Importer Says Hookah Tobacco Not 'Pipe Tobacco,' Not Subject to Excise Tax
CBP improperly classified importer Air Distribution USA's shisha molasses, also known as "hookah tobacco," as a type of "smoking tobacco" and erroneously subjected the shisha molasses to federal excise taxes on "pipe tobacco," Air Distribution argued in a complaint last month at the Court of International Trade (Air Distribution USA v. United States, CIT # 25-00063).
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The importer argued that shisha molasses is unlike pipe tobacco, since it's "heated by charcoal, not burned, and the vapors from the heated shisha molasses are passed down the stem and through the water-filled base before they are inhaled by the consumer through the shisha hose." Hookah tobacco isn't suitable for burning, unlike pipe tobacco, and, if burned, it "will produce an unpleasant, acrid taste that is difficult to consume," the complaint said.
Nevertheless, CBP liquidated the importer's shisha molasses under Harmonized Tariff Schedule subheading 2403.11.0000, which provides for "Other manufactured tobacco: Smoking tobacco; water pipe tobacco." Air Distribution protested the decision, arguing that the hookah tobacco should be classified under subheading 2404.11.0000, which provides for "Products containing tobacco: Products intended for inhalation without combustion; Containing tobacco."
The HTS chapter notes on subheading 2404.11.0000 describe the subheading as covering tobacco products that involve "inhalation through heated delivery or other means, without combustion," which is the "precise means through which consumers inhale the vapor produced from the heating of shisha molasses using charcoal without combustion," the complaint said.
In denying the protest, CBP still classified the products under subheading 2403.11.0000, yet it said the importer's shisha molasses is "water pipe tobacco" and not "pipe tobacco." Air Distribution argued that since its products aren't "pipe tobacco," they shouldn't be subject to federal excise taxes on "pipe tobacco."