FBR Slaps 20% Customs Duty on Cadbury Dairy Milk Ingredient

The Federal Board of Revenue (FBR) has rejected the viewpoint of a leading importer of dairy products for charging a lower rate of 11 percent duty on the import of “CDM MAS CRUMBS” and slapped a 20 percent customs duty on this item.

The customs classification committee of the Federal Board of Revenue (FBR) issued a ruling on Monday.

According to a ruling issued by the committee on Monday, the item is not subjected to a lower rate of 11 percent duty under the Pakistan Customs Tariff (PCT) Heading 1806.2020. The item falls under PCT heading 1901.9090 which is liable to 20 percent customs duty.

Brief facts are that credible information was received that M/s Mondelez Pakistan is clearing “CDM MAS CRUMBS” under PCT heading 1806.2020 attracting lower tariff rates whereas actually same is classifiable under heading 1901.9090 with high customs tariff rates.

Accordingly, a consignment was blocked and a lab test was conducted. However, the importer filed a petition in the Sindh High Court for provisional release which was acceded to. During the awaiting of clarification Lab, one more consignment of an importer having an identical item was blocked again, and whose fate is still pending.

The court referred the matter to the Classification Committee for determination of the exact classification of subject goods.

The department opined that the goods are a milk-based complex mixture of different commodities and are classifiable under PCT heading 1901.9090.

The manufacturer itself called the product “CDM MAS Crumbs” and CDM stands for “Cadbury Dairy Milk” which also reflects that the imported goods are a dairy-based product and milk has essential character.

The authorized representative of the importer stated that the CDM mass crumb (chocolate crumb) being sugar confectionery falls under PCT heading 1806.2020.

Upon thorough examination of the classification issue concerning Chocolate Crumbs, the committee went through the Explanatory Notes to both the PCT headings and lab report, manufacturer’s literature and observed that the product is described as “Chocolate Crumb” having Cocoa Mass percentage composition of 3.77 percent, however, the lab reported the goods as a milk-based complex mixture of different commodities.

The classification of the goods should be based on the tested attributes and the guidelines provided in the Explanatory Notes. The importer’s argument that the goods should be classified as sugar confectionery does not hold weight, as sugar confectionery typically comprises sweets, candied nuts, chocolates, chewing gum, sweetmeats, pastillage, and similar items primarily composed of sugar.

Therefore, the importer’s assertion that the goods should be classified as sugar confectionery is not deemed worthy of consideration.

The Classification Committee is of the view that the classification of “Chocolate Crumbs” hinges on its composition and characteristics. Despite the manufacturer’s description as “Chocolate Crumbs,” the pivotal factor remains the cocoa content.

While the importer posited the classification as sugar confectionery or under per heading 1806.2020, these arguments are invalidated by the composition (specifically cocoa content) of the product.

With a cocoa mass percentage of only 3.77 percent, the goods fail to meet the threshold for inclusion in either category. Consequently, the committee affirms that the appropriate classification for the product lies within PCT heading 1901.9090, as milk-based preparations with a cocoa content below 5 percent, FBR’s committee added.