United States Court of Appeals for the Federal Circuit
2007-1020
DEGUSSA CORPORATION,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
Frederic D. Van Arnam, Jr., Barnes, Richardson & Colburn, of New York, New York,
argued for plaintiff-appellee. With him on the brief was Eric W. Lander. Of counsel was
Rufus E. Jarman, Jr.
Bruce N. Stratvert, Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, of New York, New York, argued for defendant-appellant.
With him on the brief were Peter D. Keisler, Acting Attorney General, Jeanne E. Davidson,
Director, of Washington, DC; and Barbara S. Williams, Attorney in Charge, International
Trade Field Office, of New York, New York. Of counsel on the brief was Chi S. Choy,
Office of Assistant Chief Counsel, International Trade Litigation, United States Customs
and Border Protection, of New York, New York.
Appealed from: United States Court of International Trade
Senior Judge Thomas J. Aquilino, Jr.
United States Court of Appeals for the Federal Circuit
2007-1020
DEGUSSA CORPORATION,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
___________________________
DECIDED: November 26, 2007
___________________________
Before SCHALL, Circuit Judge, CLEVENGER, Senior Circuit Judge, and MOORE,
Circuit Judge.
MOORE, Circuit Judge.
The United States Customs Service (Customs) classified Degussa Corporation’s
(Degussa) surface-modified silicon dioxide products under Heading 3824 of the
Harmonized Tariff Schedule of the United States (HTSUS), thereby making them
subject to a five percent ad valorem tax. The United States Court of International Trade
held that the subject products are properly classified under Heading 2811 of the
HTSUS, which provides for “Silicon dioxide: Other” and are not subject to a duty tax.
See Degussa Corp. v. United States, 452 F. Supp. 2d 1310 (Ct. Int’l Trade 2007). The
government appealed. We conclude that because Degussa’s products contain certain
impermissible impurities, they are not properly classified under Heading 2811 of the
HTSUS, but rather under Heading 3824, as determined by Customs. Therefore, we
reverse the judgment of the Court of International Trade.
BACKGROUND
The products at issue are surface-modified silicon dioxide. 1 Silicon dioxide
(SiO2) has a basic tetrahedral structure, where four oxygen atoms surround a central
silicon atom (“silicon dioxide” is also known as “silica”). The SiO2 stoichiometry of silica
requires that each oxygen atom must be shared by silicon atoms in two tetrahedra.
Because silicon atoms on the surface of natural, unmodified silicon dioxide are
surrounded only by two, not four oxygen atoms, they are highly strained and react with
water molecules present in the air to form silanol groups (Si-OH). The resultant surface
of natural, unmodified silica contains both siloxane (O-Si-O) groups and silanol groups.
The silanol groups on the surface of the silica cause the natural, unmodified silica to be
hydrophilic (i.e., water-attractive).
The surface modification of silica in Degussa’s products is a result of reacting
silicon dioxide with certain silanes or silicone oil. The resultant surface comprises
hydrocarbon moieties bonded to the silica surface and silanol groups. Depending on
the silane used, the number of residual silanol groups on the treated silica surface is
reduced by 30% to 70% as compared to the number of silanol groups on the untreated
silica surface. In contrast to unmodified silica, the surface-modified silica is hydrophobic
(i.e. water-repellent). This surface modification does not affect the bulk properties of the
1
There are several products at issue, for example: AEROSIL ® R202, AEROSIL
® R805, AEROSIL ® R812, AEROSIL ® R812S, AEROSIL ® R972, AEROSIL ® R104,
and AEROSIL ® R976.
2007-1020 2
silica but it does change the surface, and concomitantly the moisture absorption (or
wettability) of the particle. The Court of International Trade found the hydrophobic
nature of the surface-modified particles “allows the particles to be incorporated into
certain organic solvents and polymers faster and easier than hydrophilic [particles].”
Degussa, 452 F. Supp. 2d at 1315.
Customs classified the product in question under Chapter 38, which specifically
excludes “separate chemically defined compounds.” HTSUS Chapter 38 Note 1(a).
Degussa appealed the Custom’s classification, asserting that its surface-modified silica
is properly classified under Chapter 28, which includes “separate chemically defined
compounds, whether or not containing impurities.” HTSUS Chapter 28 Note 1(a). For
its part, the government argued that Degussa’s products were not properly classified
under Chapter 28 because they did not contain permissible “impurities” within the
meaning of Chapter 28 Note 1(a). The government noted the provision of the
Explanatory Note to Chapter 28 Note 1 stating that when substances from the
manufacturing process “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 . . . .” The government argued that the carbon containing
moieties in Degussa’s products were “deliberately incorporated in, and left in, the
products, with the view to rendering them particularly suitable for specific use.” That
use was to render the product hydrophobic.
The Court of International Trade agreed with the government’s description of
Degussa’s products. Degussa, 452 F. Supp. 2d at 1315. The court ruled, however, that
the conditions or exclusions set forth in the Explanatory Note to Heading 2811
2007-1020 3
pertaining specifically to “(M) Silicon Compounds” were the only conditions or
exclusions that apply to Silicon compounds. In other words, the trade court effectively
found that when there are specific explanatory notes directed to particular compounds
(like “(M) Silicon Compounds” or “(A) Compounds of Fluorine” or “(B) Compounds of
Chlorine”) these specific provisions become the exclusive provisions that apply to these
compounds and that they trump all of the general conditions (such as the impermissible
impurities) even if the general conditions are in no way inconsistent with the specific
ones. As a result, the trade court found that even though the hydrocarbon moieties
were impermissible impurities as defined by the Explanatory Note to Chapter 28 Note 1,
this did not remove the product from Chapter 28. Id. Instead, the trade court reasoned
that because the hydrocarbon moieties were not within the exclusions set forth in the
Explanatory Note to Heading 2811 pertaining specifically to silicon compounds, the
product was still properly classified under Chapter 28. Id. At the same time, the court
stated: “Here, the plaintiff has borne its burden of proving that the bulk and the essence
of each of its powders at issue are silicone dioxide, a separate chemically-defined
compound.” Id. Thus, the court apparently disregarded the surface chemistry of the
surface-modified silicon dioxide. Based upon its analysis, the Court of International
Trade held the surface-modified silica is properly classified under the eo nomine
Subheading 2811.22.50, entitled “Silicon dioxide: Other.” Id. at 1316.
The government appealed. We have jurisdiction pursuant to 28 U.S.C.
§ 1295(5).
2007-1020 4
ANALYSIS
The meaning of a tariff term is a question of law, reviewable de novo by this
court, while the determination of whether a particular product fits within that meaning is
a question of fact, reviewable for clear error. Nat’l Advanced Sys. v. United States, 26
F.3d 1107, 1109 (Fed. Cir. 1994).
I.
HTSUS General Rule of Interpretation 1 provides that, “for legal purposes,
classification shall be determined according to the terms of the headings and any
relative section or chapter notes . . . .” HTSUS General Rules of Interpretation, R. 1
(1990). The section and chapter notes are integral parts of the HTSUS, and have the
same legal force as the text of the headings. HTSUS Chapter 28 Note 1(a) provides:
“Except where the context otherwise requires, the headings of this chapter apply only
to: (a) Separate chemical elements and separate chemical defined compounds,
whether or not containing impurities . . . .”
The Explanatory Notes for HTSUS Chapter 28 provide insight as to the meaning
of “separate chemically defined compounds.” Explanatory notes are not legally binding
but may be consulted for guidance and are generally indicative of the proper
interpretation of a tariff provision. Motorola, Inc. v. United States, 436 F.3d 1357, 1361
(Fed. Cir. 2006).
Significantly, not all impurities in a compound qualify as impurities permissible
within the meaning of Chapter 28 Note 1(a). The Explanatory Note for Chapter 28 Note
1 states:
The term “impurities” applies exclusively to substances whose presence in
the single chemical compound results solely and directly from the
2007-1020 5
manufacturing process (including purification). The 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.
Explanatory Notes at 261 (emphasis in original).
Moreover, the Explanatory Note for Chapter 28 Note 1 further states that “Such
products with added water-repellents are, on the other hand, excluded [from Chapter
28] since such agents modify the original characteristics of the products.” Explanatory
Notes at 261 (emphasis in the original). The surface modification has changed the
nature of the silica particle from hydrophilic (i.e. water-attractive) to hydrophobic (i.e.
water-repellent). While Degussa argued during oral argument that its surface-modified
silica is hydrophobic but not water-repellent, all of Degussa’s own evidence contradicts
this argument. In its literature, Degussa explains that the “R” in AEROSIL® R is taken
from the word repellent and that the “R” should not be confused with the ® for
“registered trademark.” Degussa Corp., Technical Bulletin Fine Particles: Basic
Characteristics of AEROSIL ® Fumed Silica Number 11 at 10; Joint Appendix JA 707.
See also Degussa Corp., Technical Bulletin Fine Particles: Basic Characteristics of
AEROSIL ® Fumed Silica Number 11 at 64; Joint Appendix JA 761 (Degussa defines
hydrophobic as “water-repellent.”). The Explanatory Notes are clear and based upon
sound principles. The hydrocarbon moieties are added to the silicon dioxide for the
2007-1020 6
purpose of rendering the silica hydrophobic and are therefore impermissible impurities.
Hence the product at issue cannot be classified under Chapter 28.
Degussa argued for the first time in oral argument that Rubie’s Costume Co. v.
United States, 337 F.3d 1350 (Fed. Cir. 2003) bars this court from considering the
permissible versus impermissible impurity distinction in the Explanatory Note for
Chapter 28 Note 1, as this distinction would improperly narrow the scope of Chapter 28
Note 1(a). Although there is language in Rubie’s Costume that “Explanatory Notes are
only instructive and are not dispositive or binding,” Rubie’s Costume, 337 F.3d at 1359
(quoting Marubeni Am. Corp. v. United States, 35 F.3d 530, 535 n.3 (Fed. Cir. 1994)),
we did not hold, as Degussa argues, that an explanatory note cannot define a term in a
way that might narrow the plausible interpretation of a chapter note or heading.
In Rubie’s Costume, Customs had solicited and received written comments
regarding the classification of the product, and had provided Rubie with detailed written
reasons for its classification choice. Id. at 1352. The explanatory note at issue in that
case gave examples of items that were included in Heading 9505. Id. at 1353. The
trade court suggested that these examples were exhaustive and improperly imported
“their limiting characteristics . . . to narrow the language of the classification heading
itself.” Id. This court reversed the trade court and held that Customs’ classification
ruling was persuasive and therefore must be granted deference. Id. at 1360.
In contrast to Rubie’s Costume, the language of Chapter 28 Note 1(a) is not
being narrowed by a limiting characteristic gleaned from a list of inclusive examples in
an explanatory note. Chapter 28 Note 1(a) states that “except where the context
otherwise requires,” headings of Chapter 28 only apply to “separate chemically defined
2007-1020 7
compounds, whether or not containing impurities.” The Explanatory Note for Chapter
28 Note 1(a) defines the term “impurities” broadly: “substances whose presence in the
single chemical compound results solely and directly from the manufacturing process
(including purification).” The explanatory note then carves out an exception for
impermissible impurities: “substances [that] are deliberately left in the product with a
view to rendering it particularly suitable for specific use rather than for general use.”
Explanatory Notes at 261. The Explanatory Note simply defines permissible and
impermissible impurities; at no time are we importing a limiting characteristic from a set
of inclusive examples in the explanatory note.
Degussa argues that the hydrocarbon moieties are not impermissible impurities
because they are not in the product (but instead on the surface of the product). This
argument is not persuasive as there is nothing in the language of the explanatory note
to suggest the term “in” should be so artificially limited. The evidence at trial
demonstrated that the hydrocarbon groups attached to the surface of silica are not just
deliberately left in, but intentionally added, to the particles to change the nature of the
product from hydrophilic to hydrophobic. Degussa, 452 F. Supp. 2d at 1314–15. The
government argues that this transformation renders the product suitable for specific use
(namely, uses requiring a hydrophobic attribute—water-repellent). The trade court
concurred, finding the hydrophobic silica particles have a lower moisture absorption that
enables them to be more readily incorporated into certain organic solvents and
polymers. Id. at 1315. We agree.
The trade court stated that finding the surface-modified silica contained
impermissible impurities did “not foreclose classification of plaintiff’s products under
2007-1020 8
HTSUS subheading 2811.22.50.” Id. Instead, the court reasoned that because the
hydrocarbon moieties were not within the exclusions set forth in the Explanatory Note
for Heading 2811: Silicon Compounds, 2 the products were still properly classified under
Chapter 28. Id. The government argues that the exclusions set forth in the Explanatory
Note for Heading 2811: Silicon Compounds are not exhaustive. We agree. The
exclusions set forth in the explanatory notes that pertain to particular compounds
supplement the remainder of the chapter notes and explanatory notes. For a silica
product to fall within Chapter 28, it must be a separate chemically defined compound
containing only permissible impurities and it must also not be (a) natural silica, (b)
colloidal suspension of silica, or (c) silica gel with added cobalt salts.
II.
As seen above, the Court of International Trade also appeared to ground its
analysis in the proposition that the surface chemistry of the surface-modified silicon
dioxide is not relevant. Under the general section for Chapter 28, the Explanatory Note
states:
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 elements of a separate chemically defined compound combine in a
specific characteristic proportion determined by the valency and the
bonding requirements of the individual atoms. The proportion of each
element is constant and specific to each compound and it is therefore said
to be stoichiometric.
2
The Explanatory Note for Heading 2811: Silicon Compounds excludes: (a)
natural silica, (b) colloidal suspension of silica, and (c) silica gel with added cobalt salts.
Explanatory Notes at 283.
2007-1020 9
Small deviations in the stoichiometric ratios can occur because of gaps or
insertions in the crystal lattice. These compounds are described as quasi-
stoichiometric and are permitted as separate chemically defined
compounds provided that the deviations have not been intentionally
created.
Explanatory Notes at 260.
The parties agree that the bulk of the surface-modified silica meets the
Explanatory Note’s definition of separate chemically defined compounds. The question
is whether the entire particle (bulk plus the modified surface) constitutes a separate
chemically defined compound. The government argues that the presence of the
hydrocarbon moieties on the surface of the silica causes the product to lack
stoichiometry, as the quantity of hydrocarbon moieties is not in a constant ratio with the
number of silicon or oxygen atoms. Further, the government argues that the entire
particle cannot be represented by a definitive structural diagram, as the number of
hydrocarbon moieties on the surface vary from particle to particle. Degussa argues that
the surface chemistry is irrelevant and should be disregarded in determining whether
the surface-modified silica is a separate chemically defined compound.
This court is cognizant of the fact that the tetrahedral structure of silicon dioxide
present in the bulk is not identically present at the surface. This court is also mindful
that the number of atoms on the surface of a particle is normally very small when
compared to the number of atoms in the bulk phase, and that chemists normally
disregard the surface of unmodified silica when determining whether a particle is a
separate chemically defined compound. See Degussa, 452 F. Supp. 2d at 1315 (“You
would have to torture something in chemistry to try and make surfaces stoichiometric or
to encompass them totally in the definition of a bulk . . . .”).
2007-1020 10
The parties do not dispute that, in the case of unmodified silicon dioxide,
naturally occurring silanol groups at the surface differ from the bulk structure. 3 Clearly
such compounds were intended to be covered by Chapter 28, Heading 2811.
Nonetheless, when the surface of a product is intentionally modified, the surface
chemistry is to be considered when determining whether a product is a separate
chemically defined compound that contains impermissible “impurities” for purposes of
Chapter 28. The Court of International Trade erred in concluding to the contrary.
III.
In sum, Degussa’s surface treated silicon dioxide products contain impermissible
impurities (water-repellents) and therefore, cannot be classified under Chapter 28.
Customs properly classified the surface-modified silica products under Chapter 38
entitled “Miscellaneous chemical products” and more specifically under Subheading
3824.90.90 covering “chemical products and preparation of the chemical and allied
industries.” 4 Explanatory Notes for HTSUS Heading 3824 provide examples of
products included in Heading 3824 such as chemical products that are analogous to
surface-modified silica, for example surface-treated calcium carbonate (whereas non-
3
The silanol groups present on unmodified silica are the result of its surface
reacting with water vapor in the atmosphere. This reaction is naturally occurring and
common for metal oxides.
4
Note 1(a) to Chapter 38 states “this chapter does not cover: separate
chemically defined compounds,” with exceptions not relevant here. Because the
hydrocarbon moieties were intentionally added to the surface of the silica particles, the
surface chemistry must be considered when determining whether Degussa’s surface-
modified silica is a separate chemically defined compound. When considering the
entire particle (bulk plus modified surface chemistry), Degussa’s surface-modified silica
is not stoichiometric and cannot be represented by a definitive structural diagram.
Further, the ratio of hydrocarbon moieties is not in constant proportion to the number of
silicon or oxygen atoms. Therefore, Degussa’s surface-modified silica is not a separate
chemically defined compound.
2007-1020 11
surface treated calcium carbonate is classified in HTSUS subheading 2836.50.00). See
Explanatory Notes at 697–703. The Court of International Trade erred in failing to
recognize, as a matter of law, that Chapter 28 excludes separate chemical compounds
that contain impermissible impurities.
CONCLUSION
Based on the foregoing, we conclude that Degussa’s surface-modified silica is
properly classified under Heading 3824. Accordingly, the judgment of the Court of
International Trade is
REVERSED.
2007-1020 12