September 07, 2022

Export Q & A: Finding the Correct HS Code for Condiments

Q: Our Company exports cheese fondue as well as other sauces. When asked we use HS 2103.90 which is “sauces, dressings and condiments” for our customers. I am having an issue with a customer in Canada. They advised us that the HS is incorrect, and it is actually 2106.90. That is a miscellaneous edible preparation. We think sauces are all classified the same. Can you help clarify which is correct?

A: Would you believe you are both correct? If you look in the Canadian tariff under 2106.90 there is a line item which says “cheese fondue” with the tariff line item of 2106.90.41.10. It may seem odd as it is essentially a dairy product, although there is no quota applied to it in Canada as they do so many other dairy products. But many destination tariffs have products with milkfat in them classified in 2106.90. If you use the “3CE” or Commodity Code Classification” search engine which intuitively assists the HS and Schedule B codes, located at Census Bureau Schedule B Search Engine (3ceonline.com) and type in “Fondue” then you get 2103.90. 90.90 which is for “sauces and preparations therefore.” It does ask you to identify it as a “cheese sauce” in advance of the classification, the “sauce” being the keyword.

And there is yet another surprise. If you check in the “HTSUSA” which is Schedule A for importing into the U.S. and not exporting from it, you see our Customs classifies it as a cheese product under 0406.30 and applies a tariff rate quota to it. In another odd pairing, right beneath the cheese fondue “Popping corn, prepared and packaged for use with microwave ovens” is listed in the Canadian tariff as 2106.90. In the 3CE microwave popcorn is classified as 2008.19.9050 for “Popcorn put up in microwaveable packages”. And (here we go again) in the HTSUSA Customs classifies it as 1005.90.4040 which is “other, other, other, popcorn.” Could they all be correct? Let’s see.

The Harmonized System – HS 
The Harmonized System (HS) for tariff nomenclature is an internationally standardized system of names and numbers to classify traded products. It came into effect in 1988 and has since been developed and maintained by the World Customs Organization (WCO) an independent intergovernmental organization based in Brussels, Belgium, with over 200 member countries. It is in invaluable tool for exporters and importers and is the source for customs clearance, duty, and tax analysis, import and export data, free trade agreement rules of origin, trade negotiations, monitoring for illegal trading and sustainability as well as food security, transportation tariffs and market research.

According to the World Customs Organization, WCO, Customs in any member country have the option when using the HS to apply it as they see fit. It works well but there are obviously some exceptions like the one you have. Responsibility for a proper classification for customs clearance at the destination is the responsibility of the importer, who in most cases would be relying on the expertise of their custom house broker who actually makes the entry with Customs.

If the importer or their broker asked for some specific advice from you on the nature and composition of the ingredients, or what HS code you use (only at six digits as they have their own last numbers) then you should provide it. But exporters do not have the authority to demand the importer use the code of their choice, which actually could cause them some difficulty with Customs in the country. So, for your exporting purposes and U.S. law using 2103.90.9090 is fine, but that number is not used at the destination for customs clearance, in fact other than the first six digits, the “HS,” the extension does not exist in their tariff.

Although there are several variations, the word fondue primarily refers to a dish consisting of melted cheeses combined with wine, cognac, or brandy. It is served communally, from a ceramic pot containing the cheese warmed from below to keep it melted and enjoyed by dipping chunks of bread at the ends of long forks into the cheese and then eating them. But cheese is not the only type of fondue. Some varieties use hot oil instead of cheese, and chunks of meat in place of the bread. Vegetables and seafood are also sometimes served with hot oil fondue. Yet another popular variation on fondue is fondue au chocolat, or chocolate fondue, which consists of a pot of melted chocolate, into which pieces of fruit, pastry is dipped. All of these products may be classified differently in the HS based on their dominant ingredients.

Explanatory Notes to Heading 2103
The Canadian Border Services Agency (CBSA), along with the WCO, provided details in a memo on 2103. They said that it covers preparations, generally of a highly spiced character, used to flavor certain dishes (meat, fish, salads, etc.), and made from various ingredients (eggs, vegetables, meat, fruit, flours, starches, oil, vinegar, sugar, spices, mustard, flavorings, etc.). Sauces are generally in liquid form and preparations for sauces are usually in the form of powders to which only milk, water, etc. need to be added to obtain a sauce.

Sauces are normally added to food as it cooks or as it is served. Sauces provide flavor, moisture, and contrast in texture and color. They may also serve as a medium in which food is contained, for example, the velouté sauce of creamed chicken. Seasoning liquids (soya sauce, hot pepper sauce, fish sauce) are used both as ingredients in cooking and at table as condiments. This is part of what it confusing as soya sauce had its own HS code and Schedule B number and is not listed as a sauce or condiment.

The heading also includes certain preparations, based on vegetable or fruit, which are mainly liquids, emulsions, or suspensions, and sometimes contain visible pieces of vegetables or fruit. These preparations differ from prepared or preserved vegetable or fruit of Chapter 20 in that they are used as sauces, i.e., as an accompaniment to food or in the preparation of certain food dishes but are not intended to be eaten by themselves.

Mixed condiments and mixed seasonings containing spices differ from the spices and mixed spices of headings 09.04 to 09.10 in that they also contain one or more flavoring or seasoning substances of Chapters other than Chapter 9, in such proportions that the mixture has no longer the essential character of a spice within the meaning of Chapter 9. Examples of products covered by the heading are mayonnaise, salad dressings. Both of these products also have their own Schedule B numbers but are under the 6-digit HS “subheading” of 2103.90, along with your cheese fondue.

HS Heading 2103
As far as the comment on all sauces being coded the same, we now know that is not the case. Even in the U.S. Schedule B system in 3CE there are different codes for different types of sauces within the 4 digit “heading” of 2103. Many Companies participating in Food Export promotions have varieties of excellent sauces which are in high demand globally. 2021 U.S. exports of HS 2103 totaled nearly US$1.9 billion (with a B!), which was 14% growth over 2020. Through June of 2022 exports have grown an additional 5% on a year to date (YTD) basis and are already over $1 billion. So, though most sauces are under Heading 2103 they do have some different 6-digit HS codes as well as different 10 digit Schedule B numbers. Let us review them, some technical definitions from the WCO, and some exceptions which as we already now know, can occur.

Under the heading of 2103 are all “Sauces and preparations therefor; mixed condiments and mixed seasonings; mustard flour and meal and prepared mustard:” There are 4 separate HS codes and 9 different Schedule B numbers.

HS 2103.10 – This is for soy sauce and the Schedule B number extends to 2103.10.0000. All 0’s are common endings for B numbers that do not have any further extensions, so just one code. There are a number of areas of the Schedule B which would be enhanced by further extensions to be more specific, and there are a couple of examples in 2103.  U.S. exports of soy sauce grew 27% in 2021 reaching US$69.6 million. Top markets included Canada, Mexico, Israel, Chile, Belgium, and Netherlands.

HS 2103.20 – This one is for tomato ketchup and other tomato sauces. It contains 3 Schedule B numbers:

2103.20.2000 is for ketchup. U.S. exports of ketchup have dropped 6% from the all-time high of US$126.5 million to US$118.8 million since 2019, likely as a result of foodservice lockdowns during the pandemic. Top markets include Canada, Mexico, Guatemala, Korea, Dominican Republic, and Israel. 2103.40.4050 is for tomato sauces which are not organic, and they reached US$166.5 million in 2021, growth of 5% and rebounding to the pre-pandemic level. Top markets included Canada, Mexico, Japan, Belize, Chile, and Korea. 2103.20.4010 is for organic tomato sauce. U.S. exports totaled US$26.3 million and a drop of 14% so they have yet to recover. The Canadian tariff has an additional line item for “pizza sauce” which would also be helpful for U.S. exporters to be able to track exports for market research purposes.

HS 2103.30 – This one is for mustard flour and meal and prepared mustard, and the Schedule B extends t0 2103.30.0000.  This is an example of a code that could be extended with 2 new codes to separate out the flour and meal from the prepared mustard. Most prepared mustard exporters do not export flour and meal and the export data is compromised since they are consolidated. The Canadian tariff has split them and has 2 separate line items for customs clearance. U.S. exports added up to a record high US$67.2 million in 2021, growth of 18% from the prior year. Top markets included (as usual) Canada and Mexico as well as U.K., Korea, Japan, and United Arab Emirates.

HS 2103.90 – This one is for “other” sauces, dressings, and condiments. It has 4 Schedule B numbers under it.  2103.90.9020 is specifically for mayonnaise. U.S. exports totaled US$245.8 million in 2021 but were down 7% or close to US$20 million from the pre-pandemic record high of almost US$269 million in 2019. So again, the number was very likely affected by the reduced demand of foodservice lockdown around the world. Top markets included surprisingly Chile on top, followed by Canada, Mexico, Saudi Arabia, United Arab Emirates and Colombia. 2103.90.9040 is for salad dressings, and U.S. exports hit a record high US$165.7 million in 2021, growth of 12%. Top markets included Canada and Mexico as well as Sweden, Saudi Arabia, and United Arab Emirates.

2103.90.9070 is for condiments and seasonings. This is another one that should be split as well since producers often have one or the other and the research data is compromised. The CBSA memo states “A condiment shall be a prepared food compound, containing one or more spices or spice extractives, which when added to food, after it has been served, enhances the flavor of food.” Webster’s describes condiments as “Something usually pungent, acid, salty, or spicy added to or served with food to enhance its flavor or to give added flavor.”  

They describe seasonings as “ingredients added to food to intensify or improve its flavor. Some of the most commonly used seasonings include herbs, (such as oregano, rosemary, and basil) spices (like cinnamon, nutmeg, cloves, and allspice). Condiments (such as Worcestershire sauce, soy sauce and mustard), a variety of vinegars and - the most common of all - salt and pepper.” 2021 U.S. exports of condiments and seasonings totaled US$322.7 million, an increase of 11% from 2020. Top markets included our USMCA partners again which is most often the case, along with Saudi Arabia, Philippines, Honduras, Korea, and Japan.

The final Schedule B number under HS 2103.90 is “sauces and preparations therefore” which is a pretty wide net and certainly has the highest value of all the products. Some tariffs refer to codes like this as “Nesoi” for not elsewhere specified or included. The B number is 2103.90.9090 and U.S. exports of these hit an all-time high of US$626.5 million in the pre-pandemic year of 2019, then exports dropped a full 10% which was over US$65 million in 2020. Exports came roaring back in 2021 and grew 28% to a new all-time record of US$715.6 million.

In summary, we learned that products like cheese fondue and microwave popcorn can and are being classified differently in different countries and even in the same country depending on whether it is going out or coming in. The Harmonized System allows for Customs Authorities to have the final say on which HS codes are used, which is why the decision needs to be made at the destination, such as in your case with Canada. We also now know that heading HS 2103 has a variety of six-digit HS codes (4) as well as Schedule B numbers (9), some ending in all 0’s which means there are no subdivisions and a few others that could benefit some additional line items for more specific research.

And with that research we can see where the top markets are for various HS 2103 products, noting segments such as USMCA, Japan and Korea, Israel, The Emirates and Saudi Arabia in the Middle East and others in Latin America. The majority of the markets are in Free Trade Agreements with the U.S. and if not, the duties are not very high. And perhaps most importantly U.S. sauces, dressings and condiments are highly sought after and may reach an all-time record of US$2 billion in 2022.