CLA-2 OT:RR:CTF:TCM H039040 JER

Jay L. Eizenstat, Esq.
Miller & Chevalier, Charted
655 Fifteenth Street, N.W., Suite 900
Washington, DC 20005

RE: Request for Binding Ruling; Classification; Ethyl Alcohol (Ethanol) Used to Produce ETBE

Dear Mr. Eizenstat:

This is in response to your letter dated September 15, 2008, on behalf of your client Lyondell Chemical Company (“Lyondell”), to United States Customs and Border Protection (“CBP”), in which you requested a binding ruling pertaining to the tariff classification of certain ethyl alcohol under the Harmonized Tariff Schedule of the United States (“HTSUS”).

FACTS:

The subject ethyl alcohol (also known as ethanol or EtOH) is imported by Lyondell, a chemical company which is a subsidiary of a larger worldwide chemical company (Lyondell Bassell Industries AF). The ethyl alcohol will be imported as undenatured ethyl alcohol and will be denatured at a facility in the U.S. upon importation. The ethanol will then be used to produce ethyl tertiary butyl ether (“ETBE”). ETBE is a fuel additive or oxygenate which is added to gasoline to reduce carbon dioxide emissions from the combustion of gasoline. It is produced by mixing ethanol (47%) and isobutylene (53%) in a process known

as catalytic etherification, i.e., mixing ethanol and isobutylene and reacting them with heat over a catalyst. In the attachments provided, it is noted that “compared to ethanol and isobutylene separately, the combined ETBE product has much more favorable gasoline blending properties such as higher octane and lower vapor pressure.”

On December 16, 2008, a meeting was held between Miller & Chevalier, a representative from Lyondell and CBP to discuss the present ruling request and matters related to the ultimate use of the imported ethyl alcohol. After which, your office provided supplemental information concerning the legislative history of the subject Chapter 99 provision. The content of that discussion along with the supplemental submission has been taken into consideration in rendering this decision.

ISSUE:

Whether ethyl alcohol imported to produce ETBE is excepted from the additional duty under subheading 9901.00.50, HTSUS, by operation of Note 2 to Chapter 99.

LAW AND ANALYSIS:

Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order. The 2009 HTSUS provisions under consideration are as follows: 2207 Undenatured ethyl alcohol of an alcoholic strength by volume of 80 percent vol. or higher; ethyl alcohol and other spirits, denatured, of any strength: 2207.10 Undenatured ethyl alcohol of an alcoholic strength by volume of 80 percent vol. or higher: 2207.10.60 For nonbeverage purposes…. 2207.10.6010 For Fuel Use 2207.20.00 Ethyl alcohol and other spirits, denatured, of any strength…. 2207.20.0010 For Fuel Use…. 9901.00.50 Ethyl alcohol (provided for in subheadings 2207.10.60 and 2207.20) or any mixture containing such ethyl alcohol (provided for in heading 2710 or 3824) if such ethyl alcohol is to be used as a fuel or in producing a mixture of gasoline and alcohol, a mixture of a special fuel and alcohol, or any other mixture to be used as fuel (including motor fuel provided for in subheading 2710.11.15, 2710.19.15 or 2710.18.21), or is suitable for any such uses…. Note 2 to Chapter 99 provides in pertinent part that:

the phrase “is suitable for any such uses” does not include ethyl alcohol provided for in 2207.10.60 and 2207.20) that is certified by the importer of record to the satisfaction of the Commissioner of Customs to be ethyl alcohol or a mixture containing such ethyl alcohol imported for uses other than liquid motor fuel use or use in producing liquid motor fuel related mixtures [.]

Certification of non-fuel use in accordance with Note 2 to Chapter 99 requires, among other things, a demonstration of non-fuel related uses which are beyond the parameters of motor fuel use or the production of motor fuel related mixtures. Absent a showing that ethyl alcohol is imported for uses other than liquid motor fuel use or uses other than the production of fuel related mixtures, the exception set forth in Note 2 to Ch. 99 is inapplicable.

You assert that the imported ethyl alcohol (“EtOH”) will not be used as a fuel or in producing fuel-related mixtures. As such, you contend that the subject EtOH falls within the exception set forth in Note 2 to Chapter 99. In support of your position, you assert that despite the fact that the subject EtOH will be used to produce ETBE you argue that ETBE is neither a fuel nor a mixture (nor a fuel related mixture). Therefore you argue that the designated use of the imported EtOH qualifies for a use other than liquid motor fuel use or a use other than producing liquid motor fuel related mixtures in accordance with Note 2. Accordingly, you state that the subject EtOH is not subject to the additional duty of 14.27¢ per liter as provided in subheading 9901.00.50, HTSUS, but instead that the subject EtOH is limited to classification in heading 2207, HTSUS. 

Classification under subheading 9901.00.50, HTSUS, requires that imported ethyl alcohol be used as a fuel, mixture of special fuel and alcohol or in any other mixture which is used as a fuel or is suitable for such uses. Note 2 to Chapter 99 elaborates on what is meant by the phrase “suitable for such uses.” Specifically, Note 2 to Ch. 99 provides that “[i]f the importer of record certifies nonliquid motor fuel use for purposes of establishing actual use or suitability under heading 9901.00.50, the Commissioner shall not liquidate the entry of ethyl alcohol until he is satisfied that the ethyl alcohol has in fact been used for liquid motor fuel use or in producing liquid motor fuel related mixtures.” Moreover, Note 2 to Chapter 99 excepts certain ethyl alcohol from classification under subheading 9901.00.50, HTSUS, where it is determined that the ethyl alcohol is imported for uses other than motor fuel or in producing motor fuel related mixtures. While the phrase “liquid motor fuel related mixtures” is not defined by the note, when read in light of the terms of subheading 9901.00.50, HTSUS, it becomes apparent that motor fuel related mixtures refers to those mixtures outlined in subheading 9901.00.50, HTSUS.

It is well settled that “[T]he words ‘suitable for suitable for use,’ as applied in the Customs law means actually, practically and commercially fit for such use.” United States v. F. W. Myers & Co., Inc. 60 C.C.P.A. 134, 135, 476 F.2d 1377, 1378 (1973). While it is clear that the subject EtOH is actually, practically and commercially fit for use in the production of gasoline and alcohol, in the production of special fuels and alcohol as well as in the production of other fuel related mixtures to be used as fuel, it is not clear that the intended use of the subject ethanol falls within any of these categories.

In the instant case, the subject EtOH will be used to produce ETBE. The ETBE will subsequently be exported outside the U.S. Additional U.S. Rules of Interpretation 1(b) provides that “a tariff classification controlled by the actual use to which the imported goods are put in the United States is satisfied only if such use is intended at the time of importation, the goods are so used and proof thereof is furnished within 3 years after the date the goods are entered.” In Headquarters Ruling Letter (“HQ”) 961890, dated September 17, 1998, we held that an actual use provision of the HTSUS, is controlled by the intended use of the goods at the time of importation and to which the actual use the imported goods are put in the United States and not the intended and actual use of the goods in a foreign country. Accordingly, we find that ETBE that is not blended with gasoline, special fuel or any other mixture to be used as a fuel while in the U.S., does not fall within the meaning of fuel related mixtures as contemplated by the terms of subheading 9901.00.50, HTSUS.

In so far as subheading 9901.00.50, HTSUS, is an actual use provision, it shall be necessary for the importer to demonstrate that the subject ethyl alcohol is actually used in the manner stated by the importer. 19 C.F.R. §10.131 – §10.139 provides that classification under an actual use provision requires that: 1) such use is intended at the time of importation 2) the article is so used and 3) proof of such use is furnished. Furthermore, in HQ 086276, dated December 31, 1990, we stated that the "Actual Use" regulations not only require the importer to state the intended use of the imported material at entry, but in addition, proof must be submitted of the actual “end-use” within the specified period.

In the instant case here, in order to facilitate the end-use certification, CBP will require a certificate of the end-use to be held by the final purchaser of the subject ethyl alcohol. Such certificate shall describe in detail how the ethanol was actually used. Additionally, the end-use certificates shall be held available for CBP’s inspection, upon reasonable notice, for a period of 3 years from the date of importation. Moreover, upon entry, the importer shall certify that the imported ethanol will not be used for fuel or other fuel related mixtures and shall further certify that the end-use product (ETBE) will be exported outside the U.S. Lastly, adequate records shall be kept along with acceptable accounting procedures followed to track the ethanol from entry to consumption in the production of ETBE.

HOLDING:

By application of GRI 1, the subject ethanol is classified in heading 2207, HTSUS. It is specifically classified in subheading 2207.20, HTSUS, which provides for: “Undenatured ethyl alcohol of an alcoholic strength by volume of 80 percent vol. or higher; ethyl alcohol and other spirits, denatured, of any strength: Ethyl alcohol and other spirits, denatured, of any strength: for fuel use.” The 2009 column one, general rate of duty is 1.9 % ad valorem. The EtOH is eligible for exemption from the additional duties under subheading 9901.00.50, HTSUS, provided the actual use requirements of 19 C.F.R. §10.131 – §10.139 are satisfied in accordance with the terms set forth above.

Sincerely,

Gail A. Hamill, Chief
Tariff Classification and Marking Branch