CLA-2 OT:RR:CTF:TCM HQ H240719 NCD
Port Director, Los Angeles/Long Beach Seaport
U.S. Customs and Border Protection
301 E. Ocean Blvd., Suite 1400
Long Beach, CA 90802
Attn: William A. Recker, Senior Import Specialist
Re: Protest and Application for Further Review No. 2704-12-102569; Classification of Silymarin Powder
Dear Port Director:
The following is our decision regarding the Application for Further Review (AFR) of Protest No. 2704-12-102569, timely filed on July 13, 2012, on behalf of Novel Ingredient Services (“Novel” or “Protestant”). The Protest and corresponding AFR pertain to a decision by U.S. Customs and Border Protection (CBP) as to the proper classification of silymarin powder under the Harmonized Tariff Schedule of the United States (HTSUS), as well as CBP’s alleged failure to liquidate four entries of the subject silymarin powder within one year of their respective entry dates. In reaching the below decision, we have taken into account Protestant’s July 13, 2012 submission, information provided during a May 9, 2016 teleconference, and Protestant’s supplemental submission of June 10, 2016.
FACTS:
The instant protest concerns fourteen entries of silymarin powder, which is a yellow, amorphous substance extracted from the seeds of the Silybum marianum, i.e., milk thistle. Among other constituents, the powder contains silymarin, a flavonolignan complex made up predominantly of the isomers silybin A, silybin B, isosilybin A, isosilybin B, silydianin, and silychristin that occur naturally in milk thistle. As flavonolignans, these isomers are part flavonoid and part polyphenol.
Protestant asserts that the powders in the subject entries have been provided by three different suppliers and has accordingly proffered three differing sets of flowcharts and descriptions pertaining to the powder’s production. Details of the manufacturing processes depicted or described in these documents are further clarified in Protestant’s supplemental submission. Common steps referenced by these various submissions include the following:
Preliminary stripping of the milk thistle seeds’ oil content and other “impurities” by means of pressing;
An initial extraction phase entailing the application of an acetone solvent for the purposes of extracting crude silymarin from the residual seed cakes (over the course of a single 24 to 32 hour extraction or two to four hour-long extractions);
A second phase involving concentration of the resulting solution and an additional extraction entailing application of hexane to the solution so as to further remove oil residue; and
Conversion of the remaining substance from liquid to solid form by means of vacuum or spray drying, and subsequent pulverization through shattering, crushing, and/or milling.
A sample of the subject powder, labeled “Silymarin Extract Powder (40 percent HPLC, 80 percent UV)” was analyzed by a CBP laboratory. Applying UV spectrophotometric analysis, the laboratory detected within the powder 43 percent total polyphenol content, 33 percent total flavonoid content, and approximately 50 percent total flavonolignan content in the form of the six above-mentioned flavonolignan isomers. The laboratory noted that the detected total polyphenol content overlaps with both the silymarin content and the total flavonoid content, and that the total flavonoid content overlaps with both the silymarin content and the total polyphenolic content. The laboratory also reported that the subject merchandise contains several natural compounds, including fatty acids, naringenin, vanillin, vanillic acid, sugars, and numerous flavor/fragrance compounds, and that the presence of these components indicates that the merchandise is based upon an extract of natural material. Based upon its analysis of the powder’s chemical composition and review of its production processes, the laboratory concluded that the powder is highly enriched in the six flavonolignan isomers, and that it is a product of a selective methodology involving use of organic solvents to target these isomers.
Appended to Protestant’s supplemental submission are independent laboratory reports analyzing, by means of high performance liquid chromatography (HPLC) and ultraviolet (UV) spectrophotometry, the silymarin content in a sample of the silymarin powder. These reports indicate that 40 percent silymarin isomers were detected when HPLC was applied to the sample, and that 80 percent silymarin isomers were detected when UV spectrophotometry was used.
The subject silymarin powder was imported in fourteen separate entries at the Port of Los Angeles (“the Port”) between November 18, 2010 and November 18, 2011, and was classified at entry in subheading 1302.19.91, HTSUS, which provides for “Vegetable saps and extracts; pectic substances, pectinates and pectates; agar-agar and other mucilages and thickeners, whether or not modified, derived from vegetable products: Other: Other.” Prior to liquidating the entries, the Port sent a series of requests for information, set forth in various issuances of CBP Form 28, for, inter alia, entries XXX-XXX5772-8, XXX-XXX6898-0, XXX-XXX6739-6, and XXX-XXX7089-5. Entries XXX-XXX6898-0, XXX-XXX6739-6, and XXX-XXX7089-5 subsequently liquidated on October 28, 2010, November 4, 2011, and November 18, 2011, respectively. Protestant responded to the requests for information on December 28, 2011. On January 20, 2012, entry number XXX-XXX5772-8 liquidated and entries XXX-XXX6898-0, XXX-XXX6739-6, and XXX-XXX7089-5 were reliquidated.
All fourteen entries covered by the instant Protest were liquidated in subheading 2932.99.61, HTSUS, which provides for “Heterocyclic compounds with oxygen hetero-atom(s) only: Other: Other: Aromatic: Other.” Protestant now claims classification as entered and argues in the alternative that, even if the subject merchandise is classified in subheading 2932.99.61, HTSUS, it is entitled to duty-free treatment as a product listed in the Pharmaceutical Appendix to the HTSUS. Protestant also claims that entries XXX-XXX5772-8, XXX-XXX6898-0, XXX-XXX739-6, and XXX-XXX7089-5 were not liquidated within a year following their respective dates of entry, and that they consequently must be deemed liquidated at the rates of duty, values, quantities, and amounts of duties asserted at their respective times of entry.
ISSUES:
Whether the subject powder is properly classified as an extract of heading 1302, HTSUS, or as a heterocyclic compound with oxygen hetero-atom(s) of heading 2932, HTSUS.
Whether the subject powder is entitled to duty-free treatment as a good listed in the Pharmaceutical Appendix to the HTSUS.
Whether entries XXX-XXX5772-8, XXX-XXX6898-0, XXX-XXX6739-6, and XXX-XXX7089-5 are deemed liquidated at the rates of duty, values, quantities, and amounts of duties asserted at their respective times of entry.
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 of the first entry. (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. 2704-12-102569 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(c) because Protestant alleges that CBP has previously classified this merchandise, but that Protestant has presented new legal arguments that were not considered at the time of these prior rulings. Specifically, Protestant argues that CBP’s reasoning regarding the classification of silymarin powder in heading 1302, HTSUS, misconstrues the language of EN 13.02, thus improperly restricting the level of purification allowed by the heading.
I. Classification
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 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in their appropriate order.
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System at the international level. While neither 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, 35128 (August 23, 1989).
The HTSUS provisions under consideration are as follows:
1302 Vegetable saps and extracts; pectic substances, pectinates and pectates; agar-agar and other mucilages and thickeners, whether or not modified, derived from vegetable products:
Vegetable saps and extracts:
1302.19 Other:
1302.19.91 Other
2932 Heterocyclic compounds with oxygen hetero-atom(s) only:
Other:
2932.99 Other:
Other:
2932.99.61 Products described in additional U.S. note 3 to section VI
At the outset, we note that heading 1302, HTSUS, covers only those extracts that are not more specifically described elsewhere. See EN 13.02 (stating, with reference to heading 1302, HTSUS, that “[t]he heading covers saps and extracts…provided that they are not specified or included in more specific headings of the Nomenclature.”). Accordingly, if the subject silymarin powder is described by heading 2932, HTSUS, which specifically applies to chemical substances of certain molecular structures, then it is properly classified in that heading rather than in heading 1302.
Heading 2932, HTSUS, provides for “Heterocyclic compounds with oxygen hetero-atom(s) only.” Note 1 to Chapter 29 provides, in relevant part, as follows:
Except where the context otherwise requires, the headings of this chapter apply only to:
Separate chemically defined organic compounds, whether or not containing impurities;
Mixtures of two or more isomers of the same organic compound (whether or not containing impurities), except mixtures of acyclic hydrocarbon isomers (other than stereoisomers), whether or not saturated (Chapter 27)…
With regard to Note 1 to Chapter 29, the EN to Chapter 29 states as follows:
A separate chemically defined compound is a substance which consists of one molecular species (e.g., covalent or ionic) whose composition is defined by a constant ratio of elements and can be represented by a definitive structural diagram. In a crystal lattice, the molecular species corresponds to the repeating unit cell…
The term “impurities” applies exclusively to substances whose presence in the single chemical compound results solely and directly from the manufacturing process (including purification). These substances may result from any of the factors involved in the process and are principally the following:
(a) Unconverted starting materials.
(b) Impurities present in the starting materials.
(c) Reagents used in the manufacturing process (including purification).
(d) By-products
It should be noted, however, that such substances are not in all cases regarded as “impurities” permitted under Note 1(a). When such substances are deliberately left in the product with a view to rendering it particularly suitable for specific use rather than for general use, they are not regarded as permissible impurities…
This chapter further includes, whether or not they contain impurities, mixtures of isomers of the same organic compound. This provision applies only to mixtures of compounds having the same chemical function (or functions) and which either coexist in their natural form or are obtained simultaneously in the course of the same synthesis…
Per Note 1(a) and the EN to Chapter 29, a substance is classifiable within Chapter 29 where it is comprised almost entirely by a single molecular structure, so long as any structurally-deviant constituents satisfy the definition of “impurities” as set forth in the EN to Chapter 29. See Degussa Corp. v. United States, 508 F.3d 1044, 1047-48 (Fed. Cir. 2007) (discussing the scope of, and applying, identical language concerning chemical impurities in the EN to Chapter 28); Rhodia, Inc. v. United States, 441 F. Supp. 2d 1368, 1375 n.3 (Ct. Int'l Trade 2006) (“The term ‘chemical compound’ is generally used to refer to ‘a substance composed chemically of two or more elements in definite proportions (as opposed to mixture).’). Pursuant to Note 1(b) to Chapter 29, headings of the chapter also cover mixtures of isomers of organic compounds, i.e., of organic compounds that are represented by a single chemical formula in diverse structural arrangements, that also may or may not contain such “impurities.” Among other things, “impurities” in a separately defined chemical compound or mixture of isomers cannot have been “deliberately left in the product with a view to rendering it particularly suitable for specific use rather than for general use.” See EN to Chapter 29; and Headquarters Ruling Letter (HQ) 965089, dated January 31, 2002 (“Toluene…is deliberately left in the product with a view to rendering it particularly suitable for the specific use of manufacturing dextro-propoxyphene rather than for general use…Hence, the toluene is an impermissible impurity for tariff classification purposes.”).
Here, according to Protestant’s submissions, analysis of the subject silymarin powder by means of high performance liquid chromatography indicates a flavonolignan content of at least 40 percent, whereas analysis by ultraviolet spectrometry reveals a flavonolignan content of approximately 80 percent. In analyzing the submitted sample, the CBP laboratory detected 50 percent flavonolignans, but observed that the product contains additional undefined polyphenol and flavonoid content. The CBP laboratory’s finding that the powder contains 50 percent flavonolignans, and possibly more in the form of the unidentified polyphenols and flavonoids, is consistent with the flavonolignan content range reported by Petitioner. Thus, it is undisputed that the instant silymarin powder is comprised at least 40 percent, and up to 80 percent, of silymarin flavonolignans, which are heterocyclic compounds that share a common chemical formula. Because these flavonolignans are isomers of each other, the powder can be described as containing a mixture of two or more isomers of the same organic compound within the meaning of Note 1(b) to Chapter 29.
By all indications, the balance of the powder’s constituents can be described as impurities resulting from the manufacturing process for purposes of Note 1(b). Protestant’s submissions indicate that this process, while varying slightly by producer, unequivocally entails initial acetone solvent extraction of the milk thistle seeds followed by concentration and a second, hexane-based solvent extraction. According to patents discussing comparable processes, the latter extraction can rightly be described as an “isolation” or “purification” step insofar as it precipitates the removal of lipids and the concentration of flavonolignans. See U.S. Patent No. 7,318,940 (dated Jan. 15, 2008); CA Patent No. 2,709,947 (dated May 17, 2016); and U.S. Patent No. 6,309,678 (dated Oct. 30, 2001). Moreover, despite Protestant assertions during the May 9, 2016 teleconference that the subject substance is not purified beyond certain predefined levels, there is no indication that the residual fatty acids, naringenin, vanillin, vanillic acid and other non-flavonolignans are deliberately retained throughout the process. In fact, the above-cited patents, as well as relevant literature, emphasize the importance of maximizing yields of silymarin isomers in the extraction and purification processes. See Sunny N. Wallace et. al., Extraction of Nutraceuticals from Milk Thistle: Part II. Extraction with Organic Solvents, 105-108 Applied Biochemistry and Biotechnology 891-903 (2003). Accordingly, the residual substances can be described as “impurities present in the starting materials” for purposes of Note 1(b). In effect, the subject powder, which consists of isomers of a heterocylic compound and residual impurities, satisfies the terms of Note 1 to Chapter 29 and is properly classified in heading 2932, HTSUS. This result is wholly consistent with our previous treatment of silymarin products. See HQ H195716, dated February 19, 2015; HQ 967971, dated March 2, 2006; and HQ 967972, dated March 2, 2006 (all classifying silymarin products in heading 2932, HTSUS).
Protestant devotes considerable portions of its submissions to advancing its contention that the subject silymarin powder falls within the scope of heading 1302, HTSUS. Specifically, Petitioner challenges our determination in HQ 967972, supra, that silymarin has been purified to a degree beyond that permitted for purposes of classification in heading 1302. Irrespective of whether the silymarin powder is classifiable in heading 1302, however, it is more specifically described by heading 2932 and, in effect, must be classified there.
II. Duty-free Treatment
Protestant argues that even if the subject merchandise is not classifiable in heading 1302, HTSUS, it is eligible for duty-free treatment under the Pharmaceutical Appendix. General Note 13 to the HTSUS provides as follows:
Pharmaceutical products. Whenever a rate of duty of “Free” followed by the symbol “K” in parentheses appears in the “Special” subcolumn for a heading or subheading, any product (by whatever name known) classifiable in such provision which is the product of a country eligible for tariff treatment under column 1 shall be entered free of duty, provided that such product is included in the pharmaceutical appendix to the tariff schedule. Products in the pharmaceutical appendix include the salts, esters and hydrates of the International Non-proprietary Name (INN) products enumerated in table 1 of the appendix that contain in their names any of the prefixes or suffixes listed in table 2 of the appendix, provided that any such salt, ester or hydrate is classifiable in the same 6-digit tariff provision as the relevant product enumerated in table 1.
As a preliminary matter, we note that the “K” symbol appears in the “special” duty rate column for subheading 2932.99.61, HTSUS, where the subject powder is classified. As to the powder’s eligibility for duty-free treatment, it is well-established that a product is not entitled to such treatment unless it is actually listed by name in the Pharmaceutical Appendix, irrespective of whether its constituent compounds are included in the Appendix. See HQ H195716, supra; HQ H011012, dated August 20, 2007; HQ 965479, dated June 24, 2002; HQ 963034, dated November 2, 2000; BASF Corp. v. United States, 391 F.Supp.2d 1246, 1256 FN 7 (Ct. Int’l. Trade 2005), aff’d 482 F.3d 1324 (Fed. Cir. 2007).
Here, silymarin is not listed by name in Table 1 to the Pharmaceutical Appendix. As Protestant correctly states, Table 1 includes silibinin, silicristin, and silidianin, which are the main constituents of silymarin. However, none of these compound encompasses the whole of silymarin, and Table 1 does not include a term denoting the combination of these compounds with other naturally-occurring substances of which silymarin is comprised. As a result, the instant silymarin powder is not entitled to duty-free treatment under the Pharmaceutical Appendix. See HQ H195716, supra.
III. Deemed Liquidation of Certain Entries
Protestant also contends in the alternative that entries XXX-XXX5772-8, XXX-XXX6898-0, XXX-XXX6739-6, and XXX-XXX7089-5 were deemed liquidated as entered in subheading 1302.19.91, HTSUS, because they were not liquidated within a year following their respective dates of entry. Pursuant to 19 U.S.C. § 1504(a)(1), an entry of merchandise for consumption that is not liquidated within one year from the date of entry of such merchandise shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted by the importer of record.
However, CBP may extend the original liquidation of entries, if warranted, for one year increments up to a period not exceeding four years as long as proper notice is given. See 19 U.S.C. § 1504(b). Whether an extension of liquidation is proper is governed by 19 CFR §159.12(a), which allows the port director to extend the one-year statutory period for liquidation if, among other things, more information is needed by CBP for proper appraisement or classification. See 19 CFR § 159.12(a)(i)-(ii). Absent the issuance of proper extension, entries not liquidated within one year are deemed liquidated by operation of law. See Pagoda Trading Corp. v. United States, 804 F.2d 665, 669 (Fed. Cir. 1986) (holding that the entries were deemed liquidated because no evidence existed showing that an authorized CBP official granted an extension, that there was a basis for an extension, or that the importer requested an extension).
When a permissible extension is made, the port director satisfies the notice requirement of 19 U.S.C. § 1504(b) by issuing a CBP Form 4333-A to the importer, consignee or agent, as well as the surety. See 19 U.S.C. §1504(b); 19 CFR §159.12(b). With respect to notice requirements generally, the Court of International Trade (“CIT”) has stated as follows:
In cases turning on the alleged giving of notice and lack of receipt thereof, there is a presumption that letters or other communications, properly addressed, stamped, and deposited in the mail, are received by the addressee in due course…That presumption is rebuttable by proof of non-receipt …
Where a notice is required to be given by Customs officials, the burden of going forward with the evidence initially falls upon the plaintiff because the notice is deemed to have been given by virtue of the presumption of regularity which attaches to official acts. However, the burden of proof is then on the Government because it is the Government’s statutory responsibility to provide the notice. The proofs offered by a plaintiff at this point are directed toward negating the presumed deliver by way of evidence of non-receipt, non-issuance, or non-delivery of the notice. When the plaintiff has met this initial requirement, the burden of going forward shifts to the Government to establish that notice was given…
See Hanover Insurance Co. v. United States, 25 CIT 447, 456 (2001) (citations omitted); See also A.N. Deringer, Inc. v. United States, 20 CIT 978, 993 (1996) (holding that “the onus upon the government is to establish proper mailing of the requisite notices; it then falls to the plaintiff to establish nonreceipt.”). Therefore, a protestant alleging lack of notice must provide evidence that notice of extension was not provided. See Bar Bea Truck Leasing Co., Inc. v. United States, 5 CIT 124, 126 (1983) (holding that mere assertions made by counsel are not evidence). If such evidence is proffered, CBP must then provide evidence that notice was in fact given.
Entries XXX-XXX6898-0, XXX-XXX6739-6, and XXX-XXX7089-5 were filed on December 18, 2010, December 23, 2010, and January 8, 2011, respectively. Protestant contends that the entries were extended without notice and ultimately liquidated on January 20, 2012, which falls outside the one-year statutory period after which entries are deemed liquidated. However, as stated above, the entries were in fact liquidated on October 28, 2010, November 4, 2011, and November 18, 2011, respectively, without any extension of liquidation. Contrary to Protestant’s contention, January 20, 2012 is the date on which CBP reliquidated all three entries with a rate advance. We note that Section 1501 of Title 19, grants CBP the authority to voluntarily reliquidate a liquidation within ninety days from the notice of the original liquidation, and that January 20, 2012 falls within 90 days of each entry’s respective date of entry. See 19 U.S.C. § 1501. Therefore, because entries XXX-XXX6898-0, XXX-XXX6739-6, and XXX-XXX7089-5 were liquidated within one year of their respective entry dates, they did not liquidate by operation of law.
Entry XXX-XXX5772-8 was entered on November 18, 2010 and liquidated on January 20, 2012, but CBP’s Automatic Commercial System (ACS) indicates that prior to liquidation, the entry was extended and that notice thereof was issued on August 8, 2011. As an initial matter, we note that the extension of liquidation for entry XXX-XXX5772-8 was in accordance with 19 CFR § 159.12(a). In the above-mentioned CBP Form 28 request for information issued to Protestant, the Port requested a detailed manufacturer’s flow chart, information regarding the production steps and equipment involved in the manufacture of the silymarin powder, and a breakdown by percentage of all components and ingredients that make up the product. As this information was needed for the proper classification of the merchandise, the extension was permissible. See 19 U.S.C. § 1504(b)(1).
Protestant does not contest that the extension was proper, but instead contends that it did not receive the notice of extension for entry number XXX-XXX5772-8. However, according to ACS, an extension notice was sent to Protestant (and its surety) for entry number XXX-XXX5772-8 on August 10, 2011. Per the reasoning in Hanover Insurance, because CBP’s computer system shows that notice was sent to Protestant, there arises a rebuttable presumption that CBP provided Protestant and its surety with notice of the suspension of liquidation. Therefore, Protestant had the burden of proving non-receipt of the notice of extension. However, other than Protestant’s assertion in its protest that it did not receive notice of extension, Protestant has not provided any evidence that it did not receive the notice. Consequently, Protestant has not successfully rebutted the presumption that CBP provided it with the notice of extension for this entry. Accordingly, notice of extension of liquidation for entry XXX-XXX5772-8 was properly given on August 8, 2011. Because CBP liquidated the entry on January 20, 2012, which is within one year of August 8, 2011, the date of extension, entry number XX-XXX5772-8 did not liquidate by operation of law.
HOLDING:
By application of GRI 1, the subject silymarin extract is classified in heading 2932, HTSUS. Because it does not listed in the Chemical Appendix to the Tariff Schedule, it is specifically classified in subheading 2932.99.6100, HTSUS (Annotated), which provides for: “Heterocyclic compounds with oxygen hetero-atom(s) only: Other: Other: Aromatic: Other: Products described in additional U.S. note 3 to section VI.” The general column one rate of duty is 6.5% ad valorem, which applies to all entries of the subject merchandise covered by the instant protest. The subject merchandise does not qualify for duty-free treatment under the Pharmaceutical Appendix. Entries XXX-XXX5772-8, XXX-XXX6898-0, XXX-XXX6739-6, and XXX-XXX7089-5 were not deemed liquidated in subheading 1302.19.91, HTSUS, and were properly liquidated in subheading 2932.99.61, HTSUS.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov/tata/hts/.
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 website 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