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HQ 966068




September 12, 2003

CLA-2 RR:CR:GC 966068ptl

CATEGORY: CLASSIFICATION

TARIFF NO.: 2106.90.9998

Ms. Melissa Miller
Sandler, Travis & Rosenberg, P.A.
5200 Blue Lagoon Drive
Miami, FL 33126-2022

RE: Reconsideration of NY I82069, NY I82543, and NY I88357; Encapsulated Oil Supplements.

Dear Ms. Miller:

This is in response to your letter of November 18, 2002, on behalf of Pharmed Group and Oleomed America, Inc. ("Oleomed"), in which you request reconsideration of the classifications of your client's products contained in two New York Ruling Letters. The letters, NY I82069 and NY I82543, both dated June 18, 2002, were issued by Customs and Border Protection (CBP), National Commodity Specialist Division, to Hellmann Worldwide Logistics on behalf of Oleomed America, Inc. This letter is also in response to your letter of January 6, 2003, in which you requested reconsideration of the classification of additional Oleomed products classified in NY I88357, dated December 12, 2002, issued by the National Commodity Specialist Division to Mr. Rosenberg, of your firm, on behalf of Pharmed and Oleomed, America, Inc.

FACTS:

You have described the Oleomed products under consideration are being "over-the-counter dietary supplements containing extra virgin olive oil encapsulated in gelatin capsules." You further state that "[t]he Oleomed Mediterranean Formulas consist of pharmaceutical grade olive oil encapsulated in soft gelatin capsules with other additives, such as vitamins, minerals, herbs, or other nutrients." The product's are marketed with names which reflect either the added ingredients or the benefit the consumer will achieve through consumption of the product.

The Oleomed products, and their ingredients, which were classified in NY I82069 are as follows: (Note: All products contain "Mediterranean" as a part of their name. Ingredient quantities are per capsule unless otherwise noted). Bone formula: Olive oil (922 mg.), folic acid (400 mg.), calcium (400 mg.) (2 capsule dosage). Energy formula: Olive oil (500 mg.), ginseng extract (100 mg.). Blood Pressure formula: Olive oil (300 mg.), garlic oil (900 mg.) (2 capsule dosage). Mind formula: Olive oil (450 mg.), ginkgo biloba extract (150 mg).

The Oleomed products, and their ingredients, which were classified in NY I82543 are as follows: Prostate formula: Olive oil (930 mg.), saw palmetto extract (270 mg.) (2 capsule dosage). Immune System formula: Olive oil (718 mg.), echinacea extract (500 mg.) (2 capsule dosage). Mood Balance formula: Olive oil (1050 mg.), St. John's Wort extract (150 mg.) 2 capsule dosage). Antioxidant formula: Olive oil (922 mg.), Vitamin E (200 IU), (Zinc 6 mg.), Selenium (30 mcg.) (2 capsule dosage).

The Oleomed products, and their ingredients, which were classified in NY I88357 are as follows: Cell Q-10 formula: Olive oil (520 mg.), Coenzyme Q-10 (25 mg.). Sleep formula: Olive oil (726 mg.), valerian extract (200 mg.), passion flower extract (200 mg.), hops extract (100 mg.) (2 capsule dosage). Weight formula: Olive oil (720 mg.), garcinia cambogia extract (400 mg.), bitter orange extract (200 mg.), guarana extract (50 mg) (2 capsule dosage).

All Oleomed products classified in NY I82069, NY I82543 and NY I88375 were classified in subheading 2106.90.9998, HTSUS, which provides for food preparations not elsewhere specified of included, other.

It is your position that all the Oleomed products are properly classifiable as goods of Chapter 15, HTSUS.

In addition to the initial letters seeking reconsideration of the New York ruling letters, you submitted samples of three varieties of Oleomed products on January 29, 2003, supplemental materials on March 24, 2003, two different sets of materials dated May 9, 2003, and more materials on May 28, 2003.

In preparing this decision and ruling, we have considered all materials you submitted as well as topics you and your colleagues raised during many telephone conversations on this issue. ISSUE:

What is the classification of encapsulated olive oil mixed with other ingredients?

LAW AND ANALYSIS:

Merchandise is classifiable under the Harmonized Tariff Schedule of the United States (HTSUS) in accordance with the General Rules of Interpretation (GRIs). The systematic detail of the HTSUS is such that most goods are classified by application of GRI 1, that is, according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied in order.

In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes may be utilized. The Explanatory Notes (ENs), although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

The HTSUS subheadings under consideration are as follows:

1509 Olive oil and its fractions, whether or not refined, but not chemically modified:

1509.10 Virgin:

1509.10.2000 Weighing with the immediate container under18 kg

2106 Food preparations not elsewhere specified or included

2106.90 Other:
Other:
Other:
Other:
Other:
2106.90.99 Other:

2106.90.9998 Other

It is your position that the Oleomed Mediterranean Formulas which "consist of pharmaceutical grade olive oil encapsulated in soft gelatin capsules with other additives, such as vitamins, minerals, herbs, or other nutrients" are properly classified in Chapter 15, HTSUS, which provides for Animal or Vegetable Fats and Oils. In support of this contention, you proffer several arguments all of which you state lead to the classification of the products in Chapter15.

You begin by stating that it is Customs practice to classify encapsulated oils in Chapter 15, HTSUS, and quote HQ 963300, dated July 26, 2001 to that effect. In that ruling, Customs stated:

"It has been Customs practice to classify encapsulated oil in Chapter 15, HTSUS, provided the processing, composition or added ingredients do not exclude it from the chapter. As the ENs indicate, products of Chapter 15 are not limited to raw materials without added ingredients. "

However, you have missed the critical language in the quoted text which is "provided the processing, composition or added ingredients do not exclude it from the chapter." The ENs to Chapter 15 provide guidance with respect to the composition, processing and allowed ingredients of products of that chapter.

The General ENs to chapter 15 provide that in order to be classified in that chapter, the animal or vegetable fats and oils being considered need to be glycerol esters. These glycerol esters are known as triglycerides: "With the exception of sperm oil and jojoba oil, animal or vegetable fats and oils are esters of glycerol with fatty acids (such as palmitic, stearic and oleic acids)."

The ENs proceed to discuss the types of processing which is allowed for goods of the chapter. "The esters forming triglyceride fats can be broken up (saponification) by the action of superheated steam, dilute acids, enzymes or catalysts, giving glycerol and fatty acids, or by the action of alkalis, which give glycerol and the alkali salts of fatty acids (soaps).

The ENs indicate that fractions of the fats and oils of the chapter are also classified in the chapter:

"Headings 15.04 and 15.06 to 15.15 also cover fractions of the fats and oils mentioned in those headings, provided they are not more specifically described elsewhere in the Nomenclature (e.g., spermaceti, heading 15.21). The main methods used for fractionation are as follows : (a) dry fractionation which includes pressing, decantation, winterisation and filtration; (b) solvent fractionation; and
(c) fractionation with the assistance of a surface-active agent. Fractionation does not cause any changes in the chemical structure of the fats or oils."

The fats and oils, and their fractions, described thus far by the ENs have been minimally processed. Paragraph (B) of the General ENs to Chapter 15 provides for "the single (i.e., not mixed with fats or oils of another nature), fixed vegetable fats and oils mentioned in the headings [1507 to 1515], together with their fractions, whether or not refined, but not chemically modified."

As stated in HQ 964595, dated, February 4, 2002:

The ENs also provide, on page 109 [now page 119], that fats and oils of Chapter 15 may also be subjected to the refining processes: "These headings cover crude fats and oils and their fractions, as well as those which have been refined or purified, e.g., by clarifying, washing, filtering, decolorizing, deacidifying or deodorizing."

T.J. Weiss, Food Oils and Their Uses, 2d ed., (AVI Publishing Company, Inc., 1983), 72 – 84 discusses the basic processing of fats and oils:

"Refining usually refers to the removal of nonglyceride fatty materials by washing the oils with strongly alkaline water solutions ."

"Bleaching is the process used for the removal of pigments from the oil although some color bodies are removed during other processes as well. The process of bleaching is relatively simple."

"As the term implies, deodorization is the process whereby the odors and flavors of fats and oils are removed, resulting in a bland finished product."

All these processing and refining procedures involve manipulation of the oils and removal of unwanted or undesirable properties from the product. These operations do not involve the addition of extraneous ingredients such as herbal extracts, vitamins, minerals and essential oils as are found in Oleomed products.

You have referred to a proceeding of the Harmonized System Committee ("HSC"), Document 38.827E, dated August 5, 1995, which was also cited in HQ 964595, as further argument that your products should be classified in Chapter 15. That decision involved product "Dr. Dunner Evening Primrose Oil" that was described as " consisting of gelatin capsules reportedly containing 500 mg of evening primrose oil and 10 mg tocopherol (vitamin E). The capsule shell comprised gelatin, glycerol, and milkfat (although it was not clear with respect to the milkfat). This product was put up for retail sale (4 blister packs each containing 30 capsules, packed together in a cardboard box) with information sheet indicating that the product was designed to be taken on a daily basis (one or two capsules daily) to supplement the normal diet with the essential fatty acids contained in the oil (in particular gamma-linolenic acid (8%), which was important to body metabolism)." The decision of the HSC states: The Secretariat remains of the opinion that the addition of vitamin E and encapsulation are not sufficient to exclude the product from Chapter 15. Furthermore, products should be classified in the residual heading 21.06 only if they are not covered by any other headings in the Nomenclature. For these reasons, the Secretariat feels that the product should be classified in Chapter 15 rather than in heading 21.06."

However, your arguments did not mention that in HSC Document 39.212, dated March 3, 1995, the "Dr. Dunner Evening Primrose Oil" consisting of encapsulated vegetable oil of chapter 15 with small amounts of milkfat and vitamin E, was classified in subheading 1517.90. The EN for heading 15.17 provides that "The products of this heading, the fats or oils of which may previously have been hydrogenated, may be worked by emulsification (e.g., with skimmed milk), churning, texturation (modification of the texture or crystalline structure), etc., and may contain small quantities of added lecithin, starch, colouring, flavouring, vitamins, butter or other milkfat (subject to the restrictions in Note 1 (c) to this Chapter)." (emphasis added).

While they are not treated as dispositive, decisions of the Harmonized System Committee of the World Customs Organization, when published in the Compendium of Classification Opinions, constitute the official interpretation of the Harmonized System, and should receive the same weight of the ENs in ascertaining the classification of merchandise. Edible mixtures or preparations of animal or vegetable oils are provided for in Heading 1517, HTSUS, and the Dr. Dunner product does contain an edible vegetable oil. The ENs to that heading also provide that the specific ingredients contained in the Dr. Dunner product could be included in a product of that heading. However, the ENs do not indicate that products of chapter 15 can contain herbal extracts, essential oils, minerals or large quantities of vitamins. Therefore, while the HSC decision is helpful in that it provides insight into the classification of products in chapter 15, the decision should not be read as expansively as you suggest. Further, the ENs to heading 15.09, HTSUS, which you suggest is correct, state that "[t]his heading covers: (A) Virgin olive oils, (B) Refined olive oil, (C) Fractions and blends of the oils described under (A) and (B) above." The heading does not contain similar language to that found in heading 1517, HTSUS, permitting the inclusion of products which are "edible mixtures or preparations of" olive oil. Thus the Oleomed products which are food preparations containing olive oil and other ingredients cannot be classified in heading 1509, HTSUS.

In order to remain goods of chapter 15, products cannot undergo more extensive processing and cannot contain more than the minimal additives specified in the ENs to that chapter. Actions which exceed either the processing or ingredient composition of fats and oils result in the creation of goods which are classified elsewhere in the tariff. As stated above, in the case of the Oleomed dietary supplements under consideration, the added ingredients have created goods which are no longer described by the terms of the subheadings of chapter15, HTSUS. We note that in NY J84292, dated May 7, 2003, Oleomed products which contain only encapsulated olive oil were classified in subheading 1509.10.2000, HTSUS, and Oleomed products containing encapsulated blended oils with a small amount of Vitamin E were classified in subheading 1517.90.2080, HTSUS.

We note that in your submissions, you cite eleven Customs Headquarters Rulings which you argue establish a Customs practice to classify encapsulated oils in Chapter 15, HTSUS. All the rulings you cite (HQ 963300, dated July 26, 2001, HQ 964804, dated February 19, 2002, HQ 964558, dated February 15, 2002, HQ 964593, dated February 13, 2002, HQ 964137, dated February 11, 2002, HQ 964530, dated February 7, 2002, HQ 954557, dated February 5, 2002, HQ 964595, dated February 4, 2002, HQ 964015, dated January 31, 2002, HQ 964594, dated January 30, 2002, and HQ 964014, dated February 8, 2002) classify products which are either encapsulated vegetable oils and/or encapsulated fish oils. None of these products contain ingredients which are not provided for in the ENs to Chapter 15. Four of the rulings (HQ 963300, HQ 964804, HQ 964015 and 964014), classify products to which 10 IU to 15 IU of vitamin E have been added to an oil. As noted above, vitamin E is a tocopherol which is added in small amounts to fats and oils to retard oxidative rancidity and is a permitted additive according to the ENs to Chapter 15, HTSUS. The products classified in these rulings are significantly different from the Oleomed products under consideration. The Oleomed products contain herbal extracts, essential oils, minerals and large quantities of vitamins. These added ingredients are not fats or oils of Chapter 15, they are not part of the refining process of fats and oils, and they are not allowed by the ENs as additives to fats and oils of Chapter 15. Accordingly, the Oleomed products can not be classified in Chapter 15, HTSUS.

In the materials you submitted, you advance extensive arguments concerning how the various Oleomed products are composite goods, consisting of two or more materials and substances. You argue that the olive oil component of the various formulations constitutes the essential character of the Oleomed products. You then proceed with a GRI 3(b) analysis to arrive at a determination that the encapsulated composite good should be classified in subheading 1509.10.2000, HTSUS, which provides for olive oil and its fractions, whether or not refined. You further state that the Oleomed products are properly classified in heading 1509 because it more completely describes than heading 2106, HTSUS. You make the additional claim that Customs has classified products in heading 2106 "only because no other competing heading specified or included food preparations."

In order to classify goods under GRI 3, the goods must be classifiable under two or more headings. The goods are marketed and sold as food supplements. Subheading 2106 provides for food preparations not elsewhere specified or included. The term "food preparations" includes goods which have been processed extensively and which are composed of multiple ingredients. The ENs to heading 21.06 provide many examples of complex food products that are included therein, most notably, "[p]reparations, often referred to as 'food supplements'." The Oleomed products are described by the language of the EN in that they are put up in packings with indications that they maintain general health or well-being. Further, they claim no therapeutic or properties and are not intended for the prevention of treatment of diseases of ailments which would exclude them from classification in heading 2106.

The Oleomed products under consideration are described by the terms of heading 2106. We have already determined that the goods are not eligible for classification in a heading of chapter 15. Since they are not described by the terms of two headings, the subject Oleomed products cannot be classified by GRI 3. Furthermore, in view of the fact that the imports are food products, and chapter 21 covers food products which are not more specifically provided for elsewhere, resort to the other GRIs is not appropriate, as GRI 1 still applies. Since the imports are foods, classification would be in chapter 21, HTSUS.

HOLDING:

The Oleomed Mediterranean Formula products, classified in NY I82069, NY I82543, and NY I88357, which consist of pharmaceutical grade olive oil encapsulated in soft gelatin capsules with other additives, such as vitamins, minerals, herbs, essential oils and other nutrients are properly classified in subheading 2106.90.9998, HTSUS, which provides for: Food preparations not elsewhere specified or included, other, other.

NY I82069, NY I82543, dated June 18, 2002, and NY I88357, dated December 12, 2002, are affirmed.

Sincerely,

Myles B. Harmon, Director

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