OT:RR:CTF:VS H321591 AP
Erik D. Smithweiss, Esq.
Neil S. Helfand, Esq.
Grunfeld, Desiderio, Lebowitz,
Silverman & Klestadt LLP
599 Lexington Avenue, 36th Floor
New York, New York 10022
RE: Applicability of subheading 9802.00.50, HTSUS; Algal Oil
Dear Mr. Smithweiss and Mr. Helfand:
This is in response to your September 28, 2021 ruling request, filed on behalf of DSM Nutritional Products LLC (“DSM”), regarding the eligibility for preferential tariff treatment under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”) to U.S.-origin algal biomass powder exported for alteration in Europe and returned to the United States as unrefined algal oil.
FACTS:
DSM produces algal biomass powder in the United States. DSM’s algal biomass powder is a whole cell algae product fermented from one of several strains of algae containing algal oil rich in Omega-3 fatty acid Docosahexaenoic acid (“DHA”). The algal biomass is used as an animal feed ingredient due to its high DHA content. DSM currently sells algal biomass powder under the brand name DHAgold S17-B, identified by Chemical Abstracts Service (“CAS”) number (“No.”) 6217-54-5, which is the CAS No. for DHA. In addition, DSM sells algal oil products extracted from algal biomass and used for animal and human nutrition, also identified by CAS No. 6217-54-5.
The subject algal biomass powder will be known as “DHASCO Spray Dried Biomass,” Product Code 50 15 053. It will be an orange-colored fermented algae powder with a DHA content of approximately 19 percent. The biomass will be fermented, dried, and packaged at a DSM facility in South Carolina. The biomass will be exported from the U.S. to a processor in Europe to undergo a mechanical oil extraction process. During the extraction process, hexane will be used as a solvent to separate the DHA oil from the biomass. The evaporation process will remove the hexane from the unrefined DHA oil. No ingredients will be added. The chemical structure of the oil and DHA content will remain the same. The unrefined algal oil will then be imported into the U.S.
After importation into the U.S., the algal oil will be refined and mixed with antioxidants and a small amount of sunflower oil and then packaged for sale. DSM will market and sell the algal oil product as DHASCO algal oil, CAS No. 6217-54-5, for use as an ingredient in foods and dietary supplements for its DHA content.
ISSUE:
Whether the subject unrefined algal oil is eligible for preferential tariff treatment under subheading 9802.00.50, HTSUS.
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides for a reduced duty on articles returned to the U.S. after having been exported for alteration. Duty is assessed on the value of the alterations abroad provided that the documentary requirements of 19 C.F.R. § 10.8 are satisfied. Changes and additions to an article are considered to be alterations “so long as the article has not lost its identity or has not been converted into something else.” May Food Mfg. v. United States, 33 CIT 430, 432, 616 F. Supp. 2d 1349, 1352 (2009) (citations omitted). Alterations “can only be made to finished articles” and “do not include intermediate processing operations which are performed as a matter of course in the preparation or the manufacture of finished articles.” Id.
In Headquarters Ruling Letter (“HQ”) H235546, Mar. 26, 2013, palmetto oil was eligible for the partial duty exemption under subheading 9802.00.50. The oil was mechanically extracted in Germany from saw palmetto powder exported from the U.S. and subjected to a mechanical extraction process to separate the oil content from the powder. The oil was then filtered, packed in drums, and shipped back to the U.S. The chemical structure of the powder and the finished product remained the same. The extraction process only changed the form of the product from powder to oil. Both the powder and oil were used in the health food industry as dietary supplements to promote prostate health. No new and commercially different article was created as a result of the foreign processing.
Here, the foreign processing is similar to that in HQ H235546. The algal biomass made in the U.S. is a finished product high in DHA sold for use as an animal feed ingredient. The processing overseas will not result in a chemical reaction that will change the identity or composition of the algal biomass powder. The foreign extraction process will extract the oil from the biomass without modifying its chemical structure. No new and commercially different product will be created. The mechanical extraction process will simply change the form of the product from algal powder into algal oil. Both the algal biomass and the algal oil will be sold as a source of DHA in foods and dietary supplements.
Accordingly, the imported algal oil will be eligible for preferential tariff treatment under subheading 9802.00.50, HTSUS, provided that the documentary requirements of 19 C.F.R. § 10.8 are met.
HOLDING:
Based upon the information submitted, the subject algal oil, as described, will be eligible for preferential tariff treatment under subheading 9802.00.50, HTSUS, when imported into the United States, provided that the documentary requirements of 19 C.F.R. § 10.8 are satisfied.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by [U.S. Customs and Border Protection (“CBP”)] field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch