- Type : • HTSUS :
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Related:
222064
FOR-3-03
OT:RR:CTF:ER H027423 ECD
Terry Estell
Service Port Director
U.S. Customs and Border Protection
2350 N. Sam Houston Pkwy E., Suite 1000
Houston, Texas 77032
RE: Foreign trade zone and subzone activation, grantee letter of concurrence, new corporate entity, 19 C.F.R. § 146.6 and 146.7
Dear Dir. Estell:
This letter is in response to your request for our opinion on whether Pasadena Refining System, Inc. (“Pasadena Refining CT”), a Connecticut corporation, as a result of two mergers and sale of its shares of stock, as well as the recent collapse of its joint venture, should be required to obtain a letter of concurrence form the Port of Houston Authority (the “Port Authority”), pursuant to 19 C.F.R. § 146.6(b)(5). Pasadena Refining is required to obtain a letter of concurrence, for the reasons explained in this letter.
FACTS:
Foreign Trade Subzone 84-N (“Subzone 84-N”) is a refinery foreign trade subzone in Harris County, Texas, and was first activated on December 11, 1995, with Crown Central Petroleum Corporation (“Crown”) as the operator of Subzone 84-N. The Port of Houston Authority (“Houston Authority”), an autonomous governmental entity authorized by the Texas legislature, received the foreign trade zone grant that includes Subzone 84-N. On July 2, 2004, Astra Oil Company, Inc. acquired Crown’s petroleum products; however, Crown retained ownership of the refinery, and remained the operator of Subzone 84-N. There was no new activation.
Crown subsequently sold its refinery to Pasadena Refining System, Inc., which was a Delaware corporation (“Pasadena Refining DE”) owned by Astra Oil Company, Inc. Pasadena Refining DE was incorporated in 2004. Subzone 84-N was activated on February 20, 2005, with Pasadena Refining DE as the operator.
On August 29, 2006, documents were filed with the Secretary of State for the state of Delaware at 11:15 a.m., and those documents indicated that Pasadena Refining DE was merged with and into Astra Refining System, Inc., a Delaware corporation. On the same day, documents were filed with the Secretary of State for the state of Delaware at 11:46 a.m. Astra Refining System, Inc. was merged with and into Astra Holding, USA, Inc., a Connecticut corporation that was first registered in 1998. Later that day, at 1:35 p.m., the corporation’s name, Astra Holding USA, Inc., was changed to Pasadena Refining System, Inc. (“Pasadena Refining CT”), and an amendment indicating the name change was filed with the Secretary of State of Connecticut. Also on August 29, 2006, Pasadena Refining System CT filed, with the Bond Desk at CBP, Customs Form 5106 indicating its new Internal Revenue Service (“IRS”) Identification Number, a request to file a new continuous bond, and a request to terminate its old continuous bond.
Pasadena Refining CT was created as a joint venture between Astra Oil Trading NV and Petrobras America Inc. Astra Oil Trading NV and Petrobras America Inc. each owned fifty percent of Pasadena Refining CT. On September 1, 2006, Pasadena Refining CT filed a request with the Port of Houston that the port approve the “change in FTZ operator” for Subzone 84-N from Pasadena Refining DE to Pasadena Refining CT. Pasadena Refining CT did not include a letter of concurrence from the Houston Authority. A new continuous bond for Pasadena Refining CT was executed on September 5, 2006, with an effective date of September 20, 2006. CBP did not approve the application.
On April 7, 2008, Pasadena Refining CT filed a statement explaining that it was not a new operator of Subzone 84-N and it does not require an activation, pursuant to 19 C.F.R. § 146.6. Pasadena Refining CT argues that Pasadena Refining CT should not be considered a new operator, because, as a result of its merger and creation from Pasadena Refining DE:
The assets were the same, the liabilities were the same, the officers were the same, and the ultimate parent remained the same. For example, the current and reorganized Pasadena Refining System, Inc. is still legally obligated under its agreement with the Port of Houston Authority. Likewise, the current and reorganized Pasadena Refining System, Inc. is still responsible to the surety under the bond required by U.S. Customs and Border Protection regulations.
Pasadena Refining CT argued that after Astra Oil Trading NV sold half its shares in Pasadena Refining CT to Petrobras America Inc., no assets were transferred; the sale meant that Pasadena Refining CT had two owners instead of one. Pasadena Refining CT argued that the sale of stock did not necessitate an application for activation.
On April 29, 2008, the zone grantee of Subzone 84-N, the Houston Authority, provided a letter on the activated status of Subzone 84-N, and stated that if CBP required a letter of concurrence from the Houston Authority, the Houston Authority would first need a “letter of non-objection” from Harris County, and it had not yet received such a letter. If CBP determined that “no significant changes have occurred to the operator of Subzone 84-N” and no action was required from the Houston Authority, then the Houston Authority would accept the decision and would not contest the activated status of Subzone 84-N.
Around this time, disputes arose between Astra Oil Trading NV and Petrobras America Inc. that led to international arbitration, as well as litigation filed in Federal courts. During the arbitration, Astra Oil Trading NV asked the international arbitration panel to validate certain put-option rights, which would force a sale of Pasadena Refining CT to Petrobras America Inc. Although Petrobras America Inc. has indicated that it is analyzing the arbitrators’ decisions, one U.S. court has stated that Petrobras America Inc. is the “de facto owner of Pasadena Refining System, Inc.” See Astra Oil Trading NV v. PRSI Trading Company LP, Court No. 08-CV-10467, 2008 U.S. Dist. LEXIS 106194 (S.D.N.Y. December 23, 2008).
CBP notified Pasadena Refining CT that it was required to obtain a letter of concurrence from the Houston Authority as part of its application for approval of activation of Subzone 84-N, but CBP has extended the time for Pasadena Refining CT to file the letter, pending advice from CBP Headquarters.
ISSUE:
Whether changes to the corporate structure of the operator of Subzone 84-N require the operator to apply for zone activation and obtain a letter of concurrence from the Houston Authority, pursuant to 19 C.F.R. § 146.6(b)(5).
LAW AND ANALYSIS
If the operator of Subzone 84-N is a new operator, then an application for approval of activation of the foreign trade subzone should have been filed. A foreign trade zone or subzone (collectively “zone”) has an activated status, or has had its “activation” approved, if the zone grantee and the CBP port director approve the operation of the zone, and the admission and handling of merchandise in zone status. See 19 C.F.R. § 146.1(a). If the operator of a zone is about to be changed, then there must be an application for approval of activation of the zone. See id., and § 146.7(e). If a zone operator applies to obtain approval of activation of a zone, then a written letter of concurrence from the zone grantee must accompany the application. See 19 C.F.R. § 146.6(b)(5). When a zone is operated by a corporation, and a change in the operator corporation “results in a new corporate entity, a new application for activation shall be made” pursuant to 19 C.F.R. § 146.6. See Foreign-Trade Zones Manual, Cust. Dir. No. 3210-030, at 40, para. 4.13(a) (August 6, 1991). Therefore, the question is whether Pasadena Refining CT is a new operator.
In this case, the operator at the time of the 2005 activation of Subzone 84-N, Pasadena Refining DE, ceased to exist on August 29, 2006. Legacy Customs has ruled that a corporation absorbed in a merger “ceases to exist and its existence is not, in any way or form, continued in the surviving or resultant corporation which constitutes a different legal being altogether.” See HQ 222064 (April 10, 1990). The operator had been a Delaware Corporation, Pasadena Refining DE, which was wholly owned by Astra Oil Company Inc. According to the “Agreement and Plan of Merger of Pasadena Refining System, Inc., a Delaware Corporation and Astra Refining System, Inc., a Delaware Corporation,” Astra Refining System, Inc. was the “Surviving Corporation,” and Pasadena Refining DE was the “Merged Corporation,” and the “Surviving Corporation shall continue its corporate existence under the laws of the State of Delaware and the separate existence and corporate organization of the Merged Corporation shall be terminated and cease.”
Subsequently, Astra Refining System, Inc. was merged with and into Astra Holding, USA, Inc., a Connecticut corporation that was first registered in 1998. According to the “Agreement and Plan of Merger of Astra Refining System Inc., a Delaware Corporation and Astra Holding USA, Inc., a Connecticut Corporation,” Astra Holding USA, Inc. was the “Surviving Corporation” and Astra Refining System, Inc. was the “Merged Corporation,” and thus Astra Refining System, Inc. was terminated and ceased to exist.
Astra Holding USA, Inc., the Surviving Corporation, subsequently changed its name to Pasadena Refining System, Inc., by a Certificate of Amendment filed with the Office of the Secretary of the State of Connecticut. The amendment listed the name change as the only amendment, thus the new Pasadena Refining CT is Astra Holding USA, Inc.
Before the sale of shares to create the joint venture between Astra Oil Trading NV and Petrobras America Inc., and before Astra Oil Trading NV exercised its put-option, Pasadena Refining CT was a new legal entity, which differed from the operator at the time of the 2005 activation of Subzone 84-N. Either the zone operator or the grantee should have applied for activation prior to the termination of Pasadena Refining DE.
Pasadena Refining CT argues that it is not required to obtain a letter of concurrence from the grantee, because the “grantee is requesting approval” of the new zone operator. In general, a zone grantee filing a request for approval of a new operator is requesting approval of an activation: the zone grantee is not required to furnish a letter of concurrence from itself. See 19 C.F.R. § 146.6(b)(5) and 146.7(e); see also 19 C.F.R. § 146.1 (“If the operator is different, it is an activation.”). Pasadena Refining CT does not dispute that Pasadena Refining DE was the operator, and the Houston Authority is the grantee of Subzone 84-N. There is nothing to indicate that Pasadena Refining CT is the same entity as the Houston Authority. The Houston Authority did not file an application for approval of the change in operator of Subzone 84-N, nor does the Houston Authority’s April 29, 2008, letter indicate that it was applying for approval of the change in operator of Subzone 84-N. The letter from the Houston Authority indicates only that if Pasadena Refining CT was a new operator, then the Houston Authority would have to obtain a non-objection letter from Harris County, before the Houston Authority could provide a letter of concurrence. Because the grantee of Subzone 84-N is not applying for approval of the new operator, the applicant is required to provide a letter of concurrence from the zone grantee, pursuant to 19 C.F.R. § 146.6(b)(5).
HOLDING:
Pasadena Refining DE, the operator of Subzone 84-N, ceased to exist on August 29, 2006, and Pasadena Refining CT is a new entity for purposes of determining whether it is a new zone operator. Therefore, in Pasadena Refining CT’s application for approval of what must be an activation, Pasadena Refining CT must provide a letter of concurrence from the Houston Authority, the zone grantee, before CBP will approve the activation.
You are to mail this decision to the Houston Authority and to Pasadena Refining CT no later than 60 days from the date of this letter. On that date, the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division