CAAR Ruling on Fatty Alcohol Ethoxylates Classification

In re Detergeo Chem Private Limited (CAAR Mumbai)

Customs Authority for Advance Rulings (CAAR), Mumbai, examined the classification of Fatty Alcohol Ethoxylates (FAE) with three or more moles of Ethylene Oxide under the Customs Tariff Act, 1975. The applicant sought clarification on whether these products fall under tariff item 3402 4200 and if they qualify for exemptions under Notification No. 46/2011-Cus. The ruling considered product characteristics, industry usage, and relevant legal provisions, including the Harmonized System of Nomenclature (HSN) and Chapter Notes of the Customs Tariff. The ruling also referenced previous decisions on similar classifications.

Based on submitted data and publicly available information, CAAR concluded that FAE with three or more moles of Ethylene Oxide meets the criteria for classification under CTI 3402 4200 as a non-ionic organic surface-active agent. The decision emphasized the importance of product testing at the time of import to confirm classification. The ruling also noted that since the goods had not yet been imported, the decision was based on the applicant’s submissions and general trade information.

RELEVANT EXTRACT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI

7. Discussions and Findings

7.1 I have considered all the materials placed before me in respect of the classification of subject oods. I have gone through the submissions made by the applicant during the personal hearing as ell as the response received from the Jurisdictional Customs Commissionerate. Therefore, I proceed o pronounce a ruling on the basis of information available on record as well as existing legal raniework.

7.2 The applicant has sought advance ruling in respect of the following questions:

a) Question: Whether the products in question namely ‘Fatty Alcohol Ethoxylates having 3 or ore moles of Ethylene Oxide’ in the present application are classifiable under Tariff Item 3402 42 0 of the First Schedule to the Customs Tariff Act, 1975 (`Tariff)?

b) Question: If the answer to the above question is in the negative, then what would be the correct classilication of ‘Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide’ under the customs Tariff of India?

c) Question: Whether the products in question ‘Fatty Alcohol Ethoxylates having 3 or more soles of Ethylene Oxide’ in the present application are eligible for exemption under Sr. No. 399 of notification No.46/2011-Cus., dated 01.06.2011 (ASEAN) as amended basis their origin from secified countries namely Thailand, Singapore, Malaysia?

7 3. The applicant submitted that the product in this application is Fatty Alcohol Ethoxylate, (FAE) having 3 / 7 / 9 moles of Ethylene Oxide (EO) and it would be used as a thickener in cosmeticsirfactant preparations such as shampoos, shower preparations, hand cleaner, dish wash detergent a id foam baths, etc. The applicant further submitted that they have already been importing Fatty alcohol Ethoxylates having one or two moles of Ethylene Oxides and have been classifying the same um der CTI4 3824. The applicant further submitted that this classification has been disputed by the Customs department and they have been issued a Show Cause Notice No. 45/2023 dated 09.05.2023 the Chennai-II Commissionerate and the same is currently pending for adjudication.

7.4 At the outset, I find that the issue raised at the Sr. No. 08 in the CAAR-1 form is squarely covered under Section 28H(2) of the Customs Act, 1962 being a matter related to the classification of goods applicably of a notification issued under sub-section (1) of section 25 of the Customs Act, 1962, having a bea, ing on the rate of duty.

Further, I find that Section 28E (c) defines the Applicant as any person holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992; or exporting any goods to India; or’ with a justifiable cause to the satisfaction of the Authority, who makes an application for advance ruling under. Section 28H. In this matter, the applicant holds a valid Importer-exporter Code Number and satisfies one of the criterions mentioned under the definition of the Applicant under Section 28E and therefore, is a valid applicant for filing application under Section 28H of the Customs Act, 1962.

Further, 1 find that the product i.e. FAE with more than 3 moles of E0 is different from the product i.e. FAE with 1 or 2 moles and therefore, no cause arise for rejection of the application under proviso of Section 281 (2) as the questions. raised in the application are not currently pending in the applicant’s case before any officer of customs, the Appellate Tribunal or any Court; nor the same as in a matter already decided by the Appellate Tribunal or any Court.

In view of the above, I now take up the issue of classification of FAE with more than 3 moles of EO and applicability of Notification 46/2011 Sr. No. 399 on the rate of duty of the product.

7.5  Before deciding on the issue, let me deliberate on the legal framework prescribed in Customs Tariff Act, 1975, Chapter/Section notes along with HSN explanatory notes. Classification of goods in the Harmonized System of Nomenclature (HSN) is governed by. the General Rules for the interpretations. Rule 1 of the General Rules for the Interpretation of the Import Tariff to the Customs Tariff Act, 1975 stipulate that for legal purposes, the classification of the import item shall be determined according to the terms of the headings and any relative Section or Chapter Notes.

7.6 Based. on the function, usage and literature provided and argument advanced by the applicant and the contention of department, it is observed that both the applicant and the department are of the opinion that the product i.e. FAE with more than 3 moles of EU merits classification under Heading 3402 as an Organic Surface-Active Agent. However, the department has further opined that the actual classification of the product cannot be decided without testing of the goods at the time of Import.

7.7 Let me first examine the relevant Section Notes, Chapter Notes and Heading Text for Heading The relevant portion of CTH 3402 is reproduced below:

7.8 From the above, it is seen that following two categories of products can be classified under Heading 3402.

i. Organic Surface-Active Agents (Other than Soap)

ii. Surface-Active Preparations, Washing Preparations and Cleaning Preparations

The applicant has submitted that, the product FAE with 3 or more mole of EO is an organic surface active agent (other than soap) and that it would be used as a thickener in cosmetic surfactant preparations. Therefore, it does not fall into second category of product.

7.9 For deciding whether the product falls under Heading 3402 or not as an Organic Surface-

Active Agent, Chapter note 3 to Chapter 34 plays a vital role as it describes the condition needed to be fulfilled before classification of any product as Organic Surface-Active Agent. The same is reproduced below for ease of reference:

3. For the purposes of heading 3402, “organic surface-active agents” are products which when mixed with water at a concentration of 0.5% at 20°C and left to stand for one hour at the same temperature: (a) give a transparent r_w translucent liquid or stable emulsion without separation of insoluble matter; and (b) reduce the surface tension of water 4.5 X10² N/in (45 dyne/Cm) or less.

7.10 The Chapter Note 3 to Heading 3402 clearly lays down the condition that for any product to be classified as Organic Surface-Active Agent, it needs to fulfil these two conditions i.e. the product should give a transparent or translucent liquid or stable emulsion and reduce the surface tension of water to 4.5 X 10^-2N/m or less when mixed with water at a concentration of 0.5% at 20° C and left.to stand for one hour at the same temperature. Both the conditions need to be fulfilled by the product for its classification as an Organic Surface-Active Agent.

7.11 Further, the IISN Explanatory notes for heading 3402 describes the Organic Surface-Active Agents as chemical compounds, not chemically defined, which contain one or more hydrophilic or hydrophobic functional groups and satisfies the conditions mentioned in the Note 3 to Chapter 34. It further clarifies that an emulsion should not he considered as having a stable character if, after being left to stand for one hour at 20°C, solid particles are visible to naked eye or it has separated into visually distinguishable phases or it has separated into a transparent part and a translucent part: visible to the naked eye i.e. there should not be any visual separation of the emulsion visible to naked eye. Relevant HSN Explanatory notes for Beading 3402 are reproduced below:

(I) ORGANIC SURFACE-ACTIVE AGENTS
(OTHER THAN SOAP)

The organic surface-active agents of this heading are chemical compounds, not chemically defined, which contain one or more hydrophilic or hydrophobic functional groups in such a proportion that, when mixed with water at a concentration of 0.5 % at 20 °C and left to stand for one hour at the same temperature, they give a transparent or translucent liquid or stable emulsion without separation of insoluble matter (see Note 3 (a) to this Chapter). For the purposes of this heading, an emulsion should not be considered as having a stable character if, after being left to stand for one hour at 20 °C, (1) solid particles are visible to the naked eye, (2) it has separated into visually distinguishable phases or (3) it has separated into a transparent part and a translucent part, visible to the naked eye.

Organic surface-active agents are capable of adsorption at an interface; in this state they display a number of physico-chemical properties, particularly surface activity (e.g., reduction of surface tension, foaming, emulsifying, wetting), which is why they arc usually known as “surfactants”.

However, products which are not capable of reducing the surface tension of distilled water to 4.5 x 10′² N/m (45 dyne/cm) or less at a concentration of 0.5 % at 20 °C are not regarded as surface-active agents and are therefore excluded from this heading.

7.12 From the above, I observe that for a product to be classified as an Organic Surface-Active Agent, it should produce a stable homogenised either transparent or translucent solution or emulsion when mixed with water at a concentration of 0.5% at 20°C and it should not have any visual separation visible to naked eye when allowed to stand for one hour at 20°C. Also, at the same time, it should reduce the surface tension of distilled water to 4.5 X 10^-2 N/m or less.

7.13 Before delving onto the issue at hand i.e. whether the product satisfies the conditions mentioned in the Chapter Note 3 or not, let me examine the answer to following questions.

i. What is Fatty Alcohol Ethoxylates?

ii. How the presence of moles of Ethylene Oxides affects their water solubility?

7.13.1 I observe that, fatty alcohol ethoxylates are a group of non-ionic surfactant derived from fatty alcohol. The ethoxylation process involves adding ethylene oxide molecule to the fatty alcohol resulting in a compound with water attracting (Hydrophilic) and oil attracting (lipophilic) properties. The general structure of fatty alcohol ethoxylates is a fatty alcohol backbone (usually C-10 to C-18 carbon chain) with polyoxymethylene chain. (-CH2CH2O-) attached to it. These compounds are widely used for their emulsifying, cleaning, wetting and foaming properties. The properties of fatty alcohol ethoxylates depend on the chain length of the fatty alcohol and the number of ethoxy groups.

7.13.2 Ethylene Oxide (EO) units are water-attracting (hydrophilic) segments added to the water-repelling (hydrophobic) fatty alcohol chain. Each ethoxy group (-CH2CFI20-) increases the compound’s affinity for water. Longer hydrocarbon chains reduce overall solubility whereas greater EO units improve water solubility by increasing the hydrophilic fraction of the molecule.

7.14 I have gone through a reference copy of the Product Catalogue, Material Safety Data Sheet, Certificate of Analysis, Supplier’s Invoice and Test report submitted by the Applicant for one of the products `Dehydol LS 3 TI-I (MB)’. From the document submitted, it is observed that the chemical name of the product is Polyoxyethylene (3) Lauryl ether. Further, from the Analysis report of the product carried out by InS Thai limited; it is observed that the product i.e. Dehydol LS 3 TH satisfies both the conditions mentioned in the Chapter Note 3 of the Chapter 34 as it decreased the surface tension of the water to 29.3654+0.268 and gives a stable emulsion without separation of insoluble matter. Reports submitted are as under:

I. Surface tension of Dehydol LS3 T11 (Batch no. Z16103063^,1)

Table 2 summarized surface tension results of sample. the sample showed the surface tension of 29.364±0.268 dynes/cm.

Table 2: Surface tension results of sample.

2. Appearance testing of Dellydol 1,S3 mown no. 2161030634)

Figure I presented the appearance of sample at 20 C. The stable emulsion without separation )f insoluble matter was visually observed on the sample alter I h.

Figure I. presented the appearance of sample at 20. c. The stable emulsion without separation of insoluble matter was visually observe on the sample after I b. 

7.15 Further, 1 have gone through the information available on the websites of the suppliers and on open source for product, brand names and suppliers mentioned in Table 1 in Para 2.3 above. From the same, I observe that the product name is mentioned as Alpha Ethoxylate-which is different from Fatty Alcohol Ethoxylates as Alpha Ethoxylates are derived from Alpha-olefins, which are linear hydrocarbons with !a double bond at the first carbon atom, typically sourced from petroleum or gas . whereas Fatty AlcOhol Ethoxylates are derived ^–from fatty alcohols, which are long-chain alcohols obtained from natural fats and oils (e.g., coconut oil, palm oil) or synthesized chemically. Further. Alpha Ethoxylates exhibits higher hydrophobicity compared to Fatty Alcohol Ethoxylates.

It has also observed that although the -product name is mentioned as Alpha Ethoxylate, the brand names mentioned refers to Fatty. Alcohol Ethoxylates. Therefore, this ruling is only in respect of Fatty Alcohol Ethoxylates, i   and specifically for the brand names mentioned in the Table 1 in Para
2.3 above..

The inforn4Ition gathered from the product data sheet downloaded from the website of Thai Ethoxylate Company limited for Dehydol LS 3 TH, Dehydol LS 7 TH and Dehydol LS 9 TH is as under:

The CAS no. ^–was checked on https://commonchemistry.cas.org/. The chemical registered against this number is Alcohols, C12-14, ethoxylated that is FAE. The chemical is also Jalown as Polyoxyethylene lauryl ether, Laurcth, non-ionic surfactant etc. It has further been observed that these FAEs are an alkyl polyglycol ether of lauryl alcohol, chemically defined as an alcohol ethoxylate having an average alkyl chain of 12-14 carbon atoms and an ethylene oxide chain of 3 / 7 / 9 ethylene oxide units and these are generally used as a surfactant.

7.16 From the data submitted by the applicant as well as information available on the websites of the suppliers, I observe that the products are non-ionic surfactants as per the description provided ‘by the applicant and information available on open source. Non-ionic surfactants are a type of surface-active agents that have no net electrical charge in their formulations. That means the molecule does not undergo any ionization when it is dissolved in water. Accordingly, the product under consideration would merit classification under CTI 34024200 as a non-ionic organic surface-active agent. It is pertinent to mention that classification of any product is governed by General Rules of Interpretations as applicable. Rule I of GRI gives foremost importance to the Heading Text, Section Notes and Chapter Notes. Since there is a specific heading for Organic Surface-Active Agents under CTH 3402, therefore, the product i.e. FAE which is essentially an Organic Surface-Active Agent, merits classification under crii 3402 and specifically under Heading 34024200 as it is a non-ionic Organic Surface.-Active Agent.

7.17 Further, n the matter of VVF (India) Limited, in Ruling No. CAAR/Mum/ARC/92/2021, this authority has al lo earlier held that the goods “Fatty Alcohol Ethoxylate el -molg,2-7.moles-,…7-dnoles)” are non-ionic organic surface-active agents and merit classification under subheading 34021300 of Customs Tariff Act, 1975, subject to prescribed conditions under note 3 to Chapter 34..

7.18 Since the products have not yet imported into the country, the ruling in this case has to rely upon the information submitted by the applicant, product description and relevant information available in the public domain. In view of above information, facts of the case and arrangement of the Customs Tariff, the product appears to be appropriately classifiable under CTI 3402 4200. I lowever, it is contingent upon the testing of the products at the time of actual import of subject goods.

7.19 Further, with regards to the applicability of Notification No. 46/2011 Sr. No. 399 as amended, I find that if the goods are imported from the ASEAN countries as listed in Appendix-I and II of the notification, and each import is accompanied with a Country of Origin Certificate in the prescribed format issued by an ASEAN country as listed in Appendix-I and II, and importer complies with the CAROTAR (Customs Administration of Rules of Origin under Trade Agreement Rules), 2022, then these products are eligible for concessional rate of duty in terms of Sr. No. 399 of Notification No. 46/2011 dated 01.06.2011 as amended.

8. In light of the above facts, discussions and observations, my findings on the questions raised by the applicant are as under:

a) Question: Whether the products in question namely ‘Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide’ in the present application are classifiable under Tariff Item 3402 42 00 of the First Schedule to the Customs Tariff Act, 1975?

Ans. Yes, the products i.e. Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide are classifiable under Tariff Item 3402 42 00 of the First Schedule to the Customs Tariff Act, 1975. However, the same is contingent upon the testing of the product at the time of import to verify that the products satisfy the conditions mentioned in Note 3 of the Chapter 34.

b) Question: If the answer to the above question is in the negative, then what would be the correct classification of ‘Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide’ under the Customs Tariff of India?

Ans. Not Applicable

c) Question: Whether the products in question ‘Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide’ in the present application are eligible for exemption under Sr. No. 399 of Notification No.46/2011-Cus., dated 01.06.2011 (ASEAN) as amended basis their origin from specified countries namely Thailand, Singapore, Malaysia?

Ans. If the products, upon testing, satisfies the conditions mentioned in Chapter Note 3 to Chapter 34 and are imported from ASEAN countries as listed in the Appendix I and II to the Notification 46/2011 dated 01.06.2011, then the exemption under Sr. No. 399 of Notification No. 46/2011-Cus. dated 01.06.2011 would be available to the applicant subject to the presentation of Country of Origin Certificate for each consignment and further following of rules and procedures as set out in the ;AROTAR rules, 2022.

9. I rule accordingly.