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HQ 085406

March 2, 1990

CLA-2:CO:R:C:G 085406 SER


TARIFF NO.: 2208.90.80

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.


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.


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.


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 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.

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.


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.


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.


John Durant, Director
Commercial Rulings Division

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