A Bowl of “Other”

Tariff classification can sometimes produce surprising results. Such is the case with Nature’s Touch Frozen Foods v. United States, a recent decision of the U.S. Court of International Trade. The seemingly simple issue was the correct classification in the Harmonized Tariff Schedule of the United States of mixtures of frozen fruit and of frozen fruit with vegetables. The competing headings are, in relevant part, 0811 “Fruit and nuts . . . frozen” and 2106 “Food preparations not elsewhere specified or included.”

Nature’s Touch argued for classification in 2106 on the grounds that the Heading 0811 does not encompass mixtures of fruits or of fruits and vegetables. Heading 0813, for example, covers "Fruit, dried, other than that of headings 0801 to 0806; mixtures of nuts or dried fruits of this chapter." There is no similar indication in 0811. Moreover, plaintiff noted that the subheadings in 0811 also do not mention mixtures; they identify only individual fruits including "Strawberries" and "Raspberries, blackberries, mulberries, loganberries, black, white or red currants and gooseberries (other than kiwi fruit)." 

Photo by Adél Grőber on Unsplash

Because the fruits were cut, frozen, and combined into the mixtures prior to importation, there is a reasonable basis to conclude as a matter of normal English usage that the merchandise, which is clearly “food,” had been prepared and is, therefore, described by Heading 2016.

The Government, after some wavering, settled on the argument that the fruit mixtures are classified in Heading 0811 and that the subheading should be determined from the classification of the included fruits with the correct classification being the individual tariff item that is last in numerical order. That is an application of General Rule of Interpretation 3(c). 

Comparing only the possible headings, as is proper, the Court recognized that if the fruit mixtures are classifiable in heading 0811, they cannot be classified in 2106, which applies only to food preparations "not elsewhere specified or included." Regarding the merchandise that consists entirely of fruit (without any vegetables in the mix), the Court held that “fruit” is a commonly understood to refer to individual fruits (e.g., a bushel of apples is "fruit") as well as to combinations of different fruits (e.g., “a bowl of fruit”). As a result, the language of Heading 0811 ("[f]ruit . . . frozen") does not excluded mixtures. 

Turning to the mixtures of fruits and vegetables, the analysis was somewhat more complex because "fruit  . . . frozen" does not fully describe the merchandise. Moreover, the Court concluded that the presence of vegetables in the mixtures was sufficient to change the commercial identity of the fruit. The Court noted that the vegetables were highlighted on the packaging. As a result, the Court concluded it could not classify the fruit and vegetable mixtures as fruit using only GRI 1 and it turned to Heading 2106.

To fit under Heading 2106, the mixtures need to be "food preparations." While there was no debating that the fruit and vegetable mixtures are "food," that was not true of "preparations." Looking at prior case law and the Explanatory Notes, the Court found that "preparation" requires that the material be processed in a way that makes it appropriate for a specific application. That means the fruit and vegetables must undergo processing beyond what is inherent in their nature as food and beyond mixing fresh ingredients. The Explanatory Notes exclude from "preparations" fruit and nut mixtures that can be consumed independently, which the Court deemed as similar to the frozen mixtures at issue. That was sufficient to exclude the merchandise from Heading 2106. 

Because GRI 1 did not settle the question, the Court had to apply the next GRI, in order. Most relevant is GRI 3(b), which requires that:

Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

Heading 0811 was still in play. Heading 2106 had been eliminated because the mixtures are not "preparations." The Court, however, identified Heading 0710 as the next contender. That heading covers frozen vegetables. As between those two possibilities, the Court found the fruit to predominate in the mixtures and to impart the essential character. That means the correct heading is 0811.

Usually, getting to the heading level is the hard part and arriving at the subheading is a matter of being able to read down the page. Such is not the case here.

The problem for everyone is that "mixtures" do not appear in any of the subheadings of 0811. Instead, the heading contains a series of individual fruits (and nuts), followed by the residual item "other" at 0811.90.80. The plaintiff and the government argued that the structure of the heading indicates that it is not intended to include mixtures in any subheading. As a result, the subheading should be determined by applying GRI 3(c) which states: 

When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. 

Under this approach, the components of each mixture would be classified and the combination classified based on the component that appears last in numerical order. Thus, a mixture of strawberries of 0811.10 (11.2%) and bananas of 0811.90.10 (3.4%), would be classified as bananas. This theory presents an opportunity for tariff engineering your imported fruit salads, which should always include duty-free blueberries.

The Court disagreed. First, it noted that many of the tariff items in 0811 cover more than one fruit. For example, 0811.20.20 covers "Raspberries, loganberries, black currants and gooseberries (other than kiwi fruit)." It seems to have been non-controversial that a mixture of all of these fruits would be classified in 0811.20.20. That implies that the tariff items are sufficiently broad to cover mixtures of different fruits. 

Personally, that seems to be putting a lot of weight on the "and" in the list. To me, without the benefit of either research or a client in this fight, it seems that if it is true that 0811.20.20 covers combinations of the fruits listed there, the consistent reading of the "and" would be that the item covers only combinations of all those fruits and not a subset of the listed fruits. But we know that is not how the HTSUS works. As a counter example, the subheading under Heading 4202 covers "Trunks, suitcases, vanity cases, attaché cases, briefcases, school satchels and similar containers." That subheading covers the individual items without regard to combinations. There is, I guess, no reason subheadings in 0811 might not cover both for mixtures and the individual listed items.

Once it is determined that the tariff items in Heading 0811 encompass mixtures, the question remains what to do with the particular mixtures at issue. On this issue, the Court found that the residual "other" at the end of the heading was sufficiently broad to cover mixtures of multiple fruits or fruits and vegetables. This means that while strawberries are classified in 0811.10.00 and raspberries in 0811.20.20, mixtures of the two are classified in 0811.90.80. The Court held that result followed from GRI 1 (per GRI 6, as applied at the subheading level). As a result, it did not need to find the essential character of the mixture for purposes of GRI 3(b) nor did it have to rely on the last HTSUS item in numerical order under GRI 3(c).

A couple things are worth noting, though neither observation is technically relevant for classification purposes. Never classify by rates. But this result means that mixtures of fruits that are not all classifiable in a single subheading of 0811 are going to bear the highest rate of duty (14.5%) applicable to goods of that heading. There is, in effect, a tariff penalty for importing mixtures. That is likely to be a surprise to the industry, which now needs to figure out how to go forward. Assuming this decision becomes final, it might pay to shift mixing and packaging to the U.S. or file protests to mount a new challenge. Interestingly, this is not the position the government advocated.

Finally, I know that we should only compare tariff provisions of the same level and that the statistical suffixes are not legal text for classification purposes (as the Court noted at footnote 11). Nevertheless, it is curious that the International Trade Commission felt comfortable placing "Frozen mixes only of combinations of strawberries, blueberries, red raspberries or blackberries" as a breakout under 0811.90.8085. That seems to indicate that 0811.90.80 is where mixtures go, even though it is not appropriate to consider that.