CLA-2 RR:CR:GC 964531ptl
Port Director
U.S. Customs Service
10 Causeway Street
Suite 603
Boston, MA 22220
RE.: Protest 0401-00-100161; Coconut Fatty Acids.
Dear Port Director:
The following is our decision on Protest 0401-00-100161, filed by counsel on behalf of Twin River Technologies, against your classification under the Harmonized Tariff Schedule of the United States (HTSUS) of a product described as split undistilled coconut fatty acid.
FACTS:
According to information supplied by counsel, the split undistilled coconut fatty acid is produced from coconut oil (which, in turn, is produced from copra). Prior to importation into the United States, the coconut oil is first subjected to treatment with sodium hydroxide which removes any free fatty acids and other undesirable materials. The coconut oil is then subjected to a hydrolysis process using water (steam) and pressure to split the glycerol molecule from the fatty acid molecules. The resulting glycerol is soluble in water. The fatty acids are not. This permits easy physical separation of the glycerol from the fatty acids. It is these fatty acids which are the subject of the protest.
The entries being protested were made during 1998 and 1999, and the goods entered in subheading 1513.19.0000, HTSUS, as coconut (copra) oil, other. The entries were liquidated on February 18, 2000, under subheading 3823.19.2000, HTSUS, which provides for industrial monocarboxylic fatty acids; … other; derived from coconut, palm-kernel or palm oil. A timely protest, seeking reliquidation of the entries as entered, was filed on May 17, 2000.
In preparing this decision, in addition to the original protest, we have considered supplemental submissions filed by counsel on October 20, 2000 and March 6, 2002, as well as arguments and statements made during a teleconference on March 7, 2002.
ISSUE:
What is the classification of split undistilled coconut fatty acid?
LAW AND ANALYSIS:
Merchandise is classifiable under the Harmonized Tariff Schedule of the United States (HTSUS) in accordance with the General Rules of Interpretation (GRIs). The systematic detail of the HTSUS is such that virtually all goods are classified by application of GRI 1, that is, 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 GRIs may then be applied in order.
In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes may be utilized. The Explanatory Notes (ENs), although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The HTSUS subheadings under consideration are as follows:
1513 Coconut (copra), palm kernel or babassu oil, and fractions thereof, whether or not refined, but not chemically modified:
Coconut (copra) oil and its fractions:
1513.19.0000 Other
3823 Industrial monocarboxylic fatty acids; acid oils from refining; industrial fatty alcohols:
Industrial monocarboxylic fatty acids; acid oils from refining:
3823.19 Other:
3823.19.2000 Derived from coconut, palm-kernel or palm oil
Protestant argues that the goods, as entered, consist of a mixture of various fatty acids, both saturated and unsaturated, which have no industrial use, but must be further processed to render them suitable for industrial use. Protestant claims that the goods do not fall within the scope of Chapter 38. In support of classification in Chapter 15, protestant asserts that the product should be considered to be a fraction or cleavage product of the raw coconut oil.
Protestant contends that the product is classified in subheading 1513.19.0000, HTSUS, which provides for, in pertinent part, "Coconut (copra) … oil, and fractions thereof, whether or not refined, but not chemically modified: Coconut oil and its fractions … other." Protestant states that: "Assuming that the cleavage of coconut oil into fatty acids and glycerol does bring about a chemical change in the scientific sense of the term, it is apparent that the drafters of the ENs did not intend this language to exclude products from this Chapter [15] which were made by the simple cleavage of fats and oils into their basic constituents." In support of protestant's position that Chapter 15 contains chemically modified goods, protestant points out language in the ENs to headings 1516 and 1518 which provide for chemically modified goods.
We do not dispute the claim that chemically modified fats and oils can properly be classified in Chapter 15. However, in order to be classified in that Chapter, the product must be described by the terms of the headings. The ENs to Chapter 15, on page 108, define the term animal or vegetable fats and oils as "esters of glycerol with fatty acids (such as palmitic, stearic and oleic acids)." … "Subject to the exclusions in Note 1 to this Chapter, vegetable or animal fats and oils and their fractions are classified in this Chapter whether used as foodstuffs or for technical or industrial purposes (e.g., the manufacture of soap, candles, lubricants, varnishes or paints)."
Fractionated oils are obtained from the whole oil by processes such as chilling, pressing and solvent fractionation. These processes separate the whole oil into two or more fractions. Each fraction is composed of the components of the original oil, but in selected proportions. As noted in the ENs, fractionation does not cause any changes in the chemical structure of the fats or oils.
The booklet, Food Fats and Oils, 6th ed., (The Institute of Shortening and Edible Oils, Inc., Washington, D.C. 1988) describes triglycerides on page 1, as follows: "A triglyceride is composed of glycerol and three fatty acids. All of the fatty acids in a triglyceride are identical, it is termed a 'simple' triglyceride. The more common forms, however, are '"mixed' triglycerides in which two or three kinds of fatty acid moieties are present in the molecule."
HQ 963214, dated May 25, 1999, concerned the classification of crude oil extracted from fermented fungal biomass by a hexane solvent. The ruling states: "The oil consists of triglycerides of several fatty acids. In a triglyceride, three fatty acids moieties are ester linked to one glycerol." The product was classified in subheading 1515.90.40, HTSUS, which provides for other fixed vegetable fats and oils.
In HQ 961401, dated July 13, 1998, a dietary supplement, Neuromins, derived from algae, was classified as a vegetable oil of Chapter 15. The ruling stated: "Neuromins is the proprietary name for a dietary supplement made from triglyceride oil derived from a species of algae. A triglyceride is an ester of glycerol in which all three hydroxyl groups are exterified with a fatty acid."
Hawley's Condensed Chemical Dictionary, 12th ed., 1993, on page 507, defines a fatty acid as "A carboxylic acid derived from or contained in an animal or vegetable fat or oil. All fatty acids are composed of a chain of alkyl groups containing from 4 to 22 carbon atoms (usually even numbered) and characterized by a terminal carboxyl group –COOH."
Protestant's product consists of fatty acids which have been separated from their glycerol molecule. The resulting product is no longer a fat or oil, since it no longer has the chemical structure of a triglyceride. The ENs to Chapter 15, in pertinent part, state: "Headings 15.07 to 15.15 of this Chapter cover the single (i.e., not mixed with fats or oils of another nature), fixed vegetable fats and oils mentioned in the headings, together with their fractions, whether or not refined, but not chemically modified." (emphasis added) Clearly, breaking up a coconut oil into glycerol and fatty acids, and then separating the fatty acids, has chemically modified the oil.
The ENs also indicate that included in the products classified in Chapter 15 are "fractions" of vegetable fats and oils. "Headings 15.04 and 15.06 to 15.15 also cover fractions of the fats and oils mentioned in those headings, provided they are not more specifically described elsewhere in the Nomenclature (e.g., spermaceti, heading 15.21). The main methods used for fractionation are as follows :
(a) dry fractionation which includes pressing, decantation, winterisation and filtration;
(b) solvent fractionation; and
(c) fractionation with the assistance of a surface-active agent."
Fractionated oils are obtained from the whole oil by processes such as chilling, pressing and solvent extraction. These processes separate the whole oil into two or more fractions. Each fraction is composed of the components in the original oil, but in selected proportions. As noted in the ENs: "Fractionation does not cause any changes in the chemical structure of the fats or oils." Products which have undergone fractionation are essentially no more than concentrations of different glycerides that are themselves animal or vegetable fats or oils, as defined in the ENs.
The protestant's product is not a fraction of an animal or vegetable oil for the same reason it is not an oil. It has been chemically modified and does not have the chemical structure of a triglyceride.
Because crude glycerol is specifically provided for in subheading 1520.00.0000, HTSUS, as a cleavage product of fats and oils, protestant argues that fatty acids should also be provided for in Chapter 15. However, under Chapter Note 1(e), the ENs specifically provide, in listing types of products excluded from classification in Chapter 15, that fatty acids are excluded.
The chemical modifications referred to in the ENs to headings 1516 and 1518 are indeed more sophisticated and extreme than that to which protestant's product is subjected. However, those ENs also provide that the materials which result from the chemical modifications "retain the original fundamental structure of fats or oils ..." (i.e. remain triglycerides. See EN 15.16 (B)(1) and (2), and EN 15.18 (A))
A pertinent part of the EN to heading 1516, referring to inter-esterified, re-esterified or trans-esterified fats and oils provides: "The consistency of an oil or fat can be increased by suitable rearrangement of the fatty acid radicals in the triglycerides contained in the product." … "Re-esterified fats and oils (also called esterified fats and oils) are triglycerides obtained by direct synthesis from glycerol with mixtures of free fatty acids or acid oils from refining. The arrangement of the fatty acid radicals in the triglycerides is different from that normally found in natural oils."
Similarly, the ENs to heading 1518 provide: " This part covers animal or vegetable fats and oils and their fractions which have been subjected to processes which modify their chemical structure thereby improving their viscosity, drying power (i.e., the property of absorbing oxygen when exposed to the air and forming elastic films) or modifying their other properties, provided they retain their original fundamental structure and are not more specifically covered elsewhere, …"
Clearly the products covered by these headings retain the fundamental structure of triglycerides even though they have been chemically modified. Protestant's goods do not retain the chemical structure of a triglyceride and thus are not eligible for classification in Chapter 15.
Protestant claims that the products have not been processed sufficiently to be considered industrial grade fatty acids of Chapter 38. In support of this position, protestant has submitted documents dating from 1992 Customs Co-operation Council (CCC) now known as the World Customs Organization (WCO) (37.467 E, 10 June 1992) Review Sub Committee (RSC) proposal which relate to the "transfer of oleo-chemicals from heading 15.19 to a new heading in Chapter 38." As part of the discussion, an argument was made by the EEC that the "more simply processed" cleavage products of animal or vegetable oils and fats should be retained in Chapter 15 because they had not undergone numerous complex and expensive chemical processes which would render them suitable for use in various industrial applications.
In rejecting this proposal that would retain corresponding fatty acids in Chapter 15, the RSC Secretariat noted that no distinguishing criteria had been identified to distinguish between the "industrial monocarboxylic fatty acids" of Chapter 38 and the "fatty acid distillate" and "acid oils from refining" proposed for retention in Chapter 15. The determination was made that while further processing might be needed to render the goods suitable for use by industry, the products were significantly advanced beyond the raw agricultural stage of processing and should be classified in Chapter 38. In summary, counsel raises a proposal not implemented, and a discussion and amendments that support classification of the instant product in heading 3823.
Further, it should be noted that heading 3823, HTSUS, which provides for Industrial monocarboxylic fatty acids, acid oils from refining, industrial fatty alcohols is not a use provision. Industrial fatty acids are fatty acids obtained by general industrial manufacturing processes such as saponification (hydrolysis) or catalytic oxidation. The split undistilled coconut fatty acids are produced by an industrial process and are therefore properly classified in that heading.
HOLDING:
Split undistilled coconut fatty acids are classified in subheading 3823.19.2000, HTSUS, which provides for: Industrial monocarboxylic fatty acids; acid oils from refining; industrial fatty alcohols: industrial monocarboxylic fatty acids; acid oils from refining: other: derived from coconut, palm-kernel or palm oil.
The protest should be DENIED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550 065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
John Durant, Director
Commercial Rulings Division