CLA-2 RR:CR:GC 964706 nel/JGB
Mr. Graeme R. Honeyfield
Glinso Foods
3554 Round Barn Blvd.
Suite 310
Santa Rosa, CA 95403
RE: Modification of NY E89271; Revocation of NY F85390 and F84515; milkfat and butterfat mixtures
Dear Mr. Honeyfield:
This letter is in regard to New York Ruling Letters (NY) E89271, dated December 17, 1999, and F85390 and F84515, both dated April 11, 2000, issued to you by the Customs National Commodity Specialist Division regarding classification of certain milkfat mixtures under the Harmonized Tariff Schedule of the United States (HTSUS). After extensive review of the classification of similar merchandise under the HTSUS, we have reconsidered NY E89271 and believe that the classification of a portion of the products therein is incorrect. We have also reconsidered F85390 and F84515 and have decided to revoke them in their entirety.
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. 103-82, 107 Stat. 2057, 2186), notice of the proposed modification of NY E89271 was published on January 3, 2001, in the Customs Bulletin, Volume 35, Number 1. As explained in a notice published on February 21, 2001, in Vol. 35, No. 8 of the Customs Bulletin, the period within which to submit comments on this proposal was extended to March 23, 2001. Your comments identified two additional rulings that would fall under the principle of the ruling proposed to be modified. Those rulings are being revoked by this letter. No additional comments were received in response to this notice.
FACTS:
NY E89271 dated December 17, 1999, classified certain milkfat confectionery mixes, which were to be imported from Australia, Canada, United Kingdom, Denmark, South Africa or New Zealand, in solid form, frozen, refrigerated, or at ambient temperature, in 25-kg cartons or 20mt bulk transport containers, for use as ingredients to manufacture confectionery or other food items. These products have the following ingredient breakdown:
AMF 8911B – 89% butter (74% milkfat, 14.4% moisture, 0.7% protein), 11% sucrose.
AMF 8911B (salted) – 89% butter (74% milkfat, 14.4% moisture, 0.7% protein), 11% salt.
AMF 7805 – 78% milkfat, 16% water, 5% sucrose, 1.25% milk protein concentrate.
AMF 7805 (salted) – 78% milkfat, 16% water, 5% salt, 1.25% milk protein concentrate.
In NY E89271, the products identified as AMF 8911B, AMF 8911B (salted), AMF 7805, and AMF 7805 (salted), were classified under subheadings 2106.90.64 and .66, HTSUS, the in- and over-quota provisions for: Food preparations not elsewhere specified or included: … Other: Containing over 10 percent by weight of milk solids: Other, dairy products described in additional U.S. note 1 to chapter 4: Described in additional U.S. note 10 to chapter 4 and entered pursuant to its provisions.
NY F85390 and F84515, both dated April 11, 2000, classified certain milkfat confectionery mixes, which were to be imported from Australia, Canada, or New Zealand, in solid form, frozen, refrigerated, or at ambient temperature, in 25-kg cartons or 20mt bulk transport containers, for use as ingredients to manufacture confectionery or other food items. These products have the following ingredient breakdown:
SDB 95 --95% salted butter, 5% sugar.
B78--89% to 95% butter, 5% to 11% sugar and/or salt.
In NY F85390 and F84515, the products identified as SBD95 and B78, were classified under subheadings 2106.90.64 and .66, HTSUS, the in- and over-quota provisions for: Food preparations not elsewhere specified or included: … Other: Containing over 10 percent by weight of milk solids: Other, dairy products described in additional U.S. note 1 to chapter 4: Described in additional U.S. note 10 to chapter 4 and entered pursuant to its provisions.
ISSUE:
With respect to the products of E 89271, whether the milkfat products, AMF 8911B, AMF 8911B (salted), AMF 7805, and AMF 7805 (salted), which consist predominantly of some form of milkfat mixed with other ingredients, are included within the scope of heading 0405, HTSUS, which provides for: Butter and other fats and oils from milk; dairy spreads.
With respect to the products of F85390 and F84515, whether the butterfat products SDB 95 and B78 which consist predominantly of some form of butterfat mixed with other ingredients, are included within the scope of heading 2106 HTSUS.
LAW & 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 (ENs) to the Harmonized Commodity Description and Coding System constitute the official interpretation of the tariff system at the international level. Though not dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS. Customs believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).
The HTSUS headings under consideration are as follows:
0405 Butter and other fats and oils derived from milk; dairy spreads:
and
2106 Food preparations not elsewhere specified or included.
Note 2(a) to chapter 4 defines “butter” as “… derived exclusively from milk, with a milkfat content of 80 percent or more but not more than 95 percent by weight, a maximum milk solids-not-fat content of 2 percent by weight and a maximum water content of 16 percent by weight. Butter does not contain added emulsifiers, but may contain sodium chloride, food colors, neutralizing salts and cultures of harmless … bacteria.”
Note 2(b) to chapter 4 defines “dairy spreads” as “a spreadable emulsion of the water-in-oil type, containing milkfat as the only fat in the product, and having a milkfat content of 39 percent or more but less than 80 percent by weight.” According to EN 04.05(B), dairy spreads “may contain optional ingredients such as cultures of harmless … bacteria, vitamins, sodium chloride, sugar, gelatine, starches; food colours; flavours; emulsifiers; thickening agents and preservatives.”
Heading 2106, HTSUS, provides for: Food preparations not elsewhere specified or included, and may be considered only when a more specific provision is not available. The ENs to the heading permit the inclusion of certain milkfat products “[p]rovided that they are not covered by any other heading of the Nomenclature, [for example]: … (3) Preparations based on butter or other fats or oils derived from milk and used, e.g., in bakers’ wares.”
The milkfat mixtures under consideration consist of butter with either salt or sugar added in amounts ranging from 5% to 11% by weight; or, milkfat with either salt or sugar added in amounts ranging from 5% to 11% by weight plus a small amount of milk protein. We first consider whether these products may be classified under heading 0405, HTSUS.
Two of the products classified in NY E89271 – AMF 8911B (salted) and AMF 8911B – are mixtures of butter with the added ingredient of salt or sugar. Based on chapter 4 note 2(a), butter with added salt, which has a milkfat content of 80% or higher is classifiable as butter under subheading 0405.10, HTSUS, which provides for: Butter. Mixtures of butter with either salt or sugar, in which the milkfat content is less than 80% but more than 39%, by weight, meet the chapter note 2(b) definition for “dairy spreads” of subheading 0405.20, HTSUS, which provides for: Dairy spreads.
Product AMF 8911B (salted) contains 89% butter and 11% salt. The product data sheet indicates the typical composition of the product, as imported, includes 73.9% milkfat, 11.0% salt, 14.4% moisture, and 0.7% protein. The definition of butter in chapter 4 note 2(a) allows the addition of salt to butter, but salted butter must contain 80% or more by weight of milkfat. Product AMF 8911B (salted) contains less than 80% milkfat and, therefore, is not butter for tariff purposes. However, the product is a spreadable water-in-oil type emulsion with a milkfat content of at least 39% and less than 80% by weight and, as such, meets the definition for dairy spreads in chapter 4 note 2(b). Product AMF 8911B (salted) will be reclassified in this ruling under the provisions for dairy spreads, subheading 0405.20, HTSUS.
Product AMF 8911B contains 89% butter and 11% sugar. The product data sheet indicates its typical composition includes 73.9% milkfat, 11.0% sucrose, 14.4% moisture, and 0.7% protein. AMF 8911B contains less than 80% milkfat and is not butter for tariff purposes. However, this product is a spreadable water-in-oil emulsion with a milkfat content within the range required for dairy spreads of subheading 0405.20, HTSUS. Sugar is an acceptable optional ingredient according to the ENs for this subheading. Product AMF 8911B will be reclassified in this ruling under the provisions for dairy spreads, subheading 0405.20, HTSUS.
Two of the products classified in NY E89271 – AMF 7805 and AMF 7805 (salted) – are mixtures of milkfat with additional ingredients. The product data sheet indicates the typical composition for AMF 7805, as imported, includes 78% milkfat, 5.0% sucrose, 16.2% moisture, 0.9% lactose, and 0.3% protein. Additionally, the data sheet states “[t]he fat in the product retains the quality of the original export unsalted butter quality.” Milkfat is the only fat in the product. This product is a spreadable water-in-oil emulsion with a milkfat content within the range, 39% or more but less than 80% by weight, that meets the definition for “dairy spreads” of chapter 4 note 2(b). Sugars, sucrose and lactose, and protein are acceptable optional ingredients according to EN 04.05(B). Product AMF 7805 will be reclassified in this ruling under the provisions for dairy spreads, subheading 0405.20, HTSUS.
The product data sheet indicates the typical composition for AMF 7805 (salted), as imported, includes 78% milkfat, 5.0% salt, 16.2% moisture, 0.5% lactose, and 0.3% protein. Additionally, the data sheet states “[t]he fat in the product retains the quality of the original export unsalted butter quality.” Milkfat is the only fat in the product. This product is a spreadable water-in-oil emulsion with a milkfat content within the range, 39% or more but less than 80% by weight, that meets the definition for “dairy spreads” of chapter 4 note 2(b). Salt (sodium chloride), sugar (lactose), and protein are acceptable optional ingredients according to EN 04.05(B). Product AMF 7805 (salted) will be reclassified in this ruling under the provisions for dairy spreads, subheading 0405.20, HTSUS.
Subheading 0405.20, HTSUS, dairy spreads, is subdivided into coequal subheadings which provide for: “Butter substitutes, whether in liquid or solid state,” and “Other” products of the subheading. “Dairy spreads” which have been substantially sweetened or salted may be suitable substitutes for butter when used, for example, as an ingredient in ice cream or baked goods. However, these products are not suitable as substitutes for butter in substantially all of its uses and, therefore, would not be considered to be “butter substitutes.” See Rudolph Faehndrich v. United States, 49 Cust. Ct. 1 (1962), which held that butteroil of 99.9% purity could not “take the place of butter in substantially all respects and substantially all conditions” and, therefore, was not classifiable as a butter substitute. Products AMF 8911B, AMF 8911B (salted), AMF 7805, and AMF 7805 (salted) are classifiable under subheading 0405.20.60 and .70, HTSUS, the in- and over-quota provisions for: Butter and other fats and oils derived from milk; dairy spreads: Dairy spreads: Other: Dairy products described in additional U.S. note 1 to chapter 4: Described in additional U.S. note 10 to this chapter and entered pursuant to its provisions.
Our decision to reclassify the products identified as AMF 8911B, 8911B (salted), 7805, and 7805 (salted) is consistent with a comparison of these products in two rulings issued by the Harmonized System Committee of the World Customs Organization (HSC) in the Compendium of Classification Opinions. These two rulings, issued by and reflecting the consensus of the HSC on the classification of butterfat mixtures in the Harmonized Tariff System (HTS), are useful to illustrate this interpretation of heading 0405.
0405.20 1. Butterfat mixture in the form of a water-in-oil type spreadable emulsion and used in the food industry, consisting of, by weight, 68.75% butteroil, 17% sugar, 13% water and 1.25% casein. See also Opinion 2106.90/18.
2106.90 18. Butterfat mixture in the form of a yellowish paste and used in the food industry, consisting of, by weight, 67.5% butterfat, 14% skimmed milk and 18.5% sugar. See also Opinion 0405.20/1.
See T.D. 89-80, stating that, decisions in the Compendium of Classification Opinions should be treated in the same manner as the ENs, i.e., while neither legally binding nor dispositive, they provide a commentary on the scope of each heading of the HTSUS.
Note that the composition of both products is very similar. However, the product, described as a “water-in-oil spreadable emulsion,” was classified in heading 0405, HTS, while the second product, described as a mixture of butterfat with other ingredients, was classified in heading 2106, HTS. The second product was not butter or a dairy spread (i.e., not a spreadable water-in-oil emulsion) and was determined to be distinct from other fats and oils derived from milk, since the product contained additional, non-butterfat, ingredients.
The decision to classify the milkfat products identified as AMF 8911B, AMF 8911B (salted), AMF 7805, and AMF 7805 (salted) under heading 0405, HTSUS, conforms to these HSC rulings. These products, which consist of milkfat “mixture in the form of a water-in-oil type spreadable emulsion,” are covered under a specific product definition, “dairy spreads,” of heading 0405, HTSUS, and must be classified there, not as a more general milkfat “mixture” under heading 2106, HTSUS.
NY F85390 and F84515 classified SDB 95 and B78 erroneously in heading 2106, HTSUS, prompting our revocation of those rulings in this document. Because of the potential changes in formulations of those products from the time of the initial ruling to the present, both within and outside the North American Free Trade Agreement, you are requested to communicate directly with the Director, National Commodity Specialist Division, U. S. Customs Service, 6 World Trade Center, New York, NY 10048 where new rulings will be issued on an expedited basis. Please include a copy of this notice with your ruling requests. We appreciate your cooperation in bringing these rulings to our attention and with this reissuance process.
HOLDING:
The milkfat products identified as AMF 8911B, AMF 8911B (salted), AMF 7805, and AMF 7805 (salted) are properly classified under subheading 0405.20.6000, HTSUS, under the tariff rate quota providing for: Butter and other fats and oils derived from milk; dairy spreads: Dairy spreads; Other: Dairy products described in additional U.S. note 1 to chapter 4: Described in additional U.S. note 10 to this chapter and entered pursuant to its provisions. Should the quantity limitation for the quota provision in 0405.20.6000 have been reached, classification will be in subheading 0405.20.7000, HTSUS. Goods classifiable in subheading 0405.20.7000, HTSUS, are subject to additional safeguard duties listed in subheadings 9904.04.50 – 9904.05.01.
EFFECT ON OTHER RULINGS:
NY E89271 dated December 17, 1999, is hereby MODIFIED with respect to the products identified as AMF 8911B, AMF 8911B (salted), AMF 7805, and AMF 7805 (salted) as set forth herein.
NY F85390 and F84515, dated April 11, 2000, 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,
John Durant, Director
Commercial Rulings Division