Dear Commissioner Bonner:

    The Grocery Manufacturers of America ("GMA") is pleased to submit the following comments concerning the petition of the National Milk Producers Federation (the "NMPF"), "Request for Classification of Certain Dairy Protein Blends under Section 516" (the "Petition").

    This comment submission is filed in response to the U.S. Customs Service’s solicitation of public comment, "Receipt of Domestic Interested Party Petition Concerning Tariff Classification of Dairy Protein Blends," 67 Fed. Reg. 58837 (Sept. 18, 2002). GMA appreciates the opportunity to comment on the tariff classification position advocated in the Petition.

    GMA is the world’s largest association of food, beverage and consumer product companies. With U.S. sales of more than $460 billion, GMA members employ more than 2.5 million workers in all 50 states. The organization applies legal, scientific and political expertise from its member companies to vital food, nutrition and public policy issues affecting the industry. Led by a board of 42 Chief Executive Officers, GMA speaks for food and consumer product manufacturers and sales agencies at the state, federal and international levels on legislative and regulatory issues. The association also leads efforts to increase productivity, efficiency and growth in the food, beverage and consumer products industry.

    GMA urges the U.S. Customs Service ("Customs") to reject the tariff classification positions taken in the Petition. These positions are contrary to law in numerous respects, as discussed in Part II of this submission. Moreover, as discussed in Part III of this submission, Customs also should reject the Petition because the Petitioner, the NMPF, has failed to place on the record information sufficient to support a finding of standing under Section 516(a)(2)(C) or (a)(3) of the Tariff Act of 1930, as amended (19 U.S.C. § 1516(a)(2)(C) or 1516(a)(3)).

I. Background

        A. Classification Position Taken by the Petition

    The Petition takes the position that two imported products, which the Petition identifies as "dairy protein blends," are being incorrectly classified by Customs in subheading 0404.90.1000, HTSUS (" . . . products consisting of natural milk constituents, whether or not containing sugar or other sweetening matter, not elsewhere specified or included: Other: milk protein concentrates"). The Petition contends that these products instead should be classified in "subheading 0402.10, 0402.21, or 0402.29, HTSUS, depending on fat content."

    The Petition, as dated June 21, 2001, was resubmitted to Customs with a cover letter dated April 17, 2002. The cover letter asserts an alternative classification position. The cover letter contends, without further explanation or argument, that the three subject products should be classified "under various subheadings of heading 0402, HTSUS, or under subheading 0404.90.3000, HTSUS." /

        B. The Products Subject to the Section 516 Petition

    The Customs Federal Register notice soliciting comment identifies, as the imported products under consideration, two products that were the subjects of NY 800374 (Jul. 27, 1994) and NY D83787 (Nov. 13, 1998), respectively. In an earlier, related administrative proceeding, Customs issued a proposal to revoke NY D83787 as well as two additional rulings, NY 816940 (Dec. 6, 1995) and NY B80989 (Jan. 16, 1997). Customs subsequently withdrew that proposal, leaving the subject rulings in effect.

    The three products addressed in the three rulings that Customs had proposed to revoke contained complete milk protein (i.e., casein plus lactalbumin) and had protein contents exceeding 40 percent by weight. These three products had fat contents of 12.5 percent, 46 percent, and 29 percent, respectively. The product addressed in NY 800374 also had a protein content exceeding 40 percent by weight and had a fat content of 2.5 percent.

II. The Products Under Consideration Are Correctly Classified as Milk Protein Concentrates for Tariff Purposes

        A. The Petition Is Incorrect in Asserting Classification of the Two Subject Products in Subheading 0402.10, 0402.21, or 0402.29, HTSUS

    The Petition takes the position that the subject products should be classified by Customs "as ‘milk . . . in powder, granules, or other solid forms,’ under in [sic] subheading 0402.10, 0402.21, or 0402.29, HTSUS, depending on their fat content." / This classification position is legally impermissible.

    Heading 0402, HTSUS is confined by the terms of its article description to "milk and cream, concentrated or containing added sugar or other sweetening matter." The term "concentrated," as applied to milk or cream, refers to a class of products (which include powdered, condensed, and evaporated milk) that are produced by reducing the amount of water in fluid milk. / As applied to milk or cream, the term does not describe products derived from milk from which constituents other than water have been removed or to which natural milk constituents have been added; such products are classified generally in heading 0404, HTSUS or in chapter 35, HTSUS. /

    The products under consideration in this proceeding are not concentrated milk. Although they are in dry form, they are not commonly or commercially referred to as milk, dried milk or milk powder, and they do not have the physical composition of milk. Consequently, they are excluded from heading 0402 by operation of General Rule of Interpretation ("GRI") 1, HTSUS.

        B. The Cover Letter to the Petition Errs in Asserting, as an Alternative Classification for the Subject Products, Subheading 0404.90.3000, HTSUS

    Subheadings 0402.10, 0402.21, and 0402.29 are the only subheadings of the HTSUS that the Petition itself advocates for the subject products. The April 17, 2002 cover letter by which the Petition was resubmitted asserts, as an alternative classification, subheading 0404.90.3000, HTSUS. The cover letter, however, contains no argument supporting this asserted alternative classification.

    Even had the Petition included a prima facie argument for classification of the subject products in subheading 0404.90.3000, HTSUS, Customs would be required to reject such an argument as contrary to established tariff classification law. Subheading 0404.90.3000, HTSUS (and its corresponding ex-quota provision, subheading 0404.90.5000, HTSUS) are not a permissible classification for the subject products. These subheadings, which comprise a tariff-rate quota, are accompanied by the article description "other," and therefore do not include the class of products encompassed by the term "milk protein concentrates."

    The products under consideration in this proceeding are milk protein concentrates and fall into the class of products that are commonly and commercially recognized as milk protein concentrates. They conform to the definition of the term "milk protein concentrate" that is set forth in Additional U.S. note 13 to chapter 4, HTSUS. They also conform to the definition of the term "milk protein concentrate" set forth in Additional U.S. note 1 to chapter 35, HTSUS. Accordingly, the products under consideration are properly classified as "milk protein concentrates" in subheading 0404.90.1000, HTSUS, subject to MFN duty at 0.37 cents per kilogram or, in the alternative, as "milk protein concentrates" in subheading 3501.10.1000, HTSUS. /

    The Petition does not offer plausible reasons why the plain meaning of the Tariff Schedule definition of "milk protein concentrate" does not include the products under consideration. Instead, the Petition contends that the Tariff Schedule definition of "milk protein concentrate" is ambiguous and that, when interpreted according to legislative history, should be read to exclude the subject imported products because, among other alleged reasons, they are "blended" products that have not been produced solely by ultrafiltration of milk. As discussed below, this argument not only disregards the plain meaning of the Tariff Schedule definition for "milk protein concentrate" but also relies on a serious misreading of the legislative history.

        1.The Petition Misinterprets the Tariff Schedule Definition of "Milk Protein Concentrate" to Exclude Products other than "Ultrafiltered Milk," Narrowly Defined

    The Petition advocates an overly narrow and strained reading of the Tariff Schedule’s definition of "milk protein concentrate" that is set forth as Additional U.S. note 13 to chapter 4. The Petition asserts, in effect, that this definition is confined in scope to those milk protein products that are obtained solely by ultrafiltration of milk and that meet certain other characteristics (e.g., the casein and lactalbumin must be undenatured and present in a precise relative proportion) that appear nowhere in the statutory language. In so doing, the Petition would limit the term "milk protein concentrate" to certain types of "ultrafiltered milk," when in fact the former has a broader meaning than the latter and encompasses products such as the products under consideration in this proceeding. Although some milk protein concentrates are obtained solely by ultrafiltration of milk, others contain both ultrafiltered milk and other substances (for example, casein, caseinates or whey protein); still others contain milk proteins (casein and lactalbumin) that were isolated from milk by means other than ultrafiltration, such as precipitation.

    The position advocated by the Petition is at odds with the plain meaning of Additional U.S. note 13 to chapter 4. As stated therein, "the term ‘milk protein concentrate’ means any complete milk protein (casein plus lactalbumin) concentrate that is 40 percent or more protein by weight." The Petition’s argument conveniently ignores the use by Congress of the word "any," which connotes a much broader scope to the term than that advocated by the Petition.

Despite the broadening effect of the word "any" and the absence of any words of limitation, the Petition further contends that the term "milk protein concentrate" is limited to those protein concentrates in which the casein and lactalbumin are present in the same proportion, relative to each other, in which they exist in milk. / In so doing, the Petition ignores the plain meaning of the parenthetical, which in context serves to define what is meant by the word "complete": the product must contain both casein and lactalbumin.

    Contrary to the construction urged in the Petition, there is no indication in the statutory language that the casein and lactalbumin must be present in any particular proportion relative to one another. The Petition further asserts that the concentrates must be "fully-functional single (unified) protein complexes" that they must "retain their functional properties after ultrafiltration," and that they must not be "denatured." None of these conditions is present in the statutory language. Had Congress intended to place such particular, hyper-technical, and restrictive limitations on the term "milk protein concentrate," or to limit the term to "ultrafiltered milk," it would have enacted a very different tariff provision from the one that it chose to enact.

    The Petition further departs from the plain meaning of the Tariff Schedule definition of "milk protein concentrate" by asserting a narrow, constrained definition of the word "concentrate" that, in the view of the Petition, can be met only by ultrafiltration. However, means other than ultrafiltration (such as precipitation) exist to isolate milk proteins from milk. Products containing 40% or more protein by weight have more protein than milk and accordingly are considered to be protein concentrates. The Tariff Schedule definition of "milk protein concentrate" establishes this point but does not place further restrictions concerning the method by which the protein level was increased above that of milk.

        2. The Petition Misreads the Legislative History of the Milk Protein Concentrate Provision

    The Petition compounds the error of its misinterpretation of the plain meaning of the tariff provision with its misreading of the legislative history. The Petition’s legislative history argument rests on the incorrect premise that Congress, in enacting the milk protein concentrate provision, intended to "carve out" a limited exception to the then-existing quotas on dairy products. From this faulty premise, the Petition concludes that Congress intended to place under the dairy quotas any milk protein product that did not conform to the narrow and specialized definition that the Petition asserts (incorrectly) Congress intended to apply to the term "milk protein concentrates."

    One of the serious flaws in the Petition’s argument is its failure to recognize that at the time Congress enacted Section 123 of the Trade and Tariff Act of 1984, various products based on concentrated milk proteins already existed and were not classified in tariff provisions that were subject to the dairy quotas. There is no indication in the legislative history of a congressional intent to place under quota milk protein products that were made by means other than ultrafiltration.

    Section 123 created three new tariff items for, respectively, whey protein concentrate (to be classified in new tariff item 118.35), lactalbumin (in new tariff item 118.40), and milk protein concentrate (in new tariff item 118.45). Senate Finance Committee Print 98-219 (cited by the Petition at 12) confirms that Congress intended to provide new tariff items for three classes of products but also confirms that Congress, in so doing, intended to make no change to the tariff rates applicable to these products.

    The products specifically mentioned in Committee Print 98-219 are whey protein concentrate (then classified in item 183.05, TSUS as an "other edible preparation[s] not specially provided for," dutiable at 10% ad val.), lactalbumin (then classified in item 190.15, as "albumin not specially provided for," free of duty), and "total milk proteinate," (then classified under item 493.17, TSUS as "other casein and mixtures in chief value thereof," subject to duty at 0.2 cents per pound). None of the three products named in the Committee Print was subject to the dairy quotas, either before or after the enactment of Section 123.

    The Petition suggests that the "milk protein concentrate" tariff provision established by Section 123 was to be limited to a single product, "total milk proteinate." The Petition further asserts that the reason Congress chose to use the term "milk protein concentrate" in the new tariff provision was the trademark status of the term "total milk proteinate." /

    Regardless whether there is merit to the Petition's contention regarding trademark status, the Petition fails to explain why, if Congress intended to create a definition for "milk protein concentrate" so narrow as to encompass only "total milk proteinate," it enacted a broad definition instead of a definition limited to the specific characteristics that the Petition ascribes to total milk proteinate. According to the Customs ruling on total milk proteinate that is cited in, and attached as Exhibit C to, the Petition (HQ 070297 (Oct. 7, 1982)), total milk proteinate consisted of 90.3% protein. By enacting a broader definition of "milk protein concentrate" encompassing products with protein contents of 40% or higher, Congress demonstrated that it did not intend to confine the tariff provision to total milk proteinate. Nor does the Petition explain how Congress conceivably could have intended to place under quota milk protein products other than total milk proteinate, even though such products were not subject to quota at the time, and even though the legislative history is inconsistent with any such intent./

    An additional difficulty with the legislative history argument presented in the Petition is that Congress, subsequent to 1984, also has provided for classification of milk protein concentrates in subheading 3501.10.1000, HTSUS, under heading 3501 ("Casein, caseinates, and other casein derivatives . . ."), with the same article description ("milk protein concentrates") and the same tariff (i.e., 0.37 cents per kilogram) as that applying to subheading 0404.90.1000, HTSUS. The inclusion of both provisions establishes that Congress intended to apply the 0.37 cents-per-kilogram tariff to a rather broad category of milk protein products, not the narrow, limited category of products asserted by the Petition.

    In summary, the legislative history of the milk protein concentrate provision fails to support the classification position advocated in the Petition. To the extent the legislative history is relevant to the classification issue under consideration, it is contrary to the position taken by the Petition.

        III. The Petition Does Not Set FOrth Information Sufficient to Support a FInding of Standing under 19 U.S.C. § 1516

    Section 516 of the Tariff Act of 1930, as amended (19 U.S.C. § 1516; "Section 516") imposes particular requirements for standing as a domestic interested party. Based on the representations in the Petition and the cover letter, the submitters of the Petition have not placed information on the record sufficient to allow Customs to conclude that they have met these standing requirements.

        A. The Petition Fails to Establish Standing under Section 516(a)(2)(C)

    The cover letter to the resubmitted Petition states summarily that "NMPF’s cooperative members produce and market dairy products of the same class or kind as the imported products, and that compete directly with the imported merchandise," further stating that "[a]s such, NMPF satisfies the definition of ‘interested party’ found in Section 516(a)(2)(C)." This allegation is insufficient to establish standing under that statutory provision.

    In the context of this proceeding, Section 516(a)(2)(C) requires for standing that a majority of the members of the trade or business association be composed of U.S. manufacturers, producers or wholesalers of goods of the same class or kind as the designated imported merchandise or associations of such manufacturers, producers or wholesalers. The designated imported merchandise consists of two types of milk protein concentrate in dry form. The cover letter does not establish, or even allege, that a majority of its members produce or market milk protein concentrates in dry form. Because milk protein concentrates in dry form differ significantly in identity, composition, physical characteristics and uses from milk in dry forms (such as nonfat dry milk or whole milk powder), milk in dry form is not a good of the same class or kind as milk protein concentrates. Dry milk protein concentrates also differ significantly from liquid milk protein concentrates.

        B. The Petition Fails to Establish Standing under Section 516(a)(3)

    The cover letter further alleges, concerning standing, that "NMPF’s members also satisfy the requirements of Section 516(a)(3), in that they produce a raw agricultural product (milk) from which is produced a processed agricultural product of the same class or kind as the imported products." This allegation is insufficient to establish standing under Section 516(a)(3), which requires that a producer of the raw agricultural commodity be considered under 19 U.S.C. § 1677(4)(E) to be part of the industry producing a processed agricultural product of the same class or kind as the designated imported merchandise.

    Under § 1677(4)(E)(i), the Petitioner is required to demonstrate that the processed agricultural product is produced from the raw product through a single continuous line of production and that there is a substantial coincidence of economic interest between the producers of the raw agricultural commodity and the processors of the processed agricultural commodity. Petitioner has made no such showing. GMA believes there is not a substantial coincidence of economic interest between milk producers and producers of dry milk protein concentrate.

    Moreover, with respect to the "single continuous line of production" requirement, there is no showing in the Petition or cover letter that the test set forth in § 1677(4)(E)(ii) has been satisfied; that test requires, inter alia, that the raw product be "substantially or completely devoted to the production of the processed agricultural product." This test cannot be met by the Petition because raw milk is not substantially or completed devoted to the production of milk protein concentrate.

   IV. Conclusion

   Both the tariff classification position advocated in the Petition and the alternative tariff classification advocated in the cover letter to the resubmitted Petition are contrary to law. GMA urges the Customs Service to reject the positions taken in the Petition and to conclude that the two products addressed in the Petition are correctly classified for tariff purposes as milk protein concentrate. GMA also urges Customs to review the issue of the standing of the submitter as an interested party under Section 516; standing is not established without a showing beyond that made in the Petition and cover letter.

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