Beverage Hydra+” in heading 2106, HTSUS. For the reasons set forth below, NY N301923 and NY N301921 are modified with respect to the tariff classification of the products at issue.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. § 1625(c)(1)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. No. 103-182, 107 Stat. 2057, 2186 (1993), notice of the proposed action was published on October 2, 2019, in Volume 53, Number 35, of the Customs Bulletin. One comment was received in response to this notice, supporting CBP’s modification and this decision.
FACTS:
In NY N301923, CBP considered the classification of four flavors of the product, specifically, “Apple Hydra+,” “Lemon Water Hydra+,” “Cranberry Cocktail Hydra+,” and “Orange Hyrda+.” The products were described as follows in the ruling:
The literature explains that these products are specially thickened beverages designed for consumption by persons suffering from dysphagia, a chronic health condition which makes it difficult for a person to swallow. Because of the added thickener, these liquids do not have a normal consistency, but are thicker, with the consistencies of nectar and honey. The products are available in one-liter packages with the suggested serving size of 4 ounces, and in single-serve packages of 118 ml.
CBP classified the four products in heading 2106, HTSUS, because it determined that the product is not potable due to its thickness, it is a dietary medical product, and it has a dosage form. Specifically, CBP classified the Cranberry Cocktail Hydra+ in subheading 2106.90.9897, HTSUSA, which provides for “Food preparations not elsewhere specified or included: Other: Other: Other: Other: Other: Other: Other: Other: Other: Containing sugar derived from sugar cane and/or sugar beets,” and the Lemon Water Hydra+, Apple Hydra+, and Orange Hydra+ in subheading 2106.90.9898, HTSUSA, which provides for “Food preparations not elsewhere specified or included: Other: Other: Other: Other: Other: Other: Other: Other: Other: Other.”
In NY N301921, CBP considered the classification of a product known as “Milk Beverage Hydra+,” which was described in the ruling as follows:
The product is known as “Milk Beverage Hydra+,” and is said to contain milk, amidon pureflo, sugar, and disodium phosphate. This Hydra+ product is a specially-thickened liquid which is designed for consumption by persons suffering from dysphagia, a chronic health condition which makes it difficult for a person to swallow. Because of the added thickener, this liquid does not have a normal consistency, but is thicker with the consistencies of nectar and honey. It is available in one-liter packages, with a suggested serving size of 4 ounces, and in single-serve packages of 118 ml.
For the same reasons discussed in NY N301923, CBP classified the product in heading 2106, HTSUS, and specifically under subheading 2106.90.9897, HTSUSA. On February 26, 2019, you filed a request for reconsideration of NY N301921 and NY N301923, opining that the products at issue should be classified as flavored waters of heading 2202, HTSUS. Ingredients lists and product literature on Hydra+ products accompanied your request. We note that while all of the products are composed primarily of filtered water with various additives and amidon pureflo (a starch-based thickener), the “Milk Beverage Hydra+” is composed primarily of milk and amidon pureflo.
You also submitted samples of each of the subject products, in addition to the “Peach Cocktail Hydra+,” in the nectar and honey consistency for our consideration. We have disposed of the samples due to their perishable nature.
ISSUE:
What is the proper classification under the HTSUS for the subject merchandise?
LAW AND ANALYSIS:
Classification under the Harmonized Tariff Schedule of the United States (“HTSUS”) is made in accordance with the General Rules of Interpretation (“GRI”). GRI 1 provides that the classification of goods shall be determined 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 2019 HTSUS provisions under consideration are as follows:
2106 Food preparations not elsewhere specified or included:
2202 Waters, including mineral waters and aerated waters, containing added sugar or other
sweetening matter or flavored, and other nonalcoholic beverages, not including fruit or vegetable juices of heading 2009:
Additional U.S. Note 1 to Chapter 4, HTSUS, provides as follows:
For purposes of this schedule, the term “dairy products described in additional U.S. note 1 to chapter 4” means any of the following goods: malted milk, and articles of milk or cream (except (a) white chocolate and (b) inedible dried milk powders certified to be used for calibrating infrared milk analyzers); articles containing over 5.5 percent by weight of butterfat which are suitable for use as ingredients in the commercial production of edible articles (except articles within the scope of other import quotas provided for in additional U.S. notes 2 and 3 to chapter 18); or, dried milk, whey or buttermilk (of the type provided for in subheadings 0402.10, 0402.21, 0403.90 or 0404.10) which contains not over 5.5 percent by weight of butterfat and which is mixed with other ingredients, including but not limited to sugar, if such mixtures contain over 16 percent milk solids by weight, are capable of being further processed or mixed with similar or other ingredients and are not prepared for marketing to the ultimate consumer in the identical form and package in which imported.
Additional U.S. Note 10 to Chapter 4, HTSUS, provides as follows:
The aggregate quantity of dairy products described in additional U.S. note 1 to chapter 4, entered under subheading 0402.29.10, 0402.99.70, 0403.10.10, 0403.90.90, 0404.10.11, 0404.90.30, 0405.20.60, 1517.90.50, 1704.90.54, 1806.20.81, 1806.32.60, 1806.90.05, 1901.10.21, 1901.10.41, 1901.10.54, 1901.10.64, 1901.20.05, 1901.20.45, 1901.90.61, 1901.90.64, 2105.00.30, 2106.90.06, 2106.90.64, 2106.90.85 and 2202.99.24 in any calendar year shall not exceed 4,105,000 kilograms (articles the product of Mexico shall not be permitted or included under the aforementioned quantitative limitation and no such articles shall be classifiable therein).
Additional U.S. Note 2 to Chapter 22, HTSUS, provides as follows:
Subheadings 2202.99.30, 2202.99.35, 2202.99.36 and 2202.99.37 cover vitamin or mineral fortified fruit or vegetable juices that are imported only in non-concentrated form. Such juices imported in concentrated form are classified in subheadings 2106.90.48, 2106.90.52 or 2106.90.54, as appropriate.
The Harmonized Commodity Description and Coding System Explanatory Notes
(“ENs”) constitute the “official interpretation of the Harmonized System” at the international level. See 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989). While neither legally binding nor dispositive, the ENs “provide a commentary on the scope of each heading” of the HTSUS and are “generally indicative of [the] proper interpretation” of these headings. See id.
The EN to 22.02 states in pertinent part, the following:
Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured.
This group includes, inter alia:
Sweetened or flavoured mineral waters (natural or artificial).
Beverages such as lemonade, orangeade, cola, consisting of ordinary drinking water, sweetened or not, flavoured with fruit juices or essences, or compound extracts, to which citric acid or tartaric acid are sometimes added. They are often aerated with carbon dioxide gas, and are generally presented in bottles or other airtight containers.
* * *
Other non-alcoholic beverages, not including fruit or vegetable juices of heading 20.09.
This group includes, inter alia:
* * *
(2) Certain other beverages ready for consumption, such as those with a basis of milk and cocoa.
* * *
In Maxcell Bioscience, Inc. v. United States, 31 Ct. Int’l Trade 1999 (2007), the Court of International Trade (“CIT”) considered whether certain liquid dietary supplements were classifiable in heading 2106, HTSUS, or 2202, HTSUS. In Maxcell, the CIT determined that the two dietary supplements were not classifiable in heading 2202, HTSUS, because they were not “beverages.” Id. The court stated that the “liquid state of [the] products is not alone sufficient to justify their classification as ‘beverages’ under heading 2202. Nor does the fact that the products are not nutritionally complete preclude their classification under heading 2106.” Id. at 2010 (citing Headquarters Ruling Letter (“HQ”) 961909 (March 29, 1999)). The CIT stated that the products were not “beverages” because: (1) they were intended for consumption in measured doses (one to two ounces, taken three times a day, before meals); (2) one product had a bitter, medicinal taste, and the other had an oily appearance and texture or consistency and, therefore, they were not “designed to be flavorful and refreshing, or to quench thirst” and would likely only be purchased or consumed for “‘strictly health or nutritional purposes’”; and (3) unlike nonalcoholic beverages, the products “carry warning labels cautioning against use by pregnant or nursing women without consulting a physician.” Id. at 2007-2008. The court ultimately determined that the two products are classifiable in heading 2106, HTSUS. Id. at 2016.
First, we must consider whether the subject merchandise is in a liquid state. We note that CBP has previously classified smoothies and drinks containing thickening agents in heading 2202, HTSUS. See, e.g., NY N279195 (Sept. 23, 2016), NY N249846 (Feb. 20, 2014), NY N028197 (May 29, 2008), NY J80167 (Feb. 5, 2003), and NY G81823 (Sept. 15, 2000). We have reviewed samples of the subject merchandise, submitted with your request for reconsideration of NY N301921 and NY N301923. We note that the consistencies are all of a liquid nature and no thicker than the consistency of smoothies. Therefore, upon reviewing the samples, we have determined that the subject merchandise are not so thick as to render them unpotable.
Second, CBP has previously stated that if a product is a “vital food and nutrient source” then it is precluded from heading 2202, HTSUS. See HQ 950299 (Dec. 30, 1991) (stating that the subject infant formula “is not merely a beverage, that is, liquid for drinking, generally without consequence to the amount ingested, but rather is a vital food and nutrient source for an infant …. in order to provide sustenance for and maintain the health and well-being of an infant”). Your submissions and your website indicate that the instant products are designed to provide patients with hydration and nutrition, but unlike infant formula, there is no indication that these drinks are designed to be a vital or primary source of nutrition for individuals with dysplasia.
Third, we consider each of the three factors considered by the CIT in Maxcell. With regard to the first Maxcell factor, specifically, whether the products are intended to be consumed in measured doses, we agree with you that the subject merchandise is not medicinal and that there is no dosing for these products. You provide a suggested serving size, which is four ounces (the equivalent to half a cup). While a four ounce serving size is small, it is only a suggested serving size, and is not suggestive of a dosing. With regard to the second Maxcell factor, specifically, whether the products are “designed to be flavorful and refreshing, or to quench thirst,” we note that the instant products are designed to hydrate patients with dysplasia, therefore, they are designed to quench thirst. Finally, with regard to the third Maxcell factor, specifically, whether the products carry warning labels, we considered the submitted samples and did not find any warnings to consumers.
In accordance with the forgoing analysis, we have determined that the proper classification for the merchandise that was the subject of NY N301923 is heading 2202, HTSUS, which, in relevant part, provides for beverages. Specifically, the nectar and honey consistencies of the Lemon Water Hydra+, Cranberry Cocktail Hydra+, Apple Hydra+, and Orange Hydra+ are classified in subheading 2202.99.90, HTSUS, which provides for “Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored, and other nonalcoholic beverages, not including fruit or vegetable juices of heading 2009: Other: Other.”
The nectar and honey consistencies of the “Milk Beverage Hydra+,” which were the subject of NY N301921, are dairy products pursuant to Additional U.S. Notes 1 and 10 to Chapter 4, HTSUS, because they are “article[s] of milk.” Accordingly, the nectar and honey consistencies of the “Milk Beverage Hydra+” are classified in subheading 2202.99.24, HTSUS, which provides for “Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored, and other nonalcoholic beverages, not including fruit or vegetable juices of heading 2009: Other: Other: Milk-based drinks: Other: Described in additional U.S. note 10 to chapter 4 and entered pursuant to its provisions.”
Upon publication in the Customs Bulletin, CBP received one comment in support of its proposed action concerning NY N301923.
HOLDING:
Under the authority of GRIs 1 and 6 the nectar and honey consistencies of the Lemon Water Hydra+, Cranberry Cocktail Hydra+, Apple Hydra+, and Orange Hydra+ are classified under heading 2202, HTSUS, and specifically in subheading 2202.99.90, HTSUS, which provides for “Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored, and other nonalcoholic beverages, not including fruit or vegetable juices of heading 2009: Other: Other.” The 2019 column one, general rate of duty is 0.2¢/liter.
Under the authority of GRIs 1 and 6 the nectar and honey consistencies of the “Milk Beverage Hydra+” are classified under heading 2202, HTSUS, and specifically in subheading 2202.99.24, HTSUS, which provides for “Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored, and other nonalcoholic beverages, not including fruit or vegetable juices of heading 2009: Other: Other: Milk-based drinks: Other: Described in additional U.S. note 10 to chapter 4 and entered pursuant to its provisions.” The 2019 column one, general rate of duty is 17.5 percent ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov/tata/hts/.
EFFECT ON OTHER RULINGS:
NY N301923, dated February 7, 2019, is MODIFIED.
NY N301921, dated February 5, 2019, is MODIFIED.
In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division