Distinct operator on List<string>

Have you tried

var ret = context.XInventTransBackOrder
    .Where(i => i.BatchRouteId != "")
    .Select(i => i.BatchRouteId)
    .ToList();
ret = ret
    .Distinct()
    .ToList();

If the BatchRouteId was a XElement, for instance, then probably an object reference comparison would be performed. In that case change the code to

var ret = context.XInventTransBackOrder
    .Where(i => i.BatchRouteId != null && !String.IsNullOrEmpty(i.BatchRouteId.Value))
    .Select(i => i.BatchRouteId.Value)
    .Distinct()
    .ToList();

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UPDATE #1

Note that some types implement implicit conversions making you think they were another type. You can pass a string to a XName parameter without explicit casting, and the string will automatically be converted to XName.

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UPDATE #2

According to a comment of nk2003dec the context is LinqToDynamicsAx. I don't know this interface but probably it does not implement Distinct. What you can to in such a case, is to change the context form a XY-LINQ to Object-LINQ by using the System.Linq.Enumerable.AsEnumerable<TSource> extension method

var ret = context.XInventTransBackOrder
    .Select(i => i.BatchRouteId)
    .Where(id => id != "")
    .AsEnumerable()
    .Distinct()
    .ToList();

I also inverted Select and Where as this simplifies the access to BatchRouteId

X++ does not have a distinct operator. The deferred execution will try to execute on ToList() and will fail because of this.