OT:RR:CTF:FTM H294502 JER
Chris Tiwari
Overton & Company Air Services, Inc.
2016 Linden Boulevard
Elmont, NY 11003
Re: Affirmation of NY N291905; classification of malt beverage base
Dear Mr. Tiwari:
On December 7, 2017, U.S. Customs and Border Protection (“CBP”) issued New York Ruling Letter (“NY”) N291905 to you, pertaining to the tariff classification of two types of bulk malt beverage base products under the Harmonized Tariff Schedule of the United States (“HTSUS”). On behalf of your client, MHW Limited (hereinafter referred to as “MHW”), you request reconsideration of CBP’s decision in NY N291905 and seek classification of the imported products in heading 2203, HTSUS, as beer. For the reasons set forth below, we find that the classification of the malt beverage base products in heading 2206, HTSUS, is correct.
FACTS:
In NY N291905, the products were described as follows:
The subject merchandise is described as two types of Bulk Malt Beverage products to be used as an ingredient to make ready-to-drink (RTD) malt beverage based products. Malt Beverage 1 (Item # BNMB22) is said to contain 52.8 percent brewing water, 45 percent dextrose syrup (wheat derived), 2 percent malted barley and less than 1 percent hops and yeast. Malt Beverage 2 (Item # BGFNMB22) is said to contain 52.8 percent brewing water, 45 percent gluten free malted grain, 2 percent glucose syrup (maize-derived), and less than 1 percent hops and yeast. Both Malt Beverages are said to have an alcoholic strength by volume of 21.9 percent. The products will be imported into the United States in flexitanks bottles of 20,000 liters.
In your response to further inquiry concerning the initial binding ruling request, you state the following:
These products will not be marketed or sold in their current form. These malt beverage products are to be used as an ingredient to make ready-to-drink (RTD) malt beverage based products. Additional flavors are added in the [post-importation] process.
The final products [post-importation] will be marketed and sold as malt beverage based ready-to-drink (RTD) products that will contain additional flavors. The final alcohol content will be approximately 5% abv.
In your reconsideration request, you describe the brewing process of the imported malt beverage based products. According to your submission, mash is created from malted barley, glucose syrup, potable water and hops. The substance is then cooled to 32°C, where yeast is added [to the wort], which begins the next stage of the process, fermentation, followed by clarification and filtration. The final process stage is quality check. We note that the post-importation production is unknown with the exception of the addition of additional flavors and the reduction of alcohol content from 21.9% abv to 5% abv.
ISSUE:
Whether the instant malt beverage base products are classified under heading 2203, HTSUS, as beer made from malt, or under heading 2206, HTSUS, as other fermented beverages?
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRI’s). 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 HTSUS provisions under consideration are as follows:
2203 Beer made from malt
2206 Other fermented beverages (for example, cider, perry, mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included:
* * *
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System at the international level. While not legally binding, and therefore not dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System and are thus useful in ascertaining the classification of merchandise under the System. See T.D. 89-80, 54 Fed. Reg. 35127 (Aug. 23, 1989).
The EN to heading 2203, HTSUS, provides in pertinent part as follows:
Beer is an alcoholic beverage obtained by fermenting a liquor (wort) prepared from malted cereals (most commonly barley or wheat), water and (usually) hops. Certain quantities of non-malted cereals (e.g., maize (corn) or rice) may also be used for the preparation of the liquor (wort). The addition of hops imparts a bitter and aromatic flavour and improves the keeping qualities. Cherries or other flavouring substances are sometimes added during fermentation.
Sugar (particularly glucose), colouring matter, carbon dioxide and other substances may also be added.
According to the fermenting process employed, the products may be bottom fermentation beer, obtained at a low temperature with bottom yeasts, or top fermentation beer, obtained at a higher temperature with top yeasts.
Beer may be pale or dark, sweet or bitter, mild or strong. It may be put up in barrels, bottles or in airtight tins and may be marketed as ale, stout, etc.
The EN to heading 2206, HTSUS, provides in relevant part as follows:
This heading covers all fermented beverages other than those in headings 22.03 to 22.05.
. . .
All these beverages may be either naturally sparkling or artificially charged with carbon dioxide. They remain classified in the heading when fortified with added alcohol or when the alcohol content has been increased by further fermentation, provided that they retain the character of products falling in the heading.
* * *
MHW contends that the subject malt beverage base products satisfy the definition of “beer,” set forth in the regulations of the Alcohol and Tobacco Tax and Trade Bureau of the U.S. Department of the Treasury (“TTB”). Section 25.11 of TTB Regulations (27 C.F.R. §25.11) defines beer as “beer, ale, porter, stout, and other similar fermented beverages (including sake or similar products) of any name or description containing one-half of 1 percent or more of alcohol by volume.” MHW states that the Base Number 1 product is made from malted barley and hops and has an ABV greater than one-half of 1 percent and that Base Number 2 is made from gluten-free malted grains, hops and has an ABV greater than one-half of 1 percent. MHW therefore concludes that the subject products are beer according to the TTB Regulations. Lastly, MHW argues that because the subject malt beverage base products do not contain wine, they should not be classified in heading 2206, HTSUS.
Initially we note that the TTB regulations referenced by MHW pertain to the collection of federal excise taxes on alcoholic products and are not intended as guidance for the classification of imported merchandise under the HTSUS. Statutes, regulations and administrative interpretations relating to ‘other than tariff purposes’ are not determinative of CBP classification disputes. See Amersham Corp. v. United States, 5 C.I.T. 49, 56, 564 F.Supp. 813, 817 (1983). Thus, the above-referenced TTB standards and definitions are not binding on CBP. However, to the extent that regulations or definitions of other federal agencies may be instructive in a tariff classification decision, we note that TTB regulations refer to both “beer” and “malt beverages” separately. In this regard, 27 U.S.C. §211(a)(7) and 27 C.F.R. §7.10, define “malt beverage” as “a beverage made by the alcoholic fermentation of an infusion or decoction, or combination of both, in potable brewing water, of malted barley with hops, or their parts, or their products, and with or without other malted cereals, and with or without the addition of unmalted or prepared cereals…” The fact that TTB regulations define “beer” and “malt beverages” separately indicates that regardless of their tax treatment, the TTB regulations acknowledge that not all beverages made from malt are “beer.”
The tariff classification of goods is based on their condition as imported. In their condition as imported, the MHV products are described as a malt beverage base with an alcohol content of 21.9% alcohol by volume (abv). MHW describes the malt beverage base products as “ingredients” which will undergo further processing following importation (sic post-importation) to make ready-to-drink malt beverage-based products. According to MHW, these items will not be marketed and sold in their condition as imported but instead once the post-importation processing is completed, they will be marketed and sold as malt beverage based ready-to-drink products with a final alcohol content of 5% abv.
It is our view, that a product which is described as an “ingredient” to make ready-to-drink malt beverages is not commonly or commercially recognized as beer. Instead, the subject products fall under a different and separate tariff provision, which is intended to cover all other fermented beverages not covered by heading 2203, HTSUS. For instance, in NY N286622, dated January 19, 2018, CBP determined that fermented malted barley and hops produced in brewing water does not, alone, make a product classifiable as beer. The decision in NY N286622 classified a malt beverage made from water, sugar, malt and yeast under heading 2206, HTSUS. The malt beverage product in NY N286622 was described as a beer-base. In NY N286622, it was noted that the malted beverage (beer-base) would not be marketed or sold as beer but instead would be used in the production of flavored malt beverage products. As such, the malted beverage (beer-base) was not classified as a beer. Much like the beer-base in NY N286622, the subject malt-beverage products are base ingredient products, which are distinct from beer as contemplated by heading 2203, HTSUS.
The ENs to heading 2203, define beer, in pertinent part, as “an alcoholic beverage obtained by fermenting a liquor (wort) prepared from malted cereals (most commonly barley or wheat), water and (usually) hops.” Heading 2203, HTSUS, is an eo nomine provision, which “describes a commodity by a specific name, usually one well known to commerce.” See United States v. Bruckmann, 65 C.C.P.A. 90, C.A.D. 1211, 582 F.2d 622, 625 n.8 (1978). As an eo nomine provision, heading 2203, HTSUS, contemplates a specific product with a specific commercial identity; one of which is well known to commerce. In sum, heading 2203, HTSUS, contemplates finished beer, not base ingredient products. In the instant case, the subject malt beverage base products are produced in a traditional brewing process and as such are fermented malt beverages with characteristics and ingredients that are similar to a finished beer product. However, the subject malt beverage-base and the beer-base are ingredient products, which are not recognized in commerce as being beer.
To determine whether a beverage is a beer, CBP examines its manufacturing process, organoleptic properties, and commercial identity. See Headquarters Ruling Letter (“HQ”) H243087, dated January 13, 2015 and HQ 084708, dated July 21, 1989. CBP has previously held that malt beverage products, which were not marketed and sold as beer were not classifiable under the specific eo nomine provision of heading 2203, HTSUS, despite being a fermented product brewed in a manner similar to the beer brewing process. For instance, in HQ H243087, CBP classified four malt beverage products (Spumante beverages) under heading 2206, HTSUS, noting that the name, appearance, character and use of the Spumante beverages were distinct from those products which are labeled, marketed, and sold as “beer.” Therefore, as fermented beverages not falling within the scope of headings 2203 to 2205, they were classified in heading 2206. Likewise, in HQ H209838, dated December 18, 2012, CBP classified a malt beverage product under heading 2206, HTSUS, finding that the malt beverage was not a beer because it contained added flavoring after the fermentation process was completed and because it was not marketed as beer.
In their condition as imported, the subject malt beverage base products are base ingredients, which will be used to make malt beverage based ready-to-drink products. Neither product will be marketed or sold as beer but instead, will be used in the production of ready-to-drink products and in some cases, beer. Ready-to-drink products are defined as packaged beverages which are sold in a prepared form, ready for consumption. Examples of ready-to-drink products include hard seltzer, craft cocktails, and hard teas. Such products are not commercially recognized or classified as beer in heading 2203, HTSUS. See e.g., HQ H314978, dated May 11, 2021 (classifying a hard seltzer (White Claw Hard Seltzer) in heading 2206, HTSUS). In HQ H314978, the White Claw Hard Seltzer began as a “beer base,” which was composed of sugar (51%), yeast and nutrients (less than 4%), water and trace amounts of malted gluten-free grains. The decision in HQ H314978 noted that this product is entirely distinct from beer because it does not have the taste, aroma, character, or appearance of beer, and it is also not named beer or sold, labeled, or marketed as beer.
According to the MHW submission, the TTB determined that Base Product Number 1 was a “malt beverage” and determined that Base Product Number 2 was a “beer base.” That CBP is not bound by TTB classifications notwithstanding, a product deemed to be a malt beverage and/or a beer base would not be considered “beer” for purposes of heading 2203, HTSUS. Moreover, the fact that the TTB determined that Base Product Number 1 was a “malt beverage” and Base Product Number 2 was a “beer base”, reinforces our view that these products are not beer for purposes of heading 2203, HTSUS, but rather are base ingredients, which are properly classified under heading 2206, HTSUS. Just as the TTB regulations make a distinction between malt-beverage and beer-base products, so too does the HTSUS Nomenclature recognize the distinction between malt beverage products and finished beer.
Finally, and contrary to MHW’s contentions, the addition of wine, juice or other flavoring is neither determinative nor required for classification under heading 2206, HTSUS. The EN to heading 2206, HTSUS, explains that “this heading provides for all fermented beverages other than those in headings 22.03 to 22.05.” Heading 2206, HTSUS, is a residual provision also known as a “basket provision.” Classification in a basket provision is only appropriate if there is no tariff category that covers the merchandise more specifically. See E.M. Industries v. U.S., 999 F. Supp. 1473, 1480 (CIT 1998) (“’Basket’ or residual provisions of HTSUS headings … are intended as a broad catch-all to encompass the classification of articles for which there is no more specifically applicable subheading.”) Based on the facts provided and their condition as imported, the subject malt beverage base products are not commercially recognizable as beer, and, therefore, do not fall within the scope of the eo nomine provision. Instead, they are fermented malt beverage base ingredients, which will be used to produce specific and more refined ready to drink beverages. As such, both the malt beverage base and the beer base are properly classified under heading 2206, HTSUS.
HOLDING:
In accordance with GRI 1, Malt Beverage Base # 1 (malt beverage) and Malt Beverage Base # 2 (beer base) ingredients are classified in heading 2206, HTSUS, specifically, these products are classified in subheading 2206.00.90, HTSUS, which provides for, in pertinent part: “[o]ther fermented beverages…: Other: Other….” The 2021 general, column one rate of duty is 4.2¢ per liter.
Duty rates are provided for convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided online at http://www.usitc.gov/tata/hts/.
EFFECT ON OTHER RULINGS:
NY N291905, dated December 7, 2017, is hereby AFFIRMED.
Sincerely,
For Craig T. Clark, Director
Commercial and Trade Facilitation Division