CLA-2:CO:R:C:G 085406 SER
Mr. Rick Wilson
Bacardi Imports, Inc.
2100 Biscayne Boulevard
Miami, Florida 33137
RE: Rum-based beverage
Dear Mr. Wilson:
This is in reference to your letter of August 21, 1989,
requesting the tariff classification of a rum-based beverage
under the Harmonized Tariff Schedule of the United States
Annotated (HTSUSA). A sample was not submitted.
FACTS:
The inquirer states that Bacardi rum is produced in Puerto
Rico by Bacardi Corporation. The molasses used in the production
of the rum is stated to be from the Dominican Republic. The
merchandise at issue will involve this rum in two different
procedures. In one case, Bacardi rum will be shipped in bulk
from Bacardi Corporation to Castleton, Florida, where it will be
blended with real fruit juices and natural flavors to create a
Bacardi rum concentrate. This concentrate will be shipped in
bulk at 120 proof in tank containers to F.B.M. in Canada where it
will be further blended with carbonated waters, sweeteners and
other minor food ingredients. The inquirer states that all the
ingredients added in Canada will be of Canadian origin. The
product will then be bottled at 4 percent alcohol by volume,
labelled, and imported into the United States.
An alternate procedure will involve shipping the rum
directly from Castleton in Florida to F.B.M. in Canada where all
the processes, i.e., blending with fruit juices, etc., will be
performed in Canada. Again, the inquirer states that all
ingredients used in the Canadian processes will be of Canadian
origin. The product will then be sent to the United States.
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ISSUE:
What is the classification of the product at issue from
Canada under the HTSUSA, and does this product qualify for
reduced duties under the United States/Canada Free Trade
Agreement.
LAW AND ANALYSIS:
When a good is imported into the United States the United
States Customs Service first classifies the good according to the
HTSUSA. Following the determination of the proper classification
the amount of tariff duty is assessed and it is determined if
any legislation would allow the good to qualify for any form of
duty exemptions, such as the United States/Canada Free Trade
Agreement.
CLASSIFICATION
Classification of goods under the HTSUSA is governed by the
General Rules of Interpretation (GRI), taken in order. The
Harmonized System is a complete product classification system,
and the goal of the Harmonized System is to place all goods that
are imported into the specific classifications. In this context
the word "goods" is used in its broadest sense to include all
merchandise. The systematic detail is such that virtually all
goods are classifiable by application of GRI 1, that is,
according to the terms of the headings and any relative section
or chapter notes.
Chapter 22, HTSUSA, covers alcoholic beverages. Within this
chapter there are two possible subheadings in which the product
at issue could be classified. One is subheading 2208.40.00,
HTSUSA, which provides for "Rum and Tafia"; the other is
subheading 2208.90.80, HTSUSA, which provides for "other"
spirituous beverages. You state that 2208.40.00, HTSUSA, is the
proper classification subheading for the merchandise at issue.
We disagree.
The previous tariff laws, the Tariff Schedules of the United
States (TSUS), described "rum" as "any alcoholic distillate from
the fermented juice of sugarcane, sugarcane syrup, sugarcane
molasses, or other sugarcane byproducts distilled at less than
190 proof, and includes mixtures solely of such distillates"
(emphasis added). Though the previous laws are not binding on
the present Tariff laws, they do provide guidance for present
classification absent an explicit change in the new laws over the
previous. Subheading 2208.90.80, HTSUSA, provides for a basic
rum product and does not provide for a rum-based beverage, which
is a product which is based on ordinary rum with many additional
ingredients which change its basic character.
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In summary, only products which can be considered a simple,
basic rum product can be classified in subheading 2208.40.00,
HTSUSA. When the nature of the product is changed by the
addition of ingredients, altering the basic nature of the
product, that product becomes an other spirituous beverage. The
merchandise at issue is properly classified in subheading
2208.90.80, HTSUSA, which provides for other spirituous
beverages. This is the most specific subheading which covers the
product at issue, and it is also consistent with previous Customs
decisions.
UNITED STATES/CANADA FREE TRADE AGREEMENT
The free trade agreement (FTA) will eliminate tariffs on
eligible goods traded between the U.S. and Canada. Rules of
Origin were devised, therefore, to define those goods which are
entitled to FTA duty-free treatment when exported from one
country to the other.
As was noted in discussions with the parties at
Headquarters, there is a conflict between the language of the
HTSUSA which Customs is required to follow, and the statutory
language approved by the United States Congress. Under the
present language of the General Notes in the HTSUSA, and as
applied in a previous Customs Ruling Letter, to be originating
goods within the Rules of Origin and thus receive the benefits of
the FTA, a product, "if not a wholly obtained good, must undergo
a transformation in which a tariff classification change in
Canada, must occur" (emphasis added). This language differs from
the statutory language of the implementing legislation enacted by
the United States Congress, which allows for transformation of a
product in either the United States or Canada or both.
Following the General Notes in the HTSUSA, since the rum,
produced in Puerto Rico, is made from molasses which is imported
from the Dominican Republic, and there has been no substantial
transformation in Canada, in the form of a change in tariff
classification as determined in the General Notes, this product
cannot receive the FTA benefits. Whereas, following the
statutory language, which allows for tariff change in the United
States or Canada, this product would most likely receive the
benefits of the FTA. As was discussed, Customs will issue a
decision on the examination of the language differences in the
near future. In the meantime, the product at issue will not
receive the FTA benefits.
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HOLDING:
The product at issue, a rum-based beverage, is properly
classified in subheading 2208.90.80, HTSUSA, which provides for
"other" spirituous beverages. The rate of duty is 33 cents per
proof liter. In addition, imports under this subheading may be
subject to a Federal Excise Tax (26 U.S.C. 5001) of $12.50 per
proof gallon and a proportionate tax at the like rate on all
fractional parts of a proof gallon. The product at issue does
not receive the benefits of the United States/Canada Free Trade
Agreement at this time.
Sincerely,
John Durant, Director
Commercial Rulings Division