HQ 562825 - Application for Further Review of Protest No. 5301-03-1000078 - United States International Trade Commision Rulings

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HQ 562825

March 23, 2004

MAR-2 RR:CR:SM 562825 KSG

CATEGORY: MARKING

Port Director
2350 N. Sam Houston Parkway, East
Suite 1000
Houston, Texas 77032

RE: Application for Further Review of Protest No. 5301-03-1000078

Dear Director:

This is in reference to a Protest and Application for Further Review filed by counsel on behalf of Valero Energy Corporation, contesting the country of origin determination for certain imported fuel oil. At the request of counsel, a meeting was held on this matter at Headquarters.

FACTS:

As a result of a January 2, 2002, directive issued by the Office of the United States Trade Representative pursuant to section 301(b) of the Trade Act of 1974 (19 U.S.C. 2411(b)), 100% ad valorem duties were imposed on certain products (including fuel oil provided for in heading 2710, HTSUS) from the Ukraine, effective with respect to goods entered, or withdrawn from warehouse, for consumption on or after January 23, 2002. See 67 Fed. Reg. 120 (January 2, 2002). This action was taken to obtain the elimination of the acts, policies and practices of the Government of Ukraine that result in inadequate protection of intellectual property rights.

This case involves eight entries of imported fuel oil. The entries were entered as a product of the Ukraine based on import nomination sheets prepared by vessel coordinators on behalf of Valero Energy Corporation (Valero) stating that the country of origin of the eight entries was the Ukraine. Valero states that this was an error because for six of the eight entries, the vessel coordinator mistook the country of export to be the country of origin. For two of the entries (entries # 4 and 5), Valero states that the vessel coordinator mistook the phrase "UK" to be an abbreviation for Ukraine when in fact these entries were a product of the United Kingdom.

Entry #1

This entry includes three parcels of fuel oil. Valero submitted documentation showing that the three parcels were loaded onto M/V Sibohelle in Kerch, Ukraine. Valero submitted three country of origin certificates signed by Inflot-Universal Ltd. Marine Company (Inflot), the terminal agent in Kerch, Ukraine, stating that the country of origin of the three parcels is Russia.

Valero purchased the three parcels from Vitol SA, Inc. At the request of Customs, Valero has submitted a letter from Vitol SA stating that the fuel oil was manufactured by Lukoil at its refinery in Volgograd City, Russia. Vitol states that Russian Export Blend and Siberian Light Crude Oil were used in the Russian refinery and that the fuel oil was transported from the refinery to Kerch, Ukraine by barges in 3 to 4,000 metric ton lots. Vitol states that upon arrival offshore Kerch, the barges discharged into the floating storage vessels, from which the fuel oil was loaded onto the M/V Sibohelle.

Entry #2

Valero states that this entry includes the remaining three parcels of the product from the M/V Sibohelle (discussed above) and five parcels that were carried on the M/V Reliance.

Valero submitted a certificate of origin for each of the three parcels loaded onto the M/V Sibohelle signed by Inflot stating that the country of origin is Russia.

Valero submitted certificates of origin for the parcels loaded aboard the M/V Reliance signed by the Yugtorsan Terminal, the terminal agents in Sevastopol, Ukraine stating that the country of origin of four parcels is Kazakhstan.

There is also a certificate of origin signed by Hydromarket, the terminal agents in Odessa, Russia, stating that one parcel loaded aboard the M/V Reliance is of Russian origin.

At the request of Customs, Valero submitted an e-mail from Sempra Energy Trading, the vendor that sold the five parcels that were carried on the M/V Reliance to Valero. Sempra's letter states that the first, second and fourth parcels were manufactured at the Atyrau refinery by Kazakhoil, the National Oil and gas Company of Kazakhstan. Sempra's e-mail also states that the third parcel was manufactured by Lukoil at its refinery in Volgograd, Russia. Lastly, Sempra's e-mail states that the fifth parcel was manufactured by Kaza Munai Gas at its refinery in Shimkent, Kazakhstan.

Entry #3

This entry involved a portion of a parcel of fuel oil that Valero purchased from Vitol. Valero submitted a certificate of origin signed by Inflot, the terminal agent in Kerch, Ukraine, stating that the country of origin of the parcel is Russia.

At the request of Customs, Valero obtained a letter from Vitol stating that the fuel oil was manufactured by Lukoil at its refinery in Volgograd City, Russia. Russian Export Blend and Siberian Light Crude Oil were used in the Russian refinery. Vitol also stated that the fuel oil was transported from the refinery to Kerch, Ukraine by barges in 3 to 4,000 metric ton lots and upon arrival offshore Kerch, the barges discharged into the floating storage vessels, from which the M/T Polys loaded the fuel oil. Vitol states that the country of origin of the fuel oil is Russia.

Entry #4 and #5

Valero submitted certificates of origin signed and completed by BP Oil UK stating that the oil was refined at its Coryton refinery in the United Kingdom.

Entry #6

This entry involves two separate shipments.

1) One shipment, consisting of three parcels, was transported on the M/V Mantinia. Valero submitted a certificate of origin issued by the Malta Chamber of Commerce stating that one parcel the fuel oil loaded onto the M/V Mantinia is of Russian origin and the other two parcels are of Ukrainian origin.

Valero acknowledges that two parcels in this shipment are of Ukrainiain origin. For these parcels, Valero submitted a letter from Lukoil Black Sea Ltd. to AOT Trading AG stating that Lukoil Black Sea Ltd. manufactured the fuel oil at its Odesssa, Ukraine refinery and sold it to AOT Trading.

2) The second shipment was on the M/V Framura containing two parcels that were loaded at an offshore installation in Malta and were purchased from Astra Oil Co. Inc. Valero acknowledges that a portion of this shipment (parcel one) originated in the Ukraine. Valero submitted a certificate of origin issued by the Malta Chamber of Commerce stating in regard to the fuel oil loaded onto the M/V Framura that one parcel is of Russian origin and the other parcel is Ukrainian.

For the M/V Mantinia and M/V Framura, Valero's vendor tendered inventory accounting records, based on a first-in, first-out (FIFO) accounting method, which supported the origins stated in the Certificates of Origin for each parcel.

Entry #7

This entry involved a portion of the third parcel discussed in entry #6. Valero submitted a certificate of origin for parcel three signed by the Malta Chamber of Commerce, where it was loaded onto the vessel M/V Mantinia, indicating that the country of origin is Russia.

Entry #8

This entry includes two parcels of fuel oil loaded onto the vessel M/V Four Etoiles. Valero declared the country of origin of one parcel as the Ukraine and has tendered duties.

For the remaining parcel, Valero submitted a certificate of origin signed by Hydromarket, the terminal agent in Odessa, Russia, stating that the fuel oil is of Russian origin.

Further, an e-mail written by AOT Trading was submitted by Valero stating that the fuel oil in the parcel declared to be Russian by Valero was from the Astrkhangasprom refinery, in Russia. The parcel has changed ownership several times. Valero purchased the parcel from Astra who purchased the parcel from AOT Trading who in turn purchased it from Lia Oil which in turn purchased it from Astrkhangasprom. The documents between AOT Trading and Astra and the contract between Lia and AOT Trading describe the product as being made by Astrakhangasprom, in a region in Russia.

On October 16, 2002, an import specialist in the Port of Houston contacted Valero to discuss the entries involved in this case. The next day, on October 17, 2002, Valero contacted Customs to make an oral disclosure that some of the entries at issue were believed to have incorrect origin declarations, in whole or in part, and that Valero would provide further information.

On October 18, 2002, Customs issued a CF 29 proposed rate advance for all the entries in question. On November 29, 2002, Valero responded to the CF 29's. Valero’s response includes the certificates of origin and letters and other evidence discussed above. Valero states that it submitted a prior disclosure to Customs on October 30, 2002, stating that it had erred and explaining that six of the entries were of non-Ukrainian origin and that some of the fuel oil was from the Ukraine. The portions of entries # 6 and 8 that Valero acknowledged to be from the Ukraine are not the subject of this protest.

On December 5, 2002, Customs rate advanced the entries in question. The entries were liquidated on December 20 and 27, 2002.

On March 5, 2003, Valero filed the instant protest and importer submitted further documentation regarding the entries in this case. On March 18, 2003, Customs officials at the Port met with Valero.

ISSUE:

What is the proper country of origin for the entries of imported fuel oil discussed above?

LAW AND ANALYSIS:

Pursuant to 19 CFR 134.1, the term "country of origin" is defined as the country of manufacture, production or growth of any article of foreign origin entering the United States.

The question presented in this case is the sufficiency of the evidence submitted by the protestant to determine the country of origin of the eight entries of imported fuel oil involved in this case.

In entry 1, Valero has submitted certificates of origin signed by the agent operating the Kerch, Ukraine terminal stating that the fuel oil is Russian. Valero also submitted supporting documentation from the company from which they purchased the fuel oil. There is no contradictory or inconsistent information in the file. Accordingly, we find that the fuel oil in entry 1 is a product of Russia.

In entry 2, Valero has submitted certificates of origin signed by the agent operating the Kerch, Ukraine terminal stating that the three parcels aboard the M/V Sibohelle is of Russian origin.

Valero has also submitted certificates of origin signed by the Yugtorsan Terminal, the terminal agent operating the port in Sevastopol, Ukraine for parcels loaded aboard the M/V Reliance stating that the country of origin of four parcels is Kazakhstan and one parcel is of Russian origin.

There is no contradictory or inconsistent information in the file concerning this entry. Accordingly, we find that the fuel oil in entry 2 includes four parcels of Russian fuel oil and four parcels of fuel oil produced in Kazakhstan.

In entry 3, Valero has submitted a certificate of origin signed by the agent operating the Kerch, Ukraine terminal stating that the fuel oil is Russian. Valero also submitted supporting documentation from the company from which they purchased the fuel oil. There is no contradictory or inconsistent information in the file. Accordingly, we find that the fuel oil in entry 3 is a product of Russia.

In entries 4 and 5, the protestant submitted certificates of origin completed and signed by BP, the company that refined the fuel oil. The name of the refinery in the U.K. where the fuel oil was processed is set forth on the certificate of origin. Customs has no contradictory or conflicting information regarding the country of origin of these entries. We note that the Port stated in the file that they have concluded that these two entries have been shown to originate in the U.K. Based on the evidence submitted, we find that the certificates of origin submitted for these entries are sufficient evidence that the country of origin of the fuel oil in entries 4 and 5 is the U.K.

In entries 6 and 7, Valero has submitted certificates of origin signed by the Malta Chamber of Commerce, where the fuel oil was loaded onto the ships, stating that one parcel of the fuel oil loaded onto the M/V Mantinia is Russian and that the fuel oil loaded onto the M/V Framura consists of one parcel of Russian origin and one parcel of Ukrainian origin. Valero has acknowledged that some of the fuel oil is from the Ukraine and has already tendered duties on that portion of entry 6. There is no contradictory or inconsistent information in the file. Accordingly, we find that two parcels in entries 6 and 7 are products of Russia.

In entry 8, Valero has submitted a certificate of origin signed by Hydromarket, the agent operating the Odessa, Ukraine terminal stating that one parcel of the fuel oil loaded onto the Four Etoiles is Russian. Valero has acknowledged that some of the fuel oil in this entry (a second parcel) is from the Ukraine and has already tendered duties on that portion of the entry. There is no contradictory or inconsistent information in the file. Accordingly, we find that one parcel of the fuel oil in entry 8 is a product of Russia.

HOLDING:

Based on the evidence submitted, the country of origin of the imported fuel oil for entry 1 is Russia.

Based on the evidence submitted, the country of origin of the imported fuel oil for entry 2, for parcels 1,2 and 3 (M/V Sibohellle) and for parcel 3 (M/V Reliance) is Russia. For four parcels (M/V Reliance), the country of origin is Kazakhstan.

Based on the evidence submitted, the country of origin of the imported fuel oil for entry 3 is Russia.

Based on the evidence submitted, the country of origin of the imported fuel oil for entries 4 and 5 is the United Kingdom.

Based on the evidence submitted, the country of origin of the imported fuel oil for entry 6, parcel 3 (M/V Mantina) and parcel 2 (M/V Framura) is Russia.

Based on the evidence submitted, the country of origin of the imported fuel oil for the disputed parcel in entry 7 is Russia.

Based on the evidence submitted, the country of origin of the imported fuel oil for entry 8 for one parcel is Russia.

The protest should be granted in full.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, 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 or entries in accordance with the decision should be accomplished prior to mailing of this decision. Sixty days from the date of this decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs 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 Rulings Division

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