Sunflower Seeds

I am falling behind on Rulings of the Week, but not for want of effort. I am keeping up with CIT decisions (more or less). The latest of which is Well Luck Co., Inc. v. United States. The case has to do with the classification of sunflower seeds that have been processed for human consumption. Some have been flavored with spices or other flavorings and dried. All are roasted and salted. The question is the tariff classification, which turns out to be trickier than you think.

The options are HTSUS item 1206.00.00, which covers "Sunflower seeds, whether or not broken." The applicable rate of duty is free and this is what the plaintiff claimed is correct. Customs and Border Protection liquidated the sunflower seeds in HTSUS item 2008.19.90 as "Fruits, nuts and other edible parts of plants, otherwise prepared or preserved . . . not elsewhere specified or included: Nuts, peanuts (ground-nuts) and other seeds . . . ." The applicable rate of duty is 17.9%, which is a significant deviation.

Think about everything you know about classification. In your heart, you already know the answer, don't you? Sunflower seeds are sunflower seeds. They are called out eo nomine in 1206.00.00 and that tariff item covers all forms of the sunflower seed. Easy. On top of that, as between the two, Heading 1206 is more specific in that is covers sunflower seeds. Heading 2008, on the other hand, covers other edible parts of plants not elsewhere specified or included, which is far less specific. Finally, since sunflower seeds are specified in 1206, they cannot be included in 2008.

All of that makes sense.

And yet, your conclusion (and mine) is wrong. Let's try to sort it out.

First off, do not jump to Relative Specificity under General Rule of Interpretation 3(a) until we fully explore the text as required by GRI 1.

Let's agree that if the processed sunflower seeds are classifiable in 1206, they are excluded from 2008. So that is the first question the Court of International Trade had to decide: are processed sunflower seeds "sunflower seeds" for purposes of Heading 1206? Getting the botany out of the way, there was no dispute that the imported product is the edible seed of Helianthus annuus, the common sunflower.

The problem for the plaintiff in this case is that the Explanatory Notes further define sunflower seeds of Heading 1206 as "minimally processed" and having general uses including for the extraction of oil and for sowing. These are not those seeds. They have been processed to add flavoring (even if just salt) and have been heated to an extent that they are no longer suitable for sowing. These are sunflower seeds with the specific use of being a food item. As a result, they are excluded from Heading 1206 and reamin classifiable in Heading 2008.

This conclusion is consistent with the Explanatory Notes. It is also consistent with the overall structure of the HTSUS, which moves from less processed to more highly processed materials. There is no doubt that the imported seeds are more highly processed than similar seeds for oil extraction or sowing. Thus, I don't have much of a problem with this result.

But, I think there is an analytical open question. A few Court of Appeals cases have held that the Explanatory Notes should not be used to impose a restriction on the language of the HTSUS that is not present in the text. See, e.g., Archer Daniels Midland v. U.S. Is that what happened here? Is there an answer to this issue that does not violate that principle?

There are no legal notes to Chapter 12 that exclude processed sunflower seeds. There are also no relevant Section Notes. Suddenly, this is a hard case.

The Court resolved this concern by noting that the meaning of the term "sunflower seed" is actually ambiguous. The lexicographical materials submitted to the Court indicate two distinct meanings. First, there are the raw and minimally processed seeds that remain suitable for oil extraction and for sowing. Those seeds may also be used for human consumption. Although not addressed by the Court, it is worth noting that Heading 1206 includes two statistical suffixes for sunflower seeds for "human use." The suffixes are not relevant to classification, but are indicative that some of the seeds of Heading 1206 are edible by humans.

The second meaning of sunflower seeds is in reference to the prepared snack food, which is no longer capable of general use. Having found two distinct meanings, the term is ambiguous and it makes sense and is legally correct to look to the Explanatory Notes to resolve the ambiguity.

That resulted in a substantial duty increase, which is why I suspect the Federal Circuit will let us know whether it agrees with this analysis. Given Archer Daniels Midland and the related cases, it is a close call on which reasonable judges might differ.

Ruling of the Week 2017.1: Geeks Will Eat Anything

It is a new year and a lot has changed in the world. People in my field are either excited about the possibilities of major changes in trade policy or are horrified by the possibilities of major changes in trade policy.

I have had several calls about whether the U.S. will withdraw from NAFTA, impose new duties on goods made in Mexico by U.S.-based companies, and raise tariffs on goods from China. My answer so far has been, "I wish I knew." The new President and the new Congress will have a lot of authority under domestic law. The bigger questions will relate to how our trading partners respond. The U.S. has agreed many times to hold or lower duties. Going back on those promises will mean violating WTO obligations and multiple free trade agreements. Some people may not care. The U.S. remains fully sovereign and can violate any international agreements it choses. As a former partner used to say, "The WTO has no army."

But, the WTO has the ability to authorize trade retaliation. That means our trading partners will likely raise tariffs on U.S. goods in retaliation for stiffer U.S. tariffs. That makes it harder for U.S. companies to export. Add to that the impact of U.S. tariffs making it harder to import. We could end up with a situation in which domestic producers face higher costs for imported raw materials and components and then can't export their finished goods. That is a bad scenario.

Despite those two paragraphs, I tend to be an optimistic person by nature. I don't really expect the professionals who will be running White House trade policy and Congress to brazenly flout trade agreements and obligations. I don't think anyone wants to start an old fashioned trade war. But, as I said, I can't see the future. It's possible.  We all need to be watching closely. No matter your business needs and policy desires, this is a good time to make sure you have your Senators and Representative on speed dial.

Happy New Year. 2017 will be interesting.

Which brings me to the ruling of the week, N126516 (Oct. 19, 2010), in which we learn that human beings will eat just about anything. In this case, we are talking about snacking on arthropods.

Item 1: Giant toasted leafcutter ants.

Via Wikipedia

Item 2: Oven-baked tarantula spiders.

Also Via Wikipedia

According to the importer, the ants are "grown specially for human consumption" and have a "nutty, bacon-like taste." The spiders, on the other hand are "crisp, crunchy, ready-to-eat snacks." The importer also requested a ruling on scorpions that have been farm raised, detoxified, and are uncooked. For whatever reason, CBP decided it was lacking the necessary information to rule on that tasty snack.

The actual classification of the ants and spiders did not seem to controversial. These are food items prepared and packaged for human consumption. There not being a more specific place these delicacies, CBP classified them as "other prepared or preserved meat, meat offal, or blood." When canned, the classification would be 1602.90.9080; un-canned it is 1602.90.9080.

The importer here is a company called Think Geek Inc. I believe this is its website. Let me just say that this is right in my wheelhouse. I would like one of these and this and this (XL) and even this. Take all my money. I might even trade tariff classifications for gift cards. What I don't want is to eat tarantulas. And, yes, I am fully aware that arthropods provide a valuable source of protein and calories. The fact of the matter is that I get too many calories as it is. Unlike Chicago-mix popcorn and frozen yogurt, I can pass up the spiders and ants.

Is that a Pine Nut?

I watch competitive cooking the way a stereotypical American male might watch baseball. I don't care if it is Top Chef or Chopped at the high end or the dreck that is Cupcake Wars and The Great American Food Truck Race. I don't watch kids compete, that's where I draw the line. I also like to eat. As a result, I am familiar with a lot of strange food items.

Pine nuts are not all that odd. I recently learned a lot more about pine nuts when I read Specialty Commodities Inc. v. United States, which involves the tariff classification of the seed of the Korean pine nut, Pinus koraiensis.

Customs and Border Protection classified these seeds as "Other nuts, fresh or dried, whether or not shelled or peeled: Other: Other: Shelled: Other" in HTSUS item 0802.90.97. The plaintiff believes they are best classified in 0802.90.25 as "Pignolia: Shelled." Clearly, the question is whether the seed of the Koreas pine, from China, is a "Pignolia" for purposes of tariff classification. Note that both classifications are in subheading 0802.90. This question is all about the last two digits.

While it may seem that a pine nut is a pine nut, that is not the case. The Explanatory Notes to the Harmonized System, which are not binding on U.S. Customs and Border Protection but are authoritative interpretations of the international parts of the tariff, state that the nuts of Heading 0802 include "pignolia nuts (seeds of the Pinus pinea)." It turns out that Pinus pinea is the Italian Stone Pine, which is native to Europe, north Africa and the Mediterranean, which would exclude both China and Korea and is in contrast to the Pinus koraiensis.

Seeds of Pinus koraiensis via Wikipedia

What this comes down to is whether the seeds of the Pinus koraiensis are within the common and commercial meaning of "pignola nuts," giving due weight to the Explanatory Notes additional notation of "Pinus pinea."

This case is a good read for anyone interested in learning how customs lawyers muster lexicographical evidence of common and commercial meaning. Plaintiff put forward a number of definitions broad enough to encompass edible pine nuts of any source. These were taken from dictionaries, trade publications, government sources, and various websites. The government put forward a similar collection of more restrictive definitions taken from other sources and challenged the plaintiff's interpretation of some of its sources. None of this competing reference material was sufficient to resolve the matter.

The plaintiff also pointed to prior CBP rulings as evidence that Customs has established the meaning of "pignolia." These rulings, however, relate to infused oils and do not directly address the classification of the pine seeds.

The Court next looked to the historical treatment of pine seeds in U.S. tariff acts. This is something we don't often see. Prior tariffs are only relevant today when the language is similar to the current law, which is often the case when an item is called out by name (or eo nomine). In this case, the Court looked at the 1921 Summaries of Trade and Tariff Information and the Tariff Act of 1922. The government, however, pointed out that neither the subsequent Tariff Act of 1930 nor the 1946 revision use the word "pignolia." This is meaningful because during that time, all pine nuts appear to have been classified as "other" and the seeds of Pinus pinea only subsequently specified as pignolia. Furthermore, a 1968 tariff report indicates that the pignolia nut is gathered in Italy, Portugal and Spain, presumably excluding similar products from China and Korea.

That took the Court back to where we started: the Explanatory Notes. In 1986, the Explanatory Notes used the phrase "pignolia nuts (Seeds of the Pinus pinea)." That language remained in subsequent editions.

This does not resolve the issue because there is no disagreement as to the proper heading and subheading (i.e., to sixth digit), which is as far as the Explanatory Notes go. Nevertheless, the Notes clearly limit pignolia to the European variety. The U.S. drafters of the HTSUS presumably knew that and were also aware of the 1968 report. Taken together, that indicates to the Court of International Trade, that these particular pine nuts are not pignolia for classification purposes.

This is the point where I usually find something in the decision to pick at. Initially, my concern was that the Explanatory Notes insert a limitation to pignolia that is not in the HTSUS and should, therefore, be ignored. That would broaden the meaning beyond seeds of Pinus pinea. But, the Court addressed this saying that there was not sufficient evidence of a common and commercial meaning to establish a conflict with the Explanatory Notes. Touché.

Now, I will go home, open my basket, and make dinner from pine nuts, squid ink, elk loin, and a Boston cream pie. If my entre does not cut it, I will be Chopped.

Ruling of the Week 2016.13: Kimera Koffee

If you have been around here long enough, you know I am a skeptical guy. I believe the consensus of medical science is in a better position than the guy at the supplement store to give medical advice. I also believe that eating or drinking something with the intention of modifying the way your body works is a medical decision whether you are taking a prescription drug or a "natural" supplement. I suspect the prescription drug has a better chance of actually working as advertised than does the supplement, but both are drugs.

With that in mind, I read HQ H268556 (Dec. 15, 2015), which considers the tariff classification of Kimera Koffee. This particular product is about 95% coffee, but it has been "boosted" with taurine, alpha GPC 50%, L-theanine, and DMAE (Deanol). As  result, the coffee is advertised as enhancing cognitive performance, boosting energy levels, improving focus and concentration, and enhancing athletic performance.

The additives are a class of products known a nootropics, also called "smart drugs." Here is a good overview of the science of nootropics from Yale neurologist Dr. Steven Novella. The article does not address the specific additives in Kimera Koffee, but the conclusion is interesting. Stimulants provide a subjective experience of enhanced performance. That makes me think that the caffeine in the coffee might be the nootropic we all already know and love. Personally, I like my nootropic in the form of a cappuccino from Intelligentsia in Chicago.

I'm not saying that the additives in this product don't work. I don't know that, and I suspect they do provide an additional jolt. But, there are a couple legal issues raised.

First, what about the tariff classification? In the ruling, Customs had to decide whether this is coffee of HTSUS Heading 0901 or preparations of coffee in Heading 2101. According to prior rulings, a preparation of coffee includes coffee with sugar, milk, etc. regardless of changes in the finished products' physical characteristics. But, coffee mixed with natural or artificial flavors has been classified as coffee, rather than as a preparation.

Although the added supplements are not flavorings, Customs believes the analysis is similar. This did not get a lot of analysis, and I think it is legally dubious. But, there it is. Customs classified this product as coffee in subheading 0901.21. As a side note, coffee of 0901.21 is exempt from country of origin marking.

The second question I have is whether this should be regulated as a drug. Assuming it falls into the category of supplements rather than drugs, it should be labeled to say that the statements about performance enhancement have not been evaluated by the FDA and that this coffee is not intended to diagnose, treat, cure, or prevent disease. That is the magic get-out-of-FDA-jail-free card for supplement sellers. Section 201(g) of the Food, Drug & Cosmetics Act defines a drug as, in part, "articles (other than food) intended to affect the structure or any function of the body of man or other animals." By its own advertising, this coffee is designed to affect the function of the human brain. By my reading, that is a drug. Of course, I can also get a cup of coffee with my apple pie, making it food. That is enough to take it out of the scope of the Act. Is that the right analysis though? It seems that by adding those ingredients to coffee for the purpose of affecting brain function, the coffee is being used as a delivery system rather than food. If I put insulin in chocolate pudding, is it no longer regulated as a drug?

Lucky for me, this is the Customs Law Blog and I don't need to know the answer to these questions. If you, on the other hand, are a F&D lawyer, please let me know how this plays out for Kimera Koffee and similar "boosted" products.

Ruling of the Week 2016.4: Curtis Stone's Chop Chop

Here is something you may not know about me . . . I watch competitive cooking shows the way a normal guy watches baseball. As far as I am concerned, Alton Brown is the Kenesaw Mountain Landis of cooking and Ted Allen is its Howard Cosell. Consequently, when a ruling (HQ H266149 (Oct. 21, 2015)) from Customs and Border Protection invokes the name of Curtis Stone, I pay attention. In this case, the question was the tariff classification of "the Curtis Stone Chop Chop Deluxe Food Chopper."

Exhibit A:

I suspect someone at Customs is a fan because the sentence "Curtis Stone is a celebrity chef from Australia," is irrelevant to the issue. It is, however, a true statement.

As you can tell from the picture, this is a hand powered chopper with interchangeable blades. The top handle presses down, pushing the food item through the blade and into the receiving container. Simple.

The goods entered the United States classified in 8205.51.30 (3.7%) as handtools (including glass cutters) not elsewhere specified or included; household tools; other. The statistical level refers to "Kitchen and table implements," but that is not really relevant for classification purposes. The customs broker subsequently corrected the entry and asserted that the correct classification is 7323.93.0060 (2%), which covers "Table, kitchen or other household articles . . . of iron or steel, of stainless steel: Kitchen ware." Customs and Border Protection rejected both classifications and went with 8210.00.0000 (3.7%) covering "Hand-operated mechanical appliances, weighing 10 kg or less, used in the preparation . . . of food . . . ."

Problem one for Curtis, who was not actually the protestant, is that the Explanatory Notes to Heading 7323 state that the heading only covers items not more specifically provided for in another heading. Further, the Explanatory Notes exclude from Heading 7323 household articles having the character of tools including cheese graters, mincers, and vegetable mashers. On the other hand, the Explanatory Notes indicate that Chapter 82 covers "Articles of cutlery" and "certain mechanical domestic appliances." To make matters worse, the EN to 8205 states that it covers all hand tools not included in other Headings of Chapter 82. The Chop Chop sits on the countertop when in use and is, therefore, not hand held. That brings us to 8210.

The Explanatory Notes state that 8210 covers non-electric mechanical appliances, not exceeding 10 kg, used in the preparation of food. The Note goes on to say that something is "mechanical" "if it has such mechanisms as crank-handles, gearing, Archimedian screw-actions, pumps, etc.; a simple lever or plunger is not in itself, however, regarded as a mechanical feature  . . . unless the appliance is designed for fixing to a wall or other surface, or is fitted with base plates, etc. for standing on a table, on the floor, etc."

According to Customs, 8210 describes the Chop Chop, which is a sufficient basis on which to exclude it from 7323 and 8205.

But, there is the mandolin issue. Exhibit B.

Mandolins have been classified in 7323, so what gives? According to Customs, the hand operated push and pull action of the mandolin is not mechanical in the same sense as is the plunger on the Chop Chop. With all due respect to Customs, I would worry about that. It strikes me that neither device provides much in the way of mechanical advantage. The plunger has a bit of a gravity assist, but that's it, and the note says a plunger is not enough. As far as I can tell, there is no gear, pulley, spring or other mechanical element that amplifies the action of the user. That strikes me as a weakness in the decision.

But, that is just me. What do you think. Is the Chop Chop mechanical? Should Curtis Stone file a case? If so, can we call him as an expert witness and have him make French fries in the courtroom as demonstrative evidence and as a snack? If so, I'm totally in.