United States Court of Appeals
for the Federal Circuit
__________________________
ARKO FOODS INTERNATIONAL, INC.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
__________________________
2010-1211
__________________________
Appeal from the United States Court of International
Trade in case No. 07-CV-0274, Judge Gregory W. Carman.
___________________________
Decided: August 11, 2011
___________________________
STEPHEN M. DE LUCA, Hume & De Luca, PC, of Wash-
ington, DC, for plaintiff-appellee.
JASON M. KENNER, Trial Attorney, Commercial Litiga-
tion Branch, Civil Division, United States Department of
Justice, of Washington, DC, for defendant-appellant. With
him on the brief were TONY WEST, Assistant Attorney
General, JEANNE E. DAVIDSON, Director, BARBARA S.
WILLIAMS, Attorney in Charge, International Trade Field
Office, of New York, New York. Of counsel on the brief was
MICHAEL HEYDRICH, Office of Assistant Chief Counsel,
ARKO FOODS INTL v. US 2
United States Customs & Border Protection, of New York,
New York.
__________________________
Before BRYSON, SCHALL and MOORE, Circuit Judges.
MOORE, Circuit Judge.
The government appeals the United States Court of In-
ternational Trade’s grant of summary judgment that mel-
lorine is not properly classified as an article of milk under
the Harmonized Tariff Schedule of the United States
(HTSUS). For the reasons described below, we affirm the
trial court’s decision.
BACKGROUND
The imported product at issue in this case is mellorine,
a frozen dessert similar to ice cream, but with vegetable or
animal fat substituted for at least some of the butterfat.
Arko Foods International, Inc. (Arko) imports six flavors of
mellorine relevant to this case: purple yam, fruit salad,
mango, macapuno (a type of coconut), durian (a fruit), and
Quezo Royale (a cheese and coconut flavor also known as
Quezo Real). On appeal, the parties do not dispute that
Arko’s mellorine is properly classified under HTSUS Chap-
ter 21, “Miscellaneous Edible Preparations,” Heading 2105,
“Ice cream and other edible ice, whether or not containing
cocoa,” as codified at 19 U.S.C. § 1202. The parties disagree
only on the proper subheading, in particular, whether
Arko’s mellorine is an article of milk.
United States Customs and Border Protection (Customs)
liquidated Arko’s mellorine under HTSUS Subheading
2105.00.40, which applies to “dairy products described in
additional U.S. note 1 to Chapter 4” for amounts above a
3 ARKO FOODS INTL v. US
certain import quota. This note describes three categories of
dairy products:
• malted milk, and articles of milk or cream (ex-
cept (a) white chocolate and (b) inedible dried
milk powders certified to be used for calibrating
infrared milk analyzers);
• articles containing over 5.5 percent by weight of
butterfat which are suitable for use as ingredi-
ents in the commercial production of edible arti-
cles . . . ; or
• dried milk, whey or buttermilk . . . which con-
tains not over 5.5% by weight of butterfat and
which is mixed with other ingredients [and con-
tains over 16% milk solids] . . . .
HTSUS, additional U.S. note 1 to Chapter 4 (Additional
Note 1) (emphasis added). Customs determined that Arko’s
mellorine was classifiable under 2105.00.40 because it is an
article of milk as described in Additional Note 1.
After Customs denied Arko’s protests, Arko filed suit at
the Court of International Trade. Arko argued that mel-
lorine is a composite good that, under Rule 3(b) of the Gen-
eral Rules of Interpretation (GRIs), is prima facie
classifiable under Heading 0811 (fruits and nuts) or 2106
(food preparations not elsewhere specified). The trial court
disagreed. Applying GRI 1, the court determined that
mellorine was prima facie classifiable only under Heading
2105 as edible ice. Arko Foods Int’l, Inc. v. United States,
679 F. Supp. 2d 1369, 1375 (Ct. Int’l Trade 2009).
Having determined that the mellorine is classifiable un-
der Heading 2105, the trial court next addressed the proper
subheading. Relying on Wilsey Foods, Inc. v. United States,
ARKO FOODS INTL v. US 4
18 C.I.T. 212 (1994), Arko argued that mellorine is not
classifiable under 2105.00.40 as an article of milk because
milk is not the essential ingredient, is not the ingredient of
chief value, and is not the preponderant ingredient. Ulti-
mately, the trial court agreed, and classified Arko’s mel-
lorine under subheading 2105.00.50, “Ice cream and other
edible ice, . . . : Other: Other.” The trial court found that
milk is not the essential ingredient because mellorine also
requires animal or vegetable fat and sweetener. Arko, 679
F. Supp. 2d at 1379 (citing FDA regulation 21 C.F.R.
§ 135.130(a)(1), which defines mellorine). Next, the trial
court found that milk is not the ingredient of chief value
because milk powder is the second-most expensive ingredi-
ent in all but the Quezo Royale flavor. In evaluating the
Quezo Royale flavor, the trial court determined that the
flavoring ingredients—cheese and coconut milk—are more
costly together than the milk powder. The trial court also
stated that when the relative value of the milk powder in
Quezo Royale mellorine is considered along with the essen-
tiality and preponderance factors, “it becomes clear that
different flavors of mellorine do not require classification
under separate subheadings.” Id. at 1379-80. And third,
the trial court found that milk is not the preponderant
ingredient because milk-derived ingredients range from
third to sixth most prevalent depending on the flavor. Id. at
1380. The trial court also found the government expert’s
testimony of limited value because, although the expert
testified that mellorine is a dairy product, the testimony did
not address whether mellorine was the specific type of dairy
product described in Additional Note 1. Id. The court
concluded that summary judgment was appropriate because
there was no dispute between the parties as to the nature of
the merchandise, but only as to the legal issue of whether
mellorine is an article of milk under the HTSUS. The trial
court concluded that the mellorine is not an article of milk
but instead properly classified as 2105.00.50 (“other”). Id.
5 ARKO FOODS INTL v. US
at 1380-82. The government appeals, and we have jurisdic-
tion under 28 U.S.C. § 1295(a)(5).
DISCUSSION
We review the Court of International Trade’s summary
judgment ruling de novo. Drygel, Inc. v. United States, 541
F.3d 1129, 1133 (Fed. Cir. 2008). Proper classification of
goods under the HTSUS is a two step process: (1) ascertain-
ing the proper meaning of specific terms in the tariff provi-
sion; and (2) determining whether the goods come within
the description of those terms as properly construed. Mil-
lennium Lumber Distrib., Ltd. v. United States, 558 F.3d
1326, 1328 (Fed. Cir. 2009). “The interpretation of the
headings and subheadings of the HTSUS is a question of
law reviewed without deference.” Drygel, 541 F.3d at 1133.
“[W]here Congress has clearly stated its intent in the
language of a statute, a court should not inquire further into
the meaning of the statute.” Millennium Lumber, 558 F.3d
at 1328. To classify goods under the HTSUS, we apply the
GRIs in numerical order. N. Am. Processing Co. v. United
States, 236 F.3d 695, 698 (Fed. Cir. 2001). Thus, our analy-
sis begins with GRI 1, which directs us to first examine the
terms of the headings and any relevant Section or Chapter
Notes. Pillowtex Corp. v. United States, 171 F.3d 1370, 1373
(Fed. Cir. 1999).
Chapter Notes, unlike Explanatory Notes, are legally
binding. Millennium Lumber, 558 F.3d at 1329. Where the
HTSUS does not define a term, the correct meaning of the
term is its common commercial meaning. Airflow Tech., Inc.
v. United States, 524 F.3d 1287, 1291 (Fed. Cir. 2008).
Whether goods fall within the scope of the headings and
subheadings is a question of fact, and Arko bears the burden
of proving the classification is erroneous because Customs’
classification decisions are presumed correct. Millennium
ARKO FOODS INTL v. US 6
Lumber, 558 F.3d at 1328. We review the factual findings of
the Court of International Trade for clear error. Deckers
Corp. v. United States, 532 F.3d 1312, 1315 (Fed. Cir. 2008).
On appeal, the government does not dispute that Head-
ing 2105, which encompasses ice cream and other edible ice,
is correct. The government asserts that the trial court
clearly erred by classifying Arko’s mellorine under subhead-
ing 2105.00.50 “other” instead of subheading 2105.00.40 as
an article of milk, which is a dairy product described in
Additional Note 1. The government argues that mellorine is
an article of milk because the industry classifies it as a
dairy product. Arko does not dispute that mellorine is a
dairy product, although it pointedly notes that the food
science textbook cited by the government at trial describes
mellorine as a “vegetable fat frozen dessert.” The question
before this court, however, is not whether mellorine is a
dairy product. It is whether Arko’s mellorine is a dairy
product described in Additional Note 1—specifically,
whether it is an article of milk.
The facts in Pillowtex are remarkably similar. In Pil-
lowtex, the goods at issue were comforters consisting of a
cotton shell stuffed with white duck down. 171 F.3d at
1372. We began our analysis with GRI 1, and examined the
terms of the headings and the applicable section and chap-
ter notes. Like this case, the parties were in agreement as
to the proper heading under which the goods should be
classified, but disputed the appropriate subheading. The
dispute centered around whether the cotton and down
comforters should be classifiable under subheading
9404.90.80 (bedding articles “of cotton”) or 9404.90.90
(“other” bedding articles). Id. at 1375. We concluded that
the language of the heading, subheading, and Explanatory
Notes did not “provide any insight into the meaning of the
term ‘of cotton’ as it relates to comforters.” Id. at 1374. The
7 ARKO FOODS INTL v. US
same is true here. The heading, subheading, and Explana-
tory Notes do not indicate what is required for something to
be considered an article of milk.
Borrowing from our analysis in Pillowtex and the GRIs,
we conclude that the appropriate definition for an article of
milk is a mixture with the “essential character” of milk.
The court in Pillowtex applied this same test and concluded
that the essential character of a comforter is its filling. Id.
at 1376. Therefore, the court held that the comforters at
issue were properly classified as “other” rather than as “of
cotton.” Id. GRI 2(a) similarly explains: “Any reference in
a heading to an article shall be taken to include a reference
to that article incomplete or unfinished, provided that, as
entered, the incomplete or unfinished article has the essen-
tial character of the completed article.” GRI 2(b) explains
that “[t]he classification of goods consisting of more than one
material or substance shall be according to the principles of
rule 3.” GRI 3(b) again explains that goods should be classi-
fied as the material or component “which gives them their
essential character.” While we do not believe that for some-
thing to be an article of milk it must be 100% milk, we
decline the government’s invitation for this court to adopt
an exact percentage of milk which must be included in order
for something to be an article of milk. Instead, we believe
that the essential character test should govern. The ques-
tion thus becomes: Does the mellorine at issue have the
essential character of milk?
We recognize that the essential character test requires
“a fact-intensive analysis.” Home Depot v. United States,
491 F.3d 1334, 1337 (Fed. Cir. 2007). The GRIs do not
define “essential character,” but the Explanatory Notes
explain that "[t]he factor which determines essential charac-
ter will vary as between different kinds of goods. It may, for
example, be determined by the nature of the material or
ARKO FOODS INTL v. US 8
component, its bulk, quantity, weight or value, or by the role
of a constituent material in relation to the use of the goods.”
Explanatory Note VIII for GRI 3(b); Home Depot, 491 F.3d
at 1336-67.
Hence, while the trial court did not phrase its analysis
precisely as one of essential character, it nonetheless per-
formed the correct inquiry. There are no genuine issues of
material fact in this case. The parties agree that mellorine
is not derived from or made from any one ingredient. FDA
regulations define mellorine as a frozen food product con-
taining milk-derived nonfat solids, vegetable or animal fat
other than milk fat, and a sweetener such as sugar. 21
C.F.R. § 135.120. The regulation further recites that mel-
lorine “is characterized by the addition of flavoring ingredi-
ents.” Id. Each of these ingredients has a vital role in
Arko’s mellorine. The parties do not dispute that, even
ignoring water, milk powder is not the most preponderant
ingredient by weight in any of the flavors at issue: there are
more sugar, oil, and/or flavoring ingredients in each flavor.
It is also undisputed that, in all flavors except Quezo
Royale, milk powder is not the costliest ingredient. Regard-
ing the Quezo Royale flavor – which the government does
not argue separately – the flavoring ingredients considered
together are more costly than the milk powder. In light of
these undisputed facts, we conclude that the mellorine does
not have the essential character of an article of milk.
We conclude that the trial court properly classified the
products at issue under subheading 9404.90.90 (“other”).
Accordingly, we affirm the Court of International Trade’s
judgment.
AFFIRMED
9 ARKO FOODS INTL v. US
COSTS
No costs.