Archer Daniels Midland Co. v. U.S.
| Decision Date | 11 April 2008 |
| Docket Number | Slip Op. 08-40. Court No. 05-00592. |
| Parties | ARCHER DANIELS MIDLAND COMPANY, Plaintiff, v. UNITED STATES, Defendant. |
| Court | U.S. Court of International Trade |
Barnes, Richardson & Colburn, Chicago, IL (Lawrence M. Friedman, William J. Murphy and Nicole Kehoskie Schude), for Plaintiff Archer Daniels Midland Company.
Jeffrey S. Bucholtz, Acting Assistant Attorney General; Barbara S. Williams, Attorney-in-Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Amy M. Rubin); and Beth C. Brotman, Office of Assistant Chief Counsel, International Trade Litigation, U.S Customs and Border Protection, of Counsel, for Defendant United States.
This matter comes before the court on Plaintiff Archer Daniels Midland Company's ("ADM") Motion for Partial Summary Judgment, Defendant United States' Cross-Motion for Summary Judgment, and Plaintiff ADM's Response and Cross-Motion. The United States Bureau of Customs and Border Protection ("Customs") classified entries of "deodorizer distillate" in Harmonized Tariff Schedule of the United States ("HTSUS") subheading 3824.90.28 at 7.9% ad valorem. Plaintiff challenges the classification and contends that a 2002 amendment to Heading 3824 renders deodorizer distillate classifiable in Heading 3807 at 0.1% ad valorem, or in the alternative, classifiable in the newly created duty-free provisions of subheadings 3825.61 or 3825.90. Plaintiff filed this action pursuant to 28 U.S.C. § 2632. The court has jurisdiction in accordance with 28 U.S.C. § 1581(a).
The subject merchandise is a substance commercially known as "vegetable oil distillate" or "deodorizer distillate" ("DOD") and categorized under Chemical Services Abstract ("CAS") Number 68476-80-2. ADM's Interrogatory Resp. ¶¶ 3, 9. DOD is a residue produced during the process of refining soybean oil whereby vacuum distillation is utilized to remove undesirable flavors and odors from an otherwise edible oil. Id. ¶ 3. The product is a chemical mixture composed of 70-80% free fatty acids but also contains sterols and tocopherols and can embody a number of other materials including tocotrienol, squalene and carotenoids. Id. ¶ 8.
Deodorization is the process by which steam strips crude soybean oil from volatile materials under low atmospheric pressure and high temperature. Id. ¶ 10. Physically, DOD is a translucent material with a brown, red, or yellow hue, which is solid at room temperature. Id. ¶ 8. DOD is primarily used for the recovery of tocopherols and phytosterols, both of which are further used for the production of tocopherol-based vitamin E products, purified phytosterols, distilled methyl esters, vegetable distilled fatty acids, mixed vegetable fatty acids, and vegetable oil residue. Id. ¶ 11.
On July 23, 2003, Plaintiff entered DOD through the port of Chicago. Memorandum in Support of Plaintiff's Cross-Motion for Summary Judgment ("Plaintiff's Response") at 1. Customs classified the merchandise in subheading 3824.90.28 as:
Chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included: mixtures containing 5 percent or more by weight of one or more aromatic or modified aromatic substances: other.
Customs' classification was consistent with the decision of this court in Cargill, Inc. v. United States, 318 F.Supp.2d 1279 (CIT 2004), although amendments had been made to Chapter 38 since the importation of the deodorizer distillate at issue in Cargill. Memorandum in Support of Plaintiff's Motion for Partial Summary Judgment ("Plaintiff's Motion") at 1.
In July 2004 Plaintiff filed a protest with an Application for Further Review contesting Customs' classification of DOD in subheading 3824.90.28. Prior to January 1, 2002, subheading 3824.90.28 covered:
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 or included: Other.
HTSUS 3824.90.28 (2001) (emphasis added); see also Amended Complaint ¶ 31. In the amended tariff schedule that went into effect on January 1, 2002, the language "residual products of the chemical or allied industries, not elsewhere specified or included" was deleted from the description for subheading 3824.90.28. Amended Complaint ¶ 30. At the same time, Heading 3825 was created. Id. ¶ 33. Heading 3825 of the 2002 Harmonized Tariff Schedule provides for:
Residual products of the chemical or allied industries, not elsewhere specified or included; municipal waste; sewage sludge; other wastes specified in note 6 to this chapter: ...
HTSUS Heading 3825 (2002) (emphasis added).
Plaintiff claimed that DOD would be properly classified in HTSUS 3825.61.00 which covers "[o]ther wastes from the chemical and allied industries: Mainly containing organic constituents." HTSUS 3825.61 (2002), see also Amended Complaint ¶ 18, Plaintiff's Motion at 1. In Plaintiffs Amended Complaint, it also argues for classification in Heading 3807 as "vegetable pitch," and in the alternative classification in subheading 3825.90 as "residual products of the chemical or allied industries" other than the wastes specified in Heading 3825. Amended Complaint ¶¶ 28, 41.
On March 10, 2005, Customs issued Ruling HQ 967288 in which it rejected Plaintiff's proposed classification based on a finding that Heading 3825 is reserved for "environmentally sensitive" or "hazardous" substances and therefore does not apply to DOD. Customs Headquarters Ruling Letter No. 967288 (March 10, 2005) ("HQ 967288"); Amended Complaint ¶¶ 19-21. Customs determined that DOD is clearly a "by-product" of the chemical and allied industries, but classifiable in Heading 3824 as a "chemical preparation" and not in Heading 3825 as a "residual product." HQ 967288 at 6. Customs noted that "residual products" for purposes of Heading 3825 are "tantamount to waste product" and that DOD is not "the unadulterated `leftovers' of a manufacturing process." Id.
In defining the scope of Headings 3824 and 3825, Customs stated that prior to 2002 there had not been a need to distinguish between "chemical preparations" and "residual products" of the chemical and allied industries. HQ 967288 at 4. Customs acknowledged that neither term is defined in the HTSUS or the accompanying Explanatory Notes ("ENs") and therefore looked to the available legislative history for Heading 3825. Id. In the absence of House or Senate reports, Customs reviewed the papers and notes relating to the proposal of Heading 3825 at the 12th session of the Harmonized System Review Sub-Committee and its subsequent adoption by Presidential Proclamation. Id. (citing Presidential Proclamation 7515, 66 Fed.Reg. 66,549 (December 18, 2001)). Customs relied on the Sub-Committee's statements analogizing wastes to residual products of the chemical or allied industries. Id. Moreover, Customs stated that the Subcommittee, at the suggestion of the U.S., only intended to create subheadings for waste products that were "(1) environmentally sensitive and whose trans-frontier movement had to be monitored and (2) which were important in international trade." Id. at 5. Based on this, and on the Sub-Committee's comment that "`residual products of the chemical and allied industries' were in fact so nearly similar to other wastes that they should be classified in this new heading," id., Customs concluded that "residual products" for purposes of Heading 3825 refers only to products "that are environmentally sensitive wastes but can be remediated into a useful product." Id. Furthermore, Customs noted that the examples listed in the ENs of products classifiable in Heading 3825, see n. 4 infra, resemble hazardous waste products and that the ENs to Heading 3824 indicate that not all by-products were intended to be moved from Heading 3824.2 Id.
On November 29, 2005, Plaintiff timely commenced this action seeking reliquidation of entries of the merchandise in issue and calculation of duties in accordance with Plaintiffs proposed tariff headings. Complaint ¶ 5. Plaintiff filed a Motion for Partial Summary Judgment seeking adjudication on the issue of whether Heading 3825 is limited to environmentally sensitive substances. Defendant cross-moved for summary judgment. Plaintiff responded and also submitted a cross-motion for summary judgment. In September 2006, Plaintiff filed a motion to amend its statement of material facts. Following an in-court conference, the court granted Plaintiffs motion and permitted Defendant to file a sur-reply relating to the amended version of Plaintiffs statement of material facts.
An entry of summary judgment is appropriate when there are "no genuine issues as to any material fact and ... the moving party is entitled to a judgment as a matter of law." USCIT R. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In fact, on a motion for summary judgment, the court "may not resolve or try factual issues." Phone-Mate, Inc. v. United States, 690 F.Supp. 1048, 12 CIT 575, 577 (1988), aff'd, 867 F.2d 1404 (Fed. Cir.1989) (citing Yamaha Int'l Corp. v. United States, 3 CIT 108, 109 (1982)). Further, while a presumption of correctness attaches to Customs' classification pursuant to 28 U.S.C. § 2639(a)(1), "this presumption `is irrelevant where there is no factual dispute between the parties.'" Bousa, Inc. v. United States, 25 CIT 386, 387 (2001) (citing Rollerblade, Inc. v. United States, 112 F.3d 481, 484 (Fed.Cir. 1997)). Here, both parties agree that there are no disputed issues of material fact, and therefore, the court...
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Archer Daniels Midland Co. v. U.S.
...Customs and held that the product should be classified as a chemical product under 3824.90.28. Archer Daniels Midland Co. v. United States, 559 F.Supp.2d 1347, 1363-64 (Ct. Int'l Trade 2008). Because we agree with ADM that deodorizer distillate is a "residual product" properly classified un......