In ruling HQ H325781 (Aug. 31, 2022), Customs and Border Protection (CBP) affirmed the tariff classification of the Efficient Lemonade Base in NY N325564 (May 16, 2022). This item is a Lemonade Base in liquid form, which contains approximately 40% water, 39% not-from-concentrate (NFC) lemon juice, and 22% granulated beet sugar with trace amounts of lemon oil. The production of this Lemonade Base requires combining and pasteurizing the ingredients in a food-grade stainless steel tank. The resulting product is packed by aseptic filling and closing into multi-laminate paperboard cartons.
This Lemonade Base will be imported at a baseline temperature and then sold to domestic restaurant operators (the distributors) as an ingredient for lemonade, which can be made by diluting the Lemonade Base. This product is not intended for consumer or retail household use. Instead, the operator will distribute the Lemonade Base to individual restaurants (the end-users). The end-users will use and prepare the product to create and sell lemonade and lemonade-containing drinks to individual consumers. The product packaging will list the preparation instructions, which requires the operator to combine 0.75 liters of the Lemonade Base with 1.25 liters of water, followed by mixing with a whisk.
CBP first determines that the Lemonade Base is not classified in subheading 2009.39.6040, HTSUS, as a fruit juice. The Explanatory Notes (ENs) to heading 2009, HTSUS, state fruit juice of this heading may contain sugar, provided the fruit juice retains its original character as a fruit juice. In this instance, CBP finds that the amount of sugar added to the lemon juice to make the Lemonade Base changes the product from a lemon juice – which would be classifiable under heading 2009, HTSUS – to a lemonade beverage. CBP makes this determination based on the percentage of sugar added (21.5%) and the brix value of lemon juice (5.0-10.0) as compared with the Lemonade base (25.05). As such, because the amount of sugar added to the product alters its original character as a lemon juice, CBP found that it could not be classified under heading 2009, HTSUS.
In contrast, the Lemonade Base is specifically described in the EN(12) to heading 2106, HTSUS, which provides for “[p]reparations for the manufacture of lemonades or other beverages … preparations [that] are intended to be consumed as beverages after simple dilution with water or after further treatment.” The Lemonade Base product, which requires diluting the product with water and stirred for use and consequently meets the food preparation requirements as outlined by heading 2106, HTSUS. At the subheading level, subheading 2106.10, HTSUS, is not applicable because it covers only protein concentrates and textured protein substances. Classification, therefore, is appropriate under subheading 2106.90, HTSUS, which covers “other” food preparations.
The analysis then turns to classification at the 8-digit level. CBP considers subheading 2106.90.9500, HTSUS, which provides for other food preparations “containing over 10% by dry weight of sugar described in additional U.S. note 3 to chapter 17” and “described in additional U.S. note 8 to chapter 17 and entered pursuant to its provisions.”
Additional U.S. note 3 to chapter 17 defines the term “articles containing 10% by dry weight of sugar” means articles containing over 10% by dry weight of sugars derived from sugar cane or sugar beets, whether or not mixed with other ingredients – subject to certain listed exceptions. See HTSUS, Ch. 17, U.S. Note 3 (2022 rev. 9). The Lemonade Base at issue contains 21.5% by dry weight of granulated beet sugar and is imported in liquid form and in bulk for certain domestic restaurant operators (and not for retail sale or retail household use). The Lemonade Base meets the terms of this note.
Additional U.S. note 8 to chapter 17 represents a quantitative limitation (or a quota). The note states that the aggregate quantity of articles containing over 10% by dry weight of sugars described in additional U.S. note 3 to chapter 17, entered under certain enumerated subheadings (including 2106.90.95) during the 12-month period from October 1 in any year to the following September 30, inclusive, “shall not exceed 64,709 metric tons” – excluding Mexican-origin products (which are not permitted or included in this quantitative limitation). See HTSUS, Ch. 17, U.S. Note 8 (2022 rev. 9). Notably, if the quantitative limits of this note are reached, then classification under subheading 2106.90.9500, HTSUS, is no longer permissible. In that case, articles that meet the terms of Additional U.S. note 3 to chapter 17 must be classified under subheading 2106.90.9700, HTSUS, which provides for other such articles.
Therefore, the Lemonade Base at issue, if imported in quantities within the limits described in additional U.S. note 8 to chapter 17 and entered pursuant to its provisions, is properly classified under subheading 2106.90.9500, HTSUS, which carries a general duty rate of 10% ad valorem. In turn, if the quantitative limits of U.S. note 8 to chapter 17 have been reached, then the Lemonade Base is properly classified under subheading 2106.90.9700, HTSUS, which applies a general duty rate of 28.8¢/kg + 8.5% ad valorem.