2026 (3) TMI 993 - AAR - Customs

Classification of technical-grade pesticides as insecticidal preparations, resulting in their classification under Heading 38.08 and an adverse ruling.

Classification focused on whether technical-grade Cyantraniliprole and Clothianidin are separate chemically defined organic compounds or insecticidal ... Classification of Goods - technical grade chemicals Cyantraniliprole and Clothianidin - classifiable under Chapter 29 (CTH 2933 and CTH 2934 respectively) or under Chapter 38 as insecticidal preparations (CTH 3808, more specifically Tariff Item 3808 91 42) - Application of General Rules of Interpretation (GRI) including Rule 1, Rule 3(a) and Rule 6 Section VI notes and relevant Chapter Notes to Chapters 29 and 38 - HSN explanatory notes - Supplementary Note 2 to Chapter 38 prescribing composition threshold for tariff item 3808 91 42. Classification of Cyantraniliprole (Technical) and Clothianidin (Technical) - HELD THAT:- The Authority found that although the subject chemicals are separately defined organic compounds, they are technical grade insecticidal substances that possess insecticidal properties and are produced through multi step synthesis resulting in technical/formulated material. Applying the Chapter notes and HSN Explanatory Notes, such products fall within the scope of Heading 3808 when they have the character of preparations or intermediate preparations possessing insecticidal properties. The Supreme Court's ratio in Union of India v. Pesticides Manufacturers & Formulators Association of India endorses that technical grade pesticides [2002 (10) TMI 95 - SUPREME COURT] are classifiable under Heading 3808. The Finance Act, 2025 introduced complementary entries in Chapters 29 and 38 and Supplementary Note 2 to Chapter 38 prescribes a mass content threshold; the subject goods satisfy the >90% active ingredient criterion. On the application of GRI 3(a) the specific description for insecticidal preparations in Heading 3808 prevails over the more general chemical headings in Chapter 29. For these reasons the Authority held that the appropriate classification is under Heading 3808 and, more specifically, Tariff Item 3808 91 42. [Paras 20, 21, 23, 25, 30] To sum up: i) The subject chemicals, namely Cyantraniliprole and Clothianidin, are Technical Grade Chemicals. ii) As per the technical write-up (Cyantraniliprole DPX-HGW86 and Clothianidin Ref: CGA 322704), both substances are specifically described and recognized as insecticides. iii) The subject goods possess insecticidal properties and are known, marketed and traded in the commercial market as insecticides. iv) The CIB registration certificate also identifies the subject goods as technical/formulated insecticidal material. v) Further, the amendments introduced through the Finance Act, 2025 simultaneously created specific tariff items and supplementary notes in both Chapter 29 and Chapter 38. As clarified in the Memorandum explaining the provisions of the Finance Bill, the amendments in Chapter 29 relate to identification of certain dual-use chemicals for non-pesticidal purposes, whereas the amendments in Chapter 38 specifically relate to identification of certain technical-grade pesticides. This clearly indicates the legislative intent to classify technical-grade insecticidal substances under Chapter 38. vi) Additionally, as per the commercial production process details of the subject goods, it is evident that the goods are produced through multi-step chemical synthesis involving various reactions and purification stages. These processes ultimately result in the final technical grade active insecticidal substance. Therefore, it can safely and conclusively be held that the subject goods constitute preparations, as they are formulated chemical compounds produced through a multi-step synthesis process. Hon'ble Supreme Court in the matter of Union of India v. Pesticides Manufacturers & Formulators Association of India has discussed the issue comprehensively and ratio is clearly applicable to this case. vii) In view of the manufacturing process and technical literature on record, the goods are clearly preparations within the meaning of the tariff. viii) Being insecticidal preparations, they are appropriately covered under Heading 3808. ix) Further, Supplementary Note 2 to Chapter 38 specifically identifies certain technical-grade pesticides including Cyantraniliprole and Clothianidin under Tariff Item 3808 91 42 where the content by mass exceeds 90%. The subject goods satisfy the prescribed purity criterion and therefore squarely fall within the scope of the said tariff entry. x) Further, the import policy applicable to goods falling under Chapter 38 requires mandatory registration under Section 9 of the Insecticides Act, 1968 for chemicals intended to be used as insecticides. The subject goods, being technical-grade insecticides, are required to be registered with the Central Insecticides Board and Registration Committee prior to import, which further reinforces their regulatory and commercial identity as insecticides. xi) Further, in terms of Note 1(a)(2) of Chapter 38, the General HSN Explanatory Note to Note 29 (Note (D)(2)(h)) of Chapter 29, as well as the General HSN Explanatory Note (2) of Chapter 38, insecticides put up as described in Heading 38.08 are excluded from Chapter 29 and are classifiable under Chapter 38. xii) Applying Rule 3(a) of the General Rules for Interpretation, the heading providing the most specific description-namely Heading 3808 for insecticides-prevails over any more general chemical heading under Chapter 29. xiii) Without prejudice, even if it is assumed that the goods are prima facie classifiable under more than one heading, Rule 3(b) of the General Rules for Interpretation would apply, inasmuch as the essential character of the subject goods is derived from their insecticidal properties. The dominant function, commercial identity, and intended use of the goods are as insecticides, and therefore classification under Heading 3808 is warranted. Final Conclusion: The Authority ruled that the technical grade chemicals Cyantraniliprole and Clothianidin are insecticidal preparations/intermediate preparations and are classifiable under CTH 3808, more specifically under tariff item 3808 91 42, applying the Chapter notes, HSN explanatory notes, the Supreme Court precedent and the percentage criterion in Supplementary Note 2. Issues: Whether the technical grade chemicals Cyantraniliprole and Clothianidin are classifiable under Chapter 29 (CTH 2933 and CTH 2934 respectively) or under Chapter 38 as insecticidal preparations (CTH 3808, more specifically Tariff Item 3808 91 42) of the First Schedule to the Customs Tariff Act, 1975.Analysis: The classification framework applied comprises the General Rules of Interpretation (GRI) including Rule 1, Rule 3(a) and Rule 6, Section VI notes and relevant Chapter Notes to Chapters 29 and 38, and HSN explanatory notes. The goods submitted are technical grade insecticidal substances imported in bulk (200/226-litre drums) with high active ingredient content (exceeding 90% in each case) and are registered as technical/formulated insecticidal material. Chapter 29 ordinarily covers separate chemically defined organic compounds, while Chapter 38 covers insecticides when they are put up for retail sale, are preparations (including intermediate preparations possessing insecticidal properties), or are articles. The goods on record possess insecticidal properties and, despite being chemically defined substances, are technical-grade preparations produced via multi-step synthesis and are identifiable in trade as insecticides. The Finance Act, 2025 introduced parallel entries and supplementary notes in both Chapters 29 and 38; Supplementary Note 2 to Chapter 38 expressly identifies technical-grade pesticides (with content by mass greater than 90%) including the subject chemicals under Tariff Item 3808 91 42. Precedent and HSN explanatory notes recognize that intermediate preparations which already possess insecticidal properties fall under Heading 38.08.Conclusion: Cyantraniliprole (technical grade) and Clothianidin (technical grade) are classifiable as insecticidal preparations under Heading 3808, specifically under Tariff Item 3808 91 42 of the Customs Tariff Act, 1975; the advance ruling is adverse to the applicant (against the assessee).