CLA-2 RR:CR:GC 961061 RTR
Port Director of Customs
U.S. Customs Service
110 South Fourth Street
Minneapolis, Minnesota 55401
RE: Protest 3501-96-100416; sugar-free cough drops
Dear Port Director:
This is our decision on Protest 3501-96-100416, filed
against your classification of Halls' Sugar-free Cough Drops.
The entries under protest were liquidated on September 27, and
October 4, 11, and 25, 1996. This protest was timely filed on
December 6, 1996.
FACTS:
The merchandise under protest consists of sugar-free cough
drops in lozenge form, which contain measured doses of
approximately 5 to 6 mg. of menthol. The U.S. Food & Drug
Administration (FDA), the national governmental agency
responsible for regulating the health and safety of drugs and
food, considers cough drops containing 5 to 10 mg. of menthol to
be over-the-counter drugs, because they cure, mitigate, prevent
or treat disease.
The merchandise was entered under a provision for other
"medicaments" in subheading 3004.90.90, Harmonized Tariff
Schedule of the United States (HTSUS). However, the entries were
liquidated under subheading 2106.90.99, HTSUS, as "other food
preparations not elsewhere specified or included."
ISSUES:
(1) Whether a court-approved stipulation has precedential
effect over the classification of merchandise not the subject of
that order. (2) Whether sugar-free cough drops containing
menthol in such amounts as to give the drops therapeutic use as a
cough suppressant, or as oral health-care anesthetics for sore
throat relief, are classified as "food preparations" in
subheading 2106.90.99, HTSUS, or as "medicaments" in subheading
3004.90.90, HTSUS.
LAW AND ANALYSIS:
The provisions under consideration are as follows:
1704 Sugar confectionary (including white chocolate),
not containing cocoa:
* * * *
2106 Food preparations not elsewhere specified or
included:
2106.90 Other:
2106.90.99 Other.
* * * *
3004 Medicaments (excluding goods of heading 3002,
3005, or 3006) consisting of mixed or unmixed
products for therapeutic or prophylactic uses, put
up in measured doses or in forms of packings for
retail sale:
3004.90 Other:
3004.90.90 Other.
(1) Ricola v. U.S.
We first address your claim that a stipulation agreed to in
Ricola v. United States, Court No. 95-04-00505, should control
the disposition of the instant case. That proceeding involved
both sugar-based and sugar-free lozenges. The sugar-free
lozenges were initially classified by Customs as "food
preparations" under subheading 2106.90.69, HTSUS, for 1994
entries, and under subheading 2106. 90.99, HTSUS, for 1995
entries. This litigation ended with the assent of the parties to
two stipulated agreements in which Customs reclassified the
merchandise as "medicaments" under subheading 3004.90.30, HTSUS.
The Court of International Trade (CIT) has indicated that a
case submitted on an agreed stipulation of facts, without trial
or briefing by the Court, lacks precedential value. See Siemens
America, Inc. and Siemens Corp. v. United States, 2 CIT 136, 140
(1981), aff'd. 1 Fed Cir (T) 9, 692 F.2d 1382 (Fed. Cir. 1982),
where three prior judgments, which were predicated on an agreed
statement of facts had no stare decisis effect on subsequent
liquidations. The reasoning for the conclusion that an agreement
to stipulate should have no effect as precedent was that the
agreement may be based on a variety of factors which are unique
to the particular facts of the case.
Furthermore, the Supreme Court has made it clear that, as
collateral estoppel does not apply in classification cases, the
government is free to relitigate the classification of
merchandise at issue in an action covering other entries. United
States v. Stone & Downer Co., 274 U.S. 225 (1927). See also,
Schott Optical Glass, Inc., v. United States, 748, 677 (Fed. Cir.
1984); Heraeus Amersil, Inc. v. United States, 13 CIT 764, 766
(1989); Ashdown, U.S.A., Inc. v. United States, 12 CIT 808, 810
n.1, 696 F. Supp. 661 (1988). In an action before the CIT, if
the court makes a determination that merchandise which is before
it should be classified in a certain manner, there is nothing
precluding similar merchandise in future importations from being
treated differently by the Customs Service. Thus, Customs is
under no obligation to classify Hall's Sugar-free Cough Drops in
the same subheading as the merchandise in Ricola.
(2) Classification of Sugar-based Cough Drops
Merchandise is classifiable under the HTSUS in accordance
with the General Rules of Interpretation (GRIs). GRI 1 states in
part that classification shall be determined according to the
terms of the headings and any relative section or chapter notes
and, provided the headings or notes do not require otherwise,
according to GRIs 2 through 6.
The Harmonized Commodity Description and Coding System
Explanatory Notes (ENs) constitute the official interpretation of
the Harmonized System. 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.
Customs believes the ENs should always be consulted. See T.D.
89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).
Heading 3004, HTSUS, covers "Medicaments (excluding goods
of heading 3002, 3005, or 3006) consisting of mixed or unmixed
products for therapeutic or prophylactic uses, put up in measured
doses or in forms or packings for retail sale."
The ENs to subheading 3004.90, HTSUS, provide that
preparations put up as throat pastilles or cough drops,
consisting essentially of sugars (whether or not with
other foodstuffs such as gelatin, starch or flour) and
flavouring agents (including substances having
medicinal properties, such as benzyl alcohol, menthol,
eucalyptol, and tolu balsam) fall in heading 17.04.
Throat pastilles or cough drops containing substances
having medicinal properties, other than flavouring
agents, remain classified in this heading when put up
in measured doses or in forms or packings for retail
sale, provided that the proportion of those substances
in each pastille or drop is such that they are given
therapeutic or prophylactic uses.
Heading 1704, HTSUS, covers sugar confectionary (including
white chocolate), not containing cocoa. According to EN 1704.90
(v), which corresponds to the EN for subheading 3004.90, HTSUS,
mentioned above, chapter 1704, HTSUS, provides that
throat pastilles or cough drops which contain
substances having medicinal properties, other than
flavouring agents, fall into Chapter 30 provided that
the proportion of those substances in each pastille or
drop is such that they are thereby given therapeutic or
prophylactic uses.
Presidential Proclamation 6857, dated December 29, 1995,
mandated that certain sugar-based cough drops be classified in
1704.90.25, HTSUS, or 1704.90.35, HTSUS. Additional U.S. Note 11
to chapter 17, HTSUS, provides that for purposes of subheading
1704.90.25, HTSUS, "cough drops" must contain a minimum of 5 mg.
per measured dose of menthol, of eucalyptol, or of a combination
of menthol and eucalyptol. In this way, the tariff explicitly
directs classification of sugar-based cough drops in heading 1704
because it provides both a definition for sugar-based "cough
drops," and an eo nomine provision for them.
(3) Classification of Sugar-free Cough Drops
We next address your contention that Hall's Sugar-free Cough
Drops, which contain 5 to 6 mg. of menthol per dose, are
classifiable as "medicaments" in subheading 3004.90.90, HTSUS,
based on the premise that they possess antitussive (cough
suppressing) properties, and thus have "therapeutic" or
"prophylactic" uses.
Heading 1704, HTSUS, which provides for sugar confectionary
only, cannot be considered because the merchandise at issue here
is a sugar-free product. The remaining headings under
consideration are 2106, HTSUS, and 3004, HTSUS.
As stated above, heading 3004, HTSUS, covers "medicaments"
which, for tariff purposes, are restricted to goods which have
"therapeutic" or "prophylactic" uses for the treatment of a
specific disease or ailment. Scientific studies conducted over a
number of years in the U.S. conclusively demonstrate that when
present in sufficient amounts in lozenges, menthol acts (1) as an
effective cough suppressant and (2) as an effective oral health-care anesthetic for sore throat relief. The FDA has accepted the
results of those studies and recognizes the effectiveness of
cough drops with 5 to 10 mg. per measured dose of menthol in
combating specific ailments, namely maladies manifesting
themselves in coughing and sore throats. Clearly, then, menthol
has "therapeutic" or "prophylactic" uses when present in
sufficient amounts in cough drops. Accordingly, sugar-free
cough drops which possess menthol in sufficient quantities to
render them effective as cough suppressants, or as oral health-care anesthetics for sore throat relief, have "therapeutic" or
"prophylactic" uses and are classified in heading 3004, HTSUS.
Hall's Sugar-free Cough Drops, with 5 to 6 mg. of menthol per
measured dose, have "therapeutic" or "prophylactic" uses and are
thus classified in heading 3004, HTSUS.
Heading 2106, HTSUS, is a residual provision for food
preparations not specifically provided elsewhere in the tariff.
Legal note 1(f) to chapter 21 excludes products of heading 3004,
HTSUS, from that chapter. Having decided that sugar-free cough
drops are covered by heading 3004, HTSUS, the merchandise is not
classified in heading 2106, HTSUS.
We have decided that sugar-free cough drops are classified
as "medicaments" and that sugar-based cough drops are not. This
result may be seen as inconsistent. The difference in
classification is due to the absence of a legal note directing
classification of sugar-free cough drops in heading 2106, HTSUS
(cf. Additional U.S. Note 11 to chapter 17).
(4) Established and Uniform Practice
In HQ 954615, dated December 10, 1993, Customs classified
sugar-free throat drops in subheading 2106.90.6599, HTSUS. For
the following reason, to the extent that this merchandise
contained 5 mg. or more of menthol per measured dose, Customs
lacked the legal authority to classify the merchandise in heading
2106, HTSUS.
The classification of goods controlled by an established and
uniform practice may be changed, but if the change results in the
imposition of a higher rate of duty or charge, then the procedure
set forth in 19 U.S.C. 1315(d) -- requiring publication of notice
of such change -- must be followed. Where an established and
uniform practice governs an imported article's classification
under the HTSUS, any Customs ruling which changes the tariff
classification of the article to result in a higher rate of duty
without complying with the procedures of 19 U.S.C. 1315(d) is,
pursuant to that section, of no effect. In 1993, goods of
subheading 2106.90.6599, HTSUS, were dutiable at 10% ad valorem;
subheading 3004.90.3005, HTSUS, for which the inquirer argued,
carried a duty rate of "free." Based upon a review of
liquidations, Customs has determined that an established and
uniform practice existed for classifying sugar-free cough drops
containing 5 to 6 mg. of menthol each in subheading 3004.90.90,
HTSUS. The holding in HQ 954615 resulted in a higher rate of
duty. Accordingly, the notice requirement of 19 U.S.C. 1315(d)
was triggered. However, prior to issuing HQ 954615, Customs did
not comply with the procedures of 19 U.S.C. 1315(d). Therefore,
HQ 954615 must be considered void and of no effect with respect
to the classification of sugar-free cough drops.
Inasmuch as the tariff classification of sugar-free cough
drops containing 5 to 6 mg. of menthol each is controlled by an
established and uniform practice, Hall's Sugar-free Cough Drops
are properly classified as "medicaments" in subheading
3004.90.90, HTSUS.
HOLDING:
Hall's Sugar-free Cough Drops, containing 5 to 6 mg. of
menthol each, are classified as other "medicaments" in subheading
3004.90.90, HTSUS. Accordingly, the protest should be GRANTED.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, you should 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 take steps to make the decision
available to Customs personnel via the Customs Rulings Module in
ACS and to the public via the Diskette Subscription Service, the
Freedom of Information Act and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division