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HQ 964138




December 7, 2000

CLA-2 RR:CR:GC 964138 nel

CATEGORY: CLASSIFICATION

TARIFF NO.: 2202.90.24

Area Port Director
U.S. Customs Service
9901 Pacific Highway
Blaine, WA 98230

RE: Protest 3004-00-100038; Arvand Yogurt Beverage

Dear Port Director:

This is our decision on protest 3004-00-100038 timely filed on May 18, 2000, by Carson Customs Brokers Inc. (protestant) against your decision in the classification of Arvand Yogurt Beverage. The manufacturer is North Bay Trading Inc. located in Canada. The entry dated June 14, 1999, was liquidated on February 4, 2000.

FACTS:

The merchandise is described as Arvand Yogurt Beverage, imported in 500 milliliter bottles. The protestant claimed classification in subheading 2202.10.0060, Harmonized Tariff Schedule of the United States (HTSUS). Customs classified the merchandise in subheading 2202.90.24 or 2202.90.28, HTSUS, depending on quota availability.

When the protest was filed the manufacturer indicated that the beverage contained: 75% carbonated spring water, 24% yogurt (milk & bacterial culture), and 1% salt & mint extract. The yogurt portion was further broken down to 86% water and 14% dry milk powder. Therefore, it is claimed, the dry milk product is 3.36% (14% of 24%). In the “Addendum to CF19,” the merchandise is claimed to contain 95.5% Canadian spring water, 3.5% milk powder, and 1% salt/cultures/etc. In response to a CF 28 dated October 9, 1998, Carson Customs Brokers indicated that the Arvand Yogurt Beverage contained 89% water, 10% yogurt, and 1% salt/flavor. In a response dated September 27, 1999, to a Notice of Action from Customs in Pembina, ND, the manufacturer claimed the Arvand beverage contained 94% Canadian spring water, 4% dry dairy matter, and flavorings.

There are two U.S. Customs Service laboratory reports on the Arvand Yogurt Beverage. Laboratory report no. 8-2000-50067-001 (entry date 03/03/00), dated March 28, 2000, states: “The sample is a white liquid packaged in a plastic bottle (500 ml) labeled ‘Arvand Sparkling Yogurt Beverage.’ Laboratory analysis found 0.5% lactose and no added sugar (sucrose). We estimate the total amount of milk solids (culture + yogurt) in the sample to be approximately 10%.” Laboratory report no. 8-1999-50467-001 (entry date 10/05/99), dated November 22, 1999, states: “The sample is a bottle of white colored liquid (500 ml) [labeled] ‘Arvand Sparkling Yogurt Beverage.’ Laboratory analysis found 0.3% lactose in the sample. We detect no added sugars (sucrose, fructose, glucose). We estimate approximately 6% milk (yogurt) solids.”

An amended Notice of Action, dated November 4, 1999, to Carson Customs Brokers states that there was no response to a CF 28 requesting a sample and ingredients for this product as entered on June 14, 1999. Therefore, the Customs classification decision was based, in part, on information from previous entries of this product obtained from a U.S. Customs laboratory and information supplied to U.S. Customs in Pembina, ND.

The importer classified the Arvand Yogurt Beverage under subheading 2202.10.0060, HTSUS, which provides for: Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored other. The reasons for claiming this subheading are outlined in the “Addendum to CF19” by Carson Customs Brokers as, “The use of dairy components in the beverage is in very small percentages consistent with the use of all flavoring agents. It is by no means significant enough to render the product ‘milk based.’ The shelf life of this product is one year or more at room temperature, the same as any other flavored soda beverage. This would not be true of a milk product.” It is also claimed that Arvand Yogurt Beverage is exported to other countries, none of which consider it to be milk-based. However, no supporting evidence was presented.

Customs classified the Arvand Yogurt Beverage under subheading 2202.90.24, 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: Milk-based drinks other Described in additional U.S. note 10 to chapter 4 and entered pursuant to its provisions. If not within the quantitative limits of additional U.S. note 10 to chapter 4, classification is under subheading 2202.90.28, HTSUS.

ISSUE:

Whether Arvand Yogurt Beverage, with the stated percentage of milk is classifiable as a milk-based beverage under subheading 2202.90.24, HTSUS, if quota quantity is available, and under subheading 2202.90.28, HTSUS, if the quota is filled.

LAW AND ANALYSIS:

The General Rules of Interpretation (GRIs) taken in their appropriate order provide a framework for classification of merchandise under the HTSUS. The majority of imported goods are classified by application of GRI 1, that is, 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, then the remaining GRIs may be applied. The Explanatory Notes to the Harmonized Commodity Description and Coding System, which represent the official interpretation of the tariff at the international level, facilitate classification under the HTSUS by offering guidance in understanding the scope of the headings and GRIs.

Heading 2202, HTSUS, 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. The Explanatory Notes to heading 2202, HTSUS, state that this heading includes sweetened or flavored mineral waters (natural or artificial); beverages such as lemonade, orangeade, cola, consisting of ordinary drinking water, sweetened or not, flavored with fruit juices or essences, or compound extracts; and certain other beverages ready for consumption, such as those with a basis of milk and cocoa.

There is no definition of “milk-based” provided in the section, chapter, or Explanatory Notes. However, there are several Headquarters Rulings (HQ) concerned with the issue of milk-based beverages. HQ 952016, dated July 26, 1992, classified a product called Calpico Water, which contained 84.89% water, 13.37% high fructose corn syrup, 1.13% nonfat dry milk, 0.36% citric acid, and 0.22% natural and artificial flavors. HQ 952016 provides several criteria to use to determine whether a beverage is milk-based. First, it was noted that the Explanatory Notes to chapter 22 indicate that heading 2202 provides for “certain beverages ready for consumption with a basis in milk or cocoa; [suggesting] that in such beverages milk would be considered the predominant ingredient.” Secondly, it is noted that fluid milk is 87% water and 13% milk solids, while skim milk is 9% milk solids, citing Modern Dairy Products, L.M. Lambert, Chem. Publ. Co. (1975). “Thus, beverages with these percentages of milk solids present a strong argument for considering milk the predominant component. However, where the percentages of milk solids fall below these levels, the entire composition of the beverage, including the value of the individual components, has to be considered.” In the case of Calpico Water, the amount of milk solids (1.13%) was considered too small to confer the predominant character of the beverage and it was classified under subheading 2202.90.9090, HTSUS, as an other nonalcoholic beverage.

HQ 952107 dated September 17, 1992, classified a product called Comfrin Echo, which contained 84.3% water, 12.5% sugars, 3.1% powdered nonfat fermented milk, and 0.1% orange flavor. This product was classified under subheading 2202.90.90, HTSUS, as not milk-based, because of the dominant orange flavor and the low percentage (3.1%) of milk.

Similarly, HQ 952178 dated November 23, 1992, classified beverages New Echo and Sangaria Coffee Drink With Milk under subheading 2202.90.90, HTSUS, as not milk-based, because the “milk ingredients in these beverages are not significant enough that they confer the essential character to the beverages. The flavoring ingredients [impart] the essential character of these beverages.” New Echo contained 83.1% water, 8.6% sugar, 4.9% soy bean, 1.5% grape sugar, 0.9% pectin, 0.5% nonfat dry milk, and 0.4% flavor. Sangaria Coffee Drink With Milk contained 87.1% water, 6.4% sugar, 2.8% condensed milk, 2.2% coffee extract, 1.4% skim milk, 0.05% flavor, and 0.06% lecithin.

HQ 952776 dated February 10, 1993, classified three protein drinks: Tiger’s Milk Drink (Liquid Caramel Vanilla), Tiger’s Milk Drink (Liquid Strawberry Shake), and DYN Body Shaper Liquid Vanilla Shake. Each contained 80% water, 8 to 9% fructose, 5.5 to over 6% nonfat dry milk, and flavors, fillers and preservatives in much lesser amounts. All three were classified under subheading 2202.90.2000, HTSUS, as milk-based drinks. HQ 952776 reads in part:

In classifying beverages under this provision consideration is given to the amount and significance of the milk content present. Since skim milk contains about 9 percent milk solids, beverages which contain over 5 percent milk solids are considered to have an appreciable amount of milk; enough to impart the drinks’ essential character in many instances. The amounts of water, sweeteners and flavors present in these beverages are, of course, common to most beverages of this type, so it is believed that it is the milk content, which is of the highest percentage next to the water and sweeteners, that imparts the individual character of these products.

The protestant and/or the manufacturer have provided U.S. Customs with ingredient information for Arvand Yogurt Beverage on at least four separate occasions. The claimed percentage of the milk ingredient varies from 3.36 to 24% per 500-ml bottle. A U.S. Customs laboratory has tested the Arvand Yogurt Beverage two times reporting approximately 6% and 10% milk solids. The Customs laboratory analysis falls within the range claimed by the protestant and manufacturer. A milk solid content of 6%, and certainly 10%, is a “predominant component” of the beverage. (See HQ 952016, comparing a beverage to skim milk, which has a milk solid content of 9%.) Previous Headquarters rulings have held that a milk solid content over 5% is appreciable and enough to impart the beverage’s essential character. See HQ 952776.

It is noted that the protestant has made inconsistent claims concerning the milk solid content of the beverage. The findings of the Customs Laboratory are presumed valid. Customs laboratory reports are official documents and cannot be disregarded for any reason. See Customs Directive 3820-002A, dated May 5, 1999. Arvand Yogurt Beverage, as tested by the Customs laboratory, has 6 to 10% milk solids, enough to classify it as a milk-based beverage consistent with previous Headquarter rulings.

Additionally, by flavor, color and advertisement, the white liquid Arvand Yogurt Beverage is milk-based. The protestant in “Addendum to CF19” states that “(milk powder) is used to develop the yogurt flavoring.” The milk component is significant in the formulation of Arvand Yogurt Beverage in both quantity and function. Where the percentage of milk solids falls below the level of skim milk, “the entire composition of the beverage, including the value of the individual components, has to be considered.” See HQ 952016. In this instance, the milk component is significant enough to impart the “essential character” to the beverage and to classify it as milk-based.

HOLDING:

Arvand Yogurt Beverage is milk-based and is classified under subheading 2202.90.24, HTSUS, if quota quantity is available, and under subheading 2202.90.28, HTSUS, if the quota is filled.

The protest should be DENIED.

In accordance with Section 3(A)(11)(b) of Customs Directive 099-3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.

Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page of the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,


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