Wednesday, March 30, 2016

Krill Oil, Cryptozoology, and Tariff Classification

Podcasts are a terrible thing if you expect to do work or read books while otherwise leading a productive life. Among the many I listen to somewhat regularly is Tetrapod Zoology, from which I learn all kinds of thing about both real and fanciful zoology. It's worth a listen, though it may be a bit of an acquired taste. I came to it through the side door. Co-host Darren Naish is an actual, credentialed scientist who is willing to talk about allegedly unidentified megafauna (e.g., the Loch Ness Monster, Yeti, and Bigfoot), not because they exist but because the notion that they might is entertaining. He and his co-host John Conway are fully comfortable trying to imagine how something as absurd as the Mongolian Death Worm might exist in the real world (because it does not).

Why I am on about this? Because I have been wracking by brain trying to think of puns involving krill and the baleen whales that eat them.

It turns out that people eat krill oil as a dietary supplement, which makes us share at least one thing with baleen whales. In Jedwards International, Inc. v. United States, the question presented to the U.S. Court of International Trade was the proper tariff classification of krill oil. The importer classified the merchandise in 1603.00.90 as "extract and juices of meat, fish or crustaceans . . . ." other than clam juice. This seems like a perfectly good description of the product, which, by the time it gets imported, contains nothing but natural components of the krill and a residual amount of ethanol from the production process. U.S. Customs and Border Protection disagreed and classified the merchandise in 3824.90.40 as a product of the chemical or allied industries, including several miscellaneous chemical products and preparation. To complicate matters, in Court, the plaintiff argued that the correct classification is as an animal fat or oil of Heading 1506 or 1517.

The Court easily eliminated Heading 3824, which is a basket provision for chemical products not elsewhere specified. Since the krill oil is described by at least one other heading, 3824 cannot apply.

To be classified in Chapter 15, the krill oil must be an "animal oil." This is where my limited knowledge of zoology might come in handy. I know, via Wikipedia, that krill are subject to the following taxonomical breakdown:

Kingdom:
Animalia
Phylum:
Arthropoda
Subphylum:
Crustacea
Class:
Malacostraca
Superorder:
Eucarida
Order:
Euphausiacea

From Wikipedia

I also know that creatures in the kingdom Animalia are, by definition, animals. So, this should not be an issue as far as science and the English language is concerned.

But, this is tariff classification we are discussing. In the tariff, an animal oil is defined as "esters of glycerol with fatty acids (such as palmitic, stearic and oleic acids)." This definition is apparently fairly consistent in the literature. The kind of fatty acid found in animal fats is chiefly of triglycerides and small amount of other stuff including free fatty acids.

It turns out that the krill oil is low in triglycerides (23%) and is mostly phospholipids (53%). Since the triglycerides do not predominate, krill oil is not animal oil, at least not according to the Court of International Trade. Despite the product being known commercially as an "oil." Advertising and marketing is evidence to be considered, but does not determine tariff classification.

Having excluded Heading 3824 and Chapter 15, the Court classified the merchandise in 1603.00.90 as an extract of crustaceans. Yummy.

This is one of those cases I tend to find frustrating. The Court relies heavily on the Explanatory Notes for a definition of "animal oils" as esters of glycerol, etc. But the term "animal oil" is not defined in the actual Harmonized Tariff Schedule. That means the Court has added a limitation to the scope of the term "animal oil" by relying, in part, on the Explanatory Notes. In this case, the Court noted that this limitation is consistent with scientific and other lexicographical sources. Consequently, I don't think there is a real problem here.

But, on principle, the Explanatory Notes, in my view, should not be elevated to nearly statutory authority unless there is some ambiguity and the available sources of common and commercial meaning have been exhausted. I HATE the fact that the Explanatory Notes are not available for free to the trade community. If the United States Government expects importers to always consult the Explanatory Notes, they should be available to importers just like the regulations, the tariff, and CBP rulings: free. I know that is not the majority view of the Explanatory Notes. Nevertheless, I think we should consult to the Explanatory Notes less often and with less deference, at least until they are made freely available.



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