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Chemtall, Inc. v. United States

United States Court of Appeals, Federal Circuit

December 21, 2017

CHEMTALL, INC., Plaintiff-Appellant
v.
UNITED STATES, Defendant-Appellee

         Appeal from the United States Court of International Trade in No. 1:12-cv-00079-LMG, Judge Leo M. Gordon.

          Matthew R. Nicely, Hughes Hubbard & Reed LLP, Washington, DC, argued for plaintiff-appellant. Also represented by Daniel Martin Witkowski; Robert L. LaFrankie, Aaron Michael Marx, Crowell & Moring, LLP, Washington, DC.

          Eric Laufgraben, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Chad A. Readler, Jeanne E. Davidson, Claudia Burke; Paula S. Smith, Office of the Assistant Chief Counsel, United States Bureau of Customs and Border Protection, United States Department of Homeland Security, New York, NY.

          Before Dyk, Bryson, and Reyna, Circuit Judges.

          Bryson, Circuit Judge.

         This customs classification case requires us to define the term "amide" as used in the Harmonized Tariff Schedule of the United States ("HTSUS"). In particular, we are called on to distinguish between "Amides" and "Other" in a heading of the HTSUS that covers amides, their derivatives, and salts thereof. Chemtall, Inc. appeals from a decision of the Court of International Trade holding that Chemtall's product, acrylamido tertiary butyl sulfonic acid ("ATBS"), is not an amide, but is a derivative of an amide. Chemtall, Inc. v. United States, 179 F.Supp.3d 1200 (Ct. Int'l Trade 2016). We affirm.

         I

         A

         Heading 2924 of the HTSUS covers carboxyamide-function compounds and amide-function compounds of carbonic acids. All amides of this type contain an amide functional group consisting of a carbon atom (C), an oxygen atom (O), and a nitrogen atom (N), in which there is a double bond between the carbon and oxygen atoms, and a single bond between the carbon and nitrogen atoms. This amide functional group contains three substituents, or radicals (designated as R1, R2, and R3), one of which is bonded to the carbon atom and two of which are bonded to the nitrogen atom. Each of the radicals R2 and R3 can be a hydrogen atom (H) or a group of atoms beginning with a carbon atom bonded to the nitrogen atom. The functional group has the following general structure:

         (Image Omitted)

         An amide with the general structure depicted above can be a primary, secondary, or tertiary amide. An amide in which the nitrogen atom is bonded to two hydrogen atoms (at locations R 2 and R3) and a carbon atom is called a primary amide; it has the general structure R-CONH2 . An amide in which the nitrogen atom is bonded to one hydrogen atom and two structures each beginning with a carbon atom is called a secondary amide; it has the general structure R-CONHR'. An amide in which the nitrogen atom is bonded to three structures each beginning with a carbon atom is called a tertiary amide; it has the general structure R-CONR'2 . The structures of these three categories of amides can be depicted as follows:

         (Image Omitted)

         L.G. Wade, Jr., Organic Chemistry 984 (8th ed. 2013); see also Marc Loudon & Jim Parise, Organic Chemistry 1048 (6th ed. 2016).

         The parties agree that in order to be considered an amide under the tariff schedule, a compound must contain an amide functional group. The central issue in this case is what elements may be included in the radical groups so that the entire compound will be considered an amide and when, with the addition of other elements, the compound ceases to be an amide.

         B

         The dispute in this case involves the proper classification of 38 entries of ATBS during 2010 and 2011. ATBS contains (1) an amide functional group and has a hydro-carbyl group in the R1 position; (2) a hydrogen atom in the R2 position; and (3) a compound containing hydrogen, carbon, oxygen, and sulfur (S) atoms in the R 3 position. The structure of ATBS can be depicted as follows:

         (Image Omitted)

         The question before the court is whether the addition of the SO 3H group as part of the R 3 radical means that the compound is not an amide within the meaning of the HTSUS, but instead is a derivative of an amide.

         The parties do not dispute that ATBS is properly categorized under heading 2924 of the HTSUS. Heading 2924 is divided into two categories. The first category, which is titled "Acyclic amides (including acyclic carbamates) and their derivatives; salts thereof, " encompasses subheadings 2924.11 through 2924.19. The second category, which is titled "Cyclic amides (including cyclic carbamates) and their derivatives; salts thereof, " encompasses subheadings 2924.21 through 2924.29. The distinction between acyclic and cyclic amides turns on whether the compound includes a cyclic structure of atoms. Because ATBS does not contain such a ring structure, it is acyclic.

         The part of subheading 2924 that addresses acyclic amides reads as follows:

         (Image Omitted)

         At the time of the entries, Chemtall classified its shipments of ATBS under subheading 2924.19.11.10, as "Other: Amides: Acrylamide, " subject to a 3.7% duty rate. U.S. Customs and Border Protection ("Customs") disagreed. In notices of action issued in early 2011, Customs notified Chemtall that it had determined that ATBS was not an amide under subheading 2924.19.11 ("Amides"), but should be reclassified under subheading 2924.19.80.00 ("Other"), which carries a 6.5% duty rate. Chemtall protested the reclassification, and Customs denied the protests. Customs ruled that ATBS was not an acyclic amide, but a sulphonated derivative of an acyclic amide and therefore did not qualify as an "Amide" classifiable under subheading 2924.19.11.

         Chemtall filed a complaint in the Court of International Trade seeking review of Customs' decision. In that action, Chemtall argued that the definition of an amide requires that the three radical groups attached to the amide functional group must consist of either hydrogen, a hydrocarbyl group, or what Chemtall referred to as a "substituted hydrocarbyl" group. Chemtall contended that the radical in the R 3 position of ATBS, which contains sulfur and oxygen, is a substituted hydrocarbyl group, and that ATBS is therefore an amide.

         The government argued that the radicals attached to an amide functional group may consist only of hydrogen, alkyl groups, or aryl groups. Both alkyl and aryl groups are hydrocarbyls and do not contain sulfur or oxygen, so ATBS is excluded from the government's definition of "amide."

         On cross-motions for summary judgment, the Court of International Trade adopted the government's definition of the term amide and held that ATBS is properly categorized ...


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