CLA-2 OT:RR:CTF:TCM H039339 DSR
Area Director of Customs
New York/Newark Service Port
1100 Raymond Boulevard
Newark, NJ 07102
RE: Internal advice request concerning the classification of certain oat ingredients
Dear Sir:
This is in response to your request for internal advice dated August 19, 2008, regarding the tariff classification under the Harmonized Tariff Schedule of the United States (HTSUS) of OatWell ® brand oat products, specifically “OatWell 14” and “OatWell 22.” The importer of the subject products, Oat Ingredients, LLC, asserts through counsel that the merchandise should be classified under heading 2302, HTSUS, as “bran, sharps (middlings) and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants.”
FACTS:
The subject merchandise was imported (via sixteen entries) between November 2003 and December 2007. According to Oat Ingredients, LLC, the oat bran products in question are milled from raw oats sourced in Sweden or Finland, and processed by CreaNutrition-Swedish Oat Fiber, A.B. The brand names OatWell 14 and OatWell 22 connote the high-soluble fiber (beta-glucan) content of the products. The raw oats are processed using traditional dry milling and sieving technologies, along with air classification, in order to separate a portion of the oats’ starch fraction and increase the relative percentage of soluble and insoluble fiber, protein, and non-starch components in the remaining bran. According to the importer, the milling, sieving, and air classification processes result in the exposure of a portion of the oat oil, or lipid, to the surface of the milled oat bran. That exposed lipid is then separated from the oat bran by use of a food-grade ethanol fractionation process in order to stabilize the exposed lipids and prevent oxidization, degradation, and potential rancidity of the oat bran. The importer asserts that only the "exposed lipid" is affected by the fractionation process and that the oat bran continues to retain at least in excess of 80% of its original oil, with the bran being “relatively unaffected” by the fractionation process, with the only component difference being an “apparent reduction in the frequency of lipid droplets commonly encountered in the endosperm (oat flour portion).” According to the importer, the ethanol fractionation process is not “further processing” that would exclude the products from heading 2302.
ISSUE:
Are OatWell 14 and OatWell 22 classified under heading 2302, HTSUS, as bran, sharps (middlings) and other residues, or under heading 2306, HTSUS, as oilcake and other solid residues resulting from the extraction of vegetable fats or oils?
LAW AND ANALYSIS:
We believe that a proper analysis of classification of the OatWell products encompasses discussion of the following provisions:
1103 Cereal groats, meal and pellets:
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1104 Cereal grains otherwise worked (for example, hulled, rolled, flaked, pearled, sliced or kibbled), except rice of heading 1006; germ of cereals, whole, rolled, flaked or ground:
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1901 Malt extract; food preparations of flour, groats, meal, starch or malt extract, not containing cocoa or containing less than 40 percent by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included; food preparations of goods of heading 0401 and 0404, not containing cocoa or containing less than 5 percent by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included:
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2302 Bran, sharps (middlings) and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants:
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2306 Oilcake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils, other than those of heading 2304 or 2305:
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Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRI's). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI’s 2 through 6 may then be applied in order. In addition, in interpreting the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89 80, 54 Fed. Reg. 35127 (August 23, 1989).
The General EN to Chapter 11 states that the chapter generally covers products from the milling of cereals of Chapter 10 (oats are covered by subheading 1004) and of sweet corn of Chapter 7. In accordance with Note 2(A) to Chapter 11, HTSUS, in order for a product to be classified in Chapter 11, it must meet certain initial parameters regarding ash content and starch content. If the product meets the ash and starch parameters, then it remains within chapter 11, HTSUS. To wit, a product from the milling of oats must have, by weight, (1) a starch content (determined by the modified Ewers polarimetric method) exceeding 45%; and (2) an ash content (after deduction of any added minerals) not exceeding 5%. If the starch and ash parameters are not met, then the product potentially falls within heading 2302, HTSUS (residues and waste from the food industries; prepared animal feed). Here, the submitted Product Data Analysis sheets for OatWell 14 and OatWell 22 show that the products have starch contents that fall below the 45% threshold of Chapter 11, HTSUS. Thus, neither product can be classified within Chapter 11, HTSUS.
Before we address the applicability of Chapter 23, HTSUS, we believe that it is also necessary to address the applicability of Chapter 19, HTSUS, which covers preparations of cereals, flour, starch or milk and bakers’ wares. The General EN to Chapter 19 states, in relevant part, that the products falling within that chapter are preparations that are generally used for food and are made directly from cereals of Chapter 10, HTSUS (oats are included in heading 1004, HTSUS). According to the internal advice request submitted on August 19, 2008, you are of the view that these products are classified under subheading 1901.90.90, HTSUS, which covers, in relevant portion, “food preparations of flour, groats, meal, starch or malt extract, not containing cocoa or containing less than 40 percent by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included …: Other: Other: Other: Other: Other.” However, EN 19.01 explains that the preparations of the heading are often used for making beverages, gruels, infant foods, dietetic foods, etc., and include, inter alia, preparations that are composed of the underlying cereal product and some other ingredient, such as milk powder, cocoa powder, sugar, eggs, and fruit flours. Here, the subject OatWell products are not mixed with any other ingredients during their production cycles. Therefore, we find that the OatWell products are not “preparations” as described within heading 1901, HTSUS, and are thus not classifiable within that heading.
We now address the applicability of headings 2302 and 2306, HTSUS. Heading 2302, HTSUS, which the importer believes covers the subject OatWell products, encompasses residues derived from the milling of cereals and essentially comprises by-products from the milling of various grains (oats included) that do not comply with the starch content and ash content requirements of Chapter 11, HTSUS. See EN 23.02. Such by-products generally exist in the forms of bran, sharps, or other residues from the milling of cereal grains; sifting or working residues obtained during pre-milling operations; pellets; and residues and similar waste resulting from the grinding or other working of leguminous plants. The heading does not cover by-products that result from the milling process and that have undergone “further processing.” Specifically, it does not include oil-cake and other solid residues resulting from the extraction of vegetable fats or oils – such products are covered by headings 23.04 to 23.06. Ibid.
Heading 2306, HTSUS, provides for “oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils (other than those of headings 2304 or 2305).” EN 23.06 states that the extraction of the oil from oil seeds, oleaginous fruits and germs of cereal occurs by solvents, in a press, or by rotary expeller. Here, the milling, sieving, and air classification processes are said to result in the exposure of a portion of the oat lipid, or oil, to the surface of the milled oat particles. That exposed lipid is then separated from the bran by use of a food-grade ethanol fractionation process. The importer implies that a de minimus amount of oil has been extracted from the oat bran by means of ethanol fractionation and, thus, the oat bran does not undergo “further processing” and remains within the purview of heading 2302, HTSUS. However, there is no limiting language within heading 2306, HTSUS, regarding how much oil must be extracted in order for the product to be considered oil-cake or “de-oiled.” The heading indicates only that an extraction of oil from the products is necessary. EN 23.06 further states that the heading includes, among other things, de-oiled bran obtained as a residue after the extraction of oil from rice bran. This strikes us as compelling evidence that the tariff schedule does not contemplate classification of “de-oiled bran” within heading 2302, HTSUS, and there is nothing in the legal text of heading 2306, HTSUS, that would exclude de-oiled bran of cereal grains other than rice.
Based upon the above, we conclude that subjecting the oat bran that comprises OatWell 14 and OatWell 22 to ethanol fractionation is “further processing” and, thus, OatWell 14 and OatWell 22 are precluded from classification under heading 2302, HTSUS. We find that OatWell 14 and OatWell 22 are classifiable under heading 2306, HTSUS.
HOLDING:
By application of GRI 1, the products OatWell 14 and OatWell 22 are classifiable under heading 2306, HTSUS. The merchandise that was entered before 2007 (but after 2002) is specifically classifiable under subheading 2306.90.0040, HTSUSA, which provides for “oilcake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils, other than those of heading 2304 or 2305: Other: Other.” Due to amendments to the 2007 HTSUS, the merchandise that was entered in 2007 is classifiable under subheading 2306.90.0140, HTSUSA, which provides for “oilcake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable fats or oils, other than those of heading 2304 or 2305: Other: Other.” The column one, general rate of duty for all of the entries is 0.32 ¢/kg.
Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division