The Hindu Business Line : Frozen yogurt-ice milk mixture injected into the void of unfrozen centre

ACCORDING to John Mortimer, "The shelf life of the modern hardback writer is somewhere between the milk and the yogurt." Shelf life of cases that go to courts competes with that of fossils, and, at times, decisions may well lie on court racks unreported as if they had an eternal shelf life.

Not so in the case of this decision of the United States Court of Appeals for the Federal Circuit, dated December 15. And, interestingly, it is about yogurt.

For starters, "Yogurt (also spelled yogourt or yoghurt) is a semi-solid fermented milk product which originated centuries ago in Bulgaria," as www.foodsci.uoguelph.ca says. On that origin, however, your grandma may have a different view. For instance, "Dahi (curd or yogurt) is a normal addition to a meal," notes www.vegetarian-restaurants. net/India.

Wikipedia informs that yoghurt remained primarily a food of India, Central Asia, Western Asia, South Eastern Europe and Central Europe until the 1900s, when a Russian biologist named Ilya Ilyich Mechnikov theorised that heavy consumption of yoghurt was responsible for the unusually long lifespan of Bulgarian peasants.

Yogurt is very much in news. `Sweet yogurt sundae with saffron and pistachios,' is a headline on San Jose Mercury News; `Yogurt May Chase Away Bad Breath,' says PakTribune.com; `The Mongolian Cow Sour Yogurt Super Girl Contest' is on The Casper Star Tribune; `Dairy tries hand at drinkable yogurt,' says Addison County Independent; and `Hospital bacteria fought with yogurt,' reports Ynetnews, Israel.

The ice-cream fight

In the case on hand before the Court of Appeals, the appellant was Pillsbury Company, and the defendant, the State. The company was aggrieved by the 2004 judgment of the US Court of International Trade, which had upheld the tariff classification preferred by the taxman. And the product in question was `imported Haagen-Dazs dessert bars'.

The taxman, that is, the Bureau of Customs and Border Protection (which is the new name of the US Customs Service, effective March 1, 2003, as per the Homeland Security Act, 2002) classified the bars under subheading 2105.00.40 of the Harmonised Tariff Schedule of the US (HTSUS). "Accordingly, Customs imposed a tariff rate of $0.517/kg + 17.5 per cent ad valorem."

But Pillsbury argued that the product should be classified under subheading 2105.00.50 or 0403.10.90.00, "either of which may entitle the product to duty-free status under the North American Free Trade Agreement (NAFTA)."

One learns from the text of the judgment that subheading 0403.10.90.00 is a default provision for `yogurt' falling outside `the purview of several explanatory notes inapplicable here'; and that 2105.00 is about `ice cream and other edible ice, whether or not containing cocoa.'

Proper classification turns on two issues, summarised the Court:

"First, if the sorbet coating of the bars predominates over the frozen yogurt-ice milk core, then 2105.00.50 is the correct subheading. Second, if the core predominates, but the core is `yogurt' rather than an `article of milk', 0403.10.90.00 is the correct subheading."

Sorbet is "a frozen dessert, usually made with fruit syrup and sometimes egg whites, whisked until smooth," defines Encarta. "Late 16th century. Via French sorbet and Italian sorbetto from Turkish serbet `cool drink' (see sherbet)," it adds about the etymology.

All about ice-cream

The origins of ice-cream can be traced back to at least the 4th century B.C., informs http://inventors.about.com. "Early references include the Roman emperor Nero (A.D. 37-68) who ordered ice to be brought from the mountains and combined with fruit toppings, and King Tang (A.D. 618-97) of Shang, China who had a method of creating ice and milk concoctions." Reuben Mattus invented Haagen-Dazs in 1960, he choose the name because it sounded Danish, informs the site.

However, from www.haagendazs.com, you can learn that Mattus, "a young entrepreneur with a passion for quality and a vision for creating the finest ice cream, worked in his mother's ice cream business selling fruit ice and ice cream pops from a horse drawn wagon in the bustling streets of the Bronx, New York." In 1983 Häagen-Dazs was sold to Pillsbury, and the product is available in 54 countries, informs the company site, where you can find many mouth-watering images too.

Trial court's logic

Chief Judge Michel, and Circuit Judges Lourie and Linn of the Court of Appeals delved into `a factual determination' of predominance. "Although the parties do not dispute the underlying facts surrounding the product, the parties strongly disagree on the trial court's resulting inference that the frozen yogurt-ice milk core of the bars predominates," said the Court.

The yardstick used by the trial court was Rule 3(b), which states: "mixtures, composite goods consisting of different materials or made up of different components... shall be classified as if they consisted of the material or component which gives them their essential character."

To assist, there is Explanatory Note VIII, noted the Court. It provides: "The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods."

The trial court heard evidence from both sides, and found that the core of the bars provides `essential character' to the product. "The sorbet coating constitutes a marginally greater percentage of the total weight and cost of the bars," it noted. Such a coating is `essential' to the manufacturing process to give the bar its size and shape, it was observed.

Here is the recipe as gathered from the court verdict: "The bar is produced by freezing sorbet in moulds, sucking out the unfrozen centre, and injecting the frozen yogurt-ice milk mixture into the void."

The trial court also looked at how Haagen-Dazs markets the bar; it was called, "Fat Free Vanilla Frozen Yogurt Coated with Raspberry Sorbet". On the packaging was stated, "We take rich, creamy Haagen-Dazs yogurt and dip it in incredibly smooth Haagen-Dazs sorbet... " Also, when developing the product, Haagen-Dazs decided early on to use vanilla-flavoured frozen yogurt in the core, but only finalised the sorbet flavourings after testing multiple options, noted the trial court.

Wait. Does the marketing emphasis prevail over reality? This question had come up before the Supreme Court in the Mead Corp case, where it was held that "while the importer's marketing of the goods will not dictate the classification, such evidence is relevant to the determination.

"The question as to which portion predominates is arguable, and Pillsbury has pointed to no clear error in the underlying finding of facts or the ultimate factual inference. As such, we affirm the trial court's determination on this issue," ruled the Court of Appeals, in favour of the taxman.

Alternative argument

Pillsbury had an alternative argument up its sleeve. It said that the bars could be properly classified as `yogurt' under subheading 0403.10.90.00. The Court reminded that merchandise must be classified `in the condition in which it is imported', as laid down in the Citroen case of 1911, and Worthington vs Robbins (1891). "The core of the dessert bar is made by mixing two ingredients: 12 per cent by weight of a fermented `yogurt base', and the remaining 88 per cent a `vanilla flavoured ice milk base'," pointed out the Court.

When the two ingredients are mixed together, the mixture becomes a `fermented milk' that can no longer be separated, it was pointed out.

"The fermented yogurt base is dispersed throughout the mixture, resulting in a core that is only partially fermented. Thus, the component ingredients become irrelevant: as imported, the core is frozen, partially-fermented milk."

In fact, the trial court had studied the question of whether partially-fermented milk is `yogurt'. An expert testimony at trial established that "the commercial definition of yogurt includes only fully-fermented milk which has a titratable acidity of at least 0.15 per cent."

A footnote explains that `fully-fermented milk' is defined as milk that contains at least 107 colony-forming units (CFU) of active cultures per gram at the end of the stated shelf life.

"Because the Haagen-Dazs product core was only partially fermented and did not meet the requisite titratable acidity level, it did not meet the industry definition of `yogurt'," the court had ruled. Another footnote in the Court of Appeals verdict says, "In a somewhat confusing use of language, the trade court continued to refer to the core as `yogurt' throughout its opinion. However, the court explained in a footnote that its chosen terminology was employed solely for convenience and did not constitute a finding of fact or conclusion of law."

One other `legal question' that came before the court was whether the phrase `article of milk' included partially-fermented milk. "The phrase `of milk' was intended to encompass more than just unaltered milk, the court reasoned.

The final ruling of the Court of Appeals was that the there was no clear error in the court's determination that frozen, partially-fermented milk cannot be categorised as `yogurt'.

Tailpiece

"Are you afraid of tsunami?"

"No. The Budget!"

Detaxification@TheHindu.co.in

D. Murali

More Stories on : Taxation | Detaxfication

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
More power to women's elbows

Treating sick democracies

Frozen yogurt-ice milk mixture injected into the void of unfrozen centre

No unjust enrichment by not refunding

EET: An exercise in pettifogging

Out-of-pocket outgoings

Techno-mapping the future