OT:RR:CTF:VS H268129 AJR
Port Director
Port of Blaine
U.S. Customs & Border Protection
9901 Pacific Highway
Blaine, WA 98230
RE: Application for Further Review of Protest 3501-14-150001; Applicability of subheading 9801.00.10; 19 C.F.R. § 123.21
Dear Port Director:
This is in response to the Application for Further Review of Protest 3501-14-150001, filed on October 15, 2014, by BP Products North America Inc. (hereinafter “protestant”), concerning the applicability of 19 C.F.R. § 123.21, or in the alternative, subheading 9801.00.10, Harmonized Tariff Schedule of the United States (“HTSUS”), to the crude oil entries at issue.
FACTS:
This case involves eight entries of crude oil entered between July 17, 2013, and October 17, 2013. According to the protestant, the subject entries are U.S.-origin crude oil batches of North Dakota Sweet (“NSW”) extracted from the Bakken field grounds of North Dakota. After extraction, the crude oil, which the protestant states was not subject to any further processing and had no materials added to it, was injected into pipelines in North Dakota for delivery to the protestant’s refinery complexes on the east coast of the United States. Due to the pipeline infrastructure, the subject crude oil, was required to temporarily move through Canada before returning to the United States for its ultimate delivery. The protestant entered the eight entries of the crude oil into the United States under subheading 2709.00.20, HTSUS. No in-transit manifest was presented. The protestant presents two arguments against the treatment of the subject entries by U.S. Customs and Border Protection (“CBP”).
First, the protestant argues that its shipments of crude oil were subjected to entry contrary to 19 C.F.R. § 123.21, which exempts certain in-transit shipments from entry. Second, the protestant argues that if it is determined that the 19 C.F.R. § 123.21 exemption does not apply and entry was required, then the entries should have been liquidated as U.S. goods returned under subheading 9801.00.10, HTSUS. Along with the protestant’s arguments, a shipping document issued by Enbridge Pipeline Inc. (“Enbridge”) was submitted, which shows that from July 1, 2013, to July 31, 2013, NSW crude oil was shipped by BP Canada Energy Group ULC from Cromer Terminal in Canada to Griffith Terminal in Indiana, and from Cromer Terminal to Superior Terminal in Wisconsin.
ISSUES:
Whether the subject crude oil transactions were exempt from 19 C.F.R. § 123.21?
Whether the subject crude oil transactions were eligible for tariff treatment under subheading 9801.00.10, HTSUS?
LAW & ANALYSIS:
19 C.F.R. § 123.21
The protestant argues that its shipments of crude oil were subjected to entry contrary to 19 C.F.R. § 123.21, which exempts certain in-transit shipments from entry. The protestant claims that CBP issued an opinion to the pipeline operator that these transactions were in-transit movements and were not subject to entry requirements. The protestant further states that CBP revoked this opinion which required parties, including the protestant itself, to file formal entries. The protestant does not specifically identify the opinions; however, according to the Port of Blaine, the “positions” referred to by the protestant are likely two inter-agency memorandum from the Office of International Trade and the Office of Field Operations to Field Operations in Chicago: “Policy and Procedures for in-Transit Movements of U.S. Bakken Crude Oil via Enbridge Pipelines,” dated April 18, 2012; and, “INFORMATION: Rescission of Policy and Procedures for In-Transit Movements of U.S. Bakken Crude Oil via Enbridge Pipelines,” dated March 25, 2013. The first memorandum concerns the in-transit movement of Bakken crude oil that would be delivered via pipelines from the United States across the Canadian border directly to Cromer Terminal, and then back to the United States via the Enbridge pipelines, without being commingled at any point along the route. The second memorandum rescinds the first memorandum because Enbridge provided information indicating that the crude oil injected into the pipelines in North Dakota, identified as NSW, may not be of U.S. origin and will be commingled in a continuous flow along the pipeline. In rescinding the first memorandum, which permitted in-transit movement without requiring entry summaries, the second memorandum set forth guidelines for entry procedures of Bakken crude oil.
In the protest under consideration, the protestant has not “distinctly and specifically” described the CBP “position” it refers to in its protest. However, if your office is correct and the protestant is referring to the positions cited above, we note that commingling was a concern. Nonetheless, the protestant did make entry under subheading 2709.00.20, HTSUS, and did not make an in-transit claim per 19 C.F.R. § 123.21. Accordingly, for purposes of the eight entries at issue, we do not reach this issue.
Subheading 9801.00.10, HTSUS
Although the protestant made entry under subheading 2709.00.20, HTSUS, it now claims that the subject entries are eligible for subheading 9801.00.10, HTSUS, treatment. In 2013, subheading 9801.00.10, HTSUS, provides that products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad may be entered duty free provided the documentary requirements of section 10.1, CBP Regulations (19 C.F.R. § 10.1) are met. In United States v. John V. Carr & Sons, Inc., 347 F. Supp. 1390 (Cust. Ct. 1972), 496 F.2d 1225 (CCPA 1974), the court stated that absent some alteration or change in the item itself, the mere repackaging of the item, even for the purpose of resale to the ultimate consumer, is not sufficient to preclude the merchandise from being classified under item 800.00, Tariff Schedules of the United States (TSUS) (now subheading 9801.00.10, HTSUS).
In Headquarters Ruling Letter (“HQ”) 563310, dated May 19, 2006, CBP found that an inventory management method may be used to segregate the U.S. portion of refrigerant gas that was commingled with German- and Chinese-origin refrigerant gas in a storage tank, and then injected into small metal cans in Mexico without addition of U.S.-origin additives for purposes of determining eligibility under subheading 9801.00.10, HTSUS, provided the documentary requirements of 19 C.F.R. § 10.1 were met. That is, since the U.S.-origin gas was only commingled without having been advanced in value or improved in condition, CBP had no issue with the applicability of subheading 9801.00.10, HTSUS, to the U.S. portion of the gas, provided that portion could be accounted for per an inventory management method.
In this case, the protestant claims that the crude oil at issue was wholly grown in the United States because it was extracted from the grounds of North Dakota, without any other processing or materials added to it. Furthermore, the protestant claims that once the oil was injected into the pipelines in North Dakota, it was at all times under the care and custody of the pipeline operator and returned to the United States without being changed, modified, improved in condition, or manufactured in any manner while in Canada.
Despite these claims, the protestant only submitted one document, which merely shows that NSW crude oil was delivered from Cromer Terminal in Canada to terminals in the United States via the Enbridge pipeline. There is no evidence, such as production records, to show that such NSW crude oil was wholly grown in the United States; nor is there evidence to show the manner in which the crude oil was transported from North Dakota to Cromer Terminal. Since eligibility under subheading 9801.00.10, HTSUS, is specific with regard to “products of the United States,” and the protestant has not provided sufficient evidence to show that the subject crude oil entered into the United States was a product of the United States, the subject crude oil is not eligible for treatment under subheading 9801.00.10, HTSUS. Therefore, the protest as it relates to the second issue should be denied.
HOLDING:
The protest should be denied. The first issue could not be addressed for the eight entries at issue because protestant did make entry under subheading 2709.00.20, HTSUS, and did not make an in-transit claim per 19 C.F.R. § 123.2. With regard to the second issue, the protestant has failed to provide sufficient evidence to demonstrate that the subject crude oil is eligible for treatment under subheading 9801.00.10, HTSUS.
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 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 Regulations and Rulings of the Office of 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 & Trade Facilitation Division