CAFC Uses Principal Use to Classify Flavorings as Food "Preps", Not Soup
The Court of Appeals for the Federal Circuit has upheld a lower court's ruling that denied CBP's classification of certain finished flavoring products as soups or broths under HTS heading 2104. The Court instead ruled in favor of the importer based on its consideration of several factors which revealed that the flavorings were not principally used for soups and broths but could be used in many different ways. Thus, the Court ruled the flavorings are classifiable as food preparations under heading 2106.
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CIT Ruled Flavorings Not Principally Used for Soups, Cannot be Under HTS 2104
This case concerns the proper classification of finished flavoring products that were imported from France by Aromont USA Inc. In 2001, U.S. Customs and Border Protection (CBP) classified Aromont’s imported flavorings derived from veal, chicken, duck, lamb, beef, fish, lobster, mushroom, or vegetable stock under HTS subheading 2104.10.001, which covers "soups and broths and preparations thereof." Aromont protested the classification, contending that the flavorings should have been classified under subheading 2106.90.99 (6.4%) as "food preparations not elsewhere specified or included." CBP denied the protest and liquidated the merchandise.
Aromont then challenged CBP's decision before the Court of International Trade (CIT). In August 2010, the CIT ruled in favor of Aromont, concluding that Aromont's products are not covered by heading 2104 because they are not "principally used" as soups or broths, but are instead found in a variety of end uses. The government timely appealed. (See ITT's Online Archives 10081501 for summary of the CIT's 2010 ruling.)
CAFC Upheld CIT Ruling Based on Several "Principal Use" Factors
The government contended that Aromont’s flavorings are classifiable under subheading 2104.10.00's principal use provision - "preparations thereof." In a 1976 ruling (U.S. v. Carborundum Co.) the CAFC established factors that provide guidance in determining principal use. Using these so-called Carborundum factors, the CAFC found the principal use of the class of the flavorings is not as preparations for soups and broths as provided under heading 2104, but under the "catch all" provision in heading 2106 for food preparations not elsewhere specified or included, for the following reasons:
Actual Use. The CAFC rejected the government's argument that the "actual use" of an imported article is irrelevant to classification in a principal use tariff provision. While actual use of the imported goods is the only factor that is looked at under actual use provisions, under principal use provisions the actual use of the particular imported goods is evidence of the principal use of the merchandise involved. As the imported products were primarily used for as flavor profiles for sauces and gravies, this weighed heaving against classifying the flavorings as preparations for soups and broths.
Cost. The cost of the flavorings also weighed against classifying Aromont's imports under heading 2104 as the products were "very expensive" compared to other products on the market and were not the "right application" for a soup or broth. Due to their higher cost and concentrated flavor, the CAFC found the flavorings were intended to be used only as "flavor profile" or a "flavor note" to other recipes, and thus, would generally be added in small amount to enhance flavor.
Expectations of the ultimate purchaser. While Aromont's advertisements mention soup as one potential use of the merchandise (in addition to sauces, glazes, etc.), Aromont's advertisements support the argument that an ultimate purchaser would expect the product to be suitable for a number of uses, including for soup, but not that use in soup is its primary use.
Other factors. The CAFC also considered the merchandise's recognition in the trade and found that because Aromont's executives described the product as a "broth," this factor slightly favored the government's classification. However, the CAFC found that (i) the physical characteristics of the merchandise; (2) the channels, class, or kind of trade in which the merchandise moves; and (3) manner in which the merchandise is displayed, did not support any type of classification. This is because preparations for soups and broths can be found in almost any form, most food products are generally sold through large ingredient customers, food service distributors, and retail stores, and because the flavorings were not sold with certain accessories or displayed in a manner particular to soup and broth preparations.
1The 2001 100% ad valorem rate for this subheading was due to the World Trade Organization beef hormone dispute, which assessed a 100% duty rate on "soups and broths and preparations thereof" if they were products of France or Germany and classified under subheading 2104.10. The U.S. terminated the beef hormone dispute retaliatory duties in May 2011. The current duty rate for this subheading is 3.2%.