OT:RR:CTF:FTM H250329 TJS
Port Director
Port of Newark, New York
U.S. Customs and Border Protection
1100 Raymond Blvd.
Newark, NJ 07102
Attn: Tarra Speaks, Import Specialist
RE: Application for Further Review of Protest No. 4601-13-100047; Tariff Classification of Donut Fry from Malaysia
Dear Port Director:
This is in reference to the Application for Further Review (“AFR”) of Protest No. 4601-13-100047, timely filed on January 11, 2013 by George R. Tuttle, P.C., on behalf of Western Pacific Oils LLC (“WPO” or “Protestant”), concerning U.S. Customs and Border Protection’s (“CBP”) tariff classification of Donut Fry under subheading 1517.90.90 of the Harmonized Tariff Schedule of the United States (“HTSUS”). WPO claims that the Donut Fry is properly classified under subheading 1511.90.00, HTSUS. In reviewing the AFR, we have also considered a supplemental submission, dated April 15, 2014. Our decision is set forth below.
FACTS:
This AFR concerns the classification of an edible palm oil product known as Donut Fry, which is used as a frying fat to fry donuts or biscuits. Donut Fry is comprised of approximately 90% RBD (Refined, Bleached, and Deodorized) palm oil and 10% palm stearin. RBD palm oil results once crude palm oil is refined, bleached, and deodorized. Palm stearin is the solid fraction of palm oil. Palm stearin is obtained by fractionation, which entails physically separating RBD palm oil into its hard component (stearin) and liquid component (olein). Palm stearin is added to increase the melting point of the palm oil.
According to Protestant’s submission, the subject Donut Fry is manufactured by blending the RBD palm oil and palm stearin in a tank that is heated to approximately 70°C. The tank is heated to ensure that the oil and stearin are fully melted and mixed homogenously. No additives, preservatives, or other chemicals are added to the blend. The oil blend is then crystallized in a “scraped surface heat exchanger” (“SSHE”), sometimes referred to the commercial brand names “Votator” or “Perfector.” In the SSHE, the blend is fed through stainless steel tubes, which are cooled by liquid ammonium. The reduction in temperature results in the crystallization of a substantial portion of the fats in the blend. Scrapers in the tubes remove the crystals from the inside surface of the tubes. Inert nitrogen gas is incorporated during the SSHE process. Protestant states that this is to further enhance the physical appearance of the product and indirectly help preserve product quality by replacing oxygen in the solids with nitrogen. According to Protestant, palm oil consists of about 1,000 different molecules, each of which crystallizes at different temperatures. During the crystallization in the SSHE, the temperature of the palm oil mixture is reduced to about 17-28°C, which results in approximately 70% of the Donut Fry being crystallized. The remaining portion is liquid, made up of the molecules that need lower temperatures to crystallize.
After the SSHE, the mixture is fed into a kneading unit called a “Pin Rotor” where additional minor crystallization takes place and where the mixture is texturized to blend the crystals and liquid together for a homogenized appearance. According to Protestant’s supplemental submission, at the end of the manufacturing process, the texturized blend resembles solid fats such as butter. The finished blend is mechanically extruded into polyethylene bags and placed in 50-lb boxes. The boxes are stored for about two days in a cold warehouse (25°C-30°C) to allow the Donut Fry to stabilize and achieve the required texture and plasticity. The boxes are then shipped to the United States.
The subject Donut Fry was entered on October 4, 2011 under subheading 1511.90.00, HTSUS, which provides for “Palm oil and its fractions, whether or not refined, but not chemically modified: Other.” On November 22, 2011, CBP issued a Customs Form 28 to WPO, requesting a sample and information describing the complete manufacturing process of the Donut Fry. On January 10, 2012, WPO provided responses and a representative sample of the Donut Fry, which were sent to CBP’s Laboratory and Scientific Services (“LSS”). The LSS was unable to issue a complete report without a detailed description of the process by which the liquid oil was cooled and solidified. WPO provided responses on March 16, 2012, March 23, 2012, and May 4, 2012. Based on the additional manufacturing information provided by WPO, the LSS reported that the Donut Fry underwent a process known as texturization using a scraped-surface heat exchanger and was therefore a shortening, classified in heading 1517, HTSUS.
As a result, the Donut Fry entries were rate advanced on June 15, 2012 and liquidated on August 3, 2012 under subheading 1517.90.90, HTSUS, which provides for “Margarine; edible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this chapter, other than edible fats or oils or their fractions of heading 1516: Other: Other: Other.” WPO filed the protest and requested the AFR on January 11, 2013. We have also considered a supplemental submission filed by Protestant on April 15, 2014.
ISSUE:
What is the tariff classification of the Donut Fry?
LAW AND ANALYSIS:
Initially, we note that the matter is protestable under 19 U.S.C. § 1514(a)(2) as a decision on classification. The protest was timely filed on January 11, 2013, within 180 days of liquidation of the entry pursuant to 19 U.S.C. § 1514(c)(3).
Classification of goods under the HTSUS is made in accordance with the General Rules of Interpretation (“GRI”). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied in order. Pursuant to GRI 6, classification at the subheading level uses the same rules, mutatis mutandis, as classification at the heading level.
The 2011 HTSUS headings under consideration are the following:
1511: Palm oil and its fractions, whether or not refined, but not chemically modified
1517: Margarine; edible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this chapter, other than edible fats or oils or their fractions of heading 1516
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In addition, the Explanatory Notes (“EN”) to the Harmonized Commodity Description and Coding System represent the official interpretation of the tariff 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 (Aug. 23, 1989).
The EN to Chapter 15 provides, in relevant part:
With the exception of sperm oil and jojoba oil, animal or vegetable fats and oils are esters of glycerol with fatty acids (such as palmitic, stearic and oleic acids).
They may be either solid or fluid, but are all lighter than water. On fairly long exposure to air they become rancid due to hydrolysis and oxidation. When heated they decompose, giving off an acrid, irritant odour. They are all insoluble in water, but completely soluble in diethyl ether, carbon disulphide, carbon tetrachloride, benzene, etc. Castor oil is soluble in alcohol but the other animal or vegetable fats and oils are only slightly soluble in alcohol. They all leave a persistent greasy stain on paper.
. . .
(B) Headings 15.07 to 15.15 of this Chapter cover the single (i.e., not mixed with fats or oils of another nature), fixed vegetable fats and oils mentioned in the headings, together with their fractions, whether or not refined, but not chemically modified.
Vegetable fats and oils occur widely in nature and are found in the cells of certain parts of plants (e.g., seeds and fruit), from which they are extracted by pressure or by means of solvents.
The vegetable fats and oils classified in these headings are fixed fats and oils - i.e., fats and oils which cannot easily be distilled without decomposition, which are not volatile and which cannot be carried off by superheated steam (which decomposes and saponifies them).
With the exception of, e.g., jojoba oil, vegetable fats and oils are mixtures of glycerides, but whereas palmitic and stearic glycerides, which are solid at room temperature, predominate in solid oils, fluid oils are mainly composed of glycerides which are liquid at room temperature (glycerides of oleic acid, linoleic acid, linolenic acid, etc.).
These headings cover crude fats and oils and their fractions, as well as those which have been refined or purified, e.g., by clarifying, washing, filtering, decolourising, deacidifying or deodorising.
The by-products of the refining of oils, e.g., “oil foots and dregs”, and soap-stocks fall in heading 15.22. Acid oils from refining fall in heading 38.23 and are prepared by decomposing with mineral acid the soap-stock obtained during the refining of crude oils.
The fats and oils covered by these headings are mainly obtained from the oil seeds and oleaginous fruits of headings 12.01 to 12.07, but may also be obtained from vegetable materials classified elsewhere (e.g.: olive oil, oils obtained from the kernels of peaches, apricots or plums of heading 12.12, oils obtained from almonds, walnuts, pignolia nuts, pistachio nuts, etc., of heading 08.02, oil obtained from germ of cereals).
These headings do not cover edible or inedible mixtures or preparations, or vegetable fats and oils that have been chemically modified (heading 15.16, 15.17 or 15.18, unless they have the character of products classified elsewhere, e.g., in headings 30.03, 30.04, 33.03 to 33.07, 34.03).
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EN 15.11 provides:
Palm oil is a vegetable fat obtained from the pulp of the fruits of oil palms. The main source is the African oil palm (Elaeis guineensis) which is native to tropical Africa but is also grown in Central America, Malaysia and Indonesia; other examples are Elaeis melanococca (also known as noli palm) and various species of Acrocomia palms, including the Paraguayan palm (coco mbocaya), originating in South America. The oils are obtained by extraction or pressing and may be of various colours depending on their condition and whether they have been refined. They are distinguishable from palm kernel oils (heading 15.13), which are obtained from the same oil palms by having a very high palmitic and oleic acid content.
Palm oil is used in the manufacture of soap, candles, cosmetic or toilet preparations, as a lubricant, for hot-dipped tin coating, in the production of palmitic acid, etc. Refined palm oil is used as a food stuff, e.g., as a frying fat, and in the manufacture of margarine.
This heading does not cover palm kernel oil or babassu oil (heading 15.13).
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EN 15.17 provides, in relevant part:
This heading covers margarine and other edible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, other than those of heading 15.16. They are generally liquid or solid mixtures or preparations of:
Different animal fats or oils or their fractions;
Different vegetable fats or oils or their fractions; or
Both animal and vegetable fats or oils or their fractions.
The products of this heading, the fats or oils of which may previously have been hydrogenated, may be worked by emulsification (e.g., with skimmed milk), churning, texturation (modification of the texture or crystalline structure), etc., and may contain small quantities of added lecithin, starch, colouring, flavouring, vitamins, butter or other milkfat (subject to the restrictions in Note 1 (c) to this Chapter).
The heading also covers edible preparations made from a single fat or oil (or fractions thereof), whether or not hydrogenated, which have been worked by emulsification, churning, texturation, etc.
The heading includes hydrogenated, inter-esterified, re-esterified or elaidinised fats and oils or their fractions, where modification involves more than one fat or oil.
The principal products of this heading are:
Margarine (other than liquid margarine), which is a plastic mass, generally yellowish, obtained from fats or oils of animal or vegetable origin or from a mixture of these fats or oils. It is an emulsion of the water-in-oil type, generally made to resemble butter in appearance, consistency, colour, etc.
Edible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, other than edible fats or oils or their fractions of heading 15.16; for example, imitation lard, liquid margarine and shortenings (produced from texturised oils or fats).
The heading further includes edible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, of a kind used as mould release preparations.
The heading does not include single fats and oils simply refined, without further treatment; these remain classified in their respective headings even if they are put up for retail sale. The heading also excludes preparations containing more than 15 % by weight of butter or other milkfat (generally Chapter 21).
The heading further excludes products obtained by pressing tallow or lard (heading 15.03) as well as hydrogenated, inter-esterified, re-esterified or elaidinised fats and oils or their fractions, where modification involves only one fat or oil (heading 15.16).
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Protestant initially argues that the subject Donut Fry is prima facie described by the terms of heading 1511.90, HTSUS, as palm oil and its fractions. Citing Michael Simon Design, Inc. v. United States, 501 F.3d 1303, 1307 (Fed. Cir. 2007), Protestant contends that the language of heading 1511, HTSUS, is clear and unambiguous so there is no need to consider the ENs to resolve the classification issue. However, in Michael Simon Design, the court did not afford any weight to the ENs because the tariff provision, heading 9505 and the relative Chapter and Section notes, was unambiguous and the EN language contradicted the court’s precedent. Michael Simon Design, 501 F.3d at 1307. Here, to determine whether the subject Donut Fry is classified in heading 1511, HTSUS, as palm oil and its fractions, or heading 1517, HTSUS, as a preparation of vegetable oil, we must have a clear understanding of the scope of each provision. As discussed below, the ENs clarify the language and scope of headings 1511 and 1517, HTSUS, particularly what amounts to “preparations.”
Heading 1511, HTSUS, covers palm oil and its fractions, whether or not refined, but not chemically modified. Per the EN to Chapter 15, headings 1507 to 1515 do not cover edible or inedible mixtures or preparations, or vegetable fats and oils that have been chemically modified. The EN directs us to classify these products under heading 1516, 1517, or 1518. Heading 1517, HTSUS, covers edible mixtures or preparations of vegetable oils or of fractions of different oils of Chapter 15. Under EN 15.17, heading 1517 covers edible preparations made from a single oil (or fractions thereof), which have been worked by texturation, but it does not include single oils simply refined, without further treatment. Accordingly, texturation is a “further treatment” that advances a single oil into a preparation classifiable in heading 1517, HTSUS. Palm oil that is texturized is therefore precluded from classification in heading 1511 and is classifiable in heading 1517, as a preparation.
To support classification of the Donut Fry as palm oil in heading 1511, HTSUS, Protestant cites Balfour, Guthrie & Co. v. United States, 5 Cust. Ct. 180, C.D. 397 (1940). The issue in Balfour was whether palm oil oleine, which is the liquid portion of palm oil, was classified under the eo nomine provision for palm oil in Paragraph 1732 of the Tariff Act of 1930 or as a nonenumerated manufactured article under Paragraph 1558. The court held that the product was entitled to free entry under Paragraph 1732 as palm oil, noting that the oleine was sold and used as palm oil, and contained all of the natural ingredients of palm oil although in different proportions. Because Balfour involved a different product than Donut Fry and the HTSUS has since superseded the tariff classification paragraphs of the Tariff Act of 1930, we do not consider the case to be particularly instructive here. Nevertheless, we do agree with Protestant’s assertion that the Donut Fry, comprised of RBD palm oil and palm stearin, is similar to the palm oil oleine in that it contains all the natural ingredients of palm oil. Although the Donut Fry is made from a single oil, its manufacturing process precludes its classification in heading 1511, HTSUS.
The question before us is whether the crystallization and texturization performed on the Donut Fry in the SSHE and Pin Rotor advance the palm oil blend into a preparation under heading 1517, HTSUS. Protestant asserts that these processes do not advance the product beyond palm oil and its fractions, but rather prepare the Donut Fry for exportation to the United States. Protestant states that the post-blending operations, including the crystallization and texturization, are primarily done to stabilize the product for ease of handling and transportation, enhance the visual appearance of the product, preserve the quality of the oil, and convert the product into a solid state for convenience of use by the consumer. As discussed above, EN 15.17 expressly includes texturation as a process by which single fats are advanced into a preparation. The texturation of the subject palm oil is a further treatment beyond simple refining, as it adds value to the finished product by stabilizing the product and making it more cosmetically appealing. We find that the crystallization and texturization are processes that remove the Donut Fry from consideration in heading 1511 and into heading 1517 as a “preparation.” Because the Donut Fry is made of a single vegetable oil that has been further treated by texturization, it is properly classified in heading 1517, HTSUS.
Protestant further argues that the LSS mischaracterized the Donut Fry as a “shortening” because shortening is typically an ingredient of a baked good while the Donut Fry is used as a frying oil for donuts or biscuits. Per the EN, heading 1517 covers shortenings, which are produced from texturized oils or fats. The Donut Fry is produced from texturized palm oil. Moreover, the use of the Donut Fry as a frying fat does not preclude it from classification under heading 1517. It also appears that shortenings are used for a variety of applications, including frying. See Taylor Jones, RD, Shortening: Good or Bad? Healthline (Dec. 31, 2016) https://www.thespruceeats.com/what-is-shortening-1328458; and All-Vegetable Shortening, Crisco, https://www.crisco.com/products/vegetable-shortening/all-vegetable-shortening (last visited Mar. 20, 2020). We further note that there is a commercial product called “Donut Fry Shortening” that is comprised entirely of palm oil and, as the name suggests, is marketed and used as a frying oil for donuts. See Donut Frying Shortening, Cargill, https://www.cargill.com/food-bev/na/donut-frying-shortening (last visited Mar. 20, 2020); Admiration ZTF Donut Fry Shortening, Admiration Foods, http://www.admirationfoods.com/products/shortenings/admiration-ztf-donut-fry-shortening/ (last visited Mar. 30, 2020); and Olera, http://www.olera.com/ (last visited Mar. 11, 2020). Thus, regardless of whether WPO refers to the Donut Fry as shortening, we find that the Donut Fry is used and produced in the same manner as shortening.
Protestant claims that there are conflicting CBP rulings on products similar to the subject Donut Fry. In New York Ruling Letter (“NY”) N097199, dated March 16, 2010, CBP classified “100% Palm Fat Blend” under subheading 1511.90.0000 of the Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”). To manufacture the Palm Fat Blend, refined palm oil and refined palm stearin (ratio of 90:10) were thoroughly mixed in a blending tank with antioxidants BHA and BHT and then immediately packed into 50-lb cartons. Conversely, in NY N097198, also dated March 16, 2010, CBP classified “100% Palm Oil Based Shortening” under subheading 1517.90.9090, HTSUSA. In that ruling, refined palm oil and refined palm stearin were thoroughly mixed in a blending tank, and then then rapidly cooled and texturized in a SSHE. CBP held that the SSHE processing added value to the mixture and transformed it into a preparation commonly used as a fat ingredient in a variety of baked goods. Protestant argues that these rulings are conflicting because they classify virtually identical products in different headings. However, NY N097199 and NY N097198 differ significantly in that the palm oil product in NY N097198 was texturized via a SSHE.
In addition to NY N097199 and NY N097198, CBP consistently classifies texturized palm oil products, such as shortening, in heading 1517, HTSUS, and other palm oil products that have not been texturized in heading 1511, HTSUS. See NY N088957 (Jan. 27, 2010) (classifying palm oil shortening in heading 1517, HTSUS); NY N176276 (Aug. 12, 2011) (classifying “Palm Fat Blend Cake Icing” made by mixing refined palm oil and palm stearin in heading 1511, HTSUS); NY N201322 (Jan. 31, 2012) (classifying a mixture of palm stearin and olein in heading 1511, HTSUS; NY N240542 (Apr. 9, 2013) (classifying RBD palm stearin in heading 1511, HTSUS).
Consistent with prior CBP rulings, and pursuant to EN 15.17, we find that texturization constitutes further treatment of the palm oil blend, advancing the product into a preparation of heading 1517, HTSUS. Therefore, the subject Donut Fry is classified in heading 1517, HTSUS, particularly under subheading 1517.90.9090, HTSUSA, which provides for “Margarine; edible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this chapter, other than edible fats or oils or their fractions of heading 1516: Other: Other: Other: Other.”
HOLDING:
By application of GRI 1, the subject Donut Fry is classified under subheading 1517.90.9090, HTSUSA, which provides for “Margarine; edible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this chapter, other than edible fats or oils or their fractions of heading 1516: Other: Other: Other: Other.” The 2011 column one, general rate of duty is 8.8% ad valorem.
You are instructed to DENY the protest in full.
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 re-liquidation 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 of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/ which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
For Craig T. Clark, Director
Commercial and Trade Facilitation Division