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Harish Damodaran

New Delhi , Aug. 20

CLASSIFICATION disputes are seemingly endemic to edible oils, more so with regard to palm oil.

Crude palm oil (CPO) currently attracts a basic Customs duty of 65 per cent, while the duty is 75 per cent on both RBD (refined, bleached, de-odourised) palm oil and RBD palmolein.

However, the 65 per cent duty on CPO is subject to it confirming to the definition of "crude palm oil and its fractions, of edible grade", as per the Revenue Department's notification dated August 1, 2003.

This, in turn, requires the oil to have "an acid value of two per cent, or more and total carotenoid (as beta carotene) in the range of 500-2,500 mg per kg, in loose or bulk form".

If a CPO consignment fails to meet the minimum carotenoid specification of 500 mg per kg, then it does not qualify as crude oil under heading 15.11.10.10 of the Customs Tariff and, therefore, would not be assessable to 65 per cent duty.

One would presume, then, that the particular oil would attract 75 per cent duty as is applicable for RBD palm oil (15.11.90.10) or RBD palmolein (15.11.90.20).

But in a new twist, the Customs authorities in Chennai have reportedly begun charging a duty of 85 per cent on imported CPO, which does not meet the minimum carotenoid specification.

The 85 per cent duty is apparently being levied on the basis of interpretation of a notification dated March 1, 2002.

The notification contained a table in which goods described against serial number 29 as "edible oils falling under headings 15.08, 15.11, 15.12, 15.13, 15.14 or 15.15" were charged to a general 85 per cent duty (15.11 deals with palm oil and its fractions).

At the same time, the table also specified a 65 per cent duty on "crude palm oil and its fractions, of edible grade, in loose or bulk form", listed under heading 15.11 against serial number 34.

What the Chennai Customs authorities have basically done is to superimpose the August 1, 2003 notification (prescribing the minimum carotenoid standards for an oil to be called `crude palm oil') on the original March 1, 2002 notification (levying 85 per cent duty on all oils mentioned against serial number 29).

By this logic, CPO consignments not confirming to the minimum carotenoid standards would be automatically assessable at 85 per cent, as they do not subscribe to the definition of "crude palm oil and fractions, of edible grade".

The move has taken importers by surprise. As it is, over 80 per cent of the CPO entering the country's ports do not meet the minimum carotenoid stipulation, which means they are either way chargeable to 75 per cent duty.

"But now, we are being levied 85 per cent. The authorities have asked us to furnish bank guarantees for 25 per cent of the duty difference amount and execute a bond for the remaining 75 per cent," said a Chennai-based importer.

The importers have also challenged the Chennai Customs authorities interpretation for levying the 85 per cent duty.

According to them, the March 1, 2002 notification provides for a 75 per cent duty to be levied on "all goods" falling under the heading 15.11.90, which is shown against serial number 434 of the table.

Heading 15.11.90, in turn, comprises three sub-headings - 15.11.90.10 (RBD palm oil), 15.11.90.20 (RBD palmolein) and 15.11.90.90 (other).

The importers claim that CPO not confirming to the minimum carotenoid specifications should be classified under sub-head 15.11.90.90 and, by virtue of this, attract the 75 per cent duty as is applicable on RBD palm oil and RBD palmolein.

With the Chennai Customs refusing to yield ground, the dispute has now been referred to the Central Board of Excise and Customs (CBEC) for clarification.

The need for acid value norms

THE purpose behind prescribing a minimum acid value of two per cent and total carotenoid range of 500-2,500 mg per kg for crude palm oil (CPO) was to ensure that the oil being imported by domestic refiners at 65 per cent duty was genuinely `crude'.

Refining mainly involves lowering the free fatty acid (FFA) content in the crude oil to 0.25 per cent or below, followed by bleaching and de-odourisation.

The crude oil is normally orange red in colour, which is due to the presence of carotenoids. The carotenoids are destroyed during bleaching and distillation in the refining process.

The refined, bleached and de-odourised (RBD) oil then undergoes further fractionation (separating the liquid `olein' from the solid `stearin' fraction) and it is the resulting `olein' that gets marketed as RBD palmolein.

Vanaspati makers, on the other hand, do not fractionate the RBD palm oil. They, instead, hydrogenate it to yield a solid product that mimics ghee.

More Stories on : Oilseeds & Edible Oil | Excise and Customs | Exports & Imports

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