Krill Oil Classifiable as Animal Extract, Not Animal Oil, Says CIT
Krill oil imported by Jedwards International is classifiable in the HTS as an animal extract, not as an animal oil, said the Court of International Trade in a decision issued March 28 (here). Ruling against proposed classifications set forth by both Jedwards and CBP, the court held that the krill oil does not have a high enough triglyceride content to be considered an animal oil for tariff classification purposes.
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Jedwards had originally entered the krill oil under the duty free HTS subheading 1603.00.90 as an extract of meat, fish or crustaceans (other than clam juice). CBP disagreed, and liquidated it as a chemical product under subheading 3824.90.40 (now 3824.90.41), which includes “fatty substances of animal or vegetable origin and mixtures thereof” and is dutiable at 4.6%. Filing suit at CIT to contest CBP’s determination, Jedwards changed tack and argued the krill oil should instead be classified as an animal oil in chapter 15 of the HTS.
Unswayed by either side’s arguments, CIT found the krill oil, which Jedwards markets as a supplement, is an extract and should be classified as originally entered. Citing prior case law and the Explanatory Notes to the tariff schedule, CIT noted that an “extract” is “a preparation containing the essence of the substance from which it is derived.” Jedwards’ krill oil is obtained “by capturing and extracting substances from krill, which are small aquatic crustaceans.” It also retains the essence of the krill, in that the oil contains only substances that were present in the krill, with the exception of a small amount of ethanol used in the extraction process.
On the other hand, CBP’s classification as a chemical product was based on faulty analysis, said the court. CBP detailed its logic in a ruling on Jedwards’ krill oil. However, that ruling misread the explanatory notes and previous cases on animal extracts. CBP’s proposed subheading is a “residual’ provision that only includes products not classifiable elsewhere in the HTS, and Jedwards’ krill oil is classifiable elsewhere as an extract, said CIT. “On a more practical level,” said CIT, krill oil “does not appear to fit logically alongside ‘nonrefractory mortars and concretes,’ ‘nonagglomerated metal carbides mixed together or with metallic binders,’ and ‘prepared binders for foundry molds or cores,’” said the court.
And though classification as an animal oil under chapter 15, as proposed by Jedwards, “presents a more interesting possibility than Customs’ assessed classification,” the krill oil does not have as high of a triglyceride content as is normally found in animal oils, said CIT. The Explanatory Notes to chapter 15 define “animal oils” as “esters of glycerol with fatty acids.” Noting that esters of glycerol found in animal fats are triglycerides, CIT said oils from animals generally consist of triglycerides with other minor constituents like phospholipids, free fatty acids and other substances. However, Jedwards’ krill oil is only 23% triglycerides, and 53% phospholipids. “Triglycerides are not the ‘predominant’ constituent and phospholipids should only be a ‘minor’ constituent for [Jedwards’] krill oil to be an animal oil within the meaning of Chapter 15,” said CIT.
(Jedwards Int'l, Inc. v. U.S., Slip Op. 16-27, CIT # 11-00031, dated 03/28/16, Judge Gordon)
(Attorneys: John Eustice of Miller & Chevalier for plaintiff Jedwards International; Jennifer LeGrange for defendant U.S. government)