• HQ H053674
• Dec 23, 2010

• Type : Classification • HTSUS : 2710.11.45
•  Related:   06096; 100013; 088342; 951428; H009361; H003734   

CLA-2- OT:RR:CTF:TCM H053674 JLG

Port Director
Port of Hartford Connecticut
U.S. Customs and Border Protection
FIS Building 85-568
Bradley International Airport
Windsor Locks, CT 06096

RE: Application for Further Review of Protest No: 0411-08-100013; Reformate

Dear Port Director: This is in reference to the Application for Further Review (“AFR”) of Protest No. 0411-08-100013, timely filed on October 27, 2008, on behalf of the importer Vitol Inc. (“Vitol”). The AFR concerns the classification of high aromatic-content reformate under the Harmonized Tariff Schedule of the United States (HTSUS). Additional information relevant to this matter was provided by Vitol in an email dated September 7, 2010. FACTS:

According to the information submitted, the merchandise at issue is described as reformate, a mixture of petroleum-derived hydrocarbons, which is typically used in the production of gasoline or other motor fuel.

The Inspectorate Certificate of Analysis submitted by Vitol, dated July 6, 2007, indicates that the cargo of reformate onboard the vessel Kirsten would meet the following specifications at the time of importation:

API Gravity @ 60°F 40.7

ASTM D 86 Distillation IBP 110.6 10% 20% 30% 40% 209.3 235.5 250.1 262.4

50% 6-% 70% 80% 272.7 282.9 294.4 307.7

90% 325.2 FBP 384.5 Recovery/Residue/Loss 98.2 1.0 0.8 E 170 E 200 E 300 3.4 7.9 74.3

D1319 Aromatics, VOL% 73.6 CALC Aromatics, WT% 81.0 (+/- 1.0) D1319 Olefins, VOL% 1.7

According to the ASTM D 86 method, the subject reformate has a 90 vol% recovery at 325.2°F (163°C). However, the instant product did not meet the ASTM D 4814 standard specification for automotive spark-ignition engine fuel, because 10% of the product distilled at 209.3°C, which exceeds the ASTM D 4814 maximum of 158°F.

The merchandise was initially entered on July 8, 2007, under subheading 2707.50.00, HTSUS, which provides for “Other aromatic hydrocarbon mixtures of which 65 percent or more by volume (including losses) distills at 250°C by the ASTM D 86 method.” U.S. Customs and Border Protection (CBP) liquidated the entry on May 2, 2008, under subheading 2710.11.90, HTSUS. The protestant asserts that the proper classification is under heading 2707, HTSUS, which provides for: “Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the nonaromatic constituents.”

ISSUE:

Whether the subject high aromatic-content reformate is classified under heading 2707.50.00, HTSUS, as “Other aromatic hydrocarbon mixtures of which 65 percent or more by volume (including losses) distills at 250°C by the ASTM D 86 method,” as other “light oils and preparations” in subheading 2710.11.90, HTSUS, or as “mixtures of hydrocarbons not elsewhere specified or included, which contain by weight not over 50 percent of any single hydrocarbon compound” in subheading 2710.11.45, HTSUS.

LAW AND ANALYSIS:

CBP notes that the protest was timely filed on October 27, 2008, within 180 days of the May 2, 2008, liquidation (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006))). Additionally, CBP’s classification of the merchandise is a protestable matter under 19 U.S.C. § 1514(a)(2). Further Review of Protest No. 0411-08-100013 is properly accorded to protestant pursuant to 19 C.F.R. § 174.24(c).

Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.

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 subheadings at the same level are compatible. For purposes of this rule, the relative section, chapter and subchapter notes also apply, unless the context otherwise requires.

The 2007 HTSUS provisions under consideration are the following:

2707 Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the nonaromatic constituents:

2707.50.00 00 Other aromatic hydrocarbon mixtures of which 65 percent or more by volume (including losses) distills at 250°C by the ASTM D 86 method

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:

2710.11.45 Other: Mixtures of hydrocarbons not elsewhere specified or included, which contain by weight not over 50 percent of any single hydrocarbon compound

* * * * 2710.11.90 00 Other

Note 2 to chapter 27, states:

References in heading 27.10 to “petroleum oils and oils obtained from bituminous minerals” include not only petroleum oils and oils obtained from bituminous minerals, but also similar oils, as well as those consisting mainly of mixed unsaturated hydrocarbons, obtained by any process, provided that the weight of the nonaromatic constituents exceeds that of the aromatic constituents.        However, the references do not include liquid synthetic polyolefins of which less than 60% by volume distils at 300 °C, after conversion to 1,013 millibars when a reducedpressure distillation method is used (Chapter 39).

Subheading Note 4 to chapter 27, states:

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 210°C (ASTM D 86 method).

Additional U.S. Note 3 of chapter 27, states:

For the purposes of subheadings 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.

Additional U.S. Note 4 of chapter 27, states:

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.

As noted above, the subject product is reformate, a petroleum hydrocarbon mixture containing a high concentration of aromatics, and as a result, is used as an octane-boosting blendstock in the production of gasoline. By application of GRI 1, the two competing headings are: 2707 and 2710. Given that the reformate at issue has a high concentration of aromatics, Vitol maintains that the product is classifiable in heading 2707, which covers “oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of nonaromatic constituents.” According to Vitol, Note 2 of Chapter 27 is dispositive because it prohibits the classification of petroleum products in heading 2710 if the aromatic content of the product exceeds the non-aromatic content.

Vitol further argues that an analysis of the Explanatory Notes (ENs) to heading 2710 illustrates that the last clause in Note 2, “provided that the weight of the non-aromatic constituents exceeds that of the aromatic constituents,” includes “petroleum oils and oils obtained from bituminous minerals.”

Vitol misconstrues the language of Note 2. The phrase limiting the amount of aromatic constituents applies to the last antecedent: “similar oils.” Under the so-called doctrine of the last antecedent, “[r]eferential and qualifying words and phrases, where no contrary intention appears, refer solely to the last antecedent, which consists of the last word, phrase, or clause that can be made an antecedent without impairing the meaning of the sentence[.]” BP Products North America, Inc. v. United States, 2010 Ct. Intl. Trade LEXIS 64 *20 (Ct. Int’l Trade June 1, 2010), (citing Finisar Corp. v. DirecTV Group, Inc., 523 F. 3d 1323, 1336 (Fed. Cir. 2008)) (hereinafter “BP Products”). See also HQ 088342 (stating that “it cannot be ignored that regardless of what might have been the drafters’ intention in the chapter note, the language fails as a matter of grammatical construction to establish that the limitation does, in fact, apply to petroleum oils; rather it is concluded that the limitation modifies only the nearest antecedent: ‘similar oils’”). Accordingly, the aromatic constituency limitation of Note 2 applies only to “similar oils.” See Id. The Explanatory Notes of 2710 are instructive as well. Section I to EN 27.10 includes three types of products.

[Section] (A) [pertains to] [t]opped crudes . . ., as well as light, medium, and heavy oils . . . which . . . consist predominately of non-aromatic hydrocarbons . . .; [section] (B) [pertains to] similar oils in which the weight of non-aromatic constituents exceeds that of the aromatic constituents . . . [which] include[] mixed alkylenes . . .; and section (C) pertains to the oils described in (A) and (B) . . . to which various substances have been added to render them suitable for particular uses, provided that the products contain by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals as a basis and that they are not covered by a more specific heading in the Nomenclature.

Vitol contends that provision (A) of the ENs is directed toward top crudes and other oils consisting of non-aromatic hydrocarbons, and that provision (B), which provides for “similar oils,” specifically states that the heading “does not include oils with predominance by weight of aromatic constituents, obtained by the processing of petroleum or by any other process (heading 27.07).” Explanatory Notes, 27.10. Consequently, Vitol asserts that high aromatic-content petroleum products are not directed to heading 2710, and in fact are expressly precluded from classification under heading 2710. Vitol fails, however, to address section (C) of the ENs for 2710, which include the “oils described in (A) and (B) to which various substances have been added to render them suitable for particular uses, provided the products contain by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals as a basis and that they are not covered by a more specific heading in the Nomenclature.” See BP Products, 2010 Ct. Intl. Trade LEXIS 64,*20-22. The subject reformate is a preparation described in section (C). It is a petroleum-derived preparation, to which a blend of aromatics and other hydrocarbons are added, for use in the production of gasoline. See HQ 088342; HQ 951428.

In BP Products, the Court of International Trade (CIT) held that a petroleum product of high aromatic content was properly classified as a “preparation” under heading 2710, HTSUS. This heading “contains three distinct categories of merchandise as indicated by the placement of semicolons: 1) oils and oils obtained from bituminous minerals, other than crude; 2) 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; and 3) waste oils.” BP Products, 2010 Ct. Intl. Trade LEXIS 64 *9 (Ct. Int’l Trade June 1, 2010) (citing Commercial Aluminum Cookware Co. v. United States, 938 F. Supp. 875, 883 (CIT 1996) for the proposition that semicolons create “separate independent clauses of a sentence”). Reformate falls into the second category as it is a high octane gasoline blending component, containing more than 70 percent petroleum oils. See HQ 951428 (holding that high-aromatic content reformate is a preparation under heading 2710 despite containing no additives); see also BP Products, 2010 Ct. Int’l Trade LEXIS 64 (holding that Conv. 93, a blended mixture of components including at least seventy percent petroleum oils with an aromatic compound content of over fifty-percent by weight, is a preparation under heading 2710).

Additionally, Vitol asserts that heading 2707, HTSUS, specifically applies to products in which the weight of aromatic constituents exceeds that of the nonaromatic constituents, and that the ENs to 2707 demonstrate that petroleum is one of the products contemplated in the heading.

Provision (2) of the ENs to heading 2707 provide in part the following:

Similar oils and products with a predominance of aromatic constituents obtained by the distillation of low temperature coal tar, by the “stripping” of coal gas, by the processing of petroleum or by any other process.

According to Vitol, the language of Provision 2 of the ENs, “similar oils . . . obtained . . . by the processing of petroleum” includes petroleum products such as reformate. Since reformate is obtained by the processing of petroleum, and the Inspectorate Certificate of Analysis demonstrates that the aromatic content of the product is greater than fifty percent, Vitol concludes that the high aromatic reformate at issue is classified under heading 2707.

Again, the protestant misinterprets the language of the tariff. In BP Products, the CIT determined that the use of the limiting adjective “similar” in heading 2707, HTSUS, shows that Congress did not intend heading 2707 to be a catch all for any predominantly aromatic substance produced by the distillation and blending of any organic hydrocarbon source . . .” BP Products, 2010 Ct. Int’l Trade LEXIS 64 *25-26 (citing TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) which held that a “statute ought . . . to be so construed that . . . no clause, sentence, or word shall be superfluous, void, or insignificant”). “The Heading and its Explanatory Notes indicate that [the word] ‘similar’ under heading 2707, HTSUS, requires more than a mere predominance of aromatic constituents . . . [it] requires a similarity to products derived from coal tar distillation. Id. at *26 (citing HQ 951428 which held that “high-aromatic-content motor fuel blending stock is a preparation under heading 2710, HTSUS, rather than a product under heading 2707, HTSUS, because ‘it is not a coal tar crude, but, rather, something more, one reformed for a special use’ that is included under heading 2710, HTSUS”). Consequently, the language of heading 2707 “requires a similarity to products derived from coal distillation.” Id. It has already been established that reformate is a petroleum-derived hydrocarbon compound, and not a coal tar crude, thus the instant product is not described by 2707, HTUS.

Accordingly, the subject reformate is classified as a preparation, under heading 2710, HTSUS, as it is not “elsewhere specified or included” in a more specific heading in the nomenclature. To determine the subheading classification, we use GRI 6, which states the following:

[T]he 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 subheadings at the same level are compatible. For purposes of this rule, the relative section, chapter and subchapter notes also apply, unless the context otherwise requires.

The Certificate of Analysis report provided by Vitol shows that under the ASTM D86 method, 90 percent or more of the reformate’s volume distilled at 325.2°F (163°C), which brings the product within the terms of Subheading Note 4 to Chapter 27, HTSUS. The subject reformate is not classified as motor fuel under subheading 2710.11.15, HTSUS. As defined by U.S. Additional Note 3 to Chapter 27, HTSUS, subheading 2710.11.15, HTSUS is a “principal use” provision. It states in part that “‘motor fuel’ is any product derived primarily from petroleum, shale or natural gas, whether or not containing additives, which is principally used as fuel in internal combustion or other engines.” Pursuant to Additional U.S. Rules of Interpretation 1(a), tariff classification controlled by principal use “is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use[.]” Thus, a petroleum product is classified under subheading 2710.11.15, HTSUS, if its principal use at the time of importation is motor fuel. There has been no assertion that the principal use of the instant product is motor fuel. Moreover, the product fails the ASTM D 4814 Standard Specification for Automotive Spark-Ignition Engine Fuel. As such, the subject reformate cannot be principally used as a fuel in internal-combustion or other engines at the time of importation, and is therefore not classified in subheading 2710.11.15.

The instant product is not classified as motor fuel blending stock under subheading 2710.11.18, HTSUS, because the requisite conditions for actual use have not been satisfied. In Clarendon Marketing v. United States, 21 C.I.T. 59 (Ct. Int’l Trade 1997), the CIT determined 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[.]

These requirements were formalized in the Code of Federal Regulations, which allow for classification under an actual use provision, provided that the importer:

(1) file a declaration of intended use upon entry or enter the article under an actual use provision of the HTS (19 C.F.R. § 10.134); (2) maintain records showing the actual use of the merchandise (19 C.F.R. § 10.137); and (3) provide within three years of liquidation a certificate executed by the end-user attesting to the actual use of the merchandise (19 C.F.R. § 10.138).” Id. at 62-63. Absent satisfaction of these conditions, petroleum products which are commercially used as motor fuel blending stock, shall be classified under a residual provision in heading 2710, HTSUS, unless and until such time that conditions affirming actual use are met. Vitol did not afford the mandatory indicia of intent and actual use; therefore, the product cannot be classified under the motor fuel blending stock actual use provision of subheading 2710.11.18, HTSUS. Subheading 2710.11.25, HTSUS, provides for “Naphthas (except motor fuel or motor fuel blending stock).” Naphtha is a general term applied to refined, partly refined or unrefined petroleum products, and liquid products of natural gas, not less than ten percent by volume of which distill below 50°C (122°F), and not less than 95% by volume distillation point below 190°C (380°F) by ASTM D 86. The product at issue has a 10% distillation point of 209.3°F, and thus fails the API Standard Petroleum Definition for Naphtha. As such, the instant product is not classified as naphtha under subheading 2710.11.25, HTSUS. In light of the above, the subject reformate is classified under subheading 2710.11.45, HTSUS, as “mixtures of hydrocarbons not elsewhere specified or included, which contain by weight not over 50 percent of any single hydrocarbon compound,” or in subheading 2710.11.90, HTSUS, a residual provision of heading 2710, HTSUS. The protestant maintained that the subject reformate satisfied the requirements of subheading 2710.11.45, HTSUS, because the product did not contain by weight over 50% of any single hydrocarbon compound. Vitol was unable to provide CBP with a Gas Chromatographic analysis indicating the hydrocarbon composition of the reformate; however, in support of its contention, Vitol argued that the smooth distillation curve of the product, from initial boiling point at 110.6°F to final boiling point at 384.5°F is further evidence of the even hydrocarbon compound distribution of the subject reformate. CBP’s laboratory prepared a distillation graph analyzing the ASTM D86 data from the Inspectorate Certificate of Analysis provided by Vitol to determine if there was sufficient information to establish whether the instant product contained over 50%, by weight, of any single hydrocarbon compound. The ASTM D 86 distillation graph showed that at 10 volume percent intervals, each succeeding data point was at a higher temperature than the previous data point, and that the constant temperature region of the graph (indicating the theoretical distillation of hydrocarbons) increased in volume from approximately 30 percent to 80 percent over an increase in distillation temperature from 250°F to 300°F. Accordingly, the lab concluded that the increase in temperature in all regions of the graph, coupled with the constant temperature at the distillation region, demonstrates that any single hydrocarbon in the sample reformate, must be less than 20 volume percent of the total amount distilled, which is substantially less than 50 weight percent when the amount of sample distilled is corrected from volume to weight percent. Furthermore, it is generally recognized that gasoline products consist of “a complex mixture of hundreds of different hydrocarbons.” BP Products at *12 (citing The New Encyclopedia Britannica 138 (15th ed. 1986)). Moreover, in two prior rulings, CBP determined that a gasoline product contained over 500 different hydrocarbons. See HQ H009361, HQ H003734. In conformity with the foregoing, we find that the reformate at issue does not contain over 50 percent of any single hydrocarbon compound, and is thus classified in subheading 2710.11.45. HOLDING:

Pursuant to GRI 1 and GRI 6, the subject reformate 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 of 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 or included, which contain by weight not over 50 percent of any single hydrocarbon compound: Other.” The general column one rate of duty at the time of entry was 10.5 ¢ bbl.

You are instructed to DENY 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 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