Hingpu Overseas (CAAR Delhi)
The Authority examined the CAAR-1 application, departmental comments, personal hearing records, and additional written submissions. The application was found valid under the Customs Act, 1962 and the CAAR Regulations, 2021, and the Authority proceeded to determine the correct tariff classification of the product proposed to be imported.
Product Description
The applicant described the goods as an alcoholic beverage produced by fermenting rice with koji (Aspergillus oryzae), yeast, carbon dioxide, and water. The beverage contains about 7.98% alcohol by volume and undergoes carbonation, filtration, and pasteurization before packaging in cans. The production process includes mashing rice with water to form wort, fermentation by yeast, maturation, and carbonation. The applicant claimed the process mirrors beer brewing and that the product should be classified under Heading 2203 00 00 as “Beer made from malt.”
Issue of Classification
The jurisdictional Commissionerate opposed this classification, arguing that Heading 2203 applies only to beer made from malted cereals. The department emphasized that malt must be produced through steeping, germination, and kilning, whereas the applicant’s beverage uses rice fermented with koji without malting. Koji fermentation involves mold-based enzyme production, which is fundamentally different from malting.
They noted that Heading 2206 00 00 covers “Other fermented beverages,” and the HSN Explanatory Notes explicitly include rice-based drinks like sake and makgeolli. As the applicant’s product resembles makgeolli, the department contended that Heading 2206 is the correct classification.
Analysis of Competing Tariff Headings
Under Rule 1 of the General Rules for Interpretation (GRI), classification must be determined based on heading terms and relevant notes. Heading 2203 covers beer made from malt, while Heading 2206 applies to other fermented beverages not specified elsewhere.
The HSN Explanatory Notes to Heading 2203 define beer as an alcoholic beverage obtained by fermenting a wort prepared from malted cereals—primarily barley or wheat—with water and usually hops. The notes clarify that although a small proportion of non-malted cereals such as rice may be added, malt remains essential.
The Explanatory Notes to Heading 2206 cover all fermented beverages other than those under Headings 2203 to 2205 and include cider, perry, mead, raisin wine, wines from fermented fruit or vegetable juices, and rice-based beverages like sake. Ginger beer and herb beer fermented with yeast are also covered.
Examination of Ingredients and Manufacturing Process
The Authority reviewed the composition submitted by the applicant—rice (17.709%), koji (3.384%), yeast (0.018%), carbon dioxide (0.443%), and water (78.446%). No malted cereal or malt extract is present. The manufacturing process does not include steeping, germination, or kilning, which are essential steps for producing malt. Instead, koji is used as a mold-based starter producing external enzymes, which the Authority noted cannot be equated with malt.
The Authority held that the biochemical processes involved in koji fermentation differ significantly from malting. The applicant’s argument that koji is “malted rice” was rejected.
Rejection of Applicant’s Other Arguments
The Authority also rejected reliance on Food Safety and Standards Regulations and State Excise labeling practices. These operate in separate regulatory contexts and cannot determine customs tariff classification. Trade parlance or licensing terminology cannot override statutory tariff definitions.
The common-parlance test was also found irrelevant because the tariff expression “beer made from malt” has a clear technical meaning in the Harmonized System, leaving no ambiguity requiring trade-parlance interpretation.
Alcohol content and shelf life were likewise deemed irrelevant for customs classification, as classification depends on the nature of raw materials and manufacturing process, not on alcohol strength or packaging attributes.
Reference to HSN Guidance and International Practice
The Authority noted that rice-based beverages such as sake and makgeolli are expressly mentioned in the HSN Explanatory Notes to Heading 2206. International customs practices—specifically in the EU and the U.S.—classify makgeolli under Heading 2206. Although not binding, these interpretations were considered persuasive as they support harmonized classification.
Conclusion
The Authority concluded that the beverage is a fermented product made from rice using koji and yeast, with no malt content. It shares essential characteristics with makgeolli, traditionally classified under Heading 2206 as an “other fermented beverage.” Carbonation and labeling as “beer” do not alter its fundamental character.
Applying Rule 1 of the GRI, the product cannot fall under Heading 2203 due to failure to meet the requirement “made from malt.” Since Heading 2203 is inapplicable, Heading 2206—being the appropriate residual heading—covers the product. Classification at subheading level under Rule 6 leads to 2206 00 00.
The Authority held that the product “PONAA MAKKOLLI STRONG RICE BEER (SPARKLING RICE MAKGEOLLI PONAA)” is classifiable under Heading 2206 00 00 as “Other fermented beverages.” Accordingly, the advance ruling was issued.
FULL TEXT OF ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, DELHI
