CLA-2 RR:OT:CTF:TCM H009361 JER
Port Director
Port of Providence
U.S. Customs & Border Protection
49 Pavilion Avenue
Providence, RI 02905
RE: Protest number 0502-2006-100005; 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. 0502-2006-100005, timely filed on behalf of Morgan Stanley Capital Group, Inc., concerning the classification of Reformulated Gasoline Blendstock for Oxygenated Blending under the Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
The subject merchandise is described as a petroleum derivative known commercially as Reformulated Gasoline Blendstock for Oxygenated Blending (“RBOB”). 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. In their submission, protestant states that the RBOB was imported into the United States for use as a blendstock in the production of U.S. grade unleaded automotive gasoline.
The merchandise was originally entered as Gasoline Treated as Blendstock (“GTAB”), motor fuel other than gasoline under subheading 2710.11.15, HTSUS. Based on an Intertek Caleb Brett Report, dated June 6, 2006, the product designated as RBOB did not meet the ASTM D-4814 standard specification for automotive spark-ignition engine fuel. Thereafter, protestant filed a Post Summery Adjustment (“PSA”) claiming classification as a mixture of predominantly non-aromatic hydrocarbons under 2710.11.45, HTSUS. The Port at Providence 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.”
ISSUE:
Whether the subject product is classified as a motor fuel blending stock under subheading 2710.11.18, HTSUS, or as an other light oil and preparation not elsewhere specified or included in subheading 2710.11.90, HTSUS, or as a mixture of hydrocarbons not elsewhere specified or included which contain by weight not over 50% of any single hydrocarbon in subheading 2710.11.45, HTSUS.
LAW AND ANALYSIS:
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 December 28, 2006, within 180 days of liquidation of the entry on November 3, 2006, pursuant to 19 U.S.C. §1514(c)(3). Further review of Protest 0502-2006-100005 was properly accorded to protestant pursuant to 19 C.F.R. §174.24. In accordance with Section 174.24(a), the decision against which the protest was filed is alleged to be inconsistent with Clarendon Marketing, Inc. v. United States, 955 F. Supp. 1501, 1504 (C.I.T. 1997), (“Clarendon”).
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 2006 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
2710.1805 Reformulated blendstock for oxygenate blending (RBOB)
Other:
2710.11.4590 Mixtures of hydrocarbons not elsewhere specified or included, which contain by weight not over 50 percent of any single hydrocarbon compound
2710.11.9000 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).
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. According to the ASTM D 86 method 90% or more of the subject RBOBs’ volume distilled at 210º C. Likewise, as noted in the submission, 100% of the RBOB distilled at 174.3º C bringing the product 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.
Protestant admits that the subject merchandise is “most likely for use as a blendstock in the production of… automotive gasoline” but states that “[r]egardless of how the product is used in the United States, Morgan has not and will not file with CBP a certificate establishing the use of the imported RBOB.”
In Clarendon, the Court held that in accordance with U.S. Additional Note 4 to Ch. 27, HTSUS, that subheading 2710.11.18, HTSUS, is an “actual use” provision. The Additional U.S. Rules of Interpretation 1(b), classification under an actual use provision states that 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) the importer shall maintain accurate and detailed records showing the use or other disposition of the imported 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. If so, the instant merchandise cannot be classified under subheading 2710.11.90, HTSUS. In support of this position, the protestant offers an expert’s opinion. The expert concludes that it is “impossible for any of the RBOB shipments in question, or for that matter any gasoline-type product, to ever contain more than 50% of one single hydrocarbon.”
According to our research, gasoline is a complex mixture which may contain over 500 different 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 Caleb Brett Report indicates that the instant RBOB consists of saturated hydrocarbons (i.e., paraffins), which make up 59.7 volume percentage by weight (vol.%) of the total mixture, and 31.2 vol.% is of aromatics, 6.4 vol.% olefins, 0.87 vol.% benzene with the remaining hydrocarbons all measuring less than 10 vol.% respectively.
In an addendum to the initial Caleb Brett Report, protestant provides a detailed hydrocarbon analysis which demonstrates that the paraffin groups are further divided into sub-groups called straight chain paraffins and branched chain paraffins (or isoparaffins). These sub-groups generally include butane, pentane, hexane, heptane, methylbutane, dimethylpropane, dimethylbutane and trimethylpenatne among others. Accordingly, the paraffins which exceed the weight of the aromatic compounds are themselves made up of several different hydrocarbon compounds. Hence the instant merchandise does not contain more than 50% of one single hydrocarbon.
Insofar as 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 2710.11.90, 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.” 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