Cargill, Inc. v. United States

Slip Op. 04-25

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
___________________________________
:
CARGILL, INCORPORATED, :
:
Plaintiff, :
:
v. : Court No.
: 00-04-00189
UNITED STATES, :
:
Defendant. :
___________________________________:

Plaintiff, Cargill, Incorporated (“Cargill”) moves pursuant to
USCIT R. 56 for summary judgment on the ground that there is no
genuine issue as to any material facts. Defendant cross-moves for
summary judgment seeking an order dismissing the case.

Held: Plaintiff’s motion for summary judgment is denied.
Defendant’s cross-motion for summary judgment is granted.

Dated: March 18, 2004

Neville Peterson LLP (Michael K. Tomenga, George W. Thompson
and Julia S. Padierna-Peralta) for Cargill, plaintiff.

Peter D. Keisler, Assistant Attorney General; Barbara S.
Williams, Attorney-in-Charge, International Trade Field Office,
Mikki Graves Walser, Commercial Litigation Branch, Civil Division,
United States Department of Justice; of counsel, Beth C. Brotman,
Office of the Assistant Chief Counsel, United States Bureau of
Customs and Border Protection, for the United States, defendant.

OPINION

TSOUCALAS, Senior Judge: Plaintiff, Cargill, Incorporated

(“Cargill”) moves pursuant to USCIT R. 56 for summary judgment on

the ground that there is no genuine issue as to any material facts.
Court No. 00-04-00189 Page 2

Defendant cross-moves for summary judgment seeking an order

dismissing the case.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 28

U.S.C. § 1581(a) (2000).

STANDARD OF REVIEW

On a motion for summary judgment, the Court must determine

whether there are any genuine issues of fact that are material to

the resolution of the action. See Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 248 (1986). A factual dispute is genuine if it might

affect the outcome of the suit under the governing law. See id.

Accordingly, the Court may not decide or try factual issues upon a

motion for summary judgment. See Phone-Mate, Inc. v. United

States, 12 CIT 575, 577, 690 F. Supp. 1048, 1050 (1988). When

genuine issues of material fact are not in dispute, summary

judgment is appropriate if a moving party is entitled to judgment

as a matter of law. See USCIT R. 56; see also Celotex Corp. v.

Catrett, 477 U.S. 317, 322-23 (1986).

DISCUSSION

I. Background

The merchandise subject to this action was entered in the port

of Chicago, Illinois between March 19, 1996, and April 26, 1996.
Court No. 00-04-00189 Page 3

See Summons. The subject merchandise involves thirteen consumption

entries covering merchandise identified as “deodorizer distillate”

on the commercial invoices. See Mem. Supp. Def.’s Opp.’n Pl.’s

Mot. Summ. J. & Supp. Def.’s Cross-Mot. Summ. J. (“Customs’ Mem.”)

at 2. The subject merchandise is a residual by-product attained

during the deodorization process of edible vegetable oils, which

removes unwanted constituents during refining. See Compl. ¶ 7.

The United States Customs Service1 (“Customs”) classified the

imported merchandise under heading 3824 of the United States

Harmonized Tariff Schedule (“HTSUS”), subject to a duty rate of 3

cents per kilogram, plus 12.2 percent ad valorem. See id. ¶ 12.

Plaintiff filed a timely protest and application for further review

with Customs challenging the classification of the subject

merchandise under HTSUS 3824.90.28. See id. ¶ 13. Cargill

requested reliquidation of the entries under subheading 3823.19.40,

which carries a duty rate of 4.4 percent ad valorem. See id. On

July 29, 1999, Customs issued Headquarters Ruling Letter (“HRL”)

960311, holding that deodorizer distillate imported with a mixture

of fatty acids that contains 5 percent or more of tocopherols is

classifiable under subheading 3824.90.28, while a mixture of fatty

acids containing less than 5 percent by weight of tocopherols is

1
The United States Customs Service was renamed the Bureau
of Customs and Border Protection of the Department of Homeland
Security, effective March 1, 2003. See H.R. Doc. No. 108-32
(2003).
Court No. 00-04-00189 Page 4

classified under 3824.90.9050. See Customs’ Mem. Ex. D at 3. In

reaching its decision, Customs states: “We agree [with Cargill’s

opinion that] the deodorizer distillate is not prima facie

classified in heading 3823, and it is not classified in heading

3823 by virtue of [Rule 1 of the General Rules of Interpretation,

HTSUS (‘GRI 1’)]. However, we disagree with the protestant’s

opinion concerning heading 3824.” Id. at 2. Accordingly, Customs

found that since the deodorizer distillate is not classifiable

under heading 3823, by virtue of GRI 1, and is not elsewhere

specified or included in the tariff, then pursuant to GRI 1, the

merchandise is classifiable under heading 3824. See id. at 2-3.

The HTSUS sections relevant to the Court’s discussion are set

forth below:

3823 Industrial monocarboxylic fatty acids; acid oils
from refining; industrial fatty alcohols:

Industrial monocarboxylic fatty acids; acid
oils from refining:

3823.11.00 Stearic acid

3823.12.00 Oleic acid

3823.13.00 Tall oil fatty acids

3823.19 Other:

3823.19.20 Derived from coconut, palm-
kernel or palm oil

3823.19.40 Other . . . 4.4%

. . . .
Court No. 00-04-00189 Page 5

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; residual products of the
chemical or allied industries, not elsewhere
specified of included:

. . . .

3824.90 Other:
Other:
Mixtures containing 5
percent or more by weight
of one or more aromatic
or modified aromatic
substances:

. . . .

3824.90.28 Other . . . 3¢/kg +
12.2%

II. Contentions of the Parties

A. Cargill’s Contentions

Cargill complains that Customs wrongly liquidated or

reliquidated the subject merchandise under subheading 3824.90.28

instead of the more specific subheading 3823.19.40. See Pl.’s Mem.

Supp. Mot. Summ. J. (“Cargill’s Mem.”) at 1-32. Cargill argues

that, by applying GRI 1, the imported deodorizer distillate is

prima facie classifiable under heading 3823. See id. at 14-18.

Cargill asserts that the classification of merchandise begins with

GRI 1. See id. at 13 (noting that “GRI 1 provides that

classification is to be determined ‘according to the terms of the
Court No. 00-04-00189 Page 6

headings and any relative section or chapter notes’” (quoting GRI

1)). Cargill maintains that heading 3823 “describes monocarboxylic

fatty acids, regardless of whether they are presented separately or

together in a combination or mixture.” Cargill’s Mem. at 14.

Relying on the explanatory notes of the HTSUS (“Explanatory Notes”)

Cargill states that merchandise described by heading 3823 may

contain substances not classifiable under Section VI but excludes

separate chemically defined elements or compounds. See id. at 14-

15. Consequently, Cargill argues that “there is no reason for the

Court to find a narrower meaning of the terms of Heading 3823

here.” Id. at 16.

Cargill further argues that heading 3823 is an eo nomine

provision because it specifically describes a class or kind of

merchandise by name. See id. Absent contrary legislative intent,

such a provision “includes all forms of the described merchandise.”

Id. Consequently, Cargill argues, heading 3823 includes all

monocarboxylic fatty acids, including those “that occur as natural

combinations or mixtures of more than one of such fatty acid.” Id.

Furthermore, Cargill asserts that the subject merchandise is

imported in bulk tanks for industrial consumers and, therefore,

falls within the definition of industrial. “The term ‘industrial’

in Heading 3823 refers to the condition in which the merchandise is

imported, i.e., in bulk, for industrial consumers.” Id. at 17.
Court No. 00-04-00189 Page 7

Consequently, since heading 3823 specifically provides for the

classification of the subject merchandise, Cargill argues that

Customs is precluded from classifying it under 3824, the “basket”

chemical provision, “which is limited to preparations of the

chemical or allied industries that are not elsewhere specified or

included.” Id.

Cargill further argues that the Explanatory Notes to heading

3823 indicate that industrial monocarboxylic fatty acids are

generally obtained by the saponification2 or hydrolysis of natural

fats or oils. See id. at 18-19. According to Cargill, the subject

merchandise is obtained “during the deodorization stage in which

the [crude] vegetable oil is subjected to steam distillation under

a vacuum to remove substances that are undesirable in edible

vegetable oil.” Id. Cargill also asserts that the exemplars of

the merchandise covered by heading 3823 include an article referred

to as “fatty acid distillate,” which is defined by the method of

its production and physical characteristics. See id. at 19.

Cargill maintains that the manner in which the subject merchandise

is produced and its physical characteristics is the same as the

“fatty acid distillate” described in the Explanatory Notes. See

2
“Saponification” is defined as “the decomposition of a
fat by the addition of an alkali which combines with its fatty
acids to form a soap, the remaining constituent, glycerine, being
consequently liberated.” Oxford English Dictionary 474 (2nd ed.
1989).
Court No. 00-04-00189 Page 8

id. Specifically, the fatty acid distillate “is characterized by

a high free fatty acid content.” Id. (quoting Explanatory Notes).

Cargill states that free fatty acids predominate in the subject

merchandise over any other substance and, therefore, has the

characteristic of a high free fatty acid content and should have

been classified under heading 3823. See id. at 19-20. Cargill

asserts that the Explanatory Notes merely describe high free fatty

acid content as a characteristic of fatty acid distillate. See id.

at 24. The Explanatory Notes do not set out “any minimum

percentage of free fatty acid content for ‘fatty acid distillate.’”

Id. Since no tariff definition of “high free fatty acid” exists,

Cargill maintains that “if there is no legislative intent to the

contrary, the tariff terms are to be construed in accordance with

their common or popular meaning.” Id. Cargill, citing various

dictionary definitions of the word “high,” argues that the term

means greater than others or prominent in rank or standing. See

id. at 25. Since the free fatty acids contained in the subject

merchandise are greater than any other substance, Cargill deduces

that it qualifies as a “fatty acid distillate” described in the

Explanatory Notes. See id. at 24. Cargill maintains that its

merchandise “is correctly characterized by a ‘high’ free fatty acid

content and thus, appropriately classified under HTSUS Heading

3823,” instead of the “basket” provision, heading 3824. Id. at 25.

Classification under heading 3824 is precluded pursuant to GRI 1
Court No. 00-04-00189 Page 9

because heading 3823 is the more specific heading. See id. at 26-

27.

Finally, Cargill contends that Customs’ HRL 960311 is not

entitled to Skidmore respect because it is based on a number of

assumptions that have no analytical or factual support. See id. at

27-28 (referencing Skidmore v. Swift & Co., 323 U.S. 134 (1944)).

Moreover, Cargill points out that “the ruling was not subject to

formal notice and comment procedures, nor was it adopted as a part

of a rulemaking process.” Id. at 31. Cargill deduces that HRL

960311 lacks thoroughness, contains unsupported assertions and

contains invalid reasoning. See id. at 28-29. While HRL 960311 is

consistent with previous rulings, Cargill argues that “those

rulings suffer from the same deficiencies that it does.” Id. at

29. Furthermore, Cargill contends that HRL 960311 contravenes

judicial precedent and implicitly applies the “more than” doctrine

which was rejected by the United States Court of Appeals for the

Federal Circuit in JVC Co. of Am. v. United States, 234 F.3d 1348,

1353-54 (Fed. Cir. 2001). See Cargill’s Mem. at 30-31.

B. Customs’ Contentions

Customs replies that it properly classified the imported

deodorizer distillate under subheading 3824.90.28. See Customs’

Mem. at 6-31. Customs points out that “the first step in analyzing

a classification issue is to examine the terms of the provision at
Court No. 00-04-00189 Page 10

issue in order to determine legislative intent.” Id. at 9

(citation omitted). Turning to the GRI for guidance, Customs

concludes that “when determining whether an imported good is

classifiable within the scope of a provision encompassing a named

material or substance, and the good is a mixture, the essential

character of the good must be determined in order to ascertain

whether or not it falls within the scope of the tariff provision.”

Id. at 10-11. Customs asserts that explanatory note VIII to GRI

3(b) elucidates the factors which determine essential character,

“by the nature of the material or component, its bulk, quantity,

weight or value, or by the role of a constituent material in

relation to the use of the goods.” Id. at 11-12 (emphasis in

original omitted). Accordingly, Customs concludes that an

essential character analysis pursuant to GRI 2(b) and GRI 3(b)

reveals that the deodorizer distillate’s essential character is

derived from its tocopherol rather than its fatty acid content.

See id. at 27-31. The subject merchandise does not derive its

value from its fatty acid content but from its non-fatty acid

component. See id. at 30.

Customs also points out that Rule 1(a) of the Additional

United States Rules of Interpretation (“ARI”) sets forth specific

requirements for classification under a “principal use” provision.

See id. at 12-13. Customs maintains that “the classification of
Court No. 00-04-00189 Page 11

merchandise pursuant to ARI 1(a) is controlled by the use of the

‘class or kind’ of merchandise to which the goods belong and not

the ‘actual’ use to which the specific imported merchandise is

put.” Id. at 12 (citing Primal Lite, Inc. v. United States, 182

F.3d 1362 (Fed. Cir. 1999)). Accordingly, Customs argues that in

reading the GRIs and ARIs together, the imported deodorizer

distillate “must be classified based upon that constituent

substance from which it derives its essential character and a

determination must be made as to whether or not the constituent

substances from which it derives its essential character is of the

same class or kind as ‘industrial monocarboxylic fatty acids.’” Id.

at 13.

Since industrial monocarboxylic fatty acids is not statutorily

defined, Customs asserts that “the correct meaning of the phrase is

its common meaning, in the absence of a proven commercial meaning

different from the common meaning or contrary to legislative

intent.” Id. at 14. While there is no definition for industrial

monocarboxylic fatty acids in any standard or technical lexicons,

Customs opines that the phrase’s meaning can be gleaned from the

definitions of the individual terms. See id. at 15. Customs

agrees with Cargill that “commercially, ‘industrial monocarboxylic

fatty acids’ is a technical way of identifying a class of fatty

acids which consists of ‘mixtures or blends of fatty acids.’” Id.
Court No. 00-04-00189 Page 12

at 16. Furthermore, Customs acknowledges that the kinds of fatty

acids covered by heading 3823 are all mixtures or blends of fatty

acids. See id. at 16-18. Customs argues, however, that such

covered fatty acids are between 90 percent to 100 percent fatty

acids with only de minimus amounts of non-fatty acid constituents.

See id. at 17-18. A “class or kind” analysis in this case would

show that the subject merchandise is not included in the class of

goods commercially used as industrial monocarboxylic fatty acids.

See id. at 18. Customs maintains that the deodorizer distillate

does not have the same general characteristic as the kinds of fatty

acids contemplated by the tariff term “industrial monocarboxylic

fatty acids.” See id. at 19.

Customs also asserts that the fatty acids encompassed by

heading 3823 contain a higher percentage of fatty acids than the

subject merchandise, 90 percent compared to less than 50 percent.

See id. The imported deodorizer distillate is not used the same

way as the fatty acids encompassed by heading 3823, which “are used

as commercial fatty acids or their constituent chemical fatty acid

components are isolated for specific applications.” Id. Rather,

the subject merchandise “is imported as a primary source material

for tocopherols and sterols.” Id. at 20. Commerce asserts that it

would be impractical for the imported deodorizer distillate to be

used for its fatty acid component. See id. Cargill’s exhibits
Court No. 00-04-00189 Page 13

demonstrate that “the value of the deodorizer distillate depends

upon the content of the unsaponifiables, pricing is based upon

tocopherol content and stigmasterol content, or both, depending on

market demand for each ingredient.” Customs’ Mem. at 20; see

Cargill’s Mem. at Exs. B and C.

While Customs concedes that the imported deodorizer distillate

is “obtained from fats and oils which have been subjected to vacuum

distillation in the presence of steam as part of a refining

process,” Customs argues that the deodorizer distillate is not a

fatty acid distillate covered by explanatory note 5 to heading

3823. Id. at 23. The imported deodorizer distillate does not have

a sufficiently “high” free fatty acid content to be classified as

monocarboxylic fatty acids under heading 3823. The deodorizer

distillate has at best a 50 percent fatty acid content whereas the

fatty acid mixtures encompassed by the heading contain at least 90

percent fatty acids. See id. Commercially “high” free fatty acid

is based on the amount of unsaponified matter contained in the

deodorizer distillate and not upon the actual dry weight of the

free fatty acids. See id. A deodorizer distillate with 10 percent

or more of unsaponifiable matter is considered to be low in fatty

acids whereas a deodorizer distillate with less than 5 percent

unsaponifiable matter is considered “high” in acidity and, thus,

characterized by a high free fatty acids content. See id. at 23-
Court No. 00-04-00189 Page 14

24. Here, the deodorizer distillate contained more than 10 percent

unsaponifiable matter and was considered to be low in free fatty

acids. See id. Accordingly, Customs contends that the deodorizer

distillate was properly classified under heading 3824 because it is

a by-product of the oil refining industry as required by the terms

in that heading. See id. at 31. “The deodorizer distillate is

similar to the examples of the residual products of chemical or

allied industries in the Explanatory Notes to Heading 3824 . . . .”

Id. In addition, the subject merchandise is a by-product used,

after importation, for the extraction of various substances which

are used to manufacture other products. See id.

Finally, Customs asserts that HRL 960311 is entitled to

Skidmore respect because Customs has specialized experience in the

classification of merchandise. Customs relied on this expertise in

HRL 960311 to give “a reasoned analysis of the proper

classification of the merchandise at issue here.” Id. at 37.

Customs’ decision is supported “by the plain language of the

competing provisions, basic tenets of classification, and the

framework of the HTSUS as it applies to fatty acids, mixtures of

fatty acids, and their derivatives.” Id. at 38. Customs also

maintains that HRL 960311 is consistent with prior classifications

of similar merchandise. See id. at 39-40.
Court No. 00-04-00189 Page 15

III. Analysis

A. Motion for Summary Judgment

Determining whether imported merchandise was classified under

the appropriate tariff provision entails a two-step process. See

Sabritas, S.A. de C.V. v. United States, 22 CIT 59, 61, 998 F. Supp

1123, 1126 (1998). First, the proper meaning of specific terms in

the tariff provision must be ascertained. Second, whether the

imported merchandise falls within the scope of such term, as

properly construed, must be determined. See Sports Graphics, Inc.

v. United States, 24 F.3d 1390, 1391 (Fed. Cir. 1994). The first

step is a question of law and the second is a question of fact.

See id.; see also Universal Elecs., Inc. v. United States, 112 F.3d

488, 491 (Fed. Cir. 1997). Pursuant to 28 U.S.C. § 2639(a)(1)

(1994), Customs’ classification is presumed correct and the party

challenging the classification bears the burden of proving

otherwise. See Universal Elecs., 112 F.3d at 491. This

presumption, however, applies only to Customs’ factual findings,

such as whether the subject merchandise falls within the scope of

the tariff provision, and not to questions of law, such as Customs’

interpretation of a particular tariff provision. See Sabritas, 22

CIT at 61, 998 F. Supp. at 1126; see also Universal Elecs., 112

F.3d at 491; Goodman Mfg., L.P. v. United States, 69 F.3d 505, 508

(Fed. Cir. 1995). When there are no material issues of fact in

dispute, as is admitted by both parties in the present case, the
Court No. 00-04-00189 Page 16

statutory presumption of correctness is irrelevant. Goodman Mfg.,

69 F.3d at 508.

The ultimate question in every tariff classification is one of

law; “whether the merchandise is properly classified under one or

another classification heading.” Bausch & Lomb, Inc. v. United

States, 148 F.3d 1363, 1365 (Fed. Cir. 1998). Where, as in the

instant case, there is no disputed material issue of fact to be

resolved by trial, disposition by summary judgment is appropriate.

Pursuant to 28 U.S.C. § 2640(a) (1994), Customs’ classification

decision is subject to de novo review based upon the record before

the Court. Accordingly, the Court must determine “whether the

government’s classification is correct, both independently and in

comparison with the importer’s alternative.” Jarvis Clark Co. v.

United States, 733 F.2d 873, 878 (Fed. Cir. 1984).

B. Skidmore Respect

As a preliminary matter, the Court finds that Customs is not

entitled to Skidmore respect. In Skidmore, 323 U.S. at 140, the

Supreme Court set forth the factors a reviewing court is to

consider in determining how much weight an agency’s decision is to

be afforded. The amount of respect an agency’s decision is

afforded by a court “will depend upon the thoroughness evident in

its consideration, the validity of its reasoning, its consistency

with earlier and later pronouncements, and all those factors which
Court No. 00-04-00189 Page 17

give it the power to persuade, if lacking power to control.” Id.

The power to persuade of each Customs’ classification ruling may

vary depending on the Skidmore factors articulated in United States

v. Mead, 533 U.S. 218 (2001). See Structural Indus., Inc. v.

United States, 356 F.3d 1366, 1370 (Fed. Cir. 2004). Applying

these factors to the case at bar, the Court finds that Customs did

not give thorough consideration and provide valid reasoning in HRL

960311.3 The Court recognizes that Customs classification rulings

are entitled to “a respect proportional to [their] ‘power to

persuade’,” Mead, 533 U.S. at 235 (quoting Skidmore, 323 U.S. at

140), but the Court has an “independent responsibility to decide

the legal issue regarding the proper meaning and scope of the HTSUS

terms.” Mead Corp. v. United States, 283 F.3d 1342, 1346 (Fed.

Cir. 2002) (citing Rocknel Fastener, Inc. v. United States, 267

F.3d 1354, 1358 (Fed Cir. 2001)).

C. Classification Under Heading 3823

Cargill argues that the application of GRI 1 renders the

imported deodorizer distillate as prima facie classifiable under

heading 3823, HTSUS. See Cargill’s Mem. at 14-18. Cargill

contends that this heading encompasses a class or kind of

merchandise, industrial monocarboxylic fatty acids, which includes

3
The Court notes, however, that Customs has specialized
experience which can aide the Court in its review of the questions
at issue in this case. See Mead, 533 U.S. at 234.
Court No. 00-04-00189 Page 18

the subject merchandise. See id. If Cargill is correct that the

deodirizer distillate is classifiable under heading 3823, then

Customs’ classification under heading 3824, a “basket” provision,

would be incorrect. The classification of imported merchandise

under a “basket” provision is only appropriate when there is no

other tariff category that covers the merchandise more

specifically. See EM Indus., Inc. v. United States, 22 CIT 156,

165, 999 F. Supp. 1473, 1480 (1998) (stating that “‘[b]asket’ or

residual provisions of HTSUS Headings . . . are intended as a broad

catch-all to encompass the classification of articles for which

there is no more specifically applicable subheading”).

Consequently, the Court must first determine whether the imported

deodorizer distillate is more specifically classifiable under

heading 3823. See Lynteq, Inc. v. United States, 976 F.2d 693, 698

(Fed. Cir. 1992).

Pursuant to GRI 1, the definition and scope of terms of a

particular provision is to be determined by the wording of the

statute and any relevant section or chapter notes. See Sabritas,

22 CIT at 62, 998 F. Supp. at 1126-27. GRI 1 states that

“classification shall be determined according to the terms of the

headings and any relative section or chapter notes . . . .”

Although Cargill asserts that heading 3823 is an eo nomine

provision, the Court finds that, for the reasons set forth below,
Court No. 00-04-00189 Page 19

heading 3823 is not an eo nomine provision but rather a designation

for goods by class.

If a tariff term is not statutorily defined in the HTSUS and

its intended meaning cannot be discerned from legislative history,

then the definition is determined by ascertaining its common and

commercial meaning. See Lynteq, 976 F.2d at 697-98; see also Mita

Copystar Am. v. United States, 21 F.3d 1079, 1082 (Fed. Cir. 1994).

To ascertain a tariff term’s common meaning, the Court may consult

dictionaries and scientific authorities, as well as its own

understanding of the term. See Brookside Veneers, Ltd. v. United

States, 847 F.2d 786, 789 (Fed. Cir. 1998), cert. denied, 488 U.S.

943 (1988). The common and commercial meaning of a term is

presumed to be the same. See Sarne Handbags Corp. v. United

States, 24 CIT 309, 316, 100 F. Supp. 2d 1126, 1133 (2000). The

Court, in determining the definition of tariff terms, may also use

the Explanatory Notes, which provide guidance in interpreting the

language of the HTSUS. See Bausch & Lomb, Inc. v. United States,

21 CIT 166, 174, 957 F. Supp. 281, 288 (1997), aff’d, 148 F.3d at

1363.4

4
The Explanatory Notes are not legally binding on the
United States, yet they “generally indicate the ‘proper
interpretation’ of provisions within the HTSUS . . . [and] are
persuasive authority for the Court when they specifically include
or exclude an item from a tariff heading.” Sabritas, 22 CIT at 62,
998 F. Supp at 1127.
Court No. 00-04-00189 Page 20

While heading 3823 encompasses “industrial monocarboxylic

fatty acids; acid oils from refining; industrial fatty alcohols,”

see HTSUS 3823, the definition of “industrial monocarboxylic fatty

acids” is not specifically defined in the HTSUS or in the relevant

legislative history. Consequently, the Court must determine, as a

matter of law, the common and commercial meaning of the phrase.

See E.M. Chems. v. United States, 920 F.2d 910, 912 (Fed. Cir.

1990). While the definition of the phrase is not found in any

standard or technical dictionaries, its meaning may be constructed

based upon the definition of the individual terms. A carboxylic

acid “may be classified in terms of the number of carboxyl (-COOH)

groups it contains. If one carboxyl group [exists], it is

designated as monocarboxylic . . . .” Van Nostrand’s Scientific

Encyclopedia 508 (7th ed. 1989). Fatty acid is “an organic

monobasic acid . . . derived from the saturated series of aliphatic

hydrocarbons . . . .” McGraw-Hill Dictionary of Scientific and

Technical Terms 780 (6th ed. 2003).

Cargill asserts that the Explanatory Notes to heading 3823

indicate that monocarboxylic fatty acids “are generally

manufactured by the saponification or hydrolysis of natural fats or

oils.” See Cargill’s Mem. at 18. In addition, Cargill maintains

that “[t]he method of production and physical characteristics [of

the exemplar labeled fatty acid distillate] match exactly the
Court No. 00-04-00189 Page 21

method of production and physical characteristics of the subject

deodorizer distillate.” Id. at 19. Accordingly, Cargill contends

that the imported deodorizer distillate is a monocarboxylic fatty

acid under the description contained in the Explanatory Notes, and

consequently prima facie classifiable under heading 3823. The

Court agrees with Cargill and finds that the imported deodorizer

distillate constitutes “monocarboxylic fatty acids.” The

deodorizer distillate is a by-product of the refining of crude

vegetable oils and contains free fatty acids, including oleic,

linoleic, stearic, palmitic and linolenic acids, and is obtained

through the process described by the Explanatory Notes to heading

3823.

In drafting the HTSUS, Congress thought it appropriate to add

the term “industrial” before the phrase “monocarboxylic fatty

acids.” Consequently, the Court must determine whether the

imported deodorizer distillate constitutes monocarboxylic fatty

acids within the scope of the definition of industrial. Cargill

argues that “industrial” refers to the condition in which

merchandise is imported, i.e. in bulk for industrial consumers.

See Cargill’s Mem. at 17. The Court does not agree. The common

definition of the term “industrial” is “of a quality suitable for

industrial use.” Oxford English Dictionary 897 (7th ed. 1989). In

heading 3823, the term “industrial” is an adjective describing the
Court No. 00-04-00189 Page 22

manner in which monocarboxylic fatty acids are to be used. While

heading 3823 provides the more specific description of deodorizer

distillate by referring to its dominant component, monocarboxylic

fatty acids, the Court finds that heading 3823 is a use provision,

describing a class or kind of merchandise by name. The

classification decision turns on whether the imported deodorizer

distillate can be characterized as containing industrial

monocarboxylic fatty acids, that is whether the monocarboxylic

fatty acids are “employed, required or used in industry.”

Webster’s II New Riverside University Dictionary 625 (1988).

Consequently, the Court holds that the deodorizer distillate is not

prima facie classifiable under heading 3823.

Cargill alternatively argues that if the imported deodorizer

distillate is prima facie classifiable under two headings, either

heading 3823 or 3824, then, pursuant to GRI 2(b) and GRI 3(a) the

subject merchandise should be classified under heading 3823. See

Cargill’s Mem. at 17 n.4. The Court finds that an analysis under

either GRI 2(b) or GRI 3(a) excludes the deodorizer distillate from

classification under heading 3823. This Court has noted that GRI

2(b) instructs that “any reference to goods of a given material or

substance shall be taken to include a reference to goods consisting

wholly or partly of such material or substance.” Pillowtex Corp.

v. United States, 21 CIT 1154, 1157, 983 F. Supp. 188, 191 (1997),
Court No. 00-04-00189 Page 23

aff’d, 171 F.3d 1370 (Fed. Cir. 1999). Plaintiff, in that case,

claimed that its comforters filled with down should be classified

as a “comforter of cotton” because GRI 2(b) extended the terms of

a heading to include merchandise only partially comprised of the

named material, and GRI 3(b) required classification based upon the

essential character of the merchandise. See id. According to the

plaintiff, its merchandise’s essential character was the part of

the good which predominated by weight, i.e. the cotton outer shell

of the comforter.

In the case at bar, Cargill makes the a similar unconvincing

argument. Cargill argues that the imported deodorizer distillate

should be classified as an “industrial monocarboxylic fatty acid”

because its free fatty acid content is in greater quantity than any

other component. See Cargill’s Mem. at 23-25. Tariff terms,

however, should be interpreted to avoid absurd or anomalous

results. See Pillowtex, 21 CIT at 1157, 983 F. Supp. at 191. An

essential character analysis made according to GRI 2(b) and GRI

3(b) reveals that the essential character of the imported

deodorizer distillate is not derived from its fatty acid content.

Moreover, ARI 1 dictates how classification should be construed

when a classification decision is controlled by use. Rule 1(a) of

the ARI deals with “principal use” provisions while ARI 1(b) deals

with “actual use” provisions. See Primal Lite, 182 F.3d at 1363.
Court No. 00-04-00189 Page 24

The rule states:

a tariff classification controlled by use (other than
actual use) is to be determined in accordance with the
use in the United States at, or immediately prior to, the
date of importation, of goods of that class or kind to
which the imported goods belong, and the controlling use
is the principal use.

ARI 1(a) (emphasis added). “Principal use” means the use which is

greater than any other single use of the good. See Minnetonka

Brands, Inc. v. United States, 24 CIT 645, 651, 110 F. Supp. 2d

1020, 1027 (2000). The “principal use” provision is used to

classify particular merchandise according to the ordinary use of

such merchandise. See Primal Lite, 182 F.3d at 1364-65 (construing

ARI 1(a) as calling for a “determination as to the group of goods

that are commercially fungible with the imported goods”).

The Court finds that the deodorizer distillate’s essential

character is not of the same class or kind as industrial

monocarboxylic fatty acids encompassed by heading 3823. While the

imported deodorizer distillate’s predominant component is free

fatty acids, it contains less than 50 percent free fatty acids.

Furthermore, the subject merchandise is not imported, obtained or

used for its fatty acid content. Rather, the subject merchandise

is used as a source material for its other components, specifically

tocopherol and sterol. Heading 3823 specifically encompasses such

fatty acids as stearic acid, oleic acid, tall oil acids and fatty

acids derived from coconut, palm-kernel and palm oil. The
Court No. 00-04-00189 Page 25

composition of these fatty acids indicates that they are comprised

of multiple types of fatty acids with de minimus amounts of non-

fatty acid constituents. The Court agrees with Customs that the

deodorizer distillate is not like the other goods encompassed by

heading 3823 because the fatty acid component of the merchandise is

not the part of the good with any commercial significance. In

addition, the deodorizer distillate is not commercially fungible

with the monocarboxylic fatty acids classified under heading 3823.

D. Customs’ Classification of the Imported Deodorizer
Distillate Under HTSUS Subheading 3824.90.28

The Court finds that the imported deodorizer distillate was

properly classified under subheading 3824.90.28. As demonstrated

in the above analysis, the deodorizer distillate is not encompassed

by heading 3823. Since the merchandise does not fit under a named

provision, it must be classified elsewhere, under the basket

provision 3824.90.28. See EM Indus., 22 CIT at 165, 999 F. Supp.

at 1480. Classification under this provision is proper because the

deodorizer distillate is undisputedly a by-product of a chemical or

allied industry. Furthermore, the deodorizer distillate is similar

to the examples contained in the Explanatory Notes to heading 3824,

of the by-products or residual products of chemical or allied

industries used in the manufacture of other products. See

Explanatory Notes. Deodorizer distillate fits into this category,

as after importation, various substances are extracted from it and
Court No. 00-04-00189 Page 26

used in the manufacture of other products. Additionally, the

subject imported deodorizer distillate contains more than 5 percent

tocopherols and sterols, the components extracted and used in

manufacturing. These are aromatic substances, properly classified

under heading 3824: “Mixtures containing 5 percent of more by

weight of one or more aromatic or modified aromatic substances:

Other.” Accordingly, the Court finds that Customs properly

classified the imported deodorizer distillate under 3824.90.28.

CONCLUSION

The deodorizer distillate does not fall within the common

meaning of the tariff terms “industrial monocarboxylic fatty acids”

because, even though they contain fatty acids, the imported goods

do not have the essential character of the same class or kind of

goods encompassed by heading 3823. The deodorizer distillate is

imported, obtained, and used for its other components, i.e.

tocopherols and sterols, and not its fatty acid content. The types

of fatty acids covered within the class designated “industrial

monocarboxylic fatty acids” are used as commercial fatty acids.

The deodorizer distillate, however, is imported and valued for its

tocopherols and sterols content. Furthermore, the pricing of

deodorizer distillate is determined based on the content of

tocopherol and stigmasterol, depending on the market demand for

each ingredient. Accordingly, Customs properly classified the
Court No. 00-04-00189 Page 27

subject merchandise under 3824.90.28. For the foregoing reasons,

Cargill’s motion for summary judgment is denied and Customs’ motion

for summary judgment is granted. Judgment will be entered

accordingly.

/s/ NICHOLAS TSOUCALAS
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: March 18, 2004
New York, New York