CLA-2 OT:RR:CTF:TCM H047495 ARM
Port Director
Port of Hartford
U.S. Customs & Border Protection
Bradley International Airport
International Arrivals Building
Windsor Locks, CT 06096
RE: Protest number 0411-08-100006; Classification of Reformulated Gasoline Blendstock for Oxygenated Blending (RBOB) and Conventional Gasoline
Dear Port Director:
The following is our decision regarding the Application for Further Review (“AFR”) of Protest No. 0411-08-100006, timely filed on behalf of Morgan Stanley Capital Group, Inc., (“Morgan Stanley”) concerning the classification of Reformulated Gasoline Blendstock for Oxygenated Blending and Conventional Gasoline under the Harmonized Tariff Schedule of the United States (“HTSUS”). Prior to the filing of the instant Protest, a meeting between CBP, Morgan Stanley, Charter Brokerage and counsel for the importer, was held on July 8, 2008. In reaching our decision herein, we have considered supplemental information submitted on September 9, 2008.
FACTS:
The Protest covers twenty six entries which were entered between January 5, 2006 and February 27, 2007. The merchandise described in the subject entries includes Gasoline blendstock and 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. RBOB is a combination of numerous light hydrocarbons that is designed for the purpose of ethanol blending at the gasoline rack (typically 10 percent of a final blend will consist of ethanol). In their submission dated September 9, 2008, Protestant provided detailed hydrocarbon analysis reports conducted by Intertek Caleb Brett (“Caleb Brett”) of the subject entries.
According to the Caleb Brett Reports nine of the twenty six entries at issue meet standard D-4814 of the American Society for Testing Materials (“ASTM”) specifications for Automotive Spark-Ignition Engine Fuel with an octane rating between 84.3 and 84.8.
Between March 14, 2008 and May 30, 2008, CBP liquidated all twenty six entries of 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 under subheading 2710.11.15, HTSUS, or 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:
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 September 9, 2008, within 180 days of liquidation of the entries, pursuant to 19 U.S.C. §1514(c)(3). Further review of Protest 0411-2008-100006 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 rulings of the Commissioner of Customs or his designee and 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 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:
2710.11.15 Motor fuel….
Gasoline:
2710.11.1510 Leaded
Unleaded:
* * *
2710.11.1550 Other
* * *
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. Notes 3 and 4 to Chapter 27, HTSUS, provide as follows:
3. For the purposes of subheading 2710.11.15, "motor fuel" is any product derived primarily from petroleum, shale or natural gas, whether or not containing additives, which is principally used as a fuel in internal-combustion or other engines.
4. 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 instant merchandise is 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 volume of the subject merchandise volume distilled at 210º C, bringing the subject products within the terms of Subheading Note 4 to Chapter 27. However, this matter concerns whether the instant merchandise is classifiable as a motor fuel blendstock, a motor fuel 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, at the eight-digit level by application of GRI 6.
Motor Fuel
First, we consider whether nine of the subject entries that meet standard D-4814 ASTM specifications for Automotive Spark-Ignition Engine Fuel (“conventional gasoline”) are properly classifiable under subheading 2710.11.15, HTSUS, as motor fuel. By memorandum, dated June 21, 2010, CBP Laboratories and Scientific Services (LSS) confirms that despite the incomplete data provided, the “nine entries can be reasonably assumed to meet the ASTM D 4814 specification.” Protestant further states that while these nine entries have relatively low octane ratings (between 84.3 and 84.8) that classification of these entries under subheading 2710.11.15, HTSUS, would be consistent with previous CBP rulings. (“Memorandum of Law in Support of Protest and Application for Further Review . . .”, dated September 9, 2008, pp.6-7).
CBP has held that petroleum products which meet the ASTM D-4814 (formerly ASTM D-439) standard specification for motor fuel and are principally used as motor fuel within the meaning of Note 3 to Ch. 27, HTSUS, are classifiable in subheading 2710.11.15, HTSUS, as motor fuel. For instance, in HQ 963780, dated September 6, 2000, CBP explained that “unlike subheading 2710.11.18, (motor fuel blending stock), subheading 2710.11.15 (motor fuel) is not an “actual use” provision but rather a “principal use” provision within the meaning of note 1 (a), Additional U.S. Rules of Interpretation. In HQ 963780, CBP concluded that fuel which meets the ASTM D-4814 requirements for Class A Motor fuel (Automotive Spark-Ignition Engine Fuel) principally used in internal combustion engines is classified in subheading 2710.11.15, HTSUS. CBP reached the same conclusion in HQ 962922, dated September 6, 2000, where a petroleum product imported for use as naphthas and which met the ASTM D-4814 standard specification for motor fuel was classifiable under subheading 2710.11.15, HTSUS.
Nine of the subject entries have octane ratings between 84.3 and 84.8. Pursuant to the Uniform Engine Fuels, Petroleum Products and Automotive Lubricants Regulation; Section II, 2.1.4, as adopted by the National Conference on Weights and Measurements, the minimum motor [fuel] octane number shall not be less than 82 for gasoline with an Antiknock Index (AKI) of 87 or greater. The regulation further provides that the lowest AKI (which includes “altitude reduction areas”) is 85 AKI. Furthermore, pursuant to Appendix X, paragraphs, X.12 and X.13 of ASTM D4814, respectively both altitude and weather reductions are allowed for all AKI values. In HQ 081795, dated May 11, 1990, we stated that “there were commercial grades of unleaded gasoline with an octane rating of less than 87…[we further noted that] for the Rocky Mountain area, the minimum octane rating was 84.3.” See also, HQ 083560, dated May 11, 1990, (which noted the variations in octane ratings in different regional areas and concluded that the commercial grade of gasoline with an octane rating between 84.3 and 85.6 existed for the period in question). Similarly, in HQ 081795, we stated that “Customs uses the standards set forth in ASTM D-439 as a guideline for determining whether an imported petroleum, product meets the headnote definition of motor fuel.” In both decisions, we held that a petroleum product, imported for use as a motor fuel, which met the ASTM D-439 standards for commercial grade gasoline was classifiable as a motor fuel despite having a relatively low octane rating.
While CBP does not rely on ASTM D-4814 to establish whether an imported petroleum product is a motor fuel, it is used as a guide, and in the absence of convincing proof to the contrary has been used to facilitate classification. In the instant case, these nine entries “belong to a class of merchandise principally used as motor fuel” and have octane ratings which are within the realm of commercial grade gasoline. As such, we find that the nine entries at issue are classifiable as motor fuel pursuant to Note 3 to Ch. 27, HTSUS and Note 1(a), Additional Rules of Interpretation.
Motor Fuel Blendstock
Next we consider the remaining entries of merchandise described as RBOB and gasoline blendstock. Protestant admits that the subject merchandise “is typically used in the production of finished gasoline.” (“Memorandum”, p.8).
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) states 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.” CBP regulations, Title 19, sections 10.134, 10.137 and 10.138 describe the three requirements necessary to obtain classification under an actual use tariff provision:
(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 “ . . .entries may not be classified as Motor fuel blending stock without the required actual use showing.” See Clarendon at 1505. 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.
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 its position, protestant offers an expert’s opinion concluding 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(s) indicate that the instant RBOBs consist of saturated hydrocarbons (i.e., paraffins), which make up between 52.8 and 59.7 volume percentage by weight (vol.%) of the total mixture, and between 19% and 32.7 vol.% is of aromatics, between 8.2% and 19.3 vol.% olefins, 0.33% and 0.87 vol.% benzene with the remaining hydrocarbons all measuring less than 10 vol.% respectively. According to the “aromatic testing” (ASTM D-1319) included in Caleb Brett Report, the subject petroleum products consisting of between 19% and 32.7% total aromatics. Expert opinion submitted with the protest states that this figure represents the limit of the most abundant individual hydrocarbon compound in the subject RBOBs. Moreover, the ASTM D-86 vapor pressure test indicate typical patterns of gasoline-like products which result from a mixture commonly composed of many different hydrocarbon components as opposed to 50% of any one single hydrocarbon.
Additionally, in addendums dated April 26, May 22, and June 3, 2008 to the Caleb Brett Reports, 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 entries which do not conform to the D-4814 ASTM specifications for motor fuel, and are instead designated as motor fuel blending stock, RBOB, do not contain more than 50% of one single hydrocarbon.
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 the subject RBOB is classified under heading 2710. By application of GRI 6 the RBOBs are specifically 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.
By application of GRI 1, the subject petroleum products are classified under heading 2710, HTSUS. By application of GRI 6 and Additional U.S. Note 3 to Chapter 27, HTSUS, nine entries of merchandise that meet ASTM D 4814 specifications are specifically classified in subheading 2710.11.15, 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: Motor fuel: Gasoline: Other.” The column one, general rate of duty at the time of entry was 52.5 ¢ bbl ad valorem.
To the extent reclassification of the merchandise as indicated above would result in a lower duty rate, you are instructed to ALLOW the protest in Part. 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