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Maywood Chemical Works v. U.S., Not Reported in F.Supp., 22 Cust.Ct. 87, 1949 WL 5032, C.D. 1165

Facts

The plaintiffs protested against the customs duty assessments on cocoa residue, which was assessed as vegetable oil cake at a lower rate. They argued that the cocoa residue, a byproduct of cocoa butter extraction, should be classified as waste and dutiable at a higher rate. Testimonies from industry experts indicated that cocoa residue is not suitable for animal feed and is primarily used for extracting theobromine or as fertilizer.

At the trial Gregoire Karch, purchasing agent of the Maywood Chemical Works, and Benjamin E. Thomas, production manager of Monsanto Chemical Co., testified that the merchandise herein was imported for the extraction of theobromine and was so used by their respective firms, and that the residue left after the said extraction was sold as fertilizer material.

Issue

Is cocoa residue properly classified as waste under paragraph 1555 of the Tariff Act of 1930, or should it be classified as vegetable oil cake under paragraph 730?

The first question is therefore the construction of paragraph 730.

Rule

Cocoa residue is classified as waste under paragraph 1555 of the Tariff Act of 1930 if it is not suitable for its original purpose and is commercially unfit for use without remanufacture.

In the tariff sense, waste is a term which includes manufactured articles which have become useless for the original purpose for which they were made and fit only for remanufacture into something else.

Analysis

The court analyzed the production process of cocoa residue and determined that it is a byproduct of cocoa butter extraction, which is not suitable for animal feed. The testimonies indicated that cocoa residue is primarily used for extracting theobromine or as fertilizer, thus fitting the definition of waste as it is not sought after in the cocoa production process.

The testimony in the instant case indicates that cocoa residue is produced in two different ways. In one process, described by Mr. Thomas, cocoa nibs are passed through expeller machines which press out the cocoa butter, leaving the cocoa residue. In that case, cocoa butter is the product sought.

Conclusion

The court concluded that cocoa residue is properly dutiable as waste at 7.5% under paragraph 1555 of the Tariff Act of 1930, and the protests were sustained.

For the foregoing reasons, we hold that the merchandise herein is properly dutiable as waste at 7 ½ per centum ad valorem under paragraph 1555 of the Tariff Act of 1930, as modified by the trade agreement with Canada, T. D. 49752, the trade agreement with the United Kingdom, T. D. 49753, and the trade agreement with Mexico, T. D. 50797.

Who won?

Plaintiffs prevailed in the case because the court agreed that cocoa residue is classified as waste and not suitable for animal feed, thus justifying the higher duty rate.

The protests are sustained and judgment will be rendered accordingly.

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