 United States Court of Appeals for the Federal Circuit

                                   05-1477, -1523


                               BASF CORPORATION,

                                                    Plaintiff-Appellant,

                                          v.


                                 UNITED STATES,

                                                    Defendant-Cross Appellant.




      Frederic D. Van Arman, Jr., Barnes, Richardson & Colburn, of New York, New
York, argued for plaintiff-appellant. With him on the brief was James S. O’Kelly. Of
counsel was Helena D. Sullivan.

       Jack S. Rockafellow, Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of New York, New York, argued for defendant-
cross appellant. With him on the brief were Peter D. Keisler, Assistant Attorney
General, David M. Cohen, Director, of Washington, DC, and Barbara S. Williams,
Attorney in Charge, International Trade Field Office, United States Department of
Justice, of New York, New York . Of counsel on the brief was Sheryl S. French, Office
of Assistant Chief Counsel, International Trade Litigation, United States Customs and
Board Protection, of New York, New York.

      Erik D. Smithweiss, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of
New York, New York, for amici curiae Roche Vitamins, Inc. et al. With him on the brief
was Joseph M. Spraragen.

Appealed from: United States Court of International Trade

Judge Evan J. Wallach
United States Court of Appeals for the Federal Circuit


                                     05-1477, -1523




                                 BASF CORPORATION,

                                                       Plaintiff-Appellant,

                                            v.

                                   UNITED STATES,

                                                       Defendant-Cross Appellant.



                           __________________________

                           DECIDED: March 29, 2007
                           __________________________



Before NEWMAN, LOURIE, and RADER, Circuit Judges.

Opinion for the court filed by Circuit Judge NEWMAN. Opinion concurring in part and
dissenting in part filed by Circuit Judge LOURIE.

NEWMAN, Circuit Judge.



      In this tariff classification case, both the importer BASF Corporation and the

government appeal the decision of the United States Court of International Trade, holding

that the imported product, brand name Lucarotin7 1%, which contains 1% beta-carotene

and is used as a food colorant, is classified under subheading 3204.19.35 ("Beta-carotene

and other carotene coloring matter") of the Harmonized Tariff Schedule of the United States
("HTSUS"). 1 BASF argues that the product is entitled to duty-free treatment because beta-

carotene is listed on the duty-free Pharmaceutical Appendix of the HTSUS. The Customs

Service had initially classified and liquidated Lucarotin7 1% under subheading 2106.90.99

("Food preparations not elsewhere specified or included: Other"), but at trial and on this

appeal the government proposes that 3204.19.40 ("Other") or 3204.19.50 ("Other") is the

correct classification.

                                               I

         The methodology of tariff classification is established by the HTSUS, which consists

of the General Notes, the General Rules of Interpretation (GRI), and the Additional United

States Rules of Interpretation (U.S. GRI), including all section and chapter notes and article

provisions and the Chemical Appendix. The rules are applied in numerical order. See

North American Processing Co. v. United States, 236 F.3d 695, 698 (Fed. Cir. 2001);

Baxter HealthCare Corp. of Puerto Rico v. United States, 182 F.3d 1333, 1337 (Fed. Cir.

1999).




         1     BASF Corp. v. United States, 391 F. Supp.2d 1246 (Ct. Int'l Trade June 13,
2005).




05-1477, -1523                                2
       The HTSUS is a hierarchical classification system which requires application of the

most specific descriptive category in determining the applicable duty. See General Elec.

Co.-Medical Systems Group v. United States, 247 F.3d 1231, 1235 (Fed. Cir. 2001) (the

proper classification of merchandise according to the HTSUS requires looking to the most

specific description and is preferred to headings of a more general description); Marubeni

America Corp. v. United States, 35 F.3d 530, 536 (Fed. Cir. 1994) ("under the General

Rules of Interpretation (GRI) when an article satisfies the requirement of two provisions, it

will be classified under the heading giving a more specific description"). When the name of

the product and its use are included in an eo nomine 2 description, that specific

classification prevails over a more general classification of either name or use.

       BASF states that the Court of International Trade erred in denying duty-free

treatment, because beta-carotene is a provitamin and is listed on the Pharmaceutical

Appendix. BASF argues that the purpose of the international agreement concerning duty-

free movement of pharmaceuticals is to facilitate and encourage trade in such products,

and therefore that they should be interpreted to include items such as Lucarotin7 1%.

BASF points out that beta-carotene is the only active component of Lucarotin7 1% and

argues that it is irrelevant, for tariff purposes, whether the beta-carotene is intended for

pharmaceutical use or for some other purpose, stressing the listing of beta-carotene in the

Pharmaceutical Appendix. BASF states that the court improperly incorporated an actual

use requirement into the Pharmaceutical Appendix.


      2      An eo nomine classification describes a product by a specific name. See
Nidec Corp. v. United States, 68 F.3d 1333, 1336 (Fed. Cir. 1995).




05-1477, -1523                               3
       It is not disputed that the only active ingredient of Lucarotin7 1% is its content of

beta-carotene. Nor is it disputed that this product is not intended for vitamin or other

pharmaceutical use, but is intended for use as a food colorant. The beta-carotene provides

a strong red-orange color, and the other ingredients are diluents, stabilizers, and

dispersants. BASF's Technical Bulletin describes Lucarotin7 1% as a food colorant

containing "stabilized beta-carotene dispersed in soybean oil and embedded as minute

droplets in a polysaccharide sugar matrix." The Court of International Trade applied the

International Trade Commission's definition of a pharmaceutical product as "used in the

prevention, diagnosis, alleviation, treatment, or cure of disease in humans or animals,"

Advice Concerning the Addition of Certain Pharmaceutical Products and Chemical

Intermediates to the Pharmaceutical Appendix to the Harmonized Tariff Schedule of the

United States, USITC Pub. 3167, at 3 (April 1999), and found, without dispute, that

"[c]ustomers do not buy Lucarotin7 1% for any purpose other than delivery of a beta-

carotene colorant." Thus the court held that Lucarotin7 1% is not eligible for duty-free

importation despite the listing of beta-carotene on the Pharmaceutical Appendix.

       When a product is specifically described or named (eo nomine) in the HTSUS, the

specific classification prevails over any more general listing that also includes the imported

product, as set forth in Rule 3 of the General Rules of Interpretation:

              GRI 3(a). The heading which provides the most specific description
       shall be preferred to headings providing a more general description.
       However, when two or more headings each refer to part of the materials or
       substances contained in mixed or composite goods or to part only of the
       items in a set put up for retail sale, those headings are to be regarded as
       equally specific in relation to those goods, even if one of them gives a more
       complete or precise description of the goods.
              (b) Mixtures, composite goods consisting of different materials or
       made up of different components, and goods put up in sets for retail sale,


05-1477, -1523                                4
       which cannot be classified by reference to 3(a), shall be classified as if they
       consisted of the material or the component which gives them their essential
       character, insofar as this criterion is applicable. [Emphases added.]

The Court of International Trade found that "[b]eta-carotene imparts the essential character

to Lucarotin7 1%," and placed Lucarotin7 1% within subheading 3204.19.35 for "Beta-

carotene and other carotenoid coloring matter," citing Explanatory Note (I)(A) to

Subheading 32.04, allowing for diluents. We agree that for the Lucarotin7 1% formulation

of beta-carotene as a food colorant, the eo nomine and specificity rules establish the tariff

classification. The "most specific description" criterion of GRI 3(a) and/or the "essential

character" criterion of GRI 3(b) so require, whether one views the Lucarotin7 product as a

mixture, emulsion, formulation, composition, or preparation. The decision of the Court of

International Trade represents the clearest and most direct application of the HTSUS

provision of a separate tariff category for beta-carotene coloring matter. We affirm that this

classification prevails over the listing of beta-carotene on the Pharmaceutical Appendix. 3

BASF's appeal is denied.

                                              II

       On cross-appeal the government states that the correct classification of Lucarotin7

1% is as a beta-carotene "preparation not otherwise specified" under heading 3204.19.40

or 3204.19.50. The government argues that although the 1% of beta-carotene provides the


        3     We note the concern of the amici curiae that if this formulation is denied
access to the Pharmaceutical Appendix, other beta-carotene products may be wrongly
classified. That concern is unfounded, for Lucarotin7 1% is unambiguously not imported as
a vitamin product.




05-1477, -1523                                5
coloring matter, the other 99% renders the beta-carotene soluble and dispersible in foods

and beverages. Thus the government argues that Lucarotin7 1% is a "preparation" and

should be so classified, whether or not there is a classification specific to use as a colorant.

       The Court of International Trade determined that it need not decide whether

Lucarotin7 1% is a "preparation," because the classification of beta-carotene coloring

matter, subheading 3204.19.35, necessarily takes precedence under the General Rules of

Interpretation.   Subheading 3204.19.35 plainly is the more specific of the potential

classifications. Lucarotin7 1% does not involve a chemical reaction or series of steps, as in

Lynteq, Inc. v. United States, 976 F.2d 693 (Fed. Cir. 1992) (classifying Cromophyl-L as a

preparation derived from marigold meal, but not as marigold meal itself). The beta-

carotene is the active ingredient of the imported product, and the ingredient that imparts the

color. Even if Lucarotin7 1% were viewed as a "preparation," when a product may be

described by both its use and its name, the use is a "convenient rule of thumb" for weighing

competing considerations. See Len-Ron Mfg. Co. v. United States, 334 F.3d 1304, 1313

(Fed. Cir. 2003) (the "rule of relative specificity" looks to "the provision with requirements

that are more difficult to satisfy and that describe the article with the greatest degree of

accuracy and certainty" (citations omitted)).        Thus when there is a specific tariff

classification naming the product and a specific use of a product that has other uses, that

classification prevails over any more general designation such as a non-specific

"preparation." See, e.g., Totes, Inc. v. United States, 69 F.3d 495, 500 (Fed. Cir. 1995)

(classifying the imported goods under the more specific description and not the more

general description, in accord with the greater specificity rule).




05-1477, -1523                                 6
      The Court of International Trade found, without error, that "[b]eta-carotene imparts

the essential character to Lucarotin 1%" in its use as a food colorant, and correctly

classified it under HTSUS 3204.19.35. The government's appeal is denied.




                                      AFFIRMED




05-1477, -1523                             7
United States Court of Appeals for the Federal Circuit


                                   05-1477, 05-1523

                                BASF CORPORATION,

                                                 Plaintiff-Appellant,

                                            v.

                                   UNITED STATES,

                                                 Defendant-Cross-Appellant.




LOURIE, Circuit Judge, concurring in part and dissenting in part.

      I agree with the majority’s conclusion that Lucarotin® 1% (“Lucarotin”) was not

entitled to duty-free treatment under the PA. Lucarotin is not simply beta-carotene; it is

a 1% formulation of beta-carotene.      As indicated by its title and the lack of more

expansive terms or contrary statements in the heading, the PA is apparently intended to

comprise substances that are to be used as pharmaceuticals and are substantially pure.

A one percent dispersion of beta-carotene intended for use as a coloring matter does

not meet those criteria, as 99% of the dispersion is not beta-carotene and the intended

use of Lucarotin as coloring matter indicates that it is not intended to be used as a

pharmaceutical.

      However, I respectfully dissent from the majority’s conclusion that Lucarotin is

properly classified under 3204.19.35 and is not a “preparation.”

      The relevant portions of the HTSUS at issue are as follows:
   3204       Synthetic organic coloring matter, whether or not chemically
              defined; preparations as specified in note 3 to this chapter based
              on synthetic organic coloring matter; synthetic organic products of a
              kind used as fluorescent brightening agents or as luminophores,
              whether or not chemically defined:
   [unnumbered] Synthetic organic coloring matter and preparations based
                  thereon as specified in note 3 to this chapter:
   3204.11               Disperse dyes and preparations based thereon:
                         *      *      *
   3204.12               Acid dyes, whether or not premetallized, and
                         preparations based thereon; mordant dyes and
                         preparations based thereon:
                         *      *      *
   3204.13               Basic dyes and preparations based thereon:
                         *      *      *
   3204.14               Direct dyes and preparations based thereon:
                         *      *      *
   3204.15               Vat dyes (including those usable in that state as
                         pigments) and preparations based thereon:
                         *      *      *
   3204.16               Reactive dyes and preparations based thereon:
                         *      *      *
   3204.17               Pigments and preparations based thereon:
                         *      *      *
   3204.19               Other, including mixtures of coloring matter of two or
                         more of the subheadings 3204.11 to 3204.19:
                                Solvent dyes and preparations based thereon:
                                       *      *      *
                                Other:
                                       *      *      *
   3204.19.35                          Beta-carotene      and     other carotenoid
                                       coloring matter
                                       Other:
   3204.19.40                                 Products described in additional U.S.
                                              note 3 to section VI
   3204.19.50                                 Other
   3204.20        Synthetic organic products of a kind used as fluorescent
                  brightening agents:
                  *      *      *
   3204.90.00     Other

      The trial court determined that it need not reach the question whether Lucarotin

is a “preparation” because it found “Beta-carotene . . . coloring matter” in subheading

3204.19.35 to be sufficiently broad to encompass Lucarotin. However, the government



05-1477, 05-1523                          -2-
renewed its arguments here that Lucarotin is properly classifiable as a “preparation,”

asserting that the trial court failed to account for the structure of the headings under

3204 and failed to give appropriate weight to the significant differences in the content

and properties of Lucarotin versus pure beta-carotene.             More specifically, the

government argues that the use of a semicolon between “Synthetic organic coloring

matter” and “preparations . . . based on synthetic organic coloring matter” in heading

3204 indicates a clear distinction between those two categories.           In addition, the

government argues that while Lucarotin includes beta-carotene as a source of color, the

other 99% of its content significantly alters its properties, including making it water-

soluble, in order to make it suitable for use as a food and beverage colorant.

       In response, BASF argues that Lucarotin is a mixture and a coloring matter

rather than a preparation, so that the government’s argument about the semicolon in

heading 3204 is irrelevant. BASF also argues that Lucarotin is a mixture in which the

beta-carotene is not altered by the formulation process (i.e., that it does not undergo a

chemical change).

       While the trial court did not decide the "preparation" issue, it was raised below,

has been fully briefed, and involves interpretation of the tariff schedule, a matter of law.

Thus, I would decide the matter here and conclude that Lucarotin is a “preparation.”

       We addressed the meaning of “preparation” in Orlando Food Corp. v. United

States, 140 F.3d 1437 (Fed. Cir. 1998), and stated that “[i]nherent in the term

‘preparation’ is the notion that the object involved is destined for a specific use. The

relevant definition from the Oxford English Dictionary defines a ‘preparation’ as ‘a

substance specifically prepared, or made up for its appropriate use or application, e.g.




05-1477, 05-1523                            -3-
as food or medicine, or in the arts or sciences.’” Id. at 1441 (citation omitted). Thus,

under the definition provided in Orlando, Lucarotin clearly is a “preparation.” The trial

court found, and the parties do not dispute, that Lucarotin is synthetic beta-carotene that

has been dissolved in soybean oil, mixed with a vitamin C derivative and vitamin E to

prevent oxidation, then mixed with carbohydrate fillers to provide hardness and make it

water soluble, and finally mixed with an anti-caking agent. Similarly, the trial court

found, and the parties do not dispute, that Lucarotin is sold for use as a colorant in a

wide variety of foods including beverages and baked goods. Lucarotin has thus been

prepared in a very specific way for a particular use, and thus it is a “preparation.”

       The government argues that preparations of beta-carotene coloring matter are

classifiable under 3204.19.40 because of the structure of the headings under 3204

described above and because our decision in Lynteq controls on the issue of how to

classify preparations when not otherwise specifically recited. The government further

argues that because each of the six-digit headings listed under 3204 before 3204.19

recites a particular type of coloring matter “and preparations based thereon,” the lack of

such specific language in subheadings 3204.19 and 3204.19.35 demonstrates that

preparations of beta-carotene coloring matter were intended to be classified under the

3204.19.40 “Other” subheading.

       I would conclude that the government is correct in urging that Lucarotin is

properly classifiable under subheading 3204.19.40. Heading 3204 recites “preparations

as specified in note 3 to this chapter based on synthetic organic coloring matter." Thus,

“preparations” are clearly included under 3204.




05-1477, 05-1523                             -4-
       Next, the six-digit subheadings 3204.11 through 3204.17 all recite a type of

coloring matter “and preparations based thereon.” Subheading 3204.19, on the other

hand, does not specifically recite preparations, except for a subheading entitled "Solvent

dyes and preparations based thereon," which is not relevant here. Preparations of beta-

carotene coloring matter, then, must be classified under the subsequent "Other"

subheading of 3204.19, under either 3204.19.35, 3204.19.40, or 3204.19.50.            The

Lucarotin preparation cannot be classified under 3204.19.35, because, as indicated

above, it is not beta-carotene and other carotenoid coloring matter, but is a preparation

thereof. Subheading 3204.19.40, on the other hand, recites “[p]roducts described in

additional U.S. note 3 to section VI.” Additional U.S. note 3 to section VI states that the

term "products described in additional U.S. note 3 to section VI are any product [under

the 3204 Synthetic organic coloring matter heading] not listed in the Chemical Appendix

to the Tariff Schedule.” (emphasis added), and it is uncontested that Lucarotin is not

listed in the Chemical Appendix. Therefore, because Lucarotin is a synthetic organic

coloring matter not listed in the Chemical Appendix, it is properly classified under

3204.19.40 as “Other: Products described in additional U.S. note 3 to section VI." It

should incidentally be noted that subheading 3204.19.40 lacks the special “K”

designation, and thus, for that reason as well, Lucarotin is not eligible for duty-free

treatment under the PA.

       The majority relies on the rule of relative specificity. However, I believe that

reliance is misplaced. Heading 3204 specifically distinguishes preparations of coloring

matter from coloring matter alone.      Thus, General Rule of Interpretation 1, which

requires “classification . . . be determined according to the terms of the headings,” takes




05-1477, 05-1523                            -5-
precedence over General Rule of Interpretation 3, which includes the rule of relative

specificity. Subheading 3204.19.35 only recites beta carotene and other carotenoid

subject matter, which does not include Lucarotin, whereas 3204.19.40 covers

preparations, which does cover Lucarotin. Therefore, I believe those headings require

that a preparation of beta carotene coloring matter be classified under 3204.19.40.

      Thus, I would reverse the Court of International Trade’s decision classifying

Lucarotin under heading 3204.19.35 of the HTSUS and classify it under heading

3204.19.40.




05-1477, 05-1523                           -6-
