CAFC Reverses CIT on Classification of Deodorizer Distillate
In Archer Daniels Midland Company v. U.S., the Court of Appeals for the Federal Circuit reversed the Court of International Trade regarding the classification of a deodorizer distillate ("DOD"), a residue from the production of edible soybean oil.
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The CAFC agreed with ADM that DOD should be classified under Harmonized Tariff Schedule (HTS) 3825.90 as a residual product of chemical or allied industries, not elsewhere specified or included, which is duty free and not under HTS 3824.90 as chemical products and preparations of the chemical or allied industries, not elsewhere specified or included, which is subject to duty of 7.9% ad valorem.
In the process of obtaining palatable soybean oil by using high-temperature high-vacuum steam distillation, DOD is formed. This residue product is a commercially valuable substance primarily used as feedstock for the recovery of tocopherols (used to produce natural Vitamin E) and phytosterols (used to produce cholesterol-reducing nutritional additives).
Customs and the CIT had relied mainly on the Explanatory Note to HTS 3825.90, which listed four (now five) residual products of the chemical or allied industries, concluding that because DOD was not listed in the Note, DOD could not be classified under HTS 3825.90.
The CAFC disagreed stating that the term "residual products" could not reasonably be construed to be limited to the four or five products listed in the Explanatory Note. Instead, the CAFC considered the ordinary or common dictionary definitions for the term "residual," and determined DOD is a product consisting of the unavoidable residue that remains after unrefined soybean oil is distilled, and thus, it is within the ordinary meaning of the term residual product.
Customs had also contended that DOD could not be within the meaning of the residual products in HTS 3825 because it is also classifiable under chemical products specifically as a by-product mentioned in the Explanatory Note to HTS 3824. In Customs' view, the two HTS headings are mutually exclusive and cannot encompass any of the same products. The CAFC ruled that this argument was without merit.
The CAFC stated that DOD could be classified both under HTS 3824 as a chemical product and under HTS 3825 as a residual product, the Court had to decide which HTS heading was more appropriate.
To resolve this question, the CAFC used GRI 3(a) to determine that DOD, a residual product, was provided for more specifically in HTS 3825 than under a general chemical product HTS 3824. Therefore, the CAFC reversed the CIT's classification decision and ruled that DOD is properly classified under HTS 3825.90.
CAFC decision 08-1342 (dated 03/26/09) available at http://www.cafc.uscourts.gov/opinions/08-1342.pdf