RR:CTF:FTM H324381 TSM
Mr. Robert D. Stang
Husch Blackwell LLP
750 17th Street NW, Suite 900
Washington, DC 20006
RE: Tariff classification of Valess Nuggets and Valess Schnitzel dairy-based meat substitutes
Dear Mr. Stang:
This is in response to your request, on behalf of FrieslandCampina Consumer Dairy US Inc. (“FrieslandCampina”), dated August 11, 2021, for a binding ruling regarding the tariff classification under the Harmonized Tariff Schedule of the United States (“HTSUS”) of dairy-based meat substitutes, marketed under the brand Valess and identified as Valess Nuggets and Valess Schnitzel. Your request was forwarded by the National Commodity Specialist Division to this office for a response. Pursuant to a request from FrieslandCampina, a meeting with members of my staff and counsel for FrieslandCampina was held on June 27, 2022.
You have asked that certain information submitted in connection with this request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets in the submissions and exhibits that you forwarded to our office will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
The products at issue are Valess Nuggets and Valess Schnitzel, described as follows:
Valess Nuggets are made from Valess Fibers and other ingredients formed into nugget shapes, which are breaded, lightly salted, and lightly seasoned. The product has a juicy, firm bite with a crunchy crust reminiscent of a chicken nugget when cooked. Valess Nuggets are made from skimmed milk, breadcrumbs (wheat flour, yeast, salt, turmeric, paprika), sunflower oil, textured wheat protein, thickener (seaweed fibers, methyl cellulose), free-range chicken egg protein, oat fiber, wheat flour, food acid (potassium lactate), stabilizer (polyphosphate), modified wheat starch, flavoring, salt, and iron.
Valess Schnitzel are made from Valess Fibers and other ingredients in an oval, drop-shape that is breaded, lightly salted, and lightly seasoned. The product has a juicy, firm bite with a crunchy crust reminiscent of a breaded chicken cutlet. Valess Schnitzel are made from skimmed milk, breadcrumbs (wheat flour, yeast, salt, spices), sunflower oil, textured wheat protein, wheat flour, thickener (seaweed fibers, methyl cellulose), free-range chicken egg protein, modified wheat starch, oat fiber, food acid (potassium lactate), stabilizer (potassium lactate), flavoring, salt, and iron.
Information regarding the Valess Nuggets and Valess Schnitzel four-step production process was provided. Based on the information provided, the first step consists of a process whereby skimmed milk is inoculated with starter culture and mixed with a mixture of cream, coagulating enzyme (microbial derived rennet) and calcium chloride. This results in the skimmed milk being converted into concentrated milk proteins by changing the microstructure of the skimmed milk. The second step consists of a process whereby the concentrated milk proteins are milled into a uniform size after which a variety of ingredients (water, plant-based fiber, melting salts, defoamer and sodium hydroxide) are added to the mixture by melting and agitation. This process results in the concentrated milk proteins being processed into a process cheese-like product, with a resulting change in microstructure. The third step consists of a process whereby seaweed fibers, water and calcium chloride are added to the process-like cheese product, after which the product is agitated. This results in the production of the novel Valess Fibers. The change from a process like cheese product to the novel Valess Fibers is evidenced through a change in the microstructure of the ingredient before and after processing. Specifically, the addition of the calcium chloride and the seaweed fibers forces a reordering of the casein in the process cheese-like product that creates a novel microstructure, which is much more structured and fibrous than process cheese. After the Valess Fibers are produced, washed, and drained, during the fourth step of the production process additional ingredients (spices, flavors, thickeners, and some water) are added to help the ingredients form a dough that is shaped, breaded, and par-fried. The shaped and par-fried products are the resulting finished products: Valess Nuggets and Valess Schnitzel.
The products are approximately 80% milk solids, which are derived from the concentrated milk proteins. The total sugar content of the Valess Nuggets is 0.8 grams on a 100-gram basis (approximately 0.24 grams per nugget). The total sugar content of the Valess Schnitzel is 0.8 grams on a 100-gram basis (approximately 0.72 grams per schnitzel patty nugget). The products are marketed as meat and plant-based substitutes and are intended to be fried and consumed by the purchasers.
ISSUE:
What is the tariff classification of the Valess Nuggets and Valess Schnitzel dairy-based meat substitutes under the HTSUS?
LAW AND ANALYSIS:
Classification decisions under the HTSUS are made in accordance with the General Rules of Interpretation (“GRIs”). 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 2 through 6 may then be applied in order.
The 2022 HTSUS provisions under consideration are as follows:
0401 Milk and cream, not concentrated nor containing added sugar or other sweetening matter
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1901 Malt extract; food preparations of flour, groats, meal, starch or malt extract, not containing cocoa or containing less than 40 percent by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included; food preparations of goods of headings 0401 to 0404, not containing cocoa or containing less than 5 percent by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included
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2106 Food preparations not elsewhere specified or included
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Note 1 to Chapter 4 provides:
The expression “milk” means full cream milk or partially or completely skimmed milk.
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In addition, in interpreting the HTSUS, the Explanatory Notes (“ENs”) of the Harmonized Commodity Description and Coding System may be utilized. The ENs to the Harmonized Commodity Description and Coding System represent the official interpretation of the tariff at the international level. 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 T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
EN 1 to Chapter 4 provides:
The expression “milk” means full cream milk or partially or completely skimmed milk.
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General EN to Chapter 4 provides in relevant part:
This Chapter covers:
(I) Dairy products:
Milk, i.e., full cream milk and partially or completely skimmed milk.
Cream.
Buttermilk, curdled milk and cream, yogurt, kephir and other fermented or acidified milk and cream.
Whey.
Products consisting of natural milk constituents, not elsewhere specified or included.
Butter and other fats and oils derived from milk; dairy spreads.
Cheese and curd.
The products mentioned at Items (A) to (E) above may contain, in addition to natural milk constituents (e.g., milk enriched in vitamins or mineral salts), small quantities of stabilising agents which serve to maintain the natural consistency of the product during transport in liquid state (disodium phosphate, trisodium citrate and calcium chloride, for instance) as well as very small quantities of anti oxidants or of vitamins not normally found in the product. Certain of these products may also contain small quantities of chemicals (e.g., sodium bicarbonate) necessary for their processing; products in the form of powder or granules may contain anticaking agents (for example, phospholipids, amorphous silicon dioxide).
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The Chapter also excludes, inter alia, the following:
Food preparations based on dairy products (in particular, heading 19.01).
Products obtained from milk by replacing one or more of the natural constituents (e.g., butyric fats) by another substance (e.g., oleic fats) (heading 19.01 or 21.06).
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EN to heading 04.01 provides in relevant part:
This heading covers milk (as defined in Note 1 to this Chapter) and cream, whether or not pasteurised, sterilised or otherwise preserved, homogenised or peptonised; but it excludes milk and cream which have been concentrated or which contain added sugar or other sweetening matter (heading 04.02) and curdled, fermented or acidified milk and cream (heading 04.03).
The products of this heading may be frozen and may contain the additives referred to in the General Explanatory Note to this Chapter. The heading also covers reconstituted milk and cream having the same qualitative and quantitative composition as the natural products.
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General EN to Chapter 19 provides as follows:
This Chapter covers a number of preparations, generally used for food, which are made either directly from the cereals of Chapter 10, from the products of Chapter 11 or from food flour, meal and powder of vegetable origin of other Chapters (cereal flour, groats and meal, starch, fruit or vegetable flour, meal and powder) or from the goods of headings 04.01 to 04.04. The Chapter also covers pastrycooks’ products and biscuits, even when not containing flour, starch or other cereal products.
The Chapter excludes:
Food preparations (other than stuffed products of heading 19.02) containing more than 20 % by weight of sausage, meat, meat offal, blood, insects, fish or crustaceans, molluscs or other aquatic invertebrates, or any combination thereof (Chapter 16).
Food preparations of flour, groats, meal, starch or malt extract containing 40 % or more by weight of cocoa calculated on a totally defatted basis and food preparations of goods of headings 04.01 to 04.04 containing 5 % or more by weight of cocoa calculated on a totally defatted basis (heading 18.06).
Roasted coffee substitutes containing coffee in any proportion (heading 09.01) and other roasted coffee substitutes (e.g., roasted barley) (heading 21.01).
Powders for the manufacture of custards, desserts, ice cream or similar preparations but not being preparations based on flour, meal, starch, malt extract or goods of headings 04.01 to 04.04 (generally heading 21.06).
Products made from flour or from starch, specially prepared for use in animal feeding (e.g., dog biscuits) (heading 23.09).
Medicaments and other products of Chapter 30.
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EN to heading 19.01 provides in relevant part:
(III) Food preparations of goods of headings 04.01 to 04.04, not containing cocoa or containing less than 5 % by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included.
The preparations of this heading may be distinguished from the products of headings 04.01 to 04.04 in that they contain, in addition to natural milk constituents, other ingredients not permitted in the products of those earlier headings. Thus heading 19.01 includes, for example:
Preparations in powder or liquid form used as food suitable for infants or young children or for dietetic purposes and consisting of milk to which secondary ingredients (e.g., cereal groats, yeast) have been added.
Milk preparations obtained by replacing one or more constituents of milk (e.g., butyric fats) by another substance (e.g., oleic fats).
The products of this heading may be sweetened and may contain cocoa. However, the heading excludes products having the character of sugar confectionery (heading 17.04) and products containing 5 % or more by weight of cocoa calculated on a totally defatted basis (see the General Explanatory Note to this Chapter) (heading 18.06) and beverages (Chapter 22).
The heading also covers mixes and bases (e.g., powders) for making ice cream but it excludes ice cream and other edible ice based on milk constituents (heading 21.05).
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EN to heading 21.06 states as follows:
Provided that they are not covered by any other heading of the Nomenclature, this heading covers:
(A) Preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk, etc.), for human consumption.
(B) Preparations consisting wholly or partly of foodstuffs, used in the making of beverages or food preparations for human consumption. The heading includes preparations consisting of mixtures of chemicals (organic acids, calcium salts, etc.) with foodstuffs (flour, sugar, milk powder, etc.), for incorporation in food preparations either as ingredients or to improve some of their characteristics (appearance, keeping qualities, etc.) (see the General Explanatory Note to Chapter 38).
However, the heading does not cover enzymatic preparations containing foodstuffs (e.g., meat tenderisers consisting of a proteolytic enzyme with added dextrose or other foodstuffs). Such preparations fall in heading 35.07 provided that they are not covered by a more specific heading in the Nomenclature.
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As heading 2106, HTSUS, provides for “[f]ood preparations not elsewhere specified or included,” the initial determination is whether the subject merchandise is classifiable in another heading in the HTSUS. As set forth supra, heading 1901, HTSUS, provides for, in pertinent part, “food preparations of goods of headings 0401 to 0404, not containing cocoa or containing less than 5 percent by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included.” EN 19.01(III) states that “preparations of this heading may be distinguished from the products of headings 04.01 to 04.04 in that they contain, in addition to natural milk constituents, other ingredients not permitted in the products of those earlier headings.” Moreover, General EN(I)(a) to Chapter 4 states that Chapter 4 excludes “[f]ood preparations based on dairy products (in particular, heading 19.01).” In Orlando Food Corp. v. United States, the U.S. Court of Appeals for the Federal Circuit reasoned that “[i]nherent in the term ‘preparation’ is the notion that the object involved is destined for a specific use.” See Orlando Food Corp. v. United States, 140 F.3d 1437, 1441 (Fed. Cir. 1998). Moreover, the court referred to The Oxford English Dictionary definition of “preparation” which is “‘a substance specially prepared, or made up for its appropriate use or application.’” Id. (citing The Oxford English Dictionary 374 (2d. ed. 1989)). Both products at issue are “preparations” within the court prescribed meaning of this term. The Valess Nuggets and Schnitzel products at issue are specially made up of various ingredients and intended to be fried and consumed by the purchasers.
The next determination is whether the subject preparations are “goods of headings 0401 to 0404,” for purposes of classification in heading 1901, HTSUS. Note 1 to Chapter 4 states that “[t]he expression ‘milk’ means full cream milk or partially or completely skimmed milk.” The CIT explained in Arko Foods Int’l, Inc. that “in determining if an item is an article of milk or cream, the Court will consider whether milk or cream is the essential ingredient, the ingredient of chief value, and the preponderant ingredient” and will also “consider any evidence” of whether the product “is considered an article of milk or cream within the industry.” Arko Foods Int’l, Inc. v. United States, 33 Ct. Int’l Trade 1891, 1901 (2009) (citing Wilsey Foods, Inc. v. United States, 18 Ct. Int’l Trade 212, 213 (1994), aff’d, 654 F.3d 1361 (2011)).
Upon review, we find that the Valess Nuggets and Valess Schnitzel products do not meet the court prescribed standards that milk or cream must be the essential ingredient, ingredient of chief value, and preponderant ingredient. This is because the skimmed milk ingredient undergoes a complex four-step manufacturing process which alters the skimmed milk into a product with different microstructure, texture, and qualities. Specifically, during the manufacturing process, the skimmed milk is first processed into concentrated milk proteins, which are then made into a process cheese-like product. The process cheese-like product is subsequently converted into Valess fibers. The Valess fibers, together with additional ingredients, such as spices, flavors, thickeners, and water, form a dough from which the finished products are created. Therefore, because the skimmed milk ingredient undergoes a complex manufacturing process that alters its microstructure and qualities, we conclude that this processing of the skimmed milk changes the character of the product, as it is no longer meets the terms of Note 1 to Chapter 4, HTSUS, and, therefore, it is no longer considered a “milk” product. Accordingly, the Valess Nuggets and Valess Schnitzel products cannot be preparations of the “goods of headings 0401 to 0404,” for purposes of classification in heading 1901, HTSUS. Moreover, there is no evidence that the Valess Nuggets and Valess Schnitzel products are considered articles of milk or cream by the industry. On the basis of these factors, we find that the Valess Nuggets and Valess Schnitzel products are not classifiable under heading 1901, HTSUS, as “food preparations of goods of headings 0401 to 0404.” Instead, they are classifiable under heading 2106, HTSUS, as “[f]ood preparations not elsewhere specified or included.”
Based on the information provided, we find that the Valess Nuggets and Valess Schnitzel products are preparations containing over 10 percent by weight of milk solids, which do not contain over 10 percent by dry weight of sugar. As such, they are classified in subheading 2106.90.82, HTSUS, which provides for “Food preparations not elsewhere specified or included: Other: Other: Other: Containing over 10 percent by weight of milk solids: Other: Other.”
HOLDING:
By application of GRI 1 and 6, we find that the Valess Nuggets and Valess Schnitzel products are classified in heading 2106, HTSUS, and specifically in subheading 2106.90.82, HTSUS, which provides for “Food preparations not elsewhere specified or included: Other: Other: Other: Containing over 10 percent by weight of milk solids: Other: Other.” The 2022 general, column one rate of duty is 6.4% 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 https://hts.usitc.gov/current.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Yuliya A. Gulis, Chief Food, Textiles and Marking Branch