Ruling of The Week 2015.20: Malt Beverages

This one is for Lando Calrissian and his doppelganger Billy Dee Williams. It has to do with the tariff treatment of malt beverages and whether they are, in fact, beer.The ruling is H243087 (Jan. 13, 2015).

The beverages at issue are "Green Apple Sparkletini Italian Spumante" and similar products in raspberry and peach varieties. There is also a "Verdi Spumante." The obvious question is, "In what analysis is spumante beer?"

Maybe in this case. The beverages are made from a mash of malted barley and non-malted cereals plus hops. That mixture is "wort," which is then mixed with brewer's yeast and allowed to ferment. So far, that sounds like beer to me.

Hat tip to my local favorite

But, the base is then filtered to remove color and aroma (two of the best parts of beer). This produces a clear base to which natural flavors in the form of "wine base" and sugar are added. We now have something that sounds a lot more like the Bartles & Jaymes of my youth and not the craft beer of my middle age.

The classification dispute here is between Heading 2203, "Beer made from malt," and Heading 2206, "Other fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included." The importer claimed that the merchandise should be classified as beer based, in part, on the regulations of the Alcohol and Tobacco Tax and Trade Bureau. The TTB allows for beer to be flavored provided the flavoring does not exceed 49% of the alcohol content of the finished product. For labeling purposes, the TTB classified these products as flavored malt beverages, which might make Billy Dee Williams happy.

In its analysis, Customs and Border Protection starts from the correct premise that it and the TTB are doing different things. The collection of federal excise taxes on alcohol is not guidance for tariff classification under the HTSUS.

"Beer made from malt" is an eo nomine classification that includes all forms of the product (unless there is indication of a contrary intent). Looking at the Explanatory Notes, Customs found that beer is obtained from fermenting wort prepared from malted barley or wheat, water, and (usually) hops. Flavoring may be added during fermentation and other substances (e.g., color and sugar) can also be added.

Here, the flavoring is added after fermentation and after the beer base has been filtered. But, because other substances can be added after fermentation without precluding classification as beer, Customs says the issue is not yet resolved.

What does resolve the issue is the fact that this is allegedly spumante (i.e., Italian sparkling wine). It is packaged in large bottles with corks and colorful labels. According to Customs and Border Protection:

The instant spumante beverages are distinct from beer because they do not have the taste, aroma, character or appearance of beer.  The beverage base is filtered after fermentation to remove the color and aroma—and consequently, any trace of “beer” characteristics or flavor—from the final product.  Furthermore, approximately 40% of the total alcohol content of the finished product is derived from the wine base.  The instant products are altered during the manufacturing process via filtering and the addition of wine base so as to fundamentally change their character; the finished products are no longer “beer”, or even flavored beer, within the scope of heading 2203, HTSUS. 

In addition to the physical nature of the product, Customs noted that the product is not marketed as wine and that some retailers stock it alongside wine. For this, CBP made the interesting decision to rely on website information to reflect real world marketing. At some point, that will be an issue.

Malt beverage-based spumante is, perhaps not surprisingly, not beer for tariff purposes. At least not for tariff classification purposes.