Customs Ruling HQ W967933 - Domestic Interested Party Petition, 19 U.S.C. §1516; Tariff Classification of "Taber Thick Juice" from Canada; NY J84482

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HQ W967933
Aug 27, 2007

Type : • HTSUS :
Related: J84482

CLA-2 OT:RR:CTF:TCM HkP

Robert C. Cassidy, Jr., Esq.
Jack A. Levy, Esq.
Wilmer Cutler Pickering Hale and Dorr, LLP
2445 M Street, NW
Washington, DC 20037

RE: Domestic Interested Party Petition, 19 U.S.C. §1516; Tariff Classification of "Taber Thick Juice" from Canada; NY J84482

Dear Messrs. Cassidy and Levy:

This is in response to the domestic interested party petition filed by you on behalf of the U.S. Beet Sugar Anticircumvention Coalition ("USBSAC"), pursuant to section 516 of the Tariff Act of 1930, as amended (19 U.S.C. §1516). At issue is the correct tariff classification of sugar beet thick juice, otherwise called "Taber Thick Juice", from Canada under the Harmonized Tariff Schedule of the United States ("HTSUS"). Pursuant to 19 U.S.C. §1516 and U.S. Customs and Border Protection ("CBP") Regulations, 19 CFR 175.21(a), notice of receipt of the domestic interested party petition was published on September 11, 2006, in the Federal Register, Volume 71, Number 175. Six comments were received in response to this notice, five of which agreed with CBP's historical position of classifying sugar beet thick juice in subheading 1702.90.4000, HTSUSA. A discussion of the dissenting comment, submitted by you, and CBP's reasoning is found below. For the reasons set forth in this decision, we hereby affirm New York Ruling Letter ("NY") J84482, dated October 21, 2003.

The USBSAC's petition challenged CBP classification decision NY J84482, in which CBP classified sugar beet thick juice in subheading 1702.90.4000, HTSUSA, which provides for, among other things: "sugar syrups not containing added flavoring or coloring matter, derived from sugar cane or sugar beets, other." Sugar products classified in this subheading are not subject to U.S. sugar quota restrictions. The USBSAC requested that CBP initiate a proceeding under Section 625(c) of the Tariff Act of 1930, as amended (19 U.S.C. §1625(c)), to modify or revoke NY J84482. The sugar beet thick juice at issue is described in NY J84482 as follows:

The product is manufactured from sugar beets, which are washed and sliced into thin strips called cossettes. The sugar in the cossettes is extracted by hot water in a diffuser. The resulting juice is purified with lime and carbon dioxide. The juice is clarified, filtered and concentrated by multiple effect evaporation to 60 to 72 percent solids. The product is now known as thick juice. It is stated that the imported thick juice contains no added flavoring or coloring. ...

The Customs laboratory has determined that the submitted sample of "Taber Thick Juice" has a total sugar content of 63.4 percent and a Brix of 68.7. The product contains 7.7 percent soluble non-sugar solids in the total soluble solids.

The USBSAC contends that CBP failed to address three key factors that, taken together, make the classification of sugar beet thick juice under subheading 1702.90.4000, HTSUSA, incorrect. First, the USBSAC submits that "sugar beet thick juice is sugar and, for this reason, the USDA has determined that it is squarely covered by the program that regulates the sale of domestically processed sugar in the United States." Second, the USBSAC submits that "there is a sordid history of tariff engineering in this area, with importers seeking to invoke HTS subheading 1702.90.4000 in order to circumvent U.S. sugar policy." Finally, the USBSAC states that NY J84482 "contravenes the legislative intent behind HTS subheading 1702.90.4000, i.e., Customs erroneously classified sugar beet thick juice under a subheading that was intended for products that do not compete with sugar." In its submission, the USBSAC suggests that sugar beet thick juice can be properly classified in either subheading 1701.12.1000 or 1701.12.5000, HTSUSA, which provides for raw beet sugar in solid form, not containing added flavoring or coloring, and is subject to quota. In the alternative, the USBSAC contends that the sugar beet thick juice can be classified in subheading 1702.90.5800, HTSUSA, which provides for blended syrups not containing added flavoring or coloring, and is subject to quota.

At issue is the correct classification of the sugar beet thick juice known as Taber Thick Juice. Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). 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 GRIs 2 through 6 may then be applied in order. GRI 6 provides that the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings, and any related subheading notes and, mutatis mutandis, to GRIs 1 though 5, on the understanding that only subheadings at the same level are comparable. The HTSUS provisions under consideration are as follows:

1701 Cane or beet sugar and chemically pure sucrose, in solid form: Raw sugar not containing added flavoring or coloring matter: 1701.12 Beet sugar: * * * 1701.12.1000 Described in additional U.S. note 5 to this chapter and entered pursuant to its provisions ..... 1701.12.5000 Other .....

1702 Other sugars, including chemically pure lactose, maltose, glucose and fructose, in solid form; sugar syrups not containing added flavoring or coloring matter; ...: * * * 1702.90 Other, including invert sugar and other sugar and sugar syrup blends containing in the dry state 50 percent by weight of fructose: Derived from sugar cane or sugar beets: * * * Other: * * * 1702.90.4000 Other ..... Other: * * * Other: Blended syrups described in additional U.S. note 4 to chapter 17: * * * 1702.90.5800 Other ..... Additional U.S. Note 4 to chapter 17, HTSUS, provides:

For the purposes of this schedule, the term "blended syrups described in additional U.S. note 4 to chapter 17" means blended syrups containing sugars derived from sugar cane or sugar beets, capable of being further processed or mixed with similar or other ingredients, and not prepared for marketing to the ultimate consumer in the identical form and package in which imported. Additional U.S. Note 5 to Chapter 17 establishes the terms of the quantitative limitations on the importation of sugar into the United States; that is, it is a quota provision.

In your petition, you contend that CBP should classify sugar beet thick juice as raw sugar under subheading 1701.12.1000 or 1701.12.5000, HTSUSA, which provides for, inter alia, raw beet sugar, in solid form, not containing added flavoring or coloring matter, because these subheadings are subject to quota. You argue that, while heading 1701, HTSUS, generally applies to sugar solids, solid raw beet sugar, as a technical and commercial matter, does not exist. Therefore, CBP should disregard the water contained in the sugar beet thick juice with the result being that the remaining solid would contain a Brix of 68.7 and the non-sugar solids would account for 7.7 percent by weight of all the soluble solids. As an initial matter we note that, in applying the provisions of the tariff, CBP utilizes the principle that Congress is presumed to know the language of commerce. The tariff provides for the distinct and separate products that are raw sugar in solid form (heading 1701) and sugar syrups (heading 1702). Subheading Note 1 to Chapter 17 provides that for the purposes of subheading 1701.12, "raw sugar means sugar whose content of sucrose by weight, in the dry state, corresponds to a polarimeter reading of less than 99.5 degrees." (Emphasis added.) The description in NY J84482 of how standard liquor is converted to granulated (crystallized) beet sugar has been supported by comments from the industry. For example, one commenter details the post importation processing of sugar beet thick juice and observes that standard liquor itself is the result of additional sugar recovery and successive crystallization efforts performed on the thick juice. The commenter further explains:

Standard liquor is taken to the crystallizing equipment of the factory where the standard liquor will be boiled under vacuum and converted to granulated beet sugar. This granulated sugar is separated from the syrup from which it was crystallized in the centrifuge. The syrup is then subjected to re-crystallization at least two more times to produce the high and low raw sugars, which are added back to the sugar beet thick juice from the evaporators and recycled. The final syrup spun off in the centrifuge after the last re-crystallization is called molasses and is most often used for animal feed. The granulated sugar is cooled and dried, and stored for shipment to customers for human consumption in the United States.

More generally, industry commenters confirmed the existence of crystallized beet sugar as a commercial product. See Comments, available at http:// www.regulations.gov.1 Based on the foregoing we find that, despite your assertions to the contrary, solid raw beet sugar does exist as a commercial product. Further, it is a well-established classification principle that goods are classified in their imported condition. XTC Products, Inc. v. United States, 771 F. Supp. 401, 405 (1991). See also United States v. Citroen, 223 U.S. 407 (1911). GRI 1 requires us to classify goods according to the terms of the headings of the HTSUS. Sugar beet thick juice is not imported in solid form; consequently, it is precluded from classification in heading 1701. Moreover, the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the HTSUS at the international level. While not legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80. EN 17.01 explains:

Raw or crude cane or beet sugars occur in the form of brown crystals ... They are generally destined for processing into refined sugar products. * * * It should be noted that cane and beet sugar fall into this heading only when in the solid form (including powders)[.] * * * (Original emphases.)

EN 17.01 further explains: "sugar syrups of cane or beet sugar, consisting of aqueous solutions of sugars, are classified in heading 17.02 when not containing added flavoring or colouring matter and otherwise in heading 21.06" (original emphases). This explanation is consistent with CBP's interpretation of heading 1701, HTSUS, and our decision to classify thick juice in heading 1702. In your petition you intimate that the water component of the thick juice at issue was added as an attempt to evade quota restrictions, similar to the circumstances that lead to the issuance of Headquarters Ruling Letter ("HQ") 961273 (August 25, 1999), in which the U.S. Customs Service (now, CBP) revoked a ruling letter and treatment relating to the classification of certain sugar syrups ("Stuffed Molasses Revocation Ruling"). It is your belief that the thick juice (discounting its water component) amounts to an "unfinished form of beet sugar," which, when classified according to the principle of GRI 2(a), would result in classification under heading 1701, HTSUS. In support of this position, you cite Varsity Watch Co. v. United States ("Varsity Watch"), 34 C.C.P.A. 155, 162-63 (1947), in which the court stated that "certain amounts of an ingredient, although substantial, may be ignored for classification purposes, depending upon many different circumstances, including the purpose which Congress sought to bring about by the language used and whether or not the amount has really changed or affected the nature of the article and, of course, its salability." We have reviewed Varsity Watch and find that it is not dispositive in this instance. That decision concerned the addition of gold (by means of electroplating) to complete and commercially recognizable products - ladies' watches - for essentially aesthetic purposes. Likewise, in the Stuffed Molasses Revocation Ruling the process of adding molasses to a complete and commercially recognizable sugar syrup served no commercial purpose and was only done to avoid quota restrictions. Our research indicates that water is an essential component in the commercially recognized product that is sugar beet thick juice. Thick juice is made by using hot water to extract sugar from cossettes (sugar beets sliced into thin strips); the word "syrup" is commonly understood to mean a thick sticky solution of sugar and water. According to one commenter, "[i]n no way can sugar beet thick juice be characterized as a 'tariff engineered product' as implied in the Petition" because "sugar beet thick juice is not itself nor does it contain a foreign substance[2]. It is a normal part of the production process for beet sugar." The commenter also cites testimony of the U.S. sugar industry made before the U.S. Senate Agriculture Committee in 2001, which recognized that "[t]hick juice, the purified and concentrated syrup produced through the beet end of a sugarbeet processing factory, is the base syrup from which granulated sugar is crystallized on the sugar end." Based on the foregoing, we find that the gold added to the watches in Varsity Watch and the molasses added to sugar syrup in the Stuffed Molasses Revocation Ruling are not comparable to the water component of thick juice. Further, we conclude that thick juice is not an incomplete form of beet sugar. Because the thick juice can be classified by application of GRI 1, it is not appropriate to apply a GRI 2(a) analysis. With regard to your proposed classification, subheading 1702.90.5800, HTSUSA, we find that it does not describe the subject thick juice. It is the view of CBP that the "blended syrups" of that subheading do not cover sugar beet thick juice that is formed through the blending of different sugar beet juices with various concentrations of sugar and viscosities (carbonation juice, thin juice, thick juice) as described in the petition because subheading 1702.90.5800, HTSUSA, provides for sugar syrups other than those derived from sugar cane or sugar beets. Consequently, the syrup must include sugars not derived from sugar cane or sugar beets. If a product contains only sugar derived from sugar cane or sugar beets, classification must fall somewhere in the subheadings 1702.90.0500 to 1702.90.4000, HTSUSA, depending on product specifications. The entire Taber Thick Juice product is derived from sugar beets, whether or not it involves mixing thin juice, thick juice and carbonation juice. In any case, sugar beet thick juice is precluded from classification in subheading 1702.90.5800, HTSUSA. Based on the composition of the thick juice, we find that this product is provided for in subheading 1702.90.4000, HTSUSA. In your comment you note that the language of subheading 1702.90.4000, HTSUSA, does not say "exclusively derived" and further, that the courts have found that "a substance may be properly said to have been derived from a source material even though the process by which it was produced from that material involved the addition of other sources" (citing Esso Standard Oil Co. v. United States, 44 C.C.P.A 102, 106 (1957) (interpreting the phrase "derived from")). It is USBSAC's belief that, "if anything, this analysis would suggest that subheading 1702.90.4000 covers syrups that may be derived from multiple sources and subheading 1702.90.5800 ("other") in turn, covers blended syrups that may not be derived from multiple sources, e.g., blended syrups derived exclusively from sugar beets." Subheading 1702.90.4000 specifically captures sugars derived, as here, from sugar cane or sugar beets. Subheading 1702.90.5800 captures sugars not derived from sugar cane or sugar beets. This does not describe the instant product. When we consider that the thick juice at issue is 100% derived from sugar beets and that subheading 1702.90.4000 provides for syrup derived from beet sugar, we find that the thick juice is correctly classified in subheading 1702.90.4000, HTSUSA. Finally, we address your argument that perceived competitors of sugar should be classified in subheadings subject to quota. Your belief that thick juice competes with sugar is based on a ruling of the U.S. Department of Agriculture ("USDA"), which states, in part, that "beet thick juice is sugar ... subject to a beet processor's sugar marketing allocation when marketed" (Dairy and Sweeteners Analysis Group, Commodity Credit Corporation, U.S. Department of Agriculture (Feb. 28, 2003)). You contend that when CBP issued NY J84482, we did not take this USDA ruling into account. We note that another agency's determinations are not binding on CBP. Sabritas S.A. de C.V. v. United States, 998 F. Supp. 1123 (CIT 1998).

You submit that CBP must give effect to the legislative purpose of subheading 1702.90.4000, HTSUSA, and take account of commercial reality when classifying sugar beet thick juice. CBP finds the issue of classification of the thick juice at issue to be a technical one based on the characteristics of the product. NY J84482 indicated that the CBP lab determined that the submitted sample of the thick juice contained 7.7 percent soluble non-sugar solids in the total soluble solids, a finding that is not in dispute. Consequently, we classified the thick juice in subheading 1702.90.4000, HTSUSA. In addition, even if CBP were to take legislative purpose into account, as you correctly state in your petition: The legislative history of the predecessor statutes to subheading 1702.90.40, HTSUS, clearly indicate[s] that Congress intended this non-quota provision to be used to classify merchandise that does not compete with sugar. In enacting the Sugar Act of 1937 Congress concluded that sugar syrups containing soluble non-sugar solids (excluding any foreign substances that may have been added or developed in the product) equal to more that 6% of the total soluble liquids did not compete with sugar (quoting Final Notice of Revocation of Ruling Letter and Treatment Relating to Tariff Classification of Certain Sugar Syrups, 33 Cust. Bull. 35/36 (Sept. 8, 1999)). (Emphasis added.)

Based on the foregoing, classifying sugar syrups with non-sugar solids (excluding foreign substances) equal to more that 6% of the total soluble liquids in a non-quota provision does not contravene the intent of Congress. Our classification of the thick juice in subheading 1702.90.4000, HTSUSA, has not contravened the legislative purpose of that provision.3 CBP classifies goods according to their characteristics and the terms of the tariff provisions; if a good is not described by a provision it cannot be classified under that provision. We have classified Taber Thick Juice in subheading 1702.90.4000, HTSUSA, which provides for syrups derived from sugar beets, because this product is provided for in this subheading and is not more specifically provided for in any other subheading. Further, the tariff provides no justification for classifying the thick juice elsewhere. By application of GRI 1, we find that the sugar beet thick juice is classified under heading 1702, HTSUS, and is specifically described in subheading 1702.90.4000, HTSUSA, which provides for: "Other sugars, including chemically pure lactose, maltose, glucose and fructose, in solid form; sugar syrups not containing added flavoring or coloring matter; ...: Other, including invert sugar and other sugar and sugar syrup blends containing in the dry state 50 percent by weight of fructose: Derived from sugar cane or sugar beets: Other: Other." NY J84482 is hereby affirmed.

Sincerely,

Myles B. Harmon, Director
Commercial and Trade Facilitation Division
1 Docket Id. USCBP-2006-0087.
2 Substances that are foreign to the sugar syrup at the relevant stage of the refining process. For example, adding molasses to sugar is not a part of the refining process for raw sugar. Heartland By-Products Inc. v. United States Beet Sugar Association, 264 F. 3d 1126 (Fed. Cir. 2001).
3 In addition, we note that heading 1703, HTSUS, allows another "competitor" of sugar, molasses, to enter the U.S. without quantitative limitations. See subheadings 1703.10.30 and 1703.90.30, HTSUSA. Molasses classifiable in these subheadings is imported for commercial extraction of sugar or for human consumption.

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