- Type : • HTSUS :
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Related:
231595
OT:RR:CTF:ER LIQ-15 HQ W231489 ECD
Ms. Sharon M. Swiatek
Supervisory Import Specialist
U.S. Customs and Border Protection
726 Exchange Street, Room 400
Buffalo, New York 14210
RE: Application for Further Review of Protest No. 0901-06-100085: Entry Requirements for Natural Gas Importations Made via Pipeline from Canada Pursuant to the North American Free Trade Agreement; Undecided Post Importation NAFTA Claim No. 0901-06-300312
The following is our decision regarding the Application for Further Review (“AFR”) of Protest No. 0901-06-100085 (the “Protest”), filed by Constellation Energy Commodities Group Inc. (“Constellation Energy” or “protestant”), which we received from your office on June 26, 2006. We have completed our review of this Protest and are returning it to you with the appropriate documents, which were forwarded for review. We are also including directions for disposition of the Protest, as discussed below.
FACTS:
On February 26, 2006, Constellation Energy filed this Protest concerning the assessment of Merchandise Processing Fees (“MPFs”) on natural gas imports, which were made from Canada into the United States via the Empire and Tennessee Gas pipelines through the Chippawa and Niagara delivery points. Constellation Energy argued that U.S. Customs and Border Protection (“CBP”) should not assess MPF on its natural gas, which it considers to be NAFTA-originating. In the alternative, assuming there were no NAFTA preference or other exemption available for its imports of natural gas, Constellation Energy argued that its MPF is limited to the filing of the monthly entry itself, and should not be calculated based on each release, because of the language of CBP Regulations, the legislative history of the Customs user fee statute, and the nature of natural gas. Finally, if an MPF must be assessed, Constellation Energy argued that CBP improperly calculated the value of its natural gas imports.
In identifying the entries covered by the Protest, Constellation Energy stated parenthetically:
(Exhibit A contains a listing of the entry numbers at issue in this protest, the monthly entry periods that they cover, their liquidation dates, and the amount of MPF assessed by Customs against each entry. The amount at issue in this protest, representing the amount of MPF billed to CCG by Customs, is $xxxxxx)
(amount omitted). In a footnote next to the dollar amount, Constellation Energy stated, “This figure does not include the amount of MPF assessed against Entry Nos. 551-xxxxx186 and 551-xxxxx194, which are included in this protest” (numbers omitted).
In its Protest, Constellation Energy provided lists of the following imports at the Chippawa delivery point and the amount of MPF paid for these entries:
Entry No.
Import Date
(mo./yr.)
Aggregate Entry Date
(mo./day/yr.)
Liquidation Date
(mo./day/yr.)
551-xxxxx055
12/2004
10/12/2005
12/2/2005
551-xxxxx063
1/2005
10/12/2005
12/2/2005
551-xxxxx071
2/2005
10/12/2005
12/2/2005
551-xxxxx089
4/2005
10/12/2005
12/2/2005
551-xxxxx097
5/2005
10/12/2005
12/2/2005
551-xxxxx105
6/2005
10/12/2005
12/2/2005
551-xxxxx113
7/2005
10/12/2005
12/2/2005
551-xxxxx121
8/2005
10/12/2005
12/2/2005
551-xxxxx915
9/2005
10/26/2005
12/2/2005
551-xxxxx053
10/2005
11/28/2005
12/23/2005
Constellation provided lists of the following imports at the Niagara delivery point and the amount of MPF paid for these entries:
Entry No.
Import Dates
(mo./yr.)
Aggregate Entry Date
(mo./day/yr.)
Liquidation Date
(mo./day/yr.)
551-xxxxx626
5/2003
10/12/2005
12/2/2005
551-xxxxx634
6/2003
10/12/2005
12/2/2005
551-xxxxx642
7/2003
10/12/2005
12/2/2005
551-xxxxx659
8/2003
10/12/2005
12/2/2005
551-xxxxx667
9/2003
10/12/2005
12/2/2005
551-xxxxx675
10/2003
10/12/2005
12/2/2005
551-xxxxx683
11/2003
10/12/2005
12/2/2005
551-xxxxx691
12/2003
10/12/2005
12/2/2005
551-xxxxx709
1/2004
10/12/2005
12/2/2005
551-xxxxx717
2/2004
10/12/2005
12/2/2005
551-xxxxx725
3/2004
10/12/2005
12/2/2005
551-xxxxx733
4/2004
10/12/2005
12/2/2005
551-xxxxx741
5/2004
10/12/2005
12/2/2005
551-xxxxx758
6/2004
10/12/2005
12/2/2005
551-xxxxx766
7/2004
10/12/2005
12/2/2005
551-xxxxx774
8/2004
10/12/2005
12/2/2005
551-xxxxx782
9/2004
10/12/2005
12/2/2005
551-xxxxx790
10/2004
10/12/2005
12/2/2005
551-xxxxx808
11/2004
10/12/2005
12/2/2005
551-xxxxx816
12/2004
10/12/2005
12/2/2005
551-xxxxx824
1/2005
10/12/2005
12/2/2005
551-xxxxx832
2/2005
10/12/2005
12/2/2005
551-xxxxx840
3/2005
10/12/2005
12/2/2005
551-xxxxx857
4/2005
10/12/2005
12/2/2005
551-xxxxx865
5/2005
10/12/2005
12/2/2005
551-xxxxx873
6/2005
10/12/2005
12/2/2005
551-xxxxx881
7/2005
10/12/2005
12/16/2005
551-xxxxx899
8/2005
10/12/2005
12/2/2005
551-xxxxx956
9/2005
10/26/2005
12/2/2005
551-xxxxx046
10/2005
11/28/2005
12/23/2005
Separately, Constellation Energy provides, without any additional information as to point of entry or MPF assessed, these four lines:
December 2005 Monthly Entries, Filed 1/23/2006
Entry Nos. Liquidation Date
551-xxxxx186 2/17/06
551-xxxxx194 2/17/06
On February 27, 2006, Constellation Energy also filed a post-importation claim, pursuant to 19 U.S.C. § 1520(d), for a refund of MPFs paid on natural gas it had imported (“Post-Importation Refund Claim”). Its Post-Importation Refund Claim encompassed
[S]everal monthly entries of natural gas made through the Port of Buffalo. (A list of the monthly entries included in this claim is attached as Exhibit A (highlighted entries.) These entries relate to importations made from February – October 2005.)
Constellation Energy provided a list of highlighted importations made from December 2004 through October 2005 at the Chippawa Pipeline, and importations made from May 2003 through October 2005 at the Niagara Pipeline; the list is identical to the detailed list in the Protest. In the Post-Importation Refund Claim, Constellation Energy argued that CBP should waive the requirement of a NAFTA Certificate of Origin, because the natural gas could only have originated from a NAFTA country; moreover, because the natural gas was allegedly NAFTA-originating, no MPF should be assessed against its entries, and CBP should refund all MPF Constellation Energy had paid.
According to Constellation Energy, there are three sectors in the natural gas industry: the upstream sector, which covers the discovery and initial stages of production of natural gas; the midstream sector, which covers the processing of natural gas; and the downstream sector, which covers the transportation and use of natural gas. Natural gas can be distributed either via pipeline as a gas, or in tanks as liquefied natural gas (“LNG”). Natural gas enters the pipeline either directly from natural gas producers who have obtained the gas from wells, or is injected into the pipeline by LNG regasification terminals; companies in the midstream and upstream sector all inject gas into the pipeline. There are no LNG marine terminals in Canada; however, there are several proposed sites, and several existing sites in the United States.
The North American natural gas pipeline is not unidirectional; it is an extensive network, extending from Mexico, through the United States, and throughout Canada, and is referred to as a pipeline grid, through which natural gas flows continuously, and includes the Niagara Falls and Chippawa delivery points. According to the Energy Information Administration, U.S. Department of Energy (“EIA”), natural gas flows in both directions at the Niagara Falls delivery point, although it is primarily an import delivery point; and, at the Chippawa delivery point, natural gas flows into the United States. See EIA Report, “Locations of U. S. Natural Gas Import & Export Points, 2008,” available at http://www.eia.doe.gov/pub/oil_gas/natural_gas/analysis_publications/ngpipeline/impex_list.html (accessed May 8, 2008, printout in file).
Ownership of the natural gas at any given point in the pipeline is determined by contractual rights, which may be traded in a secondary market and imported into the United States. Pipeline operators monitor the flow of gas, and maintain records as to what parties have contractual rights over the natural gas flowing through the pipeline at a given time. Importers receive a report indicating the quantity of natural gas, which is based on the amount of natural gas it requested be delivered based on its contractual rights. Constellation Energy provided a copy of its September 2005 TransCanada pipeline account transactions for several delivery points, including Chippawa and Niagara Falls. Although the pipeline operator may not know from whom the importer purchased the contractual right to the natural gas, the importer knows from whom it purchased its right to the natural gas, as Constellation Energy showed when it provided a list of its suppliers with its entry documentation.
Although some importers may be from the upstream or midstream sectors, or importers that purchase natural gas directly from the natural gas producers, all of which could obtain NAFTA Certificates of Origin, Constellation Energy purchases natural gas contractual rights that are traded on the secondary market, and claims that because the contractual rights are traded through many different parties, NAFTA Certificates of Origin do not travel with the natural gas rights purchased in a secondary market. Constellation Energy provided an example of how natural gas is priced in the secondary market, when it provided a copy of the “Platts Gas Daily”, dated February 23, 2006, which provides natural gas prices for various hubs.
Contrary to Constellation Energy’s assertion that no CBP inspectors or personnel monitor the flow of natural gas, CBP Regulations expressly provide that each port must establish “controls and checks on the unlading and measurement of petroleum and petroleum products imported in bulk by vessel, truck, railroad car, pipeline, or other carrier.” See 19 C.F.R. § 151.42(a)(1). Approved installations are subject to CBP verification, and CBP officers may perform or witness measurement of the natural gas, pursuant to section 151.42(b) of CBP Regulations. See 19 C.F.R. § 151.42(b).
Constellation Energy argues that natural gas should be treated as if it were electricity, because natural gas is intangible and is transported via pipeline. Constellation Energy cites a memorandum dated February 3, 1989, explaining that pursuant to the (then new) HTSUS Additional U.S. Note 5(B) in Chapter 27, electrical energy is not subject to entry requirements and is exempted from MPF assessment.
Natural gas imports that meet certain criteria may file consolidated monthly entries, pursuant to 19 C.F.R § 24.23(d). The program for the aggregation of monthly processing fees began on July 1, 1970, when CBP implemented a policy program for the monthly consolidated entry of nondutiable merchandise, expanding a pilot program from the ports of Buffalo and Detroit to the entire country to “determine its applicability to other types of ports and modes of transportations.” Customs Bureau Circular ENT-1-AC, July 1, 1970, available at http://www.cbp.gov/xp/cgov/trade/trade_programs/cargo_summary/pipeline_entry/ . When Congress amended the Customs user fee statute in 1990, it specifically carved an exception for aggregate merchandise processing fees. Section 111(f) of Pub. L. 101-382, as amended by Pub. L. 101-508, title X, Sec. 10001(c), Nov. 5, 1990, 104 Stat. 1388-386, provided that:
(1) Notwithstanding any provision of section 13031 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c), in the case of entries of merchandise made under the temporary monthly entry programs established by the Commissioner of Customs before July 1,1989, for the purpose of testing entry processing improvements, the fee charged under section 13031(a)(9) of the Consolidated Omnibus Budget Reconciliation Act of 1985 for each day’s importations at each port by the same importer from the same exporter shall be the lesser of--
(A) $400, or
(B) the amount determined by applying the ad valorem rate currently in effect under such section 13031(a)(9) to the total value of each day's importations at each port by the same importer from the same exporter.
(2) The fees described in paragraph (1) that are payable under the program described in paragraph (1) shall be paid with each monthly consumption entry. Interest shall accrue on the fees paid monthly in accordance with section 6621 of the Internal Revenue Code of 1986 [26 U.S.C. § 6621].
On December 22, 1992, the Assistant Commissioner, Office of Inspection and Control at legacy Customs, issued a memorandum, “Requirements for Pipeline Operators.” According to the memorandum, entry must be made for every importation made via pipeline, and pipeline operators were required to keep and maintain records of importations to be made available to Customs. Id., available at http://www.cbp.gov/xp/cgov/trade/trade_programs/cargo_summary/pipeline_entry/ . To reiterate the correct procedures for monthly consolidated entries, CBP issued a memorandum on April 10, 2006, “Monthly Entry for Pipeline,” which explained
The collection of MPF for monthly consolidated pipeline entries is governed by 19 CFR 24.23(d), which allows for the aggregation of the ad valorem fee for each day’s importations at an individual port by the same importer and exporter. This regulation provides that the ad valorem rate shall be the lesser of $400.00 for each day’s importations, or by applying the ad valorem rate of 0.21 percent, as listed in 19 CFR 24.23(b)(1)(i)(A), to the total value of such daily importations. In accordance with 19 CFR 24.23(d)(2), the MPF is to be paid with interest at the time of presentation of the monthly entry summary.
“Monthly Entry for Pipeline,” (April 10, 2006), available at http://www.cbp.gov/xp/cgov/trade/trade_programs/cargo_summary/pipeline_entry/ . Thus, for some highly valued importations, CBP could assess up to $400 per day, plus interest, which, aggregated into a consolidated monthly entry, could amount to several thousand dollars.
According to a search in CBP’s Automated Commercial System (“ACS”), for the monthly aggregate entries Constellation Energy filed that covered natural gas releases from May 2003 through October 2005, Constellation Energy originally paid $485 total for each monthly entry, which included multiple daily releases. According to ACS, the Port has made no decision with respect to the Post-Importation Refund Claim.
According to the entry documentation filed with Entry Nos. 551-xxxxx055, 551-xxxxx816, and 551-xxxxx808, Constellation Energy provided daily volumes for each entry, based on pipeline transportation reports, and multiplied that quantity by daily prices, “as posted by The McGraw-Hill Companies’ Platts Gas Daily Mid-Point Price for the Niagara delivery point.” The Port did not dispute the valuation methodology Constellation Energy used. Because Constellation Energy had originally paid only $485 for each entry, CBP liquidated or reliquidated the entries, pursuant to 19 C.F.R. § 24.23(d), assessing a MPF of the lesser of either $400 or an amount determined by applying 0.21 percent to the total value, as Constellation Energy had calculated it, of each daily importation.
Constellation Energy argued that it “currently employs” a methodology had been established to value entries that was based on a formula it had negotiated with the Port of Champlain: first, the aggregate amount that Constellation Energy paid for all shipments to it from Canada for a given month by adding the amounts given in all invoices received from Constellation Energy’s counterparties or suppliers. Using the aggregate volume shown on the same invoices, the percentage of total volume imported from each supplier was calculated. Multiplying the volume percentage of the monthly aggregate for each supplier by the aggregate sales price resulted in a weighted price for each supplier. Finally, according to Constellation Energy, the weighted price for each supplier was multiplied by the actual volume reported by each supplier. The total value for all suppliers per month was used as the entered value for each reporting month. The record of this protest does not indicate the statutory basis of appraisement. Furthermore, Constellation Energy fails to provide an explanation of how this methodology was used for the entries at issue in the Protest, and this formula is not reflected in the entry documents filed with the Port of Buffalo.
Constellation Energy also stated that it reports its imports and exports to the Department of Energy on a monthly basis, it receives accounts from the pipeline operators on a monthly basis, and its supplier invoices “typically are submitted on a monthly basis.” Constellation Energy, however, fails to provide samples of these invoices, nor does it explain why there would be daily prices if all transactions occur on a monthly basis, and why it would state in its entry documentation that it received daily reports from the pipeline. As for reports to the Department of Energy, in a recent Notice of Procedural Order Amending Natural Gas Import and Export Orders, the Department of Energy, Office of Fossil Energy noted that its authority to regulate the natural gas industry was pursuant to the Natural Gas Act, 15 U.S.C. § 717b, a provision completely different from Customs law. Notice of Procedural Order Eliminating Quarterly Reporting Requirement and Amending Monthly Reporting Requirement for Natural Gas and Liquefied Natural Gas Import/Export Authorization Holders, 73 Fed. Reg. 6943, 6944 (February 6, 2008). The facts do not demonstrate that natural gas industry operates entirely on a monthly basis.
On September 14, 2007, pursuant to our request, Constellation Energy provided an explanation why deductive value was not an appropriate method to value natural gas for purposes of assessing MPF.
ISSUES:
Whether the protestant may protest the assessment of MPF on entries that are also covered in a post-importation NAFTA refund claim, made pursuant to 19 U.S.C. § 1520(d), before the latter refund claim is denied.
Whether the protestant may protest an undecided request to waive the requirement for a NAFTA Certificate of Origin for imports of natural gas.
Whether the protestant may protest an undecided request to waive entry requirements, pursuant to 9801.00.10 of the Harmonized Tariff Schedule of the United States (“HTSUS”), of reimported natural gas.
Whether the requirement for a NAFTA Certificate of Origin may be waived for entries not covered by the February 27, 2006, Post-Importation Claim.
Whether natural gas is exempt from entry requirements, on the ground that it is neither solid nor liquid, and it is delivered via pipeline.
Whether MPF should be assessed on a monthly, rather than a daily, basis for imports of natural gas via pipeline.
Whether natural gas should be valued using a monthly price average, derived from Canadian natural gas trade publications’ price indices for natural gas delivered at different Canadian trading hubs and export points, rather than using a formula based on the weighted price for each supplier, multiplied by the volume reported by each supplier; even though the Port had accepted a valuation based on daily releases at the pipeline multiplied by that day’s value, as published in a Canadian natural gas publication.
LAW AND ANALYSIS:
As an initial matter, with respect to the MPF calculation issues, part of Constellation Energy’s Protest is timely, pursuant to 19 U.S.C. § 1514(c)(3)(B), because it was filed on February 26, 2006, which is within 180 days after the date CBP liquidated the following entries:
Entry No.
Import Date
(mo./yr.)
Aggregate Entry Date
(mo./day/yr.)
Liquidation Date
(mo./day/yr.)
551-xxxxx626
5/2003
10/12/2005
12/2/2005
551-xxxxx634
6/2003
10/12/2005
12/2/2005
551-xxxxx642
7/2003
10/12/2005
12/2/2005
551-xxxxx659
8/2003
10/12/2005
12/2/2005
551-xxxxx667
9/2003
10/12/2005
12/2/2005
551-xxxxx675
10/2003
10/12/2005
12/2/2005
551-xxxxx683
11/2003
10/12/2005
12/2/2005
551-xxxxx691
12/2003
10/12/2005
12/2/2005
551-xxxxx709
1/2004
10/12/2005
12/2/2005
551-xxxxx717
2/2004
10/12/2005
12/2/2005
551-xxxxx725
3/2004
10/12/2005
12/2/2005
551-xxxxx733
4/2004
10/12/2005
12/2/2005
551-xxxxx741
5/2004
10/12/2005
12/2/2005
551-xxxxx758
6/2004
10/12/2005
12/2/2005
551-xxxxx766
7/2004
10/12/2005
12/2/2005
551-xxxxx774
8/2004
10/12/2005
12/2/2005
551-xxxxx782
9/2004
10/12/2005
12/2/2005
551-xxxxx790
10/2004
10/12/2005
12/2/2005
551-xxxxx808
11/2004
10/12/2005
12/2/2005
551-xxxxx816
12/2004
10/12/2005
12/2/2005
551-xxxxx824
1/2005
10/12/2005
12/2/2005
551-xxxxx832
2/2005
10/12/2005
12/2/2005
551-xxxxx840
3/2005
10/12/2005
12/2/2005
551-xxxxx857
4/2005
10/12/2005
12/2/2005
551-xxxxx865
5/2005
10/12/2005
12/2/2005
551-xxxxx873
6/2005
10/12/2005
12/2/2005
551-xxxxx881
7/2005
10/12/2005
12/16/2005
551-xxxxx899
8/2005
10/12/2005
12/2/2005
551-xxxxx956
9/2005
10/26/2005
12/2/2005
551-xxxxx046
10/2005
11/28/2005
12/23/2005
551-xxxxx055
12/2004
10/12/2005
12/2/2005
551-xxxxx063
1/2005
10/12/2005
12/2/2005
551-xxxxx071
2/2005
10/12/2005
12/2/2005
551-xxxxx089
4/2005
10/12/2005
12/2/2005
551-xxxxx097
5/2005
10/12/2005
12/2/2005
551-xxxxx105
6/2005
10/12/2005
12/2/2005
551-xxxxx113
7/2005
10/12/2005
12/2/2005
551-xxxxx121
8/2005
10/12/2005
12/2/2005
551-xxxxx915
9/2005
10/26/2005
12/2/2005
551-xxxxx053
10/2005
11/28/2005
12/23/2005
As is explained, below, because these entries are clearly identified as part of the Protest, only they are included in the Protest.
The Port properly granted the application for further review. Further review is appropriate when the Port considers a protest should be denied, but the protest involves issues that have not been the subject of a CBP Headquarters ruling or a court decision. See 19 C.F.R. § 174.26(b)(1)(iv). In this Protest, the issues of whether MPF may be assessed on a daily basis for imports of natural gas, and whether the properties of and delivery mechanism for natural gas render it exempt from entry requirements, as enumerated above, have not been addressed in any prior rulings or court decisions. Therefore, pursuant to 19 C.F.R § 174.26(b)(1)(iv), we are addressing those issues.
As for issues that were also raised in the Post-Importation Refund Claim, we may not address them, as explained below, because the Port has not made a decision. As for other any other entries, we do not address them, because they are not clearly included in this Protest.
Part of the Protest Must Be Denied as Premature
Constellation Energy may file a protest regarding payment of the MPF for entries claimed in its Post-Importation Refund Claim only after a decision denying that claim is made. The statute allows for post-importation requests for refunds of duties and MPF, if the importer demonstrates that its imported merchandise qualifies according to the rules of origin delineated by a free trade agreement and the importer files its request within one year after the date of importation. See 19 U.S.C. § 1520(d). The U.S. Court of International Trade has interpreted the protest provision, 19 U.S.C. § 1514, to mean that a protest may be filed only after CBP renders a final decision, and that final decision must be a denial of the Post-Importation Refund Claim: “Prior to denial of a § 1520(d) claim, Customs has made no decision which can be protested.” Power-One Inc. v. United States, 83 F. Supp. 2d 1300, 1306 (Ct. Int’l Trade 1999). Until the Port makes a decision with respect to the February 27, 2006, Post-Importation Refund Claim, Constellation Energy has received no decision that it may protest.
In the Post-Importation Refund Claim, the Protestant also requested a waiver of NAFTA Certificate of Origin for future imports of natural gas, and a waiver of entry requirements pursuant to 9801.00.10 of the Harmonized Tariff Schedule of the United States (“HTSUS”) for any United States-origin natural gas, and the Port has not made any decision with respect to either waiver request. With no denial of either waiver request, CBP has made no decision that can be protested.
If a Protestant Has Not Accurately Stated Its Objection With Respect to Other Entries, Then the Protest Does Not Include Those Other Entries
Any additional entries, which are not clearly identified in this Protest, are not included. In filing a protest, the claimant must convey “‘enough information to apprise knowledgeable officials of the importer’s intent and the relief sought.’” Lykes Pasco, Inc. v. United States, 14 F. Supp. 2d 748, 749 (Ct. Int’l Trade 1998)(quoting Mattel, Inc. v. United States, 377 F. Supp. 955 (Cust. Ct. 1974)). As explained by the U.S. Court of International Trade, a protest may not place an unreasonable burden on CBP, requiring CBP officials “to go beyond the most exactly defined details of the protest, to realize that an inadvertence or omission has occurred, to incorporate its historical knowledge of the entire series of transactions that may have been involved, and to make corrections.” Lykes Pasco, Inc., 14 F. Supp. 2d at 750. In this Protest, Constellation Energy included highly detailed lists of entries, which included the amount of MPF assessed on those entries, which covered entries made on October 12 and 26, 2005, and November 28, 2005. The assessment of MPF is central to Constellation Energy’s entire claim. In asserting what entries are covered by this protest, and how much MPF it had paid, Constellation Energy stated, “The amount at issue in this protest, representing the amount of MPF billed to CCG by Customs, is $354,179.72;” however, it noted that “This figure does not include the amount of MPF assessed against Entry Nos. 551-xxxxx186 and 551-xxxxx194, which are included in this protest.” Those two entries are not included in the detailed lists of entries provided in Protest Exhibit A. It is unclear whether these entries are included in the entire protest, or are part of the waiver request only. It is also unclear whether another entry, 551-xxxxx111 is included in the Protest, because Constellation Energy included documents for Entry No. 551-xxxxx111; however, this entry is never discussed in the claim itself. To determine whether these three entries are covered by the Protest, CBP officials would be forced to make a judgment as to whether Constellation Energy intended those three entries be included in the entire claim, or included in only the claims not related to the amount of MPF assessed. To do so would place an unreasonable burden on CBP officials to edit a Protest.
Even if it could be argued that these entries could be considered for the waiver issues and the issues related to MPF assessment, and that these three entries are not discussed in the Post-Importation Refund Claim, the claim would fail, as is discussed in depth in Ruling HQ 231595. A certificate of origin is required unless the certificate was waived by the Port Director, which is not the case here. We note that, because the waiver is discretionary, Constellation Energy is not foreclosed from requesting a waiver in the future from the Port of Buffalo or any other port, and nothing in this decision may be construed as an ultimate denial of any waiver request it could make for future entries. The claim would fail with respect to the other issues, for the reasons discussed below.
Natural Gas Is Not Electricity, and Is Not Exempt from Entry Requirements
There is no legal basis for exempting natural gas from the entry requirements of 19 U.S.C. § 1484. An importer of record is required to “make entry” by filing “such information as is necessary to enable the Bureau of Customs and Border Protection to determine whether the merchandise may be released from custody of the Bureau of Customs and Border Protection.” See 19 U.S.C. § 1484(a)(1)(A). CBP Regulations provide that all merchandise imported into the United States is required to be entered, pursuant to 19 U.S.C. § 1484, “unless specifically excepted.” See 19 CFR § 141.4(a). Natural gas is considered merchandise, pursuant to 19 U.S.C. § 1401(c), which states, “The word ‘merchandise’ means goods, wares, and chattels of every description.” The definition is intentionally broad, and includes the three generally recognized states of matter, which are liquid, gas, and solid. Natural gas has its own tariff classification in the HTSUS, 2711.21.00, which is described as “In gaseous state, Natural gas.” This provision must apply to natural gas because, according to the General Note 1, “All goods provided for in this schedule and imported into the customs territory of the United States from outside thereof . . . . are subject to duty or exempt therefrom as prescribed in general notes 3 through 29 inclusive.” There is no provision excluding natural gas from entry requirements. Therefore, because natural gas is merchandise, and is specifically provided for in a tariff subheading in the HTSUS, it is treated as an imported good, and it must be entered.
Similarity to merchandise that is excepted from entry requirements does not automatically exempt other merchandise from entry requirements. Constellation Energy argues that natural gas should be treated as if it were electricity, which is specifically exempted from entry requirements. HTSUS Chapter 27 Additional U.S. Note 6(b) states
Electrical energy shall not be subject to the entry requirements for imported merchandise set forth in section 484 of the Tariff Act of 1930, as amended, (19 U.S.C. 1484), but shall be entered on a periodic basis in accordance with regulations to be prescribed by the Secretary of the Treasury.
Constellation Energy posits that natural gas has characteristics that are similar to electricity, i.e. natural gas is intangible and is transported via pipeline, and thus natural gas should be exempt from the entry requirements of 19 U.S.C. § 1484. HTSUS Chapter 27 Additional U.S. Note 6(b) covers only electricity, and not any gas or petroleum product. Following the maxim of statutory and regulatory construction, expressio unius est exclusio alterius, because HTSUS Chapter 27 Additional U.S. Note 6 (b) expressly provides for the exclusion of only electricity it cannot be read to include other matter in a gaseous state or merchandise transported via a pipeline. See Cook v. Principi, 318 F.3d 1334, 1339 n.6 (Fed. Cir. 2002)(“Expressio unius est exclusio alterius means that ‘the expression of one thing is the exclusion of another.’”(citations omitted)). According to the General Rules of Interpretation, Rule 6, of the HTSUS, “For legal purposes, 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. . . .” The terms of HTSUS 2711.21.00 specifically provide for natural gas. The terms of HTSUS Chapter 27 Additional U.S. Note 6(b) specifically exempt only electrical energy from entry requirements. There is no legal basis for applying the electrical energy entry exemption to natural gas importations.
MPF Is Properly Assessed on a Daily Basis for Each Importation
The legislative history of the Customs user fee statute indicates that Congress intended the MPF, pursuant to the pre-1989 monthly entry program at issue, to be calculated on the basis of each release, not on each consolidated monthly entry. Unless their goods are exempt from entry, all importers are required to enter their goods, and when they file an entry, they are required to pay a merchandise processing fee (“MPF”). MPF is determined on each release or entry or, if applicable, by the statutory aggregate provision. According to the Customs user fee statute, CBP “shall charge and collect” fees for the processing of merchandise that “is formally entered or released.” 19 U.S.C. § 58c(a)(9)(A). Merchandise is entered or released, if the merchandise is “entered or released from customs custody” pursuant to 19 U.S.C. § 1484(a)(1)(A). See 19 U.S.C. § 58c(b)(8)(E)(ii). The only statutory provision specifically allowing aggregate entries or releases to be treated as a single entry for purposes of assessing MPF is a provision covering merchandise withdrawn from a foreign trade zone. See 19 U.S.C. § 1484(i)(1). Natural gas importers, such as Constellation Energy, are allowed to make consolidated entries on a monthly basis, pursuant to a pre-1989 monthly entry program, and the MPF is assessed on a per-release, i.e. daily, basis. Constellation Energy posits that its MPF, if it applies at all, is limited to the filing of the monthly entry itself, because of the language of 19 C.F.R. § 24.23(d), and the nature of natural gas. As discussed below, Constellation Energy’s claim fails, because the legislative history of the Customs user fee statute indicates that Congress intended the MPF, pursuant to the pre-1989 monthly entry program at issue, to be calculated on the basis of each release; moreover, the facts do not support Constellation Energy’s arguments.
Natural gas importers, like Constellation Energy, are allowed to make aggregate entries on a monthly basis, pursuant to a pre-1989 monthly entry program, and the MPF is assessed on a per-release, i.e. daily, basis. As already discussed, the program for the aggregation of monthly processing fees began on July 1, 1970, when CBP implemented a policy program for the monthly consolidated entry of nondutiable merchandise, expanding a pilot program from the ports of Buffalo and Detroit to the entire country to “determine its applicability to other types of ports and modes of transportations.” Customs Bureau Circular ENT-1-AC, July 1, 1970, available at http://www.cbp.gov/xp/cgov/trade/trade_programs/cargo_summary/pipeline_entry/ (last visited May 9, 2008, in file). The monthly consolidated entry program was never specifically incorporated into CBP Regulations.
When Congress amended the Customs user fee statute in 1990, it specifically carved out an exception for aggregate merchandise processing fees. Section 111(f) of Pub. L. 101-382, as amended by Pub. L. 101-508, title X, Sec. 10001(c), Nov. 5, 1990, 104 Stat. 1388-386, provided that:
(1) Notwithstanding any provision of section 13031 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c), in the case of entries of merchandise made under the temporary monthly entry programs established by the Commissioner of Customs before July 1,1989, for the purpose of testing entry processing improvements, the fee charged under section 13031(a)(9) of the Consolidated Omnibus Budget Reconciliation Act of 1985 for each day's importations at each port by the same importer from the same exporter shall be the lesser of--
(A) $400, or
(B) the amount determined by applying the ad valorem rate currently in effect under such section 13031(a)(9) to the total value of each day's importations at each port by the same importer from the same exporter.
(2) The fees described in paragraph (1) that are payable under the program described in paragraph (1) shall be paid with each monthly consumption entry. Interest shall accrue on the fees paid monthly in accordance with section 6621 of the Internal Revenue Code of 1986 [26 U.S.C. § 6621].
There is no indication from the legislative history that Congress intended “temporary monthly entry programs established by the Commissioner of Customs before July 1, 1989” to mean a program that had a specified end date. See H. R. Conf. Rep. No. 101-650 (1990).
When legacy Customs drafted regulations implementing the Congressional directive, it stated that the new provision would “set forth the provision in the Act regarding the daily aggregation of the ad valorem fee for entries under existing temporary monthly entry programs.” Customs Regulations Amendments Relating to User Fees, 56 Fed. Reg. 15036 (April 15, 1991). Thus legacy Customs, by paraphrasing “temporary monthly entry programs established by the Commissioner of Customs before July 1, 1989” as “existing temporary monthly entry programs,” legacy Customs interpreted “temporary” to be a descriptive, not a controlling, term. Because Customs in implementing the program specifically stated that it was expanding a pilot program from two ports to the entire country to determine its applicability, and because it was never formally implemented in CBP Regulations, it was a temporary program established before July 1, 1989.
The Regulatory provision matches the Congressional directive word for word:
(d) Aggregation of ad valorem fee. (1) Notwithstanding any other provision of this section, in the case of entries of merchandise made under any temporary monthly entry program established by Customs before July 1, 1989, for the purpose of testing entry processing improvements, the ad valorem fee charged under paragraph (b)(1)(i) of this section for each day's importations at an individual port shall be the lesser of the following, provided that those importations involve the same importer and exporter:
(i) $400; or
(ii) The amount determined by applying the ad valorem rate under paragraph (b)(1)(i)(A) of this section to the total value of such daily importations.
(2) The fees as determined under paragraph (d)(1) of this section shall be paid to Customs at the time of presentation of the monthly entry summary. Interest shall accrue on the fees paid monthly in accordance with section 6621 of the Internal Revenue Code of 1986.
19 C.F.R. § 24.23(d).
Legislative history demonstrates that Congress intended the term “temporary,” in the phrase “temporary monthly entry program,” to be a descriptive, not a controlling, term. Constellation Energy argues that the consolidated monthly entry program has existed for so long that it could not be a temporary program, and 19 C.F.R § 24.23(d) does not apply. Such an interpretation is contrary to Congressional intent.
Congress has never limited the amount of time in which legacy Customs or CBP could develop procedures for collecting duties on imports. Congress has explicitly granted CBP the ability to set up procedures for testing the collection of duties on imports. See 19 U.S.C. § 3 (“The Secretary of the Treasury shall direct the superintencence of the collection of the duties on imports as he shall judge best.”). Even in the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057 (December 8, 1993)(“NAFTA Implementation Act”), did Congress decline to set specific time limits for testing procedures. The NAFTA Implementation Act contained provisions pertaining to Customs Modernization, including provisions for the National Customs Automation Program (NCAP), an electronic system for the processing of commercial importations. Specifically, the NAFTA Implementation Act added 19 U.S.C. §§ 1411-1414, covering the NCAP, and the new provisions set forth implementation and evaluation requirements for the NCAP. However, the statute did not implement a requirement that testing be performed within a specific period of time.
It was not until 1995 that time limits on testing were considered: in implementing 19 U.S.C. §§ 1411-1414, legacy Customs added a new regulation setting parameters covering tests of the NCAP, and expanded the new regulation to include procedures for future test programs in general. See Test Programs, 60 Fed. Reg. 14211, 14213 (March 16, 1995). The Regulation does not include any specific time limitation for conducting a new procedure or test program. See 19 C.F.R. § 101.9. Therefore, to read “temporary” to mean that 19 C.F.R. § 24.23(d) does not apply to consolidated monthly entries of natural gas, because the program has lasted for too long, would conflict with Congress’s intent to preserve the programs in existence in 1989.
As discussed above, unless their goods are exempt from entry, all importers are required to enter their goods, and when they file an entry, they are required to pay MPF. Only if certain merchandise is withdrawn from foreign trade zones, may the aggregate (weekly) entry or release be treated as a single entry for MPF assessment purposes. See 19 U.S.C. § 1484(i). Because the treatment of a weekly entry as a single entry only appears with respect to foreign trade zones, again following the maxim of statutory and regulatory construction, expressio unius est exclusio alterius, Congress did not intend for the MPF assessment of certain foreign trade zone weekly entries to be extended to consolidated monthly natural gas pipeline entries. Therefore, CBP cannot treat consolidated monthly entries as a single entry for purposes of assessing MPF.
By arguing that the monthly aggregate MPF program does not apply, Constellation Energy appears to be arguing that it should be filing entries for each release it makes, i.e., on a daily basis. Constellation Energy argues that the only basis for MPF assessment is in 19 C.F.R. § 24.23(b)(1)(i), which requires assessment against the entry summary filed with the monthly entries. According to Constellation Energy’s reasoning, instead of being liable for up to the maximum per daily release, which could be $400 times thirty-one days or $12,400, it should be liable for only the maximum or minimum for the entry itself, i.e. a maximum of $485, pursuant to 19 U.S.C. § 58c(a)(9)(B)(i). However, for 24.23(b)(1)(i) of CBP Regulations to apply, the temporary monthly entry program established before July 1, 1989, which is the monthly entry program, would have to be inapplicable to Constellation Energy’s natural gas importations. According to the entry documents Constellation Energy provided the Port of Buffalo, its natural gas is imported on a daily basis, and it is able to report daily volumes, based on pipeline transportation reports. As is discussed, above, an entry is required for each importation, and it is only pursuant to the monthly consolidated entry program that natural gas importers are not required to make entries on a daily basis. Section 24.23(d) cannot logically be read to allow for aggregated monthly entries, but not require the daily aggregate MPF that is specified within that same provision.
The MPF is structured to approximate the cost of CBP services rendered. The purpose of the fees in section 58c is to reflect the cost of commercial services CBP provides when processing merchandise, as described in 19 U.S.C. § 58c(e),(f)(4). The intent of the amendment to the Customs user fee statute was to ensure that fee revenues approximate the cost of Customs services rendered: Congress described the fee revenues as being limited to the cost of “Customs operations related to merchandise processing and to the processing of imports covered by the fee.” See H. R. Conf. Rep. No. 101-650 at 105 (1990). Processing merchandise and imports entails more than Constellation Energy recognized in its argument. Ignoring CBP Regulations, Constellation Energy argues that the services CBP provides were limited to filing the filed entries, and its assumed that CBP does not inspect, monitor, or provide Customs services at the pipeline. Constellation Energy’s assumption that CBP officials only process documentation with respect to pipeline entries is erroneous, as noted in the “Facts” section, above, particularly when the ports monitor natural gas imported by pipeline, pursuant to 19 C.F.R. § 151.42(a)(1), (b). Because Customs services rendered amount to more than simply filing entry documents or electronic entries, it is without merit for Constellation Energy to assume that the MPF is unrelated to services CBP provides.
Constellation Energy argues that all of its natural gas transaction documentation is generated on a monthly basis; therefore, even if its importations or releases occur daily, or even several times a day, its releases should be treated as a monthly entry for purposes of assessing the MPF. It reports its imports and exports to the Department of Energy on a monthly basis, it receives accounts from the pipeline operators on a monthly basis, and its supplier invoices “typically are submitted on a monthly basis.” Constellation Energy, however, fails to provide samples of these invoices, and fails to explain why there would be daily prices if all transactions occur on a monthly basis. Moreover, in its recent Notice of Procedural Order Amending Natural Gas Import and Export Orders, the Department of Energy, Office of Fossil Energy noted that its authority to regulate the natural gas industry was pursuant to the Natural Gas Act, 15 U.S.C. § 717b, a provision completely different from Customs law. Notice of Procedural Order Eliminating Quarterly Reporting Requirement and Amending Monthly Reporting Requirement for Natural Gas and Liquefied Natural Gas Import/Export Authorization Holders, 73 Fed. Reg. 6943, 6944 (February 6, 2008). Constellation Energy’s arguments do not persuade us that importations are on a monthly basis.
Finally, Constellation Energy states that all the other ports in which it imports natural gas charge only $485 total, not per importation, against the entry summary with each monthly entry. Constellation Energy lists Champlain, New York: Pembina, North Dakota; St. Albans, Vermont; and Great Falls, Montana; however, it provides no evidence to support its assertion. In fact, according to Ruling HQ 231595, Constellation Energy failed to file entry summaries from April 2005 through August 2005, and only did so for each monthly entry summary on October 3, 2005; therefore, Constellation Energy cannot argue that it was aware of a practice at the Port of Champlain when it was failing to file entries. Thus, Constellation Energy’s failure to properly file its entries does not mean that other ports have a practice that differs from this Port.
Valuation of Natural Gas for MPF Assessment
Given that CBP has no authority to assess MPF on a monthly basis, rather than per entry or release, for consolidated monthly entries, Constellation Energy has not stated a claim as to how its natural gas was improperly valued. The protestant argues that natural gas should be valued using a monthly price average, derived from Canadian natural gas trade publications’ price indices for natural gas delivered at different Canadian trading hubs and export points. It argues that the current valuation process at the Port of Champlain is to use invoice prices multiplied by percentage of the total volume imported from each supplier, a process the protestant and port officials created. However, according to three sampled entries, discussed in the “Facts” section, above, Constellation Energy provided daily volumes for each entry, based on pipeline transportation reports, and multiplied that quantity by daily prices, “as posted by The McGraw-Hill Companies’ Platts Gas Daily Mid-Point Price for the Niagara delivery point.” In assessing MPF, the Port of Buffalo accepted the valuation methodology Constellation Energy used: it applied the lesser of either $400 or an amount determined by applying 0.21 percent to the total value, as Constellation Energy had calculated it, of each daily importation. If there is no basis for an underlying objection, a protest will not be granted. See 3V, Inc. v. United States, 83 F. Supp. 2d 1351, 1353 (Ct. Int’l Trade 1999)(granting defendant’s motion to dismiss for failure to state a claim upon which relief may be granted). Therefore, Constellation Energy has no basis to protest the valuation of its entries for MPF assessment, and its claim must be denied.
HOLDING:
You are instructed to DENY the protest in full. The claim in the Protest, which objects to any assessment of MPF on certain entries, is also covered in an undecided post-importation NAFTA refund claim. Because the claim in the Protest was made before the post-importation NAFTA refund claim had been denied, that claim must be denied as premature. For the same reason, the claims in the Protest concerning an undecided request to waive the requirement for a NAFTA Certificate of Origin for imports of natural gas, and an undecided request to waive entry requirements of reimported natural gas, must be denied as premature. As for any other entries that are not included in the post-importation NAFTA refund claim, and that are not clearly and accurately described in the Protest, we do not include them in the Protest. The claim that natural gas is exempt from entry requirements, because it has characteristics similar to electricity, is denied as without legal basis. The claim that MPF should be assessed on a monthly, rather than a daily, basis for imports of natural gas made via pipeline, is denied as without legal basis. The claim concerning the valuation methodology used for calculating MPF is denied for failing to state a claim upon which relief may be granted, because the Port of Buffalo accepted the valuation methodology Constellation Energy provided.
This decision will result in the assessment of MPF, and any reliquidation of the entries in accordance with the decision must be accomplished prior to mailing of the decision, in accordance with Section IV of the Customs Protest/ Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21). You are to mail this decision, together with CBP Form 19, to the protestant no later than 60 days from the date of this letter.
No later than 60 days from the date of this letter, 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 by other means of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division