CLA-2 OT:RR:CTF:TCM H102457 TNA
Port Director, Boston Service Port
10 Causeway Street - Room 603 Boston, MA 02222
Re: Application for Further Review of Protest No: 0401-10-100085; Fish Oil Ethyl Esters
Dear Port Director:
The following is our decision regarding the Application for Further Review (“AFR”) of Protest No. 0401-10-100085, timely filed on March 30, 2010, on behalf of Jedwards, International. The AFR concerns the classification of fish oil ethyl esters under the Harmonized Tariff Schedule of the United States (HTSUS). We have also considered arguments you made to members of my staff in a meeting on July 26, 2010.
FACTS:
The subject merchandise consists of fish oil that is imported in bulk as a yellow oil. Before importation, is inter-esterified, purified, and refined. During inter-esterification, ethanol and acid are added to the crude oil. The process transforms naturally occurring triglycerides into fish oil ethyl esters, thereby modifying the physical properties of the fats and oils at issue. Assisted by the addition of a catalyst, the fatty acids are cleaved from the glycerol backbone of the triglyceride with ethanol to form new esters. After importation, the subject merchandise is encapsulated into dietary supplements.
A sample of the subject merchandise was submitted to a U.S. Customs and Border Protection (“CBP”) laboratory for testing. The resulting laboratory report, Laboratory Report CH20090705, dated July 24, 2009, indicates that the subject merchandise is a mixture of ethyl esters of fish oil.
This protest covers 12 entries of the subject merchandise that entered the Boston Port between February 3, 2009, and August 21, 2009 under subheading 1516.10.00, HTSUS, which provides for: “Animal or vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter esterified, re-esterified or elaidinized, whether or not refined, but not further prepared: Animal fats and oils and their fractions.” CBP liquidated the entries on October 23, 2009, in subheading 3824.90.40, HTSUS, as “chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included: Other: Other: Fatty substances of animal or vegetable origin and mixtures thereof.” The importer filed its protest on March 30, 2010, claiming classification under subheading 1516.10.00, HTSUS.
ISSUE:
Whether fish oil ethyl esters are classified in heading 1516, HTSUS, as “animal or vegetable fats and oils and their fractions,” or in heading 3824, HTSUS, as chemical products and preparations of the chemical or allied industries, not elsewhere specified or included”?
LAW AND ANALYSIS:
Initially, we note that the matter protested is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification. The protest was timely filed, within 180 days of liquidation for entries made on or after December 18, 2004. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)).
Further Review of Protest No. 0401-10-100085 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(c) because the decision against which the protest was filed involves matters previously ruled upon by the Commissioner of Customs or his designee or by the Customs courts but facts are alleged or legal arguments presented which were not considered at the time of the original ruling. Specifically, the Protestant argues that bulk fish oil esters was the subject of NY N012187, dated October 30, 2007, but that the subject merchandise differs from the merchandise classified in that ruling.
Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.
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, GRIs 2 through 6 may then be applied in order.
The HTSUS provisions under consideration are as follows:
1516 Animal or vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter esterified, re-esterified or elaidinized, whether or not refined, but not further prepared:
1516.10.00 Animal fats and oils and their fractions
3824 Prepared binders for foundry molds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included:
3824.90 Other:
Other:
3824.90.40 Fatty substances of animal or vegetable origin and mixtures thereof
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System. While not legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127 (Aug. 23, 1989).
The EN to heading 1516, HTSUS, provides, in pertinent part:
This heading covers animal or vegetable fats and oils, which have undergone a specific chemical transformation of a kind mentioned below, but have not been further prepared.
The heading also covers similarly treated fractions of animal or vegetable fats and oils…
(B) Inter-esterified, re-esterified or elaidinised fats and oils.
(1) Inter-esterified (or trans-esterified) fats and oils. 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. The necessary interaction and rearrangements of the esters is stimulated by the use of catalysts.
(2) 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.
Oils obtained from olives, containing re-esterified oils, fall in this heading.
(3) Elaidinised fats and oils are fats and oils processed in such a way that the unsaturated fatty acid radicals are substantially converted from the cis-form to the corresponding trans-form.
The heading includes the products as described above, even if they have a waxy character and even if they have been subsequently deodorised or subjected to similar refining processes, and whether or not they can be used directly as food. But it excludes hydrogenated, etc., fats and oils and their fractions which have undergone such further preparation for food purposes as texturation (modification of the texture or crystalline structure) (heading 15.17). The heading further excludes hydrogenated, inter-esterified, re-esterified or elaidinised fats and oils or their fractions, where modification involves more than one fat or oil (heading 15.17 or 15.18).
The General EN to Chapter 15, HTSUS, provides, in pertinent part:
With the exception of sperm oil and jojoba oil, animal or vegetable fats and oils are esters of glycerol with fatty acids (such as palmitic, stearic and oleic acids)….
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.
Fractionation does not cause any changes in the chemical structure of the fats or oils.
The EN to heading 3824, HTSUS, provides, in pertinent part:
This heading covers:
(B) CHEMICAL PRODUCTS AND CHEMICAL OR OTHER PREPARATIONS
The chemical products classified here are therefore products whose composition is not chemically defined, whether they are obtained as by products of the manufacture of other substances (this applies, for example, to naphthenic acids) or prepared directly.
The chemical or other preparations are either mixtures (of which emulsions and dispersions are special forms) or occasionally solutions. Aqueous solutions of the chemical products of Chapter 28 or 29 remain classified within those Chapters, but solutions of these products in solvents other than water are, apart from a few exceptions, excluded therefrom and accordingly fall to be treated as preparations of this heading.
The preparations classified here may be either wholly or partly of chemical products (this is generally the case) or wholly of natural constituents (see, for example, paragraph (23) below).
Subject to the above conditions, the preparations and chemical products falling here include:…
(11) Mixtures of mono , di and tri , fatty acid esters of glycerol, used as emulsifiers for fats.
Those which have the character of artificial waxes are, however, excluded (heading 34.04)…
Protestant argues that the subject merchandise is provided for, eo nomine, in heading 1516, HTSUS. Protestant further argues that the terms of this heading and of Chapter 15, HTSUS, more generally, are expansive and do not limit the fats and oils classified therein to triglycerides. In support of this argument, Protestant points to headings 1515 and 1520, HTSUS, which provide for other fixed vegetable fats and oils (including jojoba oil), and various forms of glycerol, respectively. Protestant argues that neither jojoba oil nor glycerol is a triglyceride, and yet are still classified in Chapter 15, HTSUS. As a result, Protestant argues that CBP’s long-standing position that merchandise must be a triglyceride to be classified in heading 1516, HTSUS, and long-standing exclusion of non-triglycerides from Chapter 15, HTSUS, and heading 1516, HTSUS, in particular, is incorrect.
Scientific sources that define fats and oils state that there is no difference in the chemical structure of the two, and that they are both predominantly triglycerides. “There is no chemical difference between a fat and an oil,” says Hawley’s Condensed Chemical Dictionary. “The term fat usually refers to triglycerides specifically… [Oils] are composed largely of glycerides of the fatty acids.” See Hawley’s Condensed Chemical Dictionary 549 (15th ed. 2007). In addition, “fats and oils are constructed of building blocks called “triglycerides” resulting from the combination of one unit of glycerol and three units of fatty acids. A triglyceride consists of three fatty acids attached to one glycerol molecule…. The main components of edible fats and oils are triglycerides. The minor components include mono- and diglycerides, free fatty acids, phosphatides, sterols, fatsoluble vitamins, tocopherols, pigments, waxes, and fatty alcohols.” See Food Fats and Oils, 6th ed., (The Institute of Shortening and Edible Oils, Inc., Washington, D.C., 1988). Ullman’s Encyclopedia of Chemistry also discusses “naturally occurring fats containing 97% triglycerides.” See Ullman’s Encyclopedia of Chemistry 3 (6th ed. 2003). The Kirk-Othmer Encyclopedia of Chemical technology states that “fats and oils are composed primarily of triglycerides, esters of glycerol and fatty acids. However, some oils such as sperm whale, jojoba, and roughy are largely composed of wax esters. Waxes are esters of fatty acids with long chain alipathic alcohols, sterols, tocopherols, or similar materials.” See Kirk-Othmer Encyclopedia of Chemical Technology 252 (4th ed 2001).
Thus, these sources categorize triglycerides as the identifying characteristic of fats and oils. These scientific definitions have been the basis for CBP’s long-standing position that in order for merchandise to be classified in heading 1516, HTSUS, it must be a triglyceride. See HQ 963166, dated December 11, 2001; HQ 959798, dated July 29, 1999; HQ 965396, dated July 23, 2002.
Furthermore, the ENs to Chapter 15 define the term “animal or vegetable fats and oils” as “esters of glycerol with fatty acids (such as palmitic, stearic and oleic).” These glycerol esters are known as glycerides. Chapter 15 also includes fractions of oils. Fractions of animal fats or oils are concentrations of certain glycerides which are separated from other glycerides on the basis of physical characteristics, (e.g., on the basis of different melting points). 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.” See General EN to Chapter 15, HTSUS.
Contrary to Protestant’s argument, jojoba oil and glycerols are the named exceptions of headings 1515 and 1520, HTSUS, that prove the rule. Heading 1516, HTSUS, covers inter-esterified, re-esterified and elaidinised fats and oils. See EN 15.16. The products that undergo each of these processes begin as triglycerides and, despite the chemical changes that occur, remain triglycerides after the process is complete. Although merchandise can undergo these chemical processes and still remain classified in heading 1516, HTSUS, alterations to the basic triglyceride structure removes merchandise from this heading. In the present case, the subject merchandise’s inter-esterification cleaves the fatty acid from the glycerol backbone of the triglyceride with ethanol to form new esters. As a result, it is excluded from heading 1516, HTSUS, and is classified in heading 3824, HTSUS, and specifically subheading 3824.90.40, HTSUS, which provides for “prepared binders for foundry molds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included: other: other: Fatty substances of animal or vegetable origin and mixtures thereof.”
This position is supported by the ENs to heading 1516, HTSUS, and the material Protestant cited at the July 26 meeting with CBP. Namely, Protestant points to the definition of “interesterification” on page 187 of Bailey’s Industrial Oil & Fat Products, 6th Ed., which states:
The ester bonds of fats and oils are not immutable. Under appropriate conditions, they can be broken and reformed. This allows the replace of the acid and alcohol components in an ester bond, a class of reactions generally termed interesterification. Three general types of interesterification reactions can be identified:
1. Alcoholysis… in which a new alcohol species is exchanged into the ester bonds of the lipid…
3. Transesterification, in which fatty acid exchange occurs between esters.
Only transesterification is described in EN 15.16 and other technical sources as being a form of interesterification. Protestant’s product undergoes alcoholysis, which is not a term used in the headings or the ENs thereto. Therefore, while products undergoing interesterification meet the terms of the heading, products must also meet the meet the definition of that term in the ENs and chemical literature, namely as synonymous with the term “transesterification.” Thus, while Protestant claims that alcholysis is one of the processes mentioned in the ENs as interesterification, we disagree because alcoholysis is not mentioned in the ENs. Bailey’s is the only source that cites alcoholysis as akin to interesterification, and the description in the ENs is the same as Bailey’s description of interesterification. Therefore, the only chemical transformations that are discussed in the EN 15.16 are hydrogenation, interesterification, transesterification, re-esterification, and elaidinisation. Alcoholysis is not mentioned and is not similar to the mentioned processes because, as discussed above, the fatty acids are cleaved from the glycerol backbone of the triglyceride with ethanol to form new esters, and the chemical transformations described in the ENs maintain the triglyceride.
Protestant also argues that NY J84827, which classified fish oil ethyl ester imported in bulk in subheading 3824.90.40, HTSUS, is neither applicable nor controlling because the merchandise at issue was not processed by a method specifically provided for in heading 1516, HTSUS. Protestant asserts that the merchandise at issue in NY J84827 was manufactured via ethylation, and the subject merchandise is manufactured via inter-esterification, a process specifically allowed for merchandise classified in heading 1516, HTSUS, via that chapter’s ENs.
In response, we note that simply undergoing one of the manufacturing processes allowed by heading 1516, HTSUS, does not, in itself, qualify the merchandise to be classified there. The fact that the merchandise at issue in NY J84827 was excluded from Chapter 15, HTSUS, and classified in subheading 3824.90.40, HTSUS, supports classification of the subject merchandise in subheading 3824.90.40, HTSUS as well, because CBP classifies merchandise as imported. See XTC Products, Inc. v. United States, 771 F. Supp 401, 405 (1991). The same merchandise classified in two different ways would be an untenable administrative burden on CBP.
HOLDING:
By application of GRI 1, the fish oil ethyl ester is classified under heading 3824, HTSUS. It is specifically provided for under subheading 3824.90.40, HTSUS, which provides for: “prepared binders for foundry molds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included: other: other: Fatty substances of animal or vegetable origin and mixtures thereof.” The general, column one, rate of duty is 4.6% ad valorem.
You are instructed to DENY the protest.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP 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 International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.CBP.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division