United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 2004 HQ Rulings > HQ 230284 - HQ 545536 > HQ 230322

Previous Ruling Next Ruling
HQ 230322

---

June 9, 2004

DRA-4 RR:CR:DR 230322 RDC

CATEGORY: PROTEST

Port Director
Customs and Border Protection
Houston Service Port
2350 N Sam Houston Parkway East
Suite 1000
Houston, Texas 77032-3126
Att: Deidra Golden

RE: Protest number 5301-03-10069; Glencore Ltd.; Denial of drawback claim; 19 USC § 1313(p); finished petroleum derivatives; 19 USC § 1514; same kind and quality;

Dear Sir or Madam:

Protest number 5301-03-10069 was forwarded to this office for further review on December 27, 2003. We have considered the evidence provided and the points raised by your office and the Protestant. Our decision follows.

FACTS:

The Protestant, Glencore Ltd., (Glencore), protests the partial denial of drawback claim RJ4-xxxxx05-9. Glencore filed the protested drawback claim June 6, 1996, pursuant to 19 U.S.C. § 1313(p). This claim was denied in part by the Houston drawback Center, (Houston), because the designated qualified articles and the exported articles were not classified under the same 8-digit Harmonized Tariff Schedule of the United States (1996), (HTSUS), tariff classification number. The exported articles were described as kerosene type jet fuel classified at 2710.00.15, HTSUS, but 139,872 barrels of the designated qualified articles were entered as “motor fuel blending stock,” classified at 2710.00.18, HTSUS, (1996).

According to a document prepared by Glencore, titled “Drawback Worksheet,” and attached to the drawback claim, the 991,981 barrels designated as qualified articles are comprised of 7 entries made by Glencore. Glencore describes the qualified articles 7 entries of “gasoline” and provides the entry summaries. Five of these entries, according to the entry summaries provided, cover only importations of reformulated unleaded gas motor fuel classified at 2710.00.15, HTSUS. Two entries, numbers 57-4 and 98-8, show importations of “motor fuel blending stock,” classified at 2710.00.18, HTSUS. A combined total of 139,872 barrels of “motor fuel blending stock,” 80,470 and 59,402 barrels respectively, were designated as qualified articles on the protested drawback claim. These 139,872 barrels were disallowed as qualified articles by Houston.

The exported articles are described by Glencore as “jet fuel, 8-digit tariff designation 2710.00.15.” The tanker bills of lading (BOLs) for all seven of the exports and a shipper’s export declaration for two exports are provided. The goods shipped are described on four BOLs as “Jet A-1,” on one BOL as “Jet Fuel,” and on the remaining two BOLs as “kero.” Attached to the two BOLs that describe the shipped goods as “kero” are the shipper’s export declarations. One declaration describes the exported goods as jet fuel and the other declaration describes the exported goods as “jet fuel (kero).”

According to Houston, submitted with the protested drawback claim were copies of two letters, one referring to entry 57-4 and the other to entry 98-8. These letters, dated May 6, 1996, are from a customs broker and addressed to “U.S. Customs Service, New York District.” The letters are identical but for the entry numbers to which they refer. They state that “the cargo was incorrectly classified as motor fuel blendstock” under subheading 2710.00.18, HTSUS, and request that the classification of the goods be changed to 2710.00.15, HTSUS, unleaded gasoline. The letters state that a “gauge report” was enclosed, however no report is supplied here. According to CBP’s Automated Commercial System, (ACS), entry numbers 57-4 and 98-8 were liquidated June 7, 1996, and June 14, 1996, respectively, as entered and no change was made to the classification of the goods on either entry. There is no evidence on these letters that they were received by Customs.

Upon receipt of this Protest, Houston retrieved the original paper entries and the attached documentation for entry numbers 57-4 and 98-8 from the Federal Records Center. Attached to the entry summary for entry 57-4 is a proforma invoice naming Glencore, Ltd. as the consignee for 80,470 barrels of “motor fuel blendstock” and 317,961 barrels “regular unleaded gasoline.” Also attached is a CF 7529, Carriers’ Certificate and Release Order, certifying Glencore as the consignee of 318,519 barrels of “regular unleaded gasoline” and 80,000 barrels “motor fuel blendstock.” Four “Report[s] of Weight, Gauge or Measure” are provided, each showing Glencore as the importer of a commodity described as “gasoline” with an API of either 66.6 or 65.9.

Attached to the entry summary for entry 98-8 is a proforma invoice, a Carriers’’ Certificate and Release Order, and a gauge report that includes an analysis of the cargo. The invoice is dated February 19, 1996, and shows Glencore as the consignee for 94,147.09 barrels of bulk “motor fuel blendstock @ 68.3 Deg. API.” The Carriers’ Certificate reflects that Glencore was the consignee of 94,000 barrels of “motor fuel blendstock.” The gauge report states that it is “to: Glencore LTD” but contains no other information about who generated this report. This report refers to 94,147.09 barrels of what is described only as “A5 RFG.”

According to ACS, Houston liquidated the protested drawback claim on December 13, 2002, with $443,173.70 in duty drawback allowed, reducing the amount of drawback claimed by $72,408.42. By letter dated November 22, 2002, Houston advised the claimant that the drawback entry was liquidated and the amount of drawback paid. (We note that the duty on the 139,872 barrels of blending stock was paid at the rate of $52.50 per barrel for a total duty paid of $72,907.80, and that drawback was claimed as 99 percent of this paid duty or $72,698.47. Therefore, drawback on the protested entry should have been reduced by $72,698.47 and paid at $442,883.64 (852,109 barrels at $52.50 duty with drawback paid at 99 percent.)) Further, according to the December 13, 2002, letter, zero drawback was allowed on the claim for $23,130.04 in drawback of the Harbor Maintenance Fee (HMF); however, we do not see a claim for drawback of the HMF included with the protested claim.

On February 18, 2003, Glencore filed the instant Protest number 5301-03-100079, which was received by Houston on February 19, 2003. On January 22, 2004, the protest was forwarded to this office pursuant to a request for further review and received on February 3, 2004.

ISSUE:

Whether qualified articles entered under subheading 2710.00.18, HTSUS (1996), as “motor fuel blending stock,” and exported articles described as kerosene type jet fuel classified under 2710.00.15, HTSUS (1996), are of the “same kind and quality” as required by 19 U.S.C. § 1313(p)(3)(B)?

LAW AND ANALYSIS:

We note initially that the instant Protest was timely filed, i.e., within 90 days of the refusal to pay the drawback claim (19 U.S.C. § 1514(c)(3)(B)). Under 19 U.S.C. § 1514 “decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to . . . the refusal to pay a claim for drawback . . .” (§ 1514(a)(6)) are final unless a protest of that decision is filed within 90 days of the decision to deny drawback (§ 1514(c)(3)(B)). The drawback claim was liquidated on December 13, 2002, and this Protest was filed on February 19, 2003.

Section 1313(p) of the United States Code (19 U.S.C. §1313(p)) provides for drawback of duty on certain petroleum derivatives. Under § 1313(p)(1), notwithstanding any other provision of § 1313, if:

(A) an article (referred to in section 1313(p) as the “exported article”) of the same kind an quality (as specifically defined in section 1313(p)) as a qualified article is exported; (B) the requirements set forth in section 1313(p)(2) are met; and (C) a drawback claim is filed regarding the exported article,
drawback shall be allowed, as provided in paragraph (4). For purposes of this subsection a “qualified article” per § 1313(p)(3)(A), means an article described in heading 2710, HTSUS (among other headings), which is imported and duty-paid (see also 19 C.F.R. § 191.172(a)).

For purposes of drawback per 1313(p),

An article, including an imported, manufactured, substituted, or exported article, is of the same kind and quality as the qualified article for which it is substituted under this subsection if it is a product that is commercially interchangeable with or referred to under the same eight-digit classification of the Harmonized Tariff Schedule of the United States as the qualified article . . . .

(19 U.S.C. § 1313(p)(3)(B)). The exported article here is kerosene type jet fuel classified under subheading 2710.00.15, HTSUS (1996). The designated qualified articles at issue are 139,872 barrels entered as motor fuel blending stock under subheading 2710.00.18, HTSUS. Per § 1313(p)(3)(B), the designated articles i.e., the blending stock, would be of the same kind and quality as the exported jet fuel, for which it is substituted, if the blending stock is either a product that is commercially interchangeable with, or “referred to under the same eight-digit classification of the HTSUS,” as the jet fuel.

Both entry numbers 57-4 and 98-8 were liquidated as entered under subheading 2710.00.18, HTSUS. Per 19 U.S.C. § 1514 absent certain actions on the part of the importer or CBP within the specified time limits, none of which occurred here, determinations as to the classification of goods is final and binding on all parties, including Customs. The letters stating that the goods entered were “incorrectly classified” as motor fuel blending stock and requesting that the classification be changed to 2710.00.15, HTSUS, motor show no evidence of having been received by Customs, provide no explanation for the requested change and clearly were not acted upon, if received. Accordingly, the motor fuel blending stock classified under subheading 2710.00.18, HTSUS, is not “referred to under the same eight-digit classification of the HTSUS,” as the jet fuel classified at 2710.00.15, HTSUS (1996).

The CBP Regulations at 19 C.F.R. § 191.32(c) provide that in determining commercial interchangeability:

Customs shall evaluate the critical properties of the substituted merchandise and in that evaluation factors to be considered include, but are not limited to, Governmental and recognized industrial standards, part numbers, tariff classification and value.

The best evidence of whether those criteria are used in a particular transaction are the claimant’s transaction documents.

In this case the qualified article, motor fuel blending stock, is compared to the exported article, kerosene-type jet fuel. Since both the jet fuel and the motor fuel blending stock are traded here as bulk liquids, no part numbers are relevant to the commercial interchangeability analysis. With respect to governmental and recognized industrial standards, if a standard is published and the good is traded in conformance with that standard, it is probable that the imported and exported goods are commercially interchangeable. Gasolines are usually defined by government regulation, where properties and test methods are clearly defined (see HRL 225188 May 10, 2000).

Typically gasoline in the U.S. is measured against the standard specification for automotive spark-ignition engine fuel, standard D-4814 of the American Society for Testing Materials (ASTM) used by the petroleum industry in identifying and classifying commercial gasoline in international commerce. The standard for jet fuel is ASTM D-1655 (see HRL 224368 August 3, 1993). Since the gasoline and jet fuel are traded according to different standards, this criterion does not support a finding of commercial interchangeability.

With regard to tariff classification, merchandise imported into the U.S. is classified under the HTSUSA. 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 otherwise requires, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUSA and are to be considered statutory provisions of law for all purposes. HRL 962922 (September 6, 2000), addressed the classification of imported fuel under 2710.00.18, HTSUS, as motor fuel blending stock. That ruling letter stated that the subheadings of Chapter 27 are the applicable provisions of the HTSUS (1996) and that the applicable Chapter Notes are Additional U.S. Notes 3 and 4, Chapter 27, HTSUS, (1996).

Additional U.S. Note 3 provides: “[f]or the purposes of subheading 2710.00.15, "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.” Under U.S. Note 4, Chapter 27, HTSUS, motor fuel blending stock, in subheading 2710.00.18, HTSUS, is defined as “any product (except napthas of subheading 2710.00.25) derived primarily from petroleum, shale oil, or natural gas, whether or not containing additive, to be used for direct blending in the manufacture of motor fuel. The Additional U.S. Rules of Interpretation state in part:

In the absence of special language or context which otherwise requires-- . . . (b) 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 or importation, the goods are so used and proof thereof is furnished within 3 years after the date the goods are entered[.]

(Add.U.S.Rs.Int. 1.(b), HTSUS (1996)).

The Customs Regulations at 19 C.F.R. § 10.138 (1996) provide:

Within 3 years from the date of entry or withdrawal from warehouse for consumption, the importer shall submit in duplicate in support of his claim for free entry or for a reduced rate of duty a certificate executed by (1) the superintendent or manager of the manufacturing plant, or (2) the individual end-user or other person having knowledge of the actual use of the imported article. The certificate shall include a description of the processing in sufficient detail to show that the use contemplated by the law has actually taken place. A blanket certificate covering all purchases of a given type of merchandise from a particular importer during a given period, or all such purchases with specified exceptions, may be accepted for this purpose, provided the importer shall furnish a statement showing in detail, in such manner as to be readily identified with each entry, the merchandise which he sold to such manufacturer or end-user during such period.

As stated in HRL 962922, since 2710.00.18, HTSUS, is an actual use provision, in order for an importer to have an entry liquidated under subheading 2710.00.18, HTSUS, the importer would have to satisfy all of the actual use requirements and thus prove the imported goods were not used as motor fuel. (See also HRL 955883, February 27, 1995.)

In Clarendon Marketing, Inc. v. U.S., 144 F.3d 1464 (Fed. Cir. 1998), the CAFC affirmed the decision of the CIT, (955 F. Supp. 1501 (Ct. Int'I Trade 1997) with regard to the classification of fuel described as naptha:

According to the plain language of Additional U.S. Rule of Interpretation 1(b), classification under an actual use provision such as the blending stock subheading is proper only if the actual use made of the imports in the United States is proven to be that of the actual use provision. Actual use provisions such as the blending stock subheading can also function as a controlling legal label, in the sense that an import actually used in accordance with the actual use provision will not be classified as such unless its actual use is proven (or unless "special language or context . . . otherwise requires," a point to be addressed below).

In the context of this case, a naptha that is suitable for use as a motor fuel blending stock is not considered such for purposes of tariff classification unless the actual utilization of the naptha is proven to be as a motor fuel blending stock. Therefore, if such proof is not made, the naptha is not excluded from the napthas subheading by way of the motor fuel blending stock portion of the parenthetical exception to the napthas subheading. By like token, unless such proof is made, the naptha is not classified under the blending stock subheading.

(Id. at 1468). The CAFC in Clarendon Marketing concluded that since neither party offered actual proof of the use to which the imported naptha was put,
the plain meaning of the HTSUS and the accompanying notes and rules of interpretation dictate that the merchandise not be considered a motor fuel blending stock for purposes of tariff classification. As such, the merchandise cannot be classified under the blending stock subheading . . . .

(Id.) Accordingly, notwithstanding the finality of the classification per 19 U.S.C. § 1514, absent proof of the actual use to which the fuel imported by Glencore with entry numbers 57-4 and 98-8 was actually put – no proof of use has been provided – the imported fuel should not have been classified under the blending stock subheading, 2710.00.18, HTSUS, (1996).

However, there is insufficient information provided to determine that the correct classification of the articles entered as motor fuel blending stock should have been 2710.00.15, HTSUS (1996), a principal use provision. The only evidence supporting classification as gasoline are the four gauge reports showing the importation of a commodity described as gasoline. Entry number 98-8 does include the gauge report that describes the goods as “A5 RFG.” “RFG” is an acronym for reformulated gasoline. The gauge report provides an analysis of the goods. However, the analysis does not contain the necessary values for the characteristics of gasoline as provided by the Specification for Automotive Spark-Ignition Engine Fuel, D-4814 to determine that it should be classified as gasoline. Missing from the gauge report analysis, among others, are the values for vapor pressure as reflected by test method for Vapor Pressure of Petroleum Products, D 5191 and octane index.

Moreover, because subheading 2710.00.15, HTSUS (1996), is a principal use provision, it would also have to be shown that the articles entered as motor fuel blending stock were a motor fuel which, at the time of importation, was principally used as fuel in an internal-combustion or other engine. Consequently, classification of the goods covered by entry numbers 57-4 and 98-8 under subheading 2710.00.15, HTSUS cannot be determined. Thus, because the classification of the designated qualified goods cannot be said to be the same as the exported goods, this criterion does not support a finding of commercial interchangeability.

Finally, as to the comparative value of the imported blending stock and the exported jet fuel, there is insufficient information about the value of the exported jet fuel to compare the values. To calculate the value of the exported jet fuel, the values of each export is required; however, only the two shipper’s declarations contain the value information. These two values are not enough to make a meaningful comparison with the value of the blending stock. Therefore, none of the criteria support a finding of commercial interchangeability of the blending stock and the jet fuel. Accordingly, because the exported jet fuel and the qualified articles for which it is substituted are neither commercially interchangeable or referred to under the same eight-digit classification of the HTSUS they are not of the same kind and quality as required by 19 U.S.C. § 1313(p)(3)(B).

HOLDING: The exported jet fuel and the imported motor fuel blending stock are not of the same kind and quality as required by 19 U.S.C. § 1313(p) and drawback on the blending stock was properly denied.

Therefore, this Protest should be DENIED in full. In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings 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

Previous Ruling Next Ruling

See also:

• Tariff No.: 2710.00.15 - Motor fuel, from petro oils and bitumin. minrls, o/than crude, or preps. 70%+ by wt. from petro. oils
• Tariff No.: 2710.00.18 - Motor fuel blending stock, from petro oils and bitumin. minrls, o/than crude, or preps. 70%+ by wt. from petro. oils
• Tariff No.: 2710.00.25 - Naphthas (ex. motor fuel or mtr fuel blend. stock), fr. petro oils and bitumin. minrls, o/than crude, or preps. 70%+ by wt. fr. petro. oils