[Federal Register: July 15, 2003 (Volume 68, Number 135)]
[Notices]
[Page 41836-41839]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15jy03-77]
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DEPARTMENT OF HOMELAND SECURITY
Bureau of Customs and Border Protection
Notice of Decision on Domestic Interested Party Petition and
Notice of Desire To Contest Decision
AGENCY: Customs and Border Protection, Department of Homeland Security.
ACTION: Notice of petitioner's desire to contest Customs decision in
response to domestic interested party petition.
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SUMMARY: On September 18, 2002, the U.S. Customs Service (now Customs
and Border Protection (CBP)) published in the Federal Register a notice
of receipt of a domestic interested party petition which had been
received pursuant to section 516, Tariff Act of 1930, as amended,
regarding the classification, under the Harmonized Tariff Schedule of
the United States, of certain imported dairy protein blends. The
petition asked CBP to review the classification of these products and
change the classification from a non-quota classification into a quota
classification. On April 1, 2003, after reviewing comments received in
response to the petition, CBP issued a Headquarters decision denying
the petition and affirming the current classification of the milk
protein blends. On April 29, 2003, pursuant to 19 CFR 175.23, the
domestic interested party petitioner filed a notice with CBP that it
desired to contest this decision.
Pursuant to Section 516(c), this notice attaches CBP's
determination as to the classification of the merchandise and
notification of petitioner's desire to contest that decision.
DATES: July 15, 2003.
FOR FURTHER INFORMATION CONTACT: Peter T. Lynch, General Classification
Branch, Office of Regulations and Rulings, CBP, Department of Homeland
Security, 202-572-8778.
SUPPLEMENTARY INFORMATION:
Background
Classification of Merchandise
Classification under the Harmonized Tariff Schedule of the United
States (HTSUS) is made in accordance with the General Rules of
Interpretation (GRIs). GRI 1 provides that classification shall be
determined according to the terms of the headings and any relative
section or chapter notes. Merchandise that cannot be classified in
accordance with GRI 1 is to be classified in accordance with subsequent
GRIs taken in order.
Milk Protein Concentrates/Milk Protein Blends
Classification of dairy products is essentially based on the
composition of the product. In the matter here in issue, direction is
also provided by Additional U.S. Note 13 to Chapter 4, HTSUS, which
states: ``For the purposes of subheading 0404.90.10, the term ``milk
protein concentrate'' means any complete milk protein (casein plus
lactalbumin) concentrate that is 40 percent or more protein by
weight.'' CBP has classified several products which are called milk
protein concentrates under subheading 0404.90.10, HTSUS, which provides
for: ``Whey, whether or not concentrated or containing added sugar or
other sweetening matter; products consisting of natural milk
constituents, whether or not containing added sugar or other sweetening
matter, not elsewhere specified or included: Other: Milk protein
concentrates'' which has a general duty rate of 0.37 cents per
kilogram, and is not subject to a tariff-rate quota.
The petition filed by the domestic interested party pursuant to
section 516, Tariff Act of 1930, as amended, (19 U.S.C. 1516),
contended that certain merchandise is not eligible for classification
in subheading 0404.90.10, HTSUS, because in petitioner's view it does
not conform to all the requirements set forth in Additional U.S. Note
13 to Chapter 4 (set forth above). The petition asked CBP to review two
classification rulings on products identified as ``milk protein
concentrates.'' On September 18, 2002, a notice of the petition was
published in the Federal Register (67 FR 58837) informing the public of
the petition and inviting comments on the correctness of CBP
classification of the merchandise.
After careful review of arguments set forth by petitioner, as well
as those raised by comments received in response to the Federal
Register Notice, CBP determined that the classification contained in
the rulings under review was correct and, on April 1, 2003 issued the
decision appended hereto, which denied the petitioner's requested
reclassification of the goods.
On April 29, 2003, pursuant to 19 CFR 175.23, by letter to the CBP,
petitioner filed a notice that it desired to contest the classification
of the goods. The notice to contest designated the ports at which the
goods are currently being entered and at which petitioner desires to
protest the liquidation of one entry of the goods.
Authority: This notice is published in accordance with 19 CFR
175.24 and 19 U.S.C. 1516.
Dated: July 9, 2003.
Robert C. Bonner,
Commissioner, Customs and Border Protection.
HQ 965592
April 1, 2003.
CLA-2 RR:CR:GC 965592ptl
Category: Classification.
Tariff No.: 0404.90.10.
RE: Domestic Interested Party Petition on Dairy Protein Blends.
Mr. Robert Torresen, Sidley Austin Brown & Wood, LLP, 1501 K Street,
NW., Washington, DC 20005.
Dear Mr. Torresen: This letter concerns Customs decision
regarding a petition you filed on behalf of the National Milk
Producers Federation (NMPF), pursuant to Section 516, Tariff Act of
1930, as amended (19 U.S.C. 1516), involving the tariff
classification of certain products referred to
[[Page 41837]]
as dairy protein blends under the Harmonized Tariff Schedule of the
United States (HTSUS).
Facts
On June 21, 2001, NMPF requested that Customs initiate a
proceeding under Section 625(c) of the Tariff Act of 1930, as
amended (19 U.S.C. 1625(c)), to modify various ruling letters
relating to the classification under the HTSUS of certain dairy
protein blends identified as ``milk protein concentrates'' (MPC).
Should Customs not initiate a proceeding under section 625, NMPF
requested that its communication be considered a domestic interested
party petition pursuant to Section 516 of the Tariff Act of 1930, as
amended (19 U.S.C. 1516).
Specifically, NMPF contends that certain dairy products
classified in New York ruling letters (NY) 800374, dated July 27,
1994, and NY D83787, dated November 13, 1998, did not meet the
statutory definition of MPC and were therefore not classifiable in
subheading 0404.90.10, HTSUS, which provides for ``milk protein
concentrates.'' In its submission, NMPF suggests that the subject
dairy protein blends should be classified in heading 0402, HTSUS,
which provides for milk and cream, concentrated or containing added
sugar or other sweetening matter.
The products in the rulings you have identified are described by
the importer as being milk protein concentrates. According to the
rulings, the products have the following ingredients:
Product 1: Lactose (42.2 percent, +/- 0.5 percent), protein
(41.5 percent, +/- 0.5 percent), ash (8.2 percent, +/- 0.5 percent),
moisture (4.1 percent, +/- 0.3 percent), and fat (2.5 percent, +/-
0.5 percent) (NY 800374).
Product 2: Protein (41 percent), fat (29 percent), minerals (7
percent), and moisture (6 percent) (NY D83787).
Both products contain over 40 percent protein by weight.
Additionally, product 2 also contains a significantly higher
percentage of fat than naturally occurs in milk. Neither ruling
contains any information about how the product was manufactured and
there is no indication that this information was provided to
Customs. Unfortunately, any materials which might have been included
in the original case files were lost in the destruction of the New
York Customs House at the World Trade Center on September 11, 2001.
As requested, Customs reviewed the classification decisions in
both NY 800374 and NY D83787. This review did not persuade Customs
that the classification in those rulings was incorrect. Therefore,
on September 18, 2002, in accordance with the procedures outlined in
19 U.S.C. 1516, and Title 19, Code of Federal Regulations, Part 175
(19 CFR Part 175), Customs published a notice of ``Receipt of
Domestic Interested Party Petition Concerning Tariff Classification
of Dairy Protein Blends'' in the Federal Register (67 FR 58837).
Customs summarized the NMPF contentions and invited the public to
comment on the correctness of the rulings cited and the arguments
made by NMPF. During the comment period that ended on November 18,
2002, Customs received over 960 comments. Many of the comments
contained nearly identical language expressing support for or
opposition to the NMPF position.
Issue
Whether milk protein concentrates of subheading 0404.90.10,
HTSUS, are limited to products produced by ultrafiltration and
containing casein and lactalbumin in the same proportion as found in
milk, or whether they also include a blend of milk constituents and
concentrated milk proteins where the total casein and lactalbumin
content exceeds 40 percent by weight.
Law and Analysis
Merchandise is classifiable under the Harmonized Tariff Schedule
of the United States (HTSUS) in accordance with the General Rules of
Interpretation (GRIs). The systematic detail of the HTSUS is such
that most 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, the remaining
GRIs may then be applied in order.
In understanding the language of the HTSUS, the Harmonized
Commodity Description and Coding System Explanatory Notes may be
utilized. The Explanatory Notes (ENs), although not dispositive or
legally binding, provide a commentary on the scope of each heading
of the HTSUS, and are the official interpretation of the Harmonized
System at the international level. See T.D. 89-80, 54 Fed. Reg.
35127, 35128 (August 23, 1989).
The HTSUS provisions under consideration are as follows:
0402--Milk and cream, concentrated or containing added sugar or
other sweetening matter:
0404--Whey, whether or not concentrated or containing added sugar or
other sweetening matter; products consisting of natural milk
constituents, whether or not containing added sugar or other
sweetening matter, not elsewhere specified or included:
* * * * *
0404.90................................... Other:
0404.90.10................................ Milk protein concentrates
Other:
Dairy products described in
additional U.S. note 1 to
chapter 4:
0404.90.28................................ Described in general note
15 of the tariff
schedule and entered
pursuant to its
provisions.
0404.90.30................................ Described in additional
U.S. note 10 to this
chapter and entered
pursuant to its
provisions.
0404.90.50................................ Other \1\
------------
\1\ See subheadings 9904.04.50-9904.05.01.
Additional U.S. Note 13 to Chapter 4 describes ``Milk protein
concentrate'' as follows:
13. For purposes of subheading 0404.90.10, the term ``milk
protein concentrate'' means any complete milk protein (casein plus
lactalbumin) concentrate that is 40 percent or more protein by
weight.
You contend that the products classified in NY 800374 and NY
D83787 are not ``complete milk proteins'' as defined by Additional
U.S. Note 13 because they are not ``unified protein complexes in
which both the casein and lactalbumin are present in the same
proportion, relative to each other, as they are found in milk.''
Even though the rulings do not provide information about the method
of manufacture, you also contend that neither product of the rulings
can be described as ``concentrates,'' since you contend that they
have not been produced and concentrated by means of ultrafiltration.
You assert that the language of Additional U.S. Note 13 is
intended to restrict classification in subheading 0404.90.10, HTSUS,
to products which have been produced from skim milk by a process
known as ultrafiltration. In that process, skim milk is forced
through a membrane which allows smaller lactose, water, mineral, and
vitamin molecules to pass through the membrane, while the larger
protein and fat molecules are retained and concentrated. You argue
that the phrase ``complete milk protein (casein plus lactalbumin)''
requires that a product classified in subheading 0404.90.10 contain
only fully functional, single (unified) protein complexes in
concentrate form. You claim that only products made by the
ultrafiltration process contain such proteins. You also contend that
milk proteins obtained from methods other than ultrafiltration are
neither complete nor fully functional. You state that products
produced by means other than ultrafiltration are not products
described in the note and are not eligible for classification in
subheading 0404.90.10, HTSUS.
You refer to two Customs Headquarters ruling letters, HQ 070297,
dated October 7, 1982, and HQ 073235, dated December 21, 1983, in
which an ultrafiltrated product referred to as Total Milk Proteinate
(TMP) containing nearly 90 percent milk protein was classified as a
product in chief value of casein and not subject to the dairy quota.
Despite the fact that these rulings were
[[Page 41838]]
issued under the Tariff Schedules of the United States (TSUS) (the
predecessor to the Harmonized Tariff Schedule of the United States),
you argue that they show a clear intent of Customs to classify only
products which are manufactured by means of ultrafiltration in non-
quota provisions. In your view, these rulings served as the impetus
for Congressional modification of the TSUS. To support your position
you provided language from the 1984 Senate Finance Committee Report
on the Omnibus Tariff and Trade Measures (S. Prt 98-219) which
created three new provisions in the TSUS to provide for: Whey
Protein Concentrate (Item 118.35); Lactalbumin (Item 118.40); and
Milk Protein Concentrate (Item 118.45). The Committee report
describes total milk proteinate as being ``a soluble milk proteinate
in which casein and undenatured whey products are isolated as a
single protein complex.''
That Committee Report also contained a proposed TSUS Headnote
defining milk protein concentrate as ``any milk protein concentrate
that is 40 percent or more protein by weight.'' You contend that the
report demonstrates that only ultrafiltrated milk protein
concentrates were intended to be included within the non-quota
tariff provision created by Congress. When the HTSUS was adopted,
the non-quota treatment of MPCs was carried forward to the
subheading at issue. However, you concede that Congress did not
include any language in either the TSUS Headnote, or the HTSUS
Additional U.S. Note, which explicitly identifies any particular
manufacturing process as being required for MPC.
As stated above, goods are classified under the HTSUS according
to the terms of the headings and relevant section and chapter notes
and by applying the GRIs in order. You have contended that the MPC
products in the identified rulings should be classified in heading
0402, HTSUS. Heading 0402, HTSUS, provides for: Milk and cream,
concentrated or containing added sugar or other sweetening matter.
``Concentrated'' milk is defined by the U.S. Food and Drug
Administration (FDA) as being ``the liquid food obtained by partial
removal of water from milk.'' The products which are the subjects of
the disputed rulings are not concentrated milk, but rather are
products which consist of milk constituents. The ENs to heading
0404, HTSUS, provide, in pertinent part, ``The heading also covers
fresh or preserved products consisting of milk constituents, which
do not have the same composition as the natural product, provided
they are not more specifically covered elsewhere. Thus the heading
includes products which lack one or more natural milk constituents,
milk to which natural milk constituents have been added (to obtain,
for example, a protein-rich product).'' As such, milk protein
concentrates are described by the terms of heading 0404 and not
those of heading 0402. Accordingly, they are ineligible for
classification in heading 0402 and we must now determine the correct
subheading for the products within heading 0404, HTSUS.
The manufacturers and importers buy and sell the products under
consideration as ``Milk Protein Concentrates.'' We have determined
that the products are goods of heading 0404, HTSUS. We must now
determine whether the products are included within the scope of the
legal definition of milk protein concentrate contained in Additional
U.S. Note 13 to Chapter 4.
A number of the comments received in response to the 516 Notice
discussed the terms of Additional U.S. Note 13. Many of the comments
contend that your position, which limits coverage of the Note to
products produced by ultrafiltration, is not supported by the
language of the Note. These comments point out that when Congress
was drafting the Note, it could have used restrictive language to
achieve the result you urge. However, this was not done.
These commenters state that in the food industry, the term
``milk protein concentrates'' is commonly used to refer to a wide
variety of products of varying composition. These products are
manufactured to specification to render them suitable for specific
end uses in the food industry. In addition, they point out that
certain milk protein concentrates are obtained by a combination of
ultrafiltration and blending, while other products contain milk
proteins that are isolated from milk by other processes such as
precipitation. They contend that products containing 40 percent or
more protein by weight have more protein than milk and are thus milk
protein concentrates. They also note that if Congress intended the
provision to be limited to the total milk proteinate that was the
subject of the previous Customs ruling, it would not have enacted
the broad language of Additional Note 13 and would not have set the
milk protein threshold as low as 40 percent.
Upon consideration of the petition and the comments submitted,
Customs agrees with the comments received that the Note does not
restrict MPCs to any particular method of manufacture. Rather, the
Note speaks to ``any'' complete milk protein concentrate which
contains a specified protein percentage by weight. The use of the
term ``any'' suggests that a broad rather than restrictive reading
of the note was intended. The Note does require that the protein be
``complete'' which, according to the Note, requires that it contain
casein and lactalbumin. However, the Note neither requires that the
proteins be in the same proportion as they are found in milk, nor
does it specify relative percentages of the protein components. It
requires only that the source of the proteins be milk, that casein
and lactalbumin be present, and that they constitute 40 percent or
more, by weight, of the product.
None of the conditions you urge such as retention of ``fully
functional properties'' and that the proteins not be ``denatured'',
which you have indicated are requirements for inclusion in the
subheading 0404.90.10, are specified in the text of Additional U.S.
Note 13 to Chapter 4. Had Congress intended the subheading to be
limited to only those products which meet the standards you specify,
it could have drafted the provision accordingly. However, the text
that was adopted does not contain any of the narrow restrictions you
describe. Moreover, there is nothing in the legislative history that
demonstrates an intent to limit the provision to ultrafiltrated
products. Finally, as many commenters pointed out, and the study
performed by the General Accounting Office on this issue made clear,
the term ``milk protein concentrates'' is used in commerce to refer
to a class of products much broader than those produced by
ultrafiltration. For example, the study states that products known
as milk protein concentrates produced in Canada are made by blending
milk proteins. (General Accounting Office, Report to Congressional
Requesters, Dairy Products: Imports, Domestic Production, and
Regulation of Ultra-filtered Milk, GAO-01-326, March 2001, at 7).
Tariff terms are presumed to reflect their commercial meaning.
(Nylos Trading Co. v. United States, 37 CCPA 71 (1949); Carl Zeiss,
Inc v. United States, 195 F.3d 1375 (1999), citing Simod Am. Corp.
v. United States, 872 F.2d 1572 (Fed. Cir. 1989).
For a product to be eligible for classification in subheading
0404.90.10, HTSUS, it must be a concentrate. You argue that the term
refers to a product that has had liquids removed from it to make it
stronger, and that only ultrafiltered products satisfy this
requirement. Customs itself initially considered this view in 2001,
when, as part of a Notice of proposed revocation, it stated: ``the
common dictionary meaning of the words `milk protein concentrate'
would be a protein product derived from milk in which the milk
protein content has been intensified or purified by the removal of
'foreign or inessential' milk constituents, such as water, minerals
and lactose.'' (See Customs Bulletin and Decisions, Vol. 35, No. 40,
October 3, 2001).
Comments received in response to that Notice noted that products
known in the trade as milk protein concentrates were in fact
produced by a variety of methods other than ultrafiltration. They
argued these products, e.g., a blend of skim milk and whey protein
concentrates or caseinates, were concentrates since they were dairy
products whose milk protein content was higher than that found in
milk.
Upon further consideration, Customs agrees that such products
may be considered concentrates within the meaning of the provision.
These products consist of milk constituents whose protein content
has been intensified by blending with a concentrated milk protein
such as whey protein concentrate or caseinates.
In that same proposed revocation, Customs referred to an
International Dairy Federation publication of May 1992, as the basis
for the statement that ``The dairy industry has specific terminology
and parameters when referring to milk protein concentrate.''
While that statement reflected certain information before
Customs at the time of the proposal, comments received thereafter
revealed that there is no standard of identity for MPC recognized
under the Codex Alimentarius or other international non-governmental
organizations. Similarly, there is no recognized commercial standard
for these products. Milk protein concentrates contain varying
amounts of milkfat, proteins
[[Page 41839]]
and other constituents which are customized by producers to meet the
needs of customers.
It has become clear that in the dairy industry, it currently is
common practice to create products by adding ingredients, which may,
in fact be protein concentrates themselves (such as whey protein
concentrates or caseinates), to raw materials. The resulting
products are marketed and sold to customers as milk protein
concentrates. This practice is acknowledged by the previously cited
EN to heading 0404, ``Thus the heading includes * * * milk to which
natural milk constituents have been added (to obtain, for example, a
protein-rich product).''
Based upon the foregoing information provided in the comments,
Customs decided to withdraw the proposed revocation of the rulings.
Additional U.S. Note 13 to Chapter 4, in our view, describes a
product, not a process. The provision cannot be seen to specify all
the methods that might be employed to create MPC, in part because
they had not been developed. Technologies have developed since 1984
which enable manufacturers to produce an increasing number of
varieties of products that are entered into the marketplace and
offered for sale to purchasers which are identified as MPCs. This
analysis of tariff language was recently employed by the United
States Court of International Trade when, in reference to chemical
products, it stated: ``* * * the tariff schedule should not be
interpreted by reference to the method of producing the chemical
compound at issue, instead of the relative simplicity of the
finished product's chemical structure. Relying on method of
production would undermine any consistency in the classification of
imported chemicals, as new and complex chemical processes are
developed constantly.'' E.T. Horn Co. v. United States, CIT Slip Op.
03-20 (February 27, 2003).
Over the course of many years, Customs has classified many
different products identified as MPCs in subheading 0404.90.10,
HTSUS. These products contain varying amounts of proteins and other
ingredients such as milkfat and lactose. The determinative factor in
these rulings has been the protein content, not the manufacturing
process (see, HQ 950484, dated January 3, 1992, a product produced
from skim milk by a chromatographic separation process, containing
76 to 80 percent protein; NY 812858, dated August 3, 1995, a product
produced from coagulated, heated skim milk, containing 80 percent
protein; NY 800374, dated July 27, 1994, process unidentified,
protein content 41 percent; HQ 965395, dated April 5, 2002, a
product produced either by dry blending nonfat dry milk, whey
protein concentrate 35 and fine, 90-mesh casein or by mixing
condensed liquid skim milk with whey protein concentrate 35 and
casein, containing 42 to 44 percent protein). Moreover, these
products were bought and sold in the trade as MPCs.
Based upon the above analysis of the language of the tariff, the
arguments you raised and the comments received in response to the
Notice, Customs finds that the classification provided in rulings NY
800374, dated July 27, 1994 and NY D83787, dated November 13, 1998
is correct. Accordingly, Customs hereby denies your petition to
reclassify the subject products, referred to as dairy protein
blends.
Holding
The classification of milk protein concentrates in subheading
0404.90.10, HTSUS, in NY 800374, dated July 27, 1994 and NY D83787,
dated November 13, 1998, which were the subject of the domestic
interested party petition, is correct, and these rulings are
affirmed.
Please be advised that pursuant to 19 CFR 175.23, if you so
wish, you may file a notice that you desire to contest the
classification of the subject products within 30 days of the date of
this letter. Such notice should also designate the port or ports at
which the products are being imported into the United States, and at
which you desire to protest.
Sincerely,
Myles B. Harmon,
Director, Commercial Rulings Division.
[FR Doc. 03-17802 Filed 7-14-03; 8:45 am]
BILLING CODE 4820-02-P