OT:RR:CTF:VS H328389 AP
Thomas Kendrick, Assistant Director
Petroleum, Natural Gas and Minerals
Center of Excellence and Expertise
2350 N. Sam Houston Pkwy, Ste. 1000
Houston, TX 77032
Attn.: Dianna L. Sarka, CBP Import Specialist
RE: AFR of Protest No. 3604-20-100428; 19 U.S.C. § 1520(d); NAFTA claim
Dear Assistant Center Director:
This is in response to the Application for Further Review (“AFR”) of Protest No. 3604-20-100428 filed against U.S. Customs and Border Protection’s (“CBP”) decision to deny Pembina Midstream USA, Inc.’s (the “protestant”) claim for preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”). The protestant claims that the imported liquified butane and propane qualify for NAFTA preferential treatment.
FACTS:
The imported merchandise consists of liquified butane of subheading 2711.13, Harmonized Tariff Schedule of the United States (“HTSUS”) and liquified propane of subheading 2711.12, HTSUS. First, natural gas liquids (“NGL”) of subheading 2710.12, HTSUS were processed within a fractionator train in Canada to create streams of gaseous butane and propane of subheading 2711.29. The gaseous butane and propane of subheading 2711.29 produced from the NGL were then liquified for ease of storage and transportation in Canada resulting in liquified butane of subheading 2711.13 and liquified propane of subheading 2711.12, HTSUS.
The protestant sourced the NGL of subheading 2710.12 from unrelated suppliers in Canada. The protestant did not have sufficient documentation to certify NAFTA origin separately for each supplier and treated the entire NGL as non-originating. The protestant sold the end-product to customers in the United States. The submitted NAFTA certificate of origin states that the liquified propane and liquified butane imported into the United States originated from Canada and satisfied General Note (“GN”) 12(b)(ii)(A), HTSUS and GN 12(t)/chapter 27, tariff shift rule 4B (“Rule 4B”).
On January 28, 2020, the protestant filed a NAFTA 19 U.S.C. § 1520(d) claim for its U.S. imports of liquified butane and propane entered from January 24 to December 31, 2019, and liquidated between May 3, 2019 and November 27, 2020. On March 3, 2020, CBP’s Petroleum, Natural Gas and Minerals Center of Excellence and Expertise (“Petroleum CEE”) issued a Request for Information (CBP Form 28) to Pembina Resource Services in Canada to verify the originating status of propane imported into the United States from Canada on December 31, 2019, under the rules of origin in GN 12, HTSUS. The Petroleum CEE requested documentation in support of the company’s NAFTA claim. After reviewing the protestant’s response, on
May 14, 2020, the Petroleum CEE issued a Notice of Action (CBP Form 29) to protestant denying its 19 U.S.C. § 1520(d) claim since the merchandise was not eligible for NAFTA preferential tariff treatment under Rule 4B as claimed on the NAFTA certificate of origin.
On October 16, 2020, the protestant filed this Protest/AFR. On January 4, 2021, the Petroleum CEE denied the protest stating that it did not meet the criteria under Rule 4B because it was unknown whether the nonoriginating feedstock constituted no more than 49 percent by volume of the final product imported into the United States.
ISSUE:
Whether the imported liquified butane and propane are eligible for NAFTA preferential tariff treatment.
LAW AND ANALYSIS:
We note that the matter protested is protestable under 19 U.S.C. § 1514(a) as a refusal to reliquidate entries pursuant to 19 U.S.C. § 1520(d). The protest was timely filed within 180 days of the denial of the 19 U.S.C. § 1520(d) claim by the Petroleum CEE. Further review of this protest is properly accorded to the protestant pursuant to 19 C.F.R. § 174.24(b) because the issues protested involve questions of law or fact, which have not been ruled upon.
GN 12, HTSUS (2019), provides in relevant part:
(a) Goods originating in the territory of a party to the North American Free Trade Agreement (NAFTA) are subject to duty as provided herein. For the purposes of this note – … (i) Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Canada under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn followed by the symbol “CA” in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
… (b) For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party”
only if –
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
they have been transformed in the territory of Canada, Mexico and/or the United States so that – (A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or (B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; ….
GN 12(t) sets forth the applicable tariff shift rules as follows:
Chapter 27.
… 4B. A change to a good of subheadings 2711.12 through 2711.14 from within that subheading or any other subheading, including another subheading within that group, provided that the non-originating feedstock constitutes no more than 49 percent by volume of the good.
…
4E. A change to subheading 2711.29 from any other subheading, except from subheadings 2711.12 through 2711.21.
Self-produced material may be a material for determining applicability of rules of origin, pursuant to 19 C.F.R. Part 181, Appendix, Section 4(8), which states:
For purposes of determining whether non-originating materials undergo an applicable change in tariff classification, a self-produced material may, at the choice of the producer of a good into which the self-produced material is incorporated, be considered as an originating material or non-originating material, as the case may be, used in the production of that good.
The protestant asserts that GN 12(b)(ii)(A) and GN 12(t)/chapter 27, tariff shift rule 4E (“Rule 4E”) were satisfied and as a result the gaseous butane and propane of subheading 2711.29 processed from the non-originating NGL of subheading 2710.12 became 100 percent Canada-originating. According to the protestant, the imported liquified butane and propane qualified for NAFTA preferential tariff treatment under GN 12(b), HTSUS.
The articles that are imported are liquified butane of subheading 2711.13, HTSUS, and liquified propane of subheading 2711.12, HTSUS, and not a product of subheading 2711.29, HTSUS, as claimed by the protestant. Nonetheless the protestant used non-originating NGL of subheading 2710.12 to produce the input (gaseous propane and butane) that went into the final product (liquified propane and butane). The gaseous butane and propane underwent a tariff shift (a change to subheading 2711.29 from subheading 2710.12, HTSUS) when processed from non-originating NGL. Because the gaseous butane and propane underwent the required tariff shift to subheading 2711.29, HTSUS, from any other subheading under Rule 4E, they may be considered self-produced materials incorporated into the final product pursuant to 19 C.F.R. Part 181, Appendix, Section 4(8), and the imported liquified butane and propane may be considered to be NAFTA-originating pursuant to GN 12(b), HTSUS.
Pursuant to GN 12(a)(i), HTSUS, the NAFTA-originating goods must also qualify to be marked as goods of Canada under the NAFTA marking rules set forth in 19 C.F.R. Part 102 before preferential tariff treatment is granted. Section 102.11 sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11 provides, in relevant part:
The following rules shall apply for purposes of determining the country of origin of imported goods other than textile and apparel products covered by § 102.21.
The country of origin of a good is the country in which: (1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied ….
Since the NGL is foreign, §§ 102.11(a)(1)-(2) are not applicable. The imported liquified propane of subheading 2711.12 and liquified butane of subheading 2711.13 produced from foreign NGL of subheading 2710.12 undergo a tariff shift under 19 C.F.R. §§ 102.11(a)(3) and 102.20 (“A change to subheading 2711.12 through 2711.19 from any other subheading, including another subheading within that group, except from subheading 2711.29.”). As a result, the liquified butane and propane are goods of Canada for marking purposes.
Accordingly, the protestant’s 19 U.S.C. § 1520(d) claim should be granted with respect to the entries that meet the one-year from the date of importation filing requirement under 19 U.S.C. § 1520(d), provided the protestant can submit to the Petroleum CEE a corrected NAFTA certificate of origin indicating that the imported merchandise is eligible for NAFTA preferential tariff treatment under GN 12(b), HTSUS.
HOLDING:
This protest/AFR should be granted for all entries that meet the one-year from the date of importation filing requirement under 19 U.S.C. § 1520(d), provided the protestant can submit a corrected NAFTA certificate of origin to the Petroleum CEE as stated above.
You are instructed to notify the protestant of this decision no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/, which can be found on the CBP website at https://www.cbp.gov and other methods of public distribution.
Sincerely,
for Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division