OT:RR:CTF:EMAIN H304962 EKR
H. Michael Leightman
Ernst & Young, LLP
5 Houston Center, Suite 1200
1401 McKinney Street
Houston, TX 77010
RE: Tariff classification of light crude distillation plant
Dear Mr. Leightman:
This is in response to your letter of February 8, 2019, submitted on behalf of ExxonMobil Oil Corporation (“ExxonMobil”), requesting a prospective ruling as to the classification of a light crude distillation plant (“the plant”) under the Harmonized Tariff Schedule of the United States (“HTSUS”). In reaching the below determination, we have considered information presented in your February 8, 2019 letter (“the February letter”), your response to questions posed by the National Commodity Specialist Division (“NCSD”) dated May 23, 2019 (“the May letter”), your supplemental letter dated June 27, 2019 (“the June letter”), and your response to questions posed by Headquarters dated March 2, 2020 (“the March letter”).
FACTS:
As detailed in the February, May, and March letters, ExxonMobil intends to import the parts and components of the plant from Thailand, first admitting them into a foreign trade zone (“FTZ”) covering the site of the intended construction. After completing construction of the plant, ExxonMobil plans to enter the completed plant by constructively transferring the plant into the Customs territory, and filing appropriate entry documentation. Therefore, ExxonMobil seeks classification of the final assembled plant, as a whole, not the individual components admitted to the FTZ.
According to your February, May and March letters, the completed plant will fractionate light crude into light virgin naphtha (“LVN”), heavy virgin naphtha (“HVN”), kerosene, light gas oil (“LGO”), heavy atmospheric gas oil (“HAGO”), and atmospheric tower bottoms (“ATB”), and will route the streams for further refining within and outside the plant. The plant will consist of assembled units and subunits permanently attached to each other, including fully heat-integrated preheat train, prefractionator tower, desalter, depentanizer, stripper, preheater, condenser, exchanger and compressor, and a cooling water tower. (February letter p. 2 and 5) You state that disconnecting any one unit from the whole would prevent the plant from functioning as designed. (February letter, p. 2).
The plant will fractionate and refine the products through a series of distillations and supporting processes. First, the light crude feed is preheated, to segment the crude feed into streams with different approach temperatures. The stream with the lowest approach temperature is mixed with process water, and sent to the desalter, where water, salt and solids are separated from the crude. The desalted crude is then directed through the preheat train, which operates at high pressure to prevent vaporization as the crude is heated. The preheated, desalted crude is then flashed at various cold temperatures into the prefractionator, which is a fractional distillation column operating at low temperature. The offgas of the prefractionator is routed to the overhead drum, see infra.
The crude from the bottom of the prefractionator is pumped through the hot preheat train into the Atmospheric Pipestill (“APS”) Furnace to be heated. (February and May letters). The heated crude is then directed into the main APS tower, which is a fractional distillation column that separates the crude into different fractions depending on the difference in volatility. (May and March letters). The four components of the crude with the highest boiling points (ATB, HAGO, LGO, and kerosene) are steam stripped in the APS tower. (May and March letters). The steam-stripped kerosene is next directed to the Kero Hydrotreater Unit (KHDT) for desulphurization. (See infra). The steam-stripped LGO is directed to the Diesel Hydrotreater Unit (DHDT) for desulphurization. (See infra). The steam-stripped ATB and HAGO are not further processed by this facility. (March letter).
The components remaining in the crude after these components have been stripped comprise the “overhead” of the APS tower. The liquid overhead is HVN, which is not further processed in this plant. (March letter). The vapor overhead is composed of LVN, steam, and offgas. The vapor overhead is directed to the overhead drum, where it is combined with the vapor overhead of the other fractionation towers. (March letter). In the overhead drum, this mixture is condensed, and water is routed to the desalter for reuse. The overhead drum also condenses part of the offgas into liquid, which is routed to the depentanizer.
The depentanizer is a fractional distillation column that further fractionates the liquid from the overhead drum into offgas, depentanizer overhead liquid, and LVN. The remaining vapor in the overhead drum is sent to the compressor suction, where it is mixed with gas streams from the KHDT and DHDT strippers (see infra), Benzene Recovery Unit flash gas (see infra), the depentanizer offgas, and recovered gas from the flare system. The mixture is compressed, contacted with the depentanizer overhead liquid, cooled, and separated into fuel gas and liquefied petroleum gas. Both streams are then amine scrubbed using an amine water solution, which bonds with carbon dioxide (CO2) and hydrogen sulfide (H2S), removing them from the gas products.
Kerosene separated from the crude feed by the APS tower is sent to the KHDT unit for desulphurization. In the first step, the kerosene feed from the APS tower is mixed with hydrogen and heated. The heated mixture is then pumped through a reactor containing fixed beds of solid metal catalyst, where the hydrogen reacts with the kerosene feed to produce hydrogen sulfide and desulphurized kerosene. The kerosene feed is then partially cooled, and separated into hydrogen gas and residual liquid in the Hot and Cold Separators. The hydrogen gas is recycled to the first step in the process. The residual liquid is sent to the kero stripper tower, a fractional distillation tower that separates the desulphurized kerosene from sour gases. The product remaining at the bottom of the distillation tower is Sulphur-free diesel. The overhead vapor from the kero stripper tower is sent to the overhead compressor. The overhead liquid from the kero stripper tower is sent to another facility for further processing. The DHDT unit removes Sulphur from LGO, using the same multi-step process.
ISSUE:
Whether the completed plant is classifiable as a “Distilling or rectifying plant” in subheading 8419.40, HTSUS, or as “other” apparatus for the treatment of materials by a process involving a change of temperature in subheading 8419.89, HTSUS.
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs) and any applicable legal notes. GRI 1 requires that classification be determined first 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 heading and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
GRI 6 provides that classification of goods at the subheading level will be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the preceding GRIs on the understanding that only subheadings at the same level are comparable.
The HTSUS provisions under consideration in the instant case are as follows:
8419 Machinery, plant or laboratory equipment, whether or not electrically heated (excluding furnaces, ovens and other equipment of heading 8514), for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, nonelectric; parts thereof:
8419.40 Distilling or rectifying plant
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Other machinery, plant or equipment:
8419.89 Other
Note 4 to Section XVI, HTSUS, which includes Chapter 84, provides as follows:
Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function.
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
Explanatory Note 84.19 explains that heading 8419, HTSUS, includes various distilling and rectifying machinery, including the following:
(II) DISTILLING OR RECTIFYING PLANT
* * * * *
(B) Fractionating or rectifying plant.
These are more complicated continuous installations incorporating vertical fractionating columns which enable complex mixtures to be separated in one operation. The most usual type of column is divided into interconnecting sections by plates fitted with bubbling caps and down-flow tubes. Vapour rising from one section is thus brought into intimate contact with a condensed portion of the vapour in the section above and, since the temperature decreases as the vapours rise in the column, they can be separated at different levels corresponding to their boiling points.
* * * * *
Continuous distillation plant (simple or fractional) is used in many industries (e.g., … in crude petroleum refining…).
As an initial matter, we agree that the plant is wholly described by heading 8419, and can be classified therein by application of GRI 1. You state that the plant will be constructed of interconnected units and subunits permanently attached to each other, and that if any particular unit were disconnected from the whole, the plant would cease to function as designed.
Note 4 to Section XVI, HTSUS, provides that a machine or combination of machines intended to contribute to a clearly defined function covered by one of the headings in chapter 84 should be classified in the heading appropriate to that function. In this instance the clearly defined purpose of the plant is to refine crude oil into various end products using a series of temperature changes to fractionate and refine the streams. While the individual units described above might be classified in their own respective HTSUS headings when imported separately, once assembled into the plant they contribute to the clearly defined function of fractionation and refining of crude oil through changes in temperature. Equipment for “the treatment of materials by a process involving a change in temperature” is provided for, eo nomine, in heading 8419, HTSUS.
Pursuant to GRI 6, in determining the appropriate subheading we reapply the GRIs in order, beginning again with GRI 1. Again, by application of Note 4 to Section XVI, HTSUS, we consider the “clearly defined function” of the plant as a whole in determining the applicable subheading. You have argued that the plant should be classified in subheading 8419.40, as a “Distilling or rectifying plant.”
The HTSUS does not define “distilling” or “rectifying.” Therefore, we construe these terms in accordance with their common meanings, ascertained by reference to “dictionaries, scientific authorities, other reliable information sources,” “lexicographic and other materials” and to the pertinent ENs. C.J. Tower & Sons v. United States, 69 C.C.P.A. 128, 673 F.2d 1268, 1271 (1982); Simod America Corp. v. United States, 872 F.2d 1572, 1576 (Fed. Cir. 1989); GRK Can., Ltd. v. United States, 761 F.3d 1354, 1357 (Fed. Cir. 2014). The Oxford English Dictionary provides the following definitions for “distill” and “rectify:”
Distill: 4.a. To subject to the process of distillation; to vaporize a substance by means of heat, and then condense the vapour by exposing it to cold, so as to obtain the substance or one of its constituents in a state of concentration or purity. Primarily said of a liquid, the vapour of which when condensed is again deposited in minute drops of pure liquid; but extended also to the volatilizing of solids, the products of which may be gaseous.
* * * * *
Rectify: 3.a. transitive. Chemistry. To purify or refine (a substance) by distillation (esp. repeated or continuous distillation) or other chemical treatment; to raise (spirit) to a required strength in this way (obsolete). Occasionally also intransitive.
"distil | distill, v." OED Online, Oxford University Press, March 2020, www.oed.com/view/Entry/55653. Accessed 11 March 2020; "rectify, v." OED Online, Oxford University Press, March 2020, www.oed.com/view/Entry/160025. Accessed 11 March 2020. The Explanatory Notes for heading 8419, HTSUS, offer additional clarity, describing “[f]ractionating or rectifying plant[s]” as:
more complicated continuous installations incorporating vertical fractionating columns which enable complex mixtures to be separated in one operation. The most usual type of column is divided into interconnecting sections by plates fitted with bubbling caps and down-flow tubes. Vapour rising from one section is thus brought into intimate contact with a condensed portion of the vapour in the section above and, since the temperature decreases as the vapours rise in the column, they can be separated at different levels corresponding to their boiling points.
EN 84.19 further notes that continuous distillation is used in many industries, including “crude petroleum refining.”
The subject plant first uses a distillation process to separate the crude feed into its constituent fractions: ATB, HAGO, LGO, kerosene, HVN, and offgas containing LVN. The prefractionator and the APS tower, which accomplish this initial separation, are “vertical fractionating columns” that separate out various fractions of the crude feed based on variances in the boiling point of the hydrocarbons comprising the crude feed. The ATB, HAGO, and HVN are routed to other facilities for further processing. The kerosene, LGO and offgas containing LVN are further rectified through distillation or other chemical treatment in the plant. Three more vertical fractionating columns, the depentanizer, kero stripper tower and the diesel product stripper, further purify their respective feeds through distillation, removing impurities from their final products (LVN and Sulphur-free diesel, respectively), and separating offgases to be sent to the Overhead Compressor to become fuel gas and liquefied petroleum gas. Chemical processes such as amine scrubbing and desulphurization further rectify these streams.
Each of these processes contributes to the function of the plant as a whole, which is to fractionate and refine the light crude feed by “[d]istilling and rectifying” the feed. This function is described eo nomine, in subheading 8419.40, which provides for “[d]istilling or rectifying plant,” and by EN 84.19. This classification is also consistent with prior rulings considering the classification of similar plants, and the application of Note 4 to Section XVI. See Headquarters Ruling Letter (“HQ”) H267791, dated January 3, 2017 (classifying an ethane processing plant in subheading 8419.40.00, HTSUS, as a functional unit pursuant to Note 4 to Section XVI, HTSUS); see also HQ H062209, dated August 10, 2009 (classifying a plant for separating a rare gas from a gaseous mixture in 8419.40.00, as a functional unit pursuant to Note 4 to Section XVI, contributing to the clearly defined function of fractionating gases); HQ 952810, dated December 9, 1992 (classifying an incubator and gas mixture apparatus as a functional unit pursuant to Note 4 to Section XVI, contributing to a clearly defined function, when imported together); New York Ruling Letter (“NY”) N292493, dated December 19, 2017 (classifying an ethane processing plant in 8419.40.00).
HOLDING:
By application of GRIs 1 and 6 (Note 4 to Section XVI), the plant is classified in heading 8419, HTSUS, specifically subheading 8419.40.00, which provides for “[m]achinery, plant or laboratory equipment, whether or not electrically heated (excluding furnaces, ovens and other equipment of heading 8514), for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, nonelectric; parts thereof: Distilling or rectifying plant.” The 2020 column one, general rate of duty for merchandise of subheading 8419.40.00, HTSUS, is free.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov/tata/hts/. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Gregory Connor, Chief
Electronics, Manufacturing, Automotive, and International Nomenclature Branch