CLA-2-39:OT:RR:NC:SP:237
Mr. John M. Peterson
Neville Peterson LLP
17 State Street - 19th Floor
New York, New York 10004
RE: Originating Status under the North American Free Trade Agreement of Certain Petroleum Coke from Canada or Mexico.
Dear Mr. Peterson:
In your letter dated November 15, 2007, on behalf of Capex Europe Ltd., you requested a ruling concerning the “originating” status, for purposes of the North American Free Trade Agreement (NAFTA), of certain petroleum coke, to be imported into the United States from Canada or Mexico.
Petroleum coke will be produced in a Canadian or Mexican refinery. The refinery uses atmospheric and vacuum distillation to separate crude petroleum oil (2709) into various product streams including residual oil. The origin of the crude petroleum oil is not provided. In the refinery, residual oil (heading 2710) is produced by both atmospheric and vacuum distillation. Catalytic hydroprocessing and other operations may also be performed. These operations occur after any non-originating refined or non-originating partly refined feedstock (such as hydrocracker bottoms or vacuum gas oils of heading 2710) has been introduced into the refinery, along with the crude petroleum oil. In the delayed coking unit at the refinery, the residual oil is charged to the coker, and processed through further distillation operations, yielding the petroleum coke (heading 2713).
Petroleum coke is typically produced in a petroleum refinery, in a unit known as a delayed coker. The refinery process uses atmospheric and vacuum distillation to separate crude petroleum oil into various product streams. For example light ends such as naphthas and xylenes are first liberated from the crude petroleum, followed by jet fuels, motor vehicle fuels, diesel fuels and residual oil or asphalt.
Petroleum coke is a solid residue left over from the cracking process in oil refining. The residual oil (heavy) matter from atmospheric or vacuum distillation of crude petroleum oil is removed from a distillation column and sent to a coker. Delayed coking is a thermal cracking process used in petroleum refineries to upgrade and convert bottoms from atmospheric and vacuum distillation of crude petroleum oil into liquid and gas product streams, leaving behind a solid concentrated carbon material, petroleum coke (a carbonaceous solid). Three physical structures of petroleum coke (shot, sponge or needle coke) can be produced by delayed coking.
The physical structures and chemical properties of petroleum coke determine its end use. Petroleum coke can be burned as a fuel, calcined for use in the aluminum, chemical or steel industries, or gasified to produce steam, electricity or gas feedstocks for the petrochemical industry.
Delayed coking is a cyclic thermal cracking process used to convert high molecular weight, high boiling point hydrocarbons into lighter, more valuable products. Chemical reactions take place in coke drums. Feedstock is fed to the coker fractionator where it mixes with hot vapors from the coke drums. The residual bottoms taken from the fractionator are furnace-heated to cracking temperatures. Cracked hydrocarbon vapors flow from the top of the coke drums to fractionation columns, where they are separated into discrete products by distillation. Products of delayed coke or processing include fuel gas, liquefied petroleum gas, naphthas, light and heavy gas oils, and petroleum coke.
Briefly, crude petroleum oil (heading 2709) is first processed into residual oil (heading 2710) along with non-originating refined or non-originating partly refined feedstock (such as hydrocracker bottoms or vacuum gas oils of heading 2710); and the residual oil is transferred to the petroleum coker and further refined into petroleum coke (heading 2713).
Pursuant to General Note 12, HTSUS, for an article to be eligible for NAFTA preference, two criteria must be satisfied. Firstly, the article in question must be "originating" under the terms of that General Note 12(b), HTSUS, and secondly, the article must qualify to be marked as a good of a NAFTA country under the NAFTA Marking Rules contained in Part 102 of the CBP Regulations.
General Note 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the NAFTA. General Note 12(b), HTSUS, (19 U.S.C. § 1202) states, in pertinent part, that
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--
(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) 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
(iii) they are goods produced entirely in the territory of Canada,
Mexico and/or the United States exclusively from originating
materials; or
(iv) they are produced entirely in the territory of Canada, Mexico and/or the United States but one or more of the nonoriginating materials falling under provisions for "parts" and used in the production of such goods does not undergo a change in tariff classification because--
(A) the goods were imported into the territory of Canada, Mexico and/or the United States in unassembled or disassembled form but were classified as assembled goods pursuant to general rule of interpretation 2(a), or
(B) the tariff headings for such goods provide for and specifically describe both the goods themselves and their parts and is not further divided into subheadings, or the subheadings for such goods provide for and specifically describe both the goods themselves and their parts,
provided that such goods do not fall under chapters 61 through 63, inclusive, of the tariff schedule, and provided further that the regional value content of such goods, determined in accordance with subdivision (c) of this note, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and such goods satisfy all other applicable provisions of this note.
Based on the information provided, in a Canadian or Mexican refinery, residual oil (heading 2710) is produced from crude petroleum oil (heading 2709) by both atmospheric and vacuum distillation. Catalytic hydroprocessing and other operations may also be performed. These operations occur after any non-originating refined or non-originating partly refined feedstock (such as hydrocracker bottoms or vacuum gas oils of heading 2710) has been introduced into the refinery, along with the crude petroleum oil. In the delayed coking unit at the refinery, the residual oil is charged to the coker and processed through further distillation operations, yielding the petroleum coke (heading 2713).
First, crude petroleum oil (heading 2709) is refined into residual oil (heading 2710). This occurs after any non-originating refined or non-originating partly refined feedstock (such as hydrocracker bottoms or vacuum gas oils of heading 2710) has been introduced into the refinery, along with the crude petroleum oil; and second, the residual oil is transferred to the petroleum coker and further refined into petroleum coke (heading 2713).
In order to qualify for NAFTA preferential treatment, the product must meet the requirements of HTSUS General Note 12(b)(ii)(A) which requires that each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (t) of this note.
First, we must determine if the residual oil (heading 2710) charged to the petroleum coker qualifies as originating.
General Note 12(t), Chapter 27, Note 4 sets forth the rule of origin for goods classified under heading 2710, as follows:
(A) A change to heading 2710 from any other heading, except from headings 2711 through 2715; or
(B) Production of any good of heading 2710 as a result of atmospheric distillation, vacuum distillation, catalytic hydroprocessing, catalytic reforming, alkylation, catalytic cracking, thermal cracking, coking or isomerization.
The residual oil charged to the petroleum coker is produced from crude petroleum oil (heading 2709) and non-originating refined or non-originating partly refined feedstock (such as hydrocracker bottoms or vacuum gas oils of heading 2710). The residual oil produced from crude petroleum oil (heading 2709) meets the requirement of GN 12(t), Chapter 27, Note 4(A) and undergoes a change in tariff classification to residual oil (heading 2710). However, the non-originating refined or non-originating partly refined feedstock (heading 2710) fails to meet the requirement of GN 12(t), Chapter 27, Note 4(B) because production as a result of atmospheric distillation, vacuum distillation, catalytic hydroprocessing, etc. occurs prior to introduction and further processing along with the crude petroleum. Any further processing by atmospheric distillation, vacuum distillation, catalytic hydroprocessing, etc. is essentially redundant.
The resulting residual oil charged to the petroleum coker fails to meet General Note 12(b)(ii)(A) which requires that each of the non-originating materials used in the production of such goods undergoes the change in tariff classification or production described in General Note 12(t), Chapter 27, Note 4(A) or (B). The residual oil charged to the petroleum coker is therefore non-originating.
Second, we must determine if the petroleum coke (heading 2713) produced from the non-originating residual oil (heading 2710) charged to the petroleum coker qualifies as originating.
General Note 12(t), Chapter 27, Note 4A. sets forth the rule of origin for goods classified under headings 2711 through 2715, as follows:
A change to headings 2711 through 2715 from any heading outside that group, except from heading 2710.
Because a change from heading 2710 to heading 2713 is not recognized as originating under NAFTA, therefore, the petroleum coke (heading 2713) produced from the non-originating residual oil (heading 2710) charged to the petroleum coker is non-originating and not eligible for preferential treatment under NAFTA.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181).
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,
Robert B. Swierupski
Director,
National Commodity
Specialist Division