CLA-2-27:OT:RR:NC:N2:237
Mr. Joseph F. Donohue, Jr.
Donohue and Donohue
26 Broadway, Suite 2300
New York, New York 10004
RE: The tariff classification and country of origin of 311,000 barrels of commingled recovered
oils from Azerbaijan, Venezuela, Netherlands, U.S. Virgin Islands and the United States.
Dear Mr. Donohue:
In your letter dated August 9, 2013, on behalf of Hovensa, you requested a tariff classification and country of origin ruling. You provided attachments comparing recovered and crude oils.
On January 18, 2012 Hovensa began closing its refinery on St. Croix. Crude oils from Azerbaijan and Venezuela were distilled into naphtha, kerosene, light and heavy gas oils and residuum, then processed into CBOB, RBOB, jet fuel, diesel fuel and No. 6 fuel. Naphtha from the Netherlands, U.S.V.I. and U.S., and catfeed from U.S.V.I. and U.S. were processed into gasoline. On February 18, 2013 major processing ended. Next, oils not used or sold, but still in tanks, pipelines and/or processing units, were recovered. Throughout the recovery, these crude oils, processed oils and slop oils were not segregated while moving in pipelines into tanks, nor were types, quantities or origins of these oils separately tracked and recorded. In all about 769,000 bbls were recovered. Your letter covers 311,000 bbls of commingled recovered oils in Hovensa Tanks 7516 and 7517.
You propose classification as a "mixture" having the essential character of a crude oil under General Rule of Interpretation (GRI) 3 (b). However, the recovered oils are not "goods" or "mixtures or combinations" pursuant to (GRI) 3 (b) because they are not combined in any fashion or formula with a commercial use (See HQ ruling 954435). There is no chemical reaction and the basic properties of each component remain essentially unchanged. Each component retains its original classification and country of origin. Each component remains classifiable in its own specific provision under the heading covering crude oils (heading 2709) or light, distillate and residual fuel oils (heading 2710). Pursuant to General Note 3 (f), HTSUS, whenever goods subject to different rates of duty are so mingled that the quantity or value of each class of goods cannot be readily ascertained by customs officers by sampling, packing lists or testing, the commingled goods shall be subject to the highest rate of duty applicable to any part thereof.
In accordance with GN 3 (f), the commingled recovered oils in Tanks 7516 and 7517 will be classified in subheading 2710.19.1600, Harmonized Tariff Schedule of United States (HTSUS), which provides for: Kerosene-type jet fuel. The rate of duty will be 52.5 cents per barrel.
Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. 1304. Congressional intent in enacting 19 U.S.C. 1304 was so that the ultimate purchaser, by knowing where the goods were produced, should be able to buy or refuse to buy them, if such marking should influence his will. CFR Sect. 134.1(b) defines "country of origin" as the country of manufacture, production or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of the marking laws and regulations.
You propose that mixing foreign crude oils, naphthas, catfeeds, and ballast slops with U.S.V.I. naphthas, catfeeds, process and ballast slops effects a substantial transformation of these oils into a new and different article of commerce and a product of the U.S.V.I. However, Customs has generally held that mere mixing of two substances in another country, not involving a chemical reaction and without additional processing, does not result in a product of a such other country (See HQ 561986, 555248, 556064, and 555403). Coastal States Marketing, Inc. v. United States, 646 F. Supp. 255 (CIT 1986) held that blending Soviet gas oil and Italian fuel oil in Italy did not result in a substantial transformation and a product of Italy. Customs applied GN 3(f) [formerly GN 7(a)] for commingling merchandise and allowed segregating components using documents.
The basic properties of each component in the recovered oils remain essentially unchanged. There is no chemical reaction and no substantial transformation. Therefore, each component retains its original classification and country of origin identity. During recovery, Hovensa did not maintain daily refinery operating records or any other information relevant to the verification of any claim for tariff preference under the Caribbean Basin Economic recovery Act (CBI). On page 15 you state: "No claim is being made here for duty-free treatment under CBI or under any other preferential duty program or free trade agreement." Also, Hovensa did not segregate, track and record the types, quantities and origins of each component recovered on a daily basis. Under these circumstances, Customs has the authority to decide which method and which information is sufficient to determine and verify the countries of origin of the recovered oils (See HQ 955203).
On page 7 you state: "The document shows that as of 12:05 A.M. February 1, 2012 Hovensa had the following crude oil and slop oil in inventory: 5,441 bbls Azeri Light (country of origin Azerbaijan); 151,590 bbls Merey (Venezuela); 47,287 bbls Mesa-30 (Venezuela); 20,147 bbls Santa Barbara (Venezuela); 186,059 bbls process slop (U.S.V.I. or unknown origin); 57,097 bbls ballast slop (unknown origin). On January 1, 2012 Hovensa had 637, 215 bbls of naphtha in inventory. During January, Hovensa imported 901,465 barrels of naphtha, of which 655,264 bbls came from the Netherlands and 246,201 bbls came from the United States, to be processed in the platformer for gasoline production. The platformer was shut down February 18, 2012. At March 1, 2012 Hovensa had a total of 149,531 bbls of naphtha remaining in inventory. On January 1, 2012 Hovensa had 160,047 bbs of 0.3% sulfur catfeed in inventory and during January 2012 Hovensa imported 384,845 bbls from the United States for processing in its catalytic cracker. The cat cracker was shut down February 3, 2012. At March 1, 2012 Hovensa had and 28,444 bbls 0.3% sulfur catfeed in inventory." This totals 645,596 bbls. In all about 769,000 bbls were recovered. We calculate a difference of 123,404 bbls allows for recovered processed oil (origin U.S.V.I). On page 3 you state: "During the recovery process, however, crude oil, slop oil and processed oil were commingled in crude oil storage tanks." Your letter covers 311,000 bbls of recovered oils in Tanks 7516 and 7517. Therefore, we conclude the recovered oils contain oils originating in Azerbaijan, Venezuela, Netherlands, U.S.Virgin Islands and the United States.
Customs has allowed articles which are commingled and randomly packaged to be marked with a phrase indicating all of the countries of origin, linked by the conjunctive "and" because this will properly inform the ultimate purchaser of the foreign origin of the commingled merchandise inside. This is acceptable for recovered oil in Hovensa Tanks 7516 and 7517 because a container would contain some portions of the components from each of the countries indicated in your letter, namely, Azerbaijan, Venezuela, Netherlands, U.S.Virgin Islands and the United States.
Therefore, the countries of origin for the commingled recovered oils in Hovensa Tanks 7516 and 7517 will be: "Azerbaijan, Venezuela, Netherlands, U.S.Virgin Islands and the United States."
This merchandise is subject to the requirements of the Toxic Substances Control Act (TSCA), administered by the U.S. Environmental Protection Agency (EPA). Information on TSCA can be obtained by contacting the EPA at 1200 Pennsylvania Avenue, N.W., Washington, D.C. 20460, by phone (202) 554-1404, by e-mail to: [email protected] or on their website: www.epa.gov.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Frank Cantone at (646) 733-3038.
Sincerely,
Myles B. Harmon
Acting Director
National Commodity Specialist Division