WORLD CUSTOMS ORGANIZATION

ORGANISATION MONDIALE DES DOUANES

Established in 1952 as the Customs Co-operation Council
Créée en 1952 sous le nom de Conseil de coopération douanière

HARMONIZED SYSTEM NC2457E1a

COMMITTEE
- O. Eng.
61st Session
-

Brussels, 7 February 2018.

CLASSIFICATION OF A PRODUCT CALLED “CRUDE PALM FATTY ACID”

(REQUEST BY SRI LANKA)
(Item IV.3 on Agenda)

Reference documents:

NC2341E1a (HSC/59) NC2373E1b, Annex IJ/7 (HSC/59 – Report)

NC2410E1a (HSC/60) NC2447E1a, Annex G/10 (HSC/60 – Report)
NS0402E1a (SSC/33) NS0416E1a, Annex A/9 (SSC/33 – Draft Report)

SUMMARY

Purpose of the document

The purpose of the document is to continue the examination of the classification of the
product called “Crude Palm Fatty Acid”.

Description of the product to be classified by the Committee

(Light) yellow coloured semisolid with small amount of reddish brown/brownish orange
coloured liquid at 28 °C. The product consists bas ically of triglycerides, diglycerides,
monoglycerides and free fatty acids (11.8 % - 22.6 %). The glyceride profile is as follows:
triglycerides (81.36 %), diglycerides (13.28 %) and monoglycerides (3.63 %). The average
profile of the predominant fatty acids is as follows: palmitic acid (40 %), oleic acid (42 %)
and linoleic acid (10 %). The product is intended to be subjected to a refining process in
order to obtain edible RBD Palm Olein.
Action required of the Committee
The Committee is invited to rule on the classification of a product commercially named
“Crude Palm Fatty Acid” taking into account the deliberations at the 33rd Session of the
Scientific Sub-Committee as well as the Secretariat’s comments below.

File No. 3508

______________________

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Copyright © 2018 World Customs Organization. All rights reserved. Requests and inquiries concerning translation, reproduction and
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I. BACKGROUND

1. On 26 August 2016, the Administration of Sri Lanka requested the Secretariat’s advice
regarding the Harmonized System (HS) classification of a product described as “Crude Palm
Fatty Acid”.

2. On 26 September, the Secretariat informed Sri Lanka (Ref. 16NL0331-AF) that it would
be inclined to classify the product called “Crude Palm Fatty Acid” in heading 15.18 (six-digit
code 1518.00) by application of GIR 1.

3. On 11 October, Sri Lanka requested the Secretariat to place the classification of the
“Crude Palm Fatty Acid” on the agenda of the HSC’s 59th Session. Sri Lanka also requested
that the extract of the Classification Advice at issue should not be placed on the WCO
Members’ website. Sri Lanka further indicated that it would be in a position to provide a
detailed report on this matter in the near future for the Secretariat.

4. On 5 December 2016, the Secretariat invited Sri Lanka (Ref. 16NL0441-AF) to provide
all the technical information on the matter as well as the opinion of Sri Lanka regarding the
classification of the product at issue to the Secretariat. On 9 March 2017, the Secretariat
received a letter and additional information from Sri Lanka which was placed in the
Presentations section of the WCO Web site for Members (HSC/59).

5. At the 59th Session of the Harmonized System Committee (HSC), the Delegate of
Sri Lanka said that the description of the product included in the boxed text of the working
document should be modified considering the additional information provided. He suggested
revisiting the matter at the next session of the Committee on the basis of the new information
provided. He also agreed with the possible submission of the question to the Scientific Sub-
Committee (SSC) for its consideration and advice.

6. For the 60th Session of the HSC, the letter received from Sri Lanka on 9 March 2017
and included in the WCO Presentations Area for Members (HSC/59) was reproduced in Doc.
NC2410E1a (HSC/60).

7. At the 60th Session of the HSC, the Delegate of Sri Lanka said that his Administration
had two different opinions concerning the classification of the product. Opinion 1, i.e.,
classifying the product in heading 15.11, was set out in paragraphs 15 to 21 of the working
document NC2410E1a (HSC/60). Opinion 2, i.e., in favour of heading 15.18, was set out in
paragraphs 22 to 24 of the mentioned working document. As his Administration couldn’t rely
on the manufacturing process submitted by the importer and the technical analysis reached
contradictory results, he asked the Committee to decide on the classification of the product.

8. The US Delegate was of the opinion that the high percentage of fatty acids found during
the analysis of the product might be the result of a deliberate mixture. In that case she said
her Administration would classify the product in heading 38.24. If the fatty acid were the
result of degradation of the product during, for example, transportation, the classification
would be in heading 15.11, but as the manufacturing process was not clear, she suggested
that the Committee could decide on the classification of the product under both of these two
scenarios.

9. The Delegate of China mentioned that the high volume of fatty acids could have been
developed during the production process and his Administration was of the view that the
product could be classified in heading 15.11.

10. The EU Delegate mentioned that there were several questions to be answered.
Different laboratories reached different conclusions on the composition of the product, which
gave rise to questions on whether or not the high proportion of fatty acids in the product were

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produced during the manufacturing process or these fatty acids had been added on purpose.
He suggested referring this issue to the SSC to answer these questions due to the fact that
with the available information it was very difficult to classify the product at issue.

11. Several delegates mentioned that given the present description of the product, its
classification was not clear. In addition, they found it difficult to classify as the technical
information was not conclusive on whether fatty acids were produced during the
manufacturing process or added deliberately.

12. The Committee decided to submit the issue to the SSC for its consideration and advice,
asking specifically if such a high content of fatty acid in the palm oil or palm olein could be
obtained either during the normal production process or as a result of a degradation process
(e.g. splitting of the triglycerides by high temperature distillation under vacuum, microbial
oxidation, etc.).

13. At the 33rd Session of the SSC, the Delegate of Sri Lanka introduced the background of
the problem and explained that, as his country was also a producer of palm oil, the
government of Sri Lanka imposed high rate of tax for importing such oil. He mentioned that
according to the Malaysian Palm Oil Board (MPOB)’s investigation carried out at Sri Lanka’s
request, the product seemed to be a blend of refined, bleached and deodorized (RBD) palm
oil with palm fatty acid distillate (PFAD).

14. The US Delegate said that there was much uncertainty about the manufacturing
process and what the product was. For that reason he explained that, based on the
information provided by the importer, the chemical analysis of various laboratories, the
investigation made by the MPOB and the opinion of the Secretariat on what had possibly
happened, his Administration worked on a basis of probabilities. Out of the different
scenarios of what was presented, his delegation concluded that the most reliable and likely
explanation of the product at hand was the report made by the MPOB, especially as they are
among the leading experts in the world on these particular types of products. He said it
seemed unlikely that the product was in fact obtained by distillation and skimming of the top
of the distillation column. While, according to the Secretariat’s comments, it might be
possible, there would have to be an exceptionally large number of things going wrong to
obtain such a final product. The most reasonable explanation was that the product was a
deliberate mixture of RBD palm oil with PFAD, which was also the conclusion of the MPOB.

15. He continued by saying that even though all analysis said it was a product of palm oil,
and it was right that all of the components were derived from palm oil, it was also a deliberate
mixture of palm oil and a palm oil derivative classified in Chapter 38. Therefore its
classification should not be based on its chemical composition as products originating from
palm oil. According to Part (B) of General Explanatory Notes of Chapter 15, headings 15.07
to 15.15 of this Chapter cover single (i.e., not mixed with fats or oils of another nature), fixed
vegetable fats and oils mentioned in the headings, together with their fractions, whether or not
refined, but not chemically modified. It should not be classified in heading 15.18 due to the
fact that this heading covers inedible mixtures or preparations of different fats and oils of
Chapter 15. Taking into account that this product was a deliberate mixture with one of its
components being PFAD, classifiable in Chapter 38, heading 38.23, he felt that the product
should not be classified in Chapter 15. It should be classified in Chapter 38 (heading 38.24)
based upon the process from which it was obtained.

16. The Delegate of Sri Lanka said that they also believed the product was a deliberate
mixture made just to evade Customs taxes, classifiable in heading 38.24.

17. The Delegate of China agreed with the US that this was not an ordinary product and
that the information on how the product was obtained was important. In his opinion if this was
a deliberate mixture, it could be classified in heading 38.24. However, heading 38.25 would
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also merit consideration as a residual product of the chemical or allied industries. He noted
that China had a product with similar composition collected from the bottom of the distillation
column as a waste product classified under heading 38.25 and used to produce biodiesel. He
also noted that the product under consideration was collected from the top of the distillation
column, but the addition of PFAD made it similar in composition.

18. Some delegates also considered the opinion of the MPOB to be valid and believed that
the product could be classified in heading 15.18 considering paragraph (B) of General
Explanatory Note to Chapter 15.

19. As the opinions were divided the SSC concluded that it was believed that the highest
likelihood was that this product was made through a deliberate mixture of two end products:
RDB palm oil classified in Chapter 15 and PFAD classified in Chapter 38. There were three
viewpoints in terms of classification. One was that Chapter 15 comprised products of fat and
oil extraction and, therefore, as this is a mixture with a product of Chapter 38, the end product
should be classified in Chapter 38 (heading 38.24). Another view, sustained by one delegate,
was that the product composition was more akin to waste products that came from the bottom
of oil distillation and therefore it should be classified in heading 38.25. A third viewpoint was
that because the product was going to be eventually re-refined back into an edible product it
should be classified in Chapter 15 (heading 15.18).

II. SECRETARIAT COMMENTS

20. First of all, the Secretariat wishes to thank Sri Lanka for its request. The additional
technical information provided by Sri Lanka was published in the Presentations area of the
WCO Web site for Members (SSC/33), in its original language (English).

21. According to the information provided by Sri Lanka, the product consists basically of
glycerides (predominantly triglycerides) and fatty acids (up to 22.6 %). The profile of the
predominant fatty acids is as follows: palmitic acid (40 %), oleic acid (42 %) and linoleic acid
(10 %). The iodine value of the product ranges between 50 and 53. The preparation of the
RBD fraction involves the extraction, de-gumming and steam distillation under vacuum by
heating at 300 o C.

22. Heading 15.11 covers: “Palm oil and its fractions, whether or not refined, but not
chemically modified”. At the subheading level, subheading 1511.10 covers “crude oil” and
subheading 1511.90 covers “other”.

23. The scope of heading 15.11 is clarified by the Explanatory Notes to Chapter 15 (on
pages III-15-3, Part (B) and III-1511-1), which stipulate :
“Palm oil is a vegetable fat obtained from the pulp of the fruits of oil palms (...). The oils
are obtained by extraction or pressing and may be of various colours depending on their
condition and whether they have been refined. (...) Headings 15.07 to 15.15 of this
Chapter cover the single (i.e., not mixed with fats or oils of another nature), fixed
vegetable fats and oils mentioned in the headings, together with their fractions, whether
or not refined, but not chemically modified. 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, decolourising, deacidifying or deodorising.”

24. On the other hand, heading 15.18 covers: “Animal or vegetable fats and oils and their
fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or
in inert gas or otherwise chemically modified, excluding those of heading 15.16; inedible
mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or
oils of this Chapter, not elsewhere specified or included”.

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25. The scope of heading 15.18 is clarified by its corresponding Explanatory Note (on
page III-1518-1) which stipulates :
“This part covers animal or vegetable fats and oils and their fractions which have been
subjected to processes which modify their chemical structure thereby improving their
viscosity, drying power (i.e., the property of absorbing oxygen when exposed to the air
and forming elastic films) or modifying their other properties, provided they retain their
original fundamental structure and are not more specifically covered elsewhere, e.g. :
(1) Boiled or oxidised oils are obtained by heating oils, generally with the addition of
small quantities of oxidising agents. These oils are used in the paint and varnish
industry”.

26. Heading 38.23 covers: “Industrial monocarboxylic fatty acids; acid oils from refining;
industrial fatty alcohols”. The Explanatory Note to heading 38.23 specifically mentions that
this heading includes, inter alia :

“(5) Fatty acid distillate, obtained from fats and oils which have been subjected to vacuum
distillation in the presence of steam as part of a refining process. Fatty acid distillate is
characterised by a high free fatty acid (ffa) content.”

27. As regards heading 38.24, it is a residual provision for “chemical preparations not
elsewhere specified or included”.

28. The Secretariat concurs with Sri Lanka in that the refined palm oil should be classified
in heading 15.11. This would apply also to fractions based on palm oil, not chemically
modified, even if they have undergone the following processes: neutralisation, fractionation,
bleaching and deodorisation (i.e., RBD palm stearin, palm olein) that should be classified in
heading 15.11, more specifically, in subheading 1511.90.

29. In that connection, the Secretariat wishes to recall that the Harmonized System
Committee (HSC), at its 54th Session unanimously agreed that a “crude palm stearin” and a
“refined bleached deodorized (RBD) palm stearin” should be classified in heading 15.11,
more specifically subheading 1511.90 by application of GIRs 1 and 6 (Classification
Opinions 1511.90/1 and 1511.90/2). These products were clearly fractions, not chemically
modified, consisting of mixtures of triglycerides. In particular, the crude palm stearin
classified by the HSC, was the high-melting fraction obtained by a one-stage or multi-stage
fractionation of crude palm oil and it contained less than 5 % of free fatty acids and less than
0.25 % of moisture and impurities.

30. PFAD is classified in heading 38.23, as per EN to the heading.

31. According to the additional technical information gathered by the Secretariat on the
Internet1, the profile of the fatty acids and the iodine value of the product under consideration
are compatible with those of the palm oil. However the high content of fatty acids (up to
22 %) in the product indicates that it contains another component apart from the RBD (which
typically contains less than 5 % of fatty acids). The Secretariat was of the opinion that the
presence of the high levels of fatty acids could be only justified by either the addition of palm
fatty acid distillate or by the splitting of the triglycerides under the steam vacuum distillation.
Sri Lanka also mentioned the microbial oxidation as a possible reason for the high levels of
fatty acids.

1
https://www.cargill.com.my/en/products-services/palm-products/palm-oil-products/rbd-palm-
oil/index.jsp
https://en.wikipedia.org/wiki/Palm_oil

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32. However the SSC concluded that it seemed unlikely that the product was in fact
obtained by distillation and skimming of the top of the distillation column or that it was
obtained as a result of microbial oxidation. They concluded that the most reasonable
explanation was that the product was a deliberate mixture of two end products: RDB palm oil
(classified in heading 15.11) with PFAD (classified in heading 38.23).

33. Based on the outcomes of the SSC at its 33rd Session, the Secretariat would note that
there are two headings meriting consideration for the classification of the product “Crude
Palm Fatty Acid”: heading 15.18 and heading 38.24.

III. CONCLUSION

34. The Committee is invited to rule on the classification of the product commercially
named “Crude Palm Fatty Acid” considering the outcomes of the SSC at its 33rd Session and
the comments made by Secretariat above.

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6.