OT:RR:CTF:FTM H314978 TJS
Mr. Arthur DeCelle
Lehrman Beverage Law
2911 Hunter Mill Road
Suite 303
Oakton, VA 22124
RE: Revocation of NY N315004 and NY N313678; Tariff Classification of White Claw Hard Seltzer
Dear Mr. DeCelle:
This is in reference to New York Ruling Letter (“NY”) NY N315004, dated October 13, 2020, concerning the tariff classification of certain hard seltzer under the Harmonized Tariff Schedule of the United States (“HTSUS”). In that ruling, U.S. Customs and Border Protection (“CBP”) classified the hard seltzer at issue under subheading 2203.00.00, HTSUS, which provides for, “Beer made from malt: In containers each holding not over 4 liters.” NY N315004 modified NY N313678, dated August 28, 2020, which contained a clerical error and classified the hard seltzer under subheading 2203.90.00, HTSUS. Upon additional review, we have found the classification of this product under heading 2203, HTSUS, to be incorrect. For the reasons set forth below, we hereby revoke NY N315004 and NY N313678.
You have asked for confidential treatment of the details of the production and packaging process in your submission. Inasmuch as your request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), your request for confidentiality is approved. The details of the production and packaging process in your letter and the attachments to your request for a binding ruling will not be released to the public.
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. 103-182, 107 Stat. 2057), a notice of the proposed action was published in the Customs Bulletin, Vol. 55, No. 11, on March 24, 2021. Two comments, which will be addressed below, were received in response to this notice. As a result of these comments, we are clarifying the analysis in our decision as it relates to the hard seltzer in question. Specifically, we are clarifying the fact that the White Claw Hard Seltzer is produced primarily from a fermented sugar brew with only trace amounts of malted ingredients. This fermented mixture, although referred to as “beer base,” lacks the color, aroma, and taste typical of beer made from malt, and the addition of seltzer water and flavoring further distinguish the final product from beer. The presence or absence of malted ingredients does not govern classification in heading 2206, rather, whether the hard seltzer lacks the characteristics of what is commonly and commercially recognized as beer made from malt is determinative for purposes of tariff classification in this case.
FACTS:
In NY N315004, the hard seltzer at issue was described as follows:
The subject merchandise is described as five different flavors (Lime, Raspberry, Ruby Grapefruit, Black Cherry and Mango) of Hard Seltzer with the brand name “White Claw Hard Seltzer.” The products consist of Beer Base (15%-17%), Natural Flavors (2%-3%), Water (81%-82%) and trace amounts of Juice Concentrate, Cane Sugar, Citric Acid and Sodium Citrate. The beer base is composed of Sugar (51%), Yeast & Nutrients (less than 4%), Water and trace amounts of Malted Gluten-Free Grains. Malted gluten free grains are mixed with sugar and warm water. The mixture is then pitched with yeast, enzymes and yeast nutrients to aid the fermentation. The fermented mixture is then clarified and filtered to produce the beer base. The beer base is then mixed with the other ingredients, including cane sugar, juice concentrate, juice flavor and water to produce the bulk product with an alcohol by volume content of 5 percent. Each flavor of the bulk finished product is packaged in 12-ounce and 19.2-ounce aluminum beverage cans ready for export to the United States.
In your request for a binding ruling, dated August 3, 2020, you described the White Claw Hard Seltzer as “a relatively new, gluten-free, low-calorie brand that has grown to become a significant subcategory of the U.S. beer market.” You further state that the hard seltzer is sold alongside beer. The White Claw website provides the following description of the finished beverages: “Crafted with quality ingredients, White Claw® Hard Seltzer is made from a blend of seltzer water, our gluten-free alcohol base, and a hint of fruit flavor.” The cans are labeled “Spiked Sparkling Water with a hint of [flavor].”
ISSUE:
What is the tariff classification of White Claw Hard Seltzer under the HTSUS?
LAW AND ANALYSIS:
Classification under the 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 GRI 2 through 6 may then be applied in order.
The HTSUS headings under consideration are as follows:
2203 Beer made from malt
2206 Other fermented beverages (for example, cider, perry, mead, sakè); 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.
* * *
You assert that the White Claw Hard Seltzer is properly classified in heading 2203, HTSUS, as beer. In particular, you claim that the hard seltzer meets the definitions of “beer” in the Internal Revenue Code (“IRC”) and the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) regulations. See 26 U.S.C. § 5052(a); 27 C.F.R. §§ 25.11, 25.15, 27.11. You state that although the excise tax is a separate function from tariff classification, the functions are substantially related. The TTB regulations you cite pertain to the collection of federal excise taxes on alcoholic products and are not intended as guidance for 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). 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; regardless of their tax treatment, TTB clearly acknowledges that not all beverages made from malt are “beer.” We also note that the IRC and TTB definitions of “beer” may encompass products not classified as beer under the HTSUS, such as sakè, which is explicitly classified in heading 2206, HTSUS. Thus, the IRC and TTB regulations are not binding on CBP for tariff classification purposes.
The present issue is whether the White Claw Hard Seltzer is a beer of heading 2203, HTSUS, or other fermented beverage of heading 2206, HTSUS. Heading 2203, HTSUS, is an eo nomine provision for 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 (Jan. 13, 2015); and HQ 084708 (July 21, 1989). CBP has consistently classified flavored malt beverages produced from a filtered fermented malt base to which flavoring is added in heading 2206, HTSUS, rather than heading 2203, HTSUS. HQ H243087 concerned the classification of four different malt beverages: “Green Apple Sparkletini Italian Spumante”; “Raspberry Sparkletini Italian Spumante”; “Peach Sparkletini Italian Spumante; and “Verdi Spumante.” The beverages were manufactured by adding different flavoring to a “beer base” that was produced from a mash of malted barley. The base was filtered after fermentation to remove the color and aroma from the malt beverage in order to create a clear, odorless base. CBP held that the beverages were precluded from classification in heading 2203, HTSUS, because they were entirely distinct from beer and were not marketed, sold, or advertised as beer.
Similarly, in HQ 084708, CBP classified fermented malt beverages described as “French Sparkler” in flavors “Wildberry” and “Raspberry.” The manufacture of the French Sparklers began with fermenting degenerated malt cereals and hops and adding sugar. The product underwent “ultra-filtration” and then flavoring, colorant, and preservatives were added. CBP noted that the beverages were produced using degenerated (old) malt cereals and hops, which are not normally used in manufacturing beer. CBP also noted that the beverages were bottled and labeled as “French Sparkler,” in an effort to compete in the wine cooler market. CBP concluded that the “French Sparkler” was distinct from beer because it did not have the taste, aroma, character or appearance of beer, nor was it commercially or commonly known as beer.
Like the beverages in HQ H243087 and HQ 084708, we find that the White Claw Hard Seltzer is entirely distinct from beer because it does not have the taste, aroma, character or appearance of beer. With regard to appearance of beer, the EN to heading 2203 provides that beer may be pale or dark whereas the White Claw Hard Seltzer has the appearance and consistency of clear sparkling water. The hard seltzer is manufactured in a manner similar to the beverages in HQ H243087 and HQ 084708, which involved filtering a fermented base and then adding flavoring to a neutral alcoholic base. Unlike those rulings, however, the White Claw Hard Seltzer is produced primarily from a fermented sugar brew with only trace amounts of malted ingredients. Even though the neutral alcoholic base is referred to as “beer base,” it lacks the color, aroma, and taste typical of beer made from malt. After the fermented mixture is clarified and filtered, seltzer water and flavoring are added to the neutral base to further distinguish the final product from beer.
Furthermore, White Claw Hard Seltzer is not named beer, and importantly, is not sold or marketed as beer. Beer is a commonly recognized product while White Claw Hard Seltzer is sold in a growing category of alcoholic beverages known as “hard seltzers” or “spiked seltzers.” You note that White Claw Hard Seltzer is sold alongside beer, but the appearance of the product alongside beer at a store does not make it a beer for tariff purposes. Other beverages that are sold alongside beer are classified in heading 2206, HTSUS, such as cider and wine coolers. Finally, the hard seltzers are not labeled or presented as beer but as “spiked sparkling water.” Notably, the White Claw website makes no reference to beer and identifies the “beer base” as “gluten-free alcohol base.” The finished products are not what is commonly or commercially known as beer within the scope of heading 2203, HTSUS. The differences in manufacturing, organoleptic properties, and the product’s unique commercial identity distinguish the subject hard seltzer from beer and make classification in heading 2206, HTSUS, appropriate.
In view of the foregoing, we find that heading 2206, HTSUS, encompasses the subject White Claw hard seltzer. Specifically, the hard seltzer is classified under subheading 2206.00.90, HTSUS, which provides for, “Other fermented beverages (for example, cider, perry, mead, sakè); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included: Other: Other.”
In response to CBP’s notice of the proposed action to revoke NY N315004 and NY N313678, two comments were received. One commenter argues that the dictionary, TTB, and IRC definitions and regulations for beer, which do not require the presence of malt in beer, apply to hard seltzer and should guide tariff classification in heading 2203, HTSUS. Heading 2203, HTSUS, covers “beer made from malt” and external definitions that do not require malt do not supersede the language of the heading. In classifying the hard seltzer in heading 2206, HTSUS, we do not take into consideration the presence or absence of malted ingredients - rather, we consider that the alcohol base lacks any beer characteristics, and the hard seltzer is not commonly nor commercially recognized as beer. As discussed above, TTB regulations and the IRC are entirely distinct legal authorities from the HTSUS, which controls the tariff classification of goods imported into the United States and does not apply to domestic products. The TTB and IRC definitions of beer are instructive, but do not control tariff classification under heading 2203, HTSUS. The commenter also notes that heading 2206, HTSUS, applies to unique wine products and not hard seltzers as they do not meet any of the formal standards of identity or consumer understanding of any of the wines fermented from fruit that are specifically referenced under heading 2206, HTSUS. We find that hard seltzers are no more distinct from wine products as they are from beer because they are a relatively new category of alcoholic beverages. Pursuant to GRI 1, the hard seltzer does not meet the terms of heading 2203, HTSUS, because it is not beer, but it does meet the terms of heading 2206, HTSUS, as “other fermented beverages.”
The second commenter also urges CBP to follow TTB’s classification of the product as beer. This commenter further argues that hard seltzers are classified prima facie in both headings 2203 and 2206, HTSUS, and consequently GRI 3(a) should be utilized to classify the product in heading 2203, HTSUS. We are not persuaded that GRI 3 is appropriate in this case because the hard seltzer is not classified by GRI 1 in heading 2203, HTSUS. The commenter’s second concern, claiming that malt substitutes should be encompassed in “malt” under subheading 2203.00.0060, HTSUSA, does not affect classification of the White Claw Hard Seltzer at issue. Finally, the commenter argues that the revocation should be prospective only and not apply retroactively for the time period covered by NY N315004 and NY N313678. We note that pursuant to 19 U.S.C. § 1625(c), the final ruling or decision shall become effective 60 days after the date of its publication in the Customs Bulletin. See also 19 C.F.R. §177.12(e)(2)(i) (stating that the revocation will, provided that liquidation of the entry in question has not become final, apply to merchandise entered, or withdrawn from warehouse for consumption, sixty calendar days after the date of publication in the Customs Bulletin).
HOLDING:
By application of GRI 1, we find that the hard seltzer at issue is classified under heading 2206, HTSUS, and specifically in subheading 2206.00.90, HTSUS, which provides for, “Other fermented beverages (for example, cider, perry, mead, sakè); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included: Other: Other.” The 2021 column one, general rate of duty is 4.2 cents per liter.
EFFECT ON OTHER RULINGS:
NY N315004, dated October 13, 2020, and NY N313678, dated August 28, 2020, are hereby REVOKED.
In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
For Craig T. Clark, Director
Commercial and Trade Facilitation Division