CLA-2 OT:RR:CTF:TCM H053677 JER
Port Director
Port of Hartford
U.S. Customs & Border Protection
Bradley International Airport
Windsor Locks, CT 06096
RE: Protest number 0411-08-100010; Classification of Reformulated Gasoline Blendstock for Oxygenated Blending (RBOB)
Dear Port Director:
The following is our decision regarding the Application for Further Review (“AFR”) of Protest No. 0411-08-100010, timely filed on behalf of Vitol, Inc., concerning the classification of Reformulated Gasoline Blendstock (“RBOB”) for Oxygenated Blending under the Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
The subject Protest covers two (2) entries, entered on May 27, 2007 and liquidated on April 11, 2008 and May 23, 2008, respectively. The subject merchandise is described by Protestant as being Reformulated Gasoline Blendstock for Oxygenated Blending (“RBOB”) for use in the production of finished commercial-grade gasoline. RBOBs are specially produced motor fuel blendstock intended for blending with oxygenates downstream of the refinery or at the point of importation in order to meet reformulated gasoline emissions performance standards set forth by the Environmental Protection Agency. 71 F.R. 88, May 8, 2006.
The Port at Hartford liquidated the subject merchandise under subheading 2710.11.90, HTSUS, which provides for: “Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or oils
obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils: Light oils and preparations: Other: Other.” A Notice of Action was issued by the Port on March 6, 2008 and April 14, 2008 concerning the liquidation of the subject RBOB under subheading 2710.11.90, HTSUS.
ISSUE:
Whether the subject RBOB is classified under subheading 2710.11.18, HTSUS; or under subheading 2710.11.45, HTSUS, as a mixture of hydrocarbons not elsewhere specified or included, which contain by weight not over 50 percent of any single hydrocarbon compound or under subheading 2710.11.90, as an other mixture of hydrocarbons containing by weight over 50 percent of any single hydrocarbon compound.
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.
GRI 6 provides that the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above rules, on the understanding that only those subheadings at the same level are comparable.
The 2008 HTSUS provisions under consideration are as follows:
2710 Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils:
2710.11 Light oils and preparations:
2710.11.18 Motor fuel blending stock
2710.11.1805 Reformulated blendstock for oxygenate blending (RBOB)
Other:
2710.11.45 Mixtures of hydrocarbons not elsewhere specified or included, which contain by weight not over 50 percent of any single hydrocarbon compound
2710.11.90 Other…..
Additional U.S. Note 4 to Chapter 27 provide as follows:
For the purposes of subheadings 2710.11.18 and 2710.19.22, "motor fuel blending stock" means any product (except naphthas of subheading 2710.11.25) derived primarily from petroleum, shale oil or natural gas, whether or not containing additives, to be used for direct blending in the manufacture of motor fuel.
Subheading Note 4 to Chapter 27, HTSUS, provides in pertinent part:
For the purposes of subheading 2710.11, “light oils and preparations” are those of which 90 percent or more by volume (including losses) distill at 210º C (ASTM D 86 method).
Initially we note that the matter is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification and the rate and amount of duties chargeable. The protest was timely filed on October 8, 2008, within 180 days of liquidation of the entries on April 11, 2008 and May 23, 2008, pursuant to 19 U.S.C. §1514(c)(3). Further review of Protest 0411-08-100010, was properly accorded to protestant pursuant to 19 C.F.R. §174.24. In accordance with Section 174.24(b), the decision against which the protest was filed involves a question of law or fact that has not been ruled upon by the Commissioner of CBP or his designee, or by the Customs courts.
Protestant argues that the subject RBOBs should be classified under subheading 2710.11.45, HTSUS, as a mixture of hydrocarbon not elsewhere specified or included, which contain by weight not over 50 percent of any single hydrocarbon compound. Specifically, protestant avers that “given the nature of RBOB production and its virtually exclusive use in gasoline production, it would not be possible for RBOB to contain 50% or more by weight of any single hydrocarbon compound and still satisfy the specified commercial criteria with respect to combustion and distillation.”
There is no dispute that by application of GRI 1 the instant merchandise is classifiable as a petroleum oil of heading 2710, HTSUS. Nor is it disputed that the subject RBOBs are classifiable in subheading 2710.11, HTSUS, as “light oils and preparations” pursuant to Subheading Note 4 to Chapter 27, HTSUS. Further, Protestant acknowledges that according to the ASTM D 86 method, 90% or more of its volume distilled at 210º C, thus bringing the RBOBs within the terms of Subheading Note 4 to Chapter 27. However, the dispute occurs at the eight-digit level by application of GRI 6. Specifically, this matter concerns whether the instant merchandise is classifiable as a motor fuel blendstock, or as a mixture of hydrocarbons, not containing by weight over 50% of any single hydrocarbon, or under another residual provision of heading 2710, HTSUS.
Despite the fact that motor fuel blendstock (RBOBs) are provided for under subheading 2710.11.18, HTSUS, the Court in Clarendon Marketing, Inc. v. United States, 955 F. Supp. 1501, 1504 (C.I.T. 1997), (“Clarendon”), held that “[classification as] motor fuel blending stock is improper unless the importer chooses to seek such classification and affords the mandatory indicia of intent and actual use.”
In Clarendon, the Court held that phrases such as “to be used” or “for use in” give rise to the mandatory actual use requirements set forth in the Additional Rules of Interpretation and formalized in 19 C.F.R. §10.134. Accordingly, heading 2710.11.18 is an actual use provision which requires the importer to certify and substantiate that the motor fuel blend stock will in fact be used for direct blending in the production of gasoline. According to the Additional Rule of Interpretation 1(b), 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, as the Court in Clarendon pointed out:
In order for entries to qualify under an actual use provision, the importer must: (1) file a declaration of intended use upon entry or enter the article under an actual use provision (19 C.F.R. §10.134); (2) maintain records showing the actual use of the merchandise (19 C.F.R. §10.137); and (3) provide within three years of liquidation a certificate executed by the end-user attesting to the actual use of the merchandise (19 C.F.R. §10.138).
The Court in Clarendon held that, absent satisfaction of these conditions, petroleum products which are otherwise commercially regarded or actually used as motor fuel blendstock, are classified under a residual provision in heading 2710, HTSUS, unless and until such time that conditions affirming actual use are met. In the instant case, the importer has elected not to certify the “actual use” of the motor fuel blendstock making classification under subheading 2710.11.18, HTSUS, improper. See Clarendon at 1504.
Thus, we consider whether the subject RBOB is properly classifiable under subheading 2710.11.45, HTSUS, as a mixture of hydrocarbon not containing by weight over 50% of any single hydrocarbon or in subheading 2710.11.90, HTSUS, a residual provision of heading 2710, HTSUS. Protestant
contends that the subject RBOBs do not contain by weight over 50% of any single hydrocarbon compound. In support of this position, the importer offers an expert opinion, an international energy consultant. The expert concludes that “the computed weight percentage of aromatics, olefins and oxygenates mathematically rules out the possibility that any single hydrocarbon compound could be present in an amount exceeding 50% by weight.”
According to our research, gasoline is a complex mixture which contains over 500 different (mostly straight chain and branch chain) hydrocarbons. Hydrocarbons contained in motor fuel mixtures consist of four primary classes of hydrocarbons which include paraffins (or alkanes), olefins (or alkenes), alkynes and aromatics such as benzene and toluene. The paraffin groups are further broken down into sub-groups identified by carbon numbers and are divided into straight chain paraffins and branched chain paraffins also called isoparaffins. These sub-groups generally include butane, pentane, hexane, heptane, methylbutane, dimethylpropane, dimethylbutane and trimethylpenatne among others.
Further, as protestant’s submission points out, the composition data for the merchandise at issue indicates that the total weight percentage of aromatics, olefins, and oxygenates combined is 57.8% to 58.3% of the total mixture. Thus, no single hydrocarbon compound could exceed 50% by weight of the total subject mixture in any of the entries at issue. As such we find that the subject RBOBs do not contain by weight over 50% of any single hydrocarbon compound.
Insofar as certification of actual use as motor fuel blendstock cannot be obtained, and the instant merchandise is described in subheading 2710.11.45, HTSUS, as a “light oil and preparation” containing not over 50% of any single hydrocarbon compound, it cannot be classified in subheading 2710.11.18, HTSUS, or in subheading 2710.11.90, HTSUS.
HOLDING:
By application of GRI 1 and GRI 6, the subject RBOB is classified under subheading 2710.11.45, HTSUS, which provides for: “Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils: Light oils and preparations: Other: Mixtures of hydrocarbons not elsewhere specified of included, which contain by weight not over 50 percent of any single hydrocarbon compound…Other.” The column one, general rate of duty at the time of entry was 10.5 ¢ bbl ad valorem.
Since reclassification of the merchandise as indicated above would result in a lower duty rate, you are instructed to ALLOW the protest in full. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Sixty days from the date of the decision Regulations and Rulings of 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