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HQ 966778




March 10, 2004

CLA-2 RR:CR:GC 966778AM

CATEGORY: CLASSIFICATION

TARIFF NO.: 2710.00.20 (2001); 2710.19.23 (2004)

Port Director
U.S. Customs and Border Protection
2350 N. Sam Houston Pkwy East, Ste. 1050
Houston, TX 77032

RE: Internal Advice 03/024; 1-K Kerosene

Dear Port Director:

This is in regard to an Internal Advice (I/A 03/024) request dated October 16, 2003, initiated by letter dated November 30, 2002, from Ernst & Young LLP, on behalf of their client, Murphy Oil Corporation, regarding the classification of I-K kerosene used as home heating fuel, under the Harmonized Tariff Schedule of the United States (HTSUS). The entries at issue occurred in 2001.

FACTS:

The merchandise consists of 1-K kerosene. Generically, kerosene can be used as home heating fuel or as jet fuel. To be used as home heating fuel, the kerosene must meet the industry-recognized ASTM D 3699 standards. For jet fuel, the standards are listed in ASTM D 1655.

The product specifications and ASTM requirements are as follows:

Murphy Oil 1-K Kerosene ASTM D3699 Kerosene ASTM D1655 Jet A Fuel Acidity 0.006 mg KOH/g N/A max 0.1g passes Aromatics 17% volume N/A max 25% passes
Mercaptan <0.003%wt max 0.003% passes max 0.003% passes Sulfur total 0.0348%wt max 0.04% passes max 0.30% passes 10% recovered 368oF/187 oC max 205 oC passes max 205 oC passes 50% recovered 413oF/212 oC N/A max
90% recovered 480oF/249oC N/A max
Final Boiling Pt 518oF/270 oC max 300 oC passes max 300 oC passes Distillation Residue 1.3% N/A max 1.5% passes Distillation Loss 0.8% N/A max 1.5% passes Flash Point 132.8 oF/56 oC min 38 oC passes min 38 oC passes Density 15oC =810.9kg/m3 N/A 775-840kg/m3 passes Vapor Press 38 oC =4.62kPa N/A N/A
Freezing Point -47oC max -30 oC passes max -40 oC passes Viscosity -20 oC =5.256mm2/s N/A max 8.0mm2/s passes Kinematic Visc @40oC =N/A min 1.0 max 1.9 unknown N/A Heat Combustion 43.219 MJ/kg N/A min 42.8MJ/kg passes Luminometer number =N/A N/A min 45
Smoke Point mm =25mm min 25 passes min 25mm passes Smoke Point mm & =N/A N/A min 18mm unknown Naphthalenes vol% =1.68% N/A max 3% passes Copper Strip 2hr 100 oC =No.1 N/A max No. 1 passes Copper Strip 3hr 100 oC =N/A max No. 3 unknown N/A Filter Pressure Drop 0.1mm Hg N/A max 25mm passes Tube Deposit less than code =0 N/A max 3 passes Existent Gum <1.0mg/100ml N/A max 7mg passes Water Interface Rating =1 N/A max 1b passes Electrical Conductivity =2pS/m N/A 50-450pS/m fails (*)(**) Burning quality =N/A (see 4.2) unknown N/A Saybolt color =N/A min 16 unknown N/A

(*) Note X1.12 Additives: Antioxidants prevent oxidation deposits, deactivators counteract catalytic effects of active metals, inhibitors prevent corrosion of steel, lubricants compensate for severe hydroprocessing and poor lubricity under high temperature and high load conditions, conductivity additives rapidly dissipate dangerous static electricity, biocides prevent growth of microorganisms, and deicers prevent ice formation in fuel systems containing water. Approved additives and maximum quantities permitted are shown in the specifications and must be declared by the fuel supplier and agreed to by the purchaser. Only additives approved by the aircraft certifying authority are permitted in the fuel on which an aircraft is operated.

(**) If electrical conductivity additive is used, the conductivity shall not exceed 450 pS/m at the point of the use of the fuel. When electrical conductivity additive is specified by the purchaser, the conductivity shall be 50 to 450 pS/m under the conditions at the point of delivery.

The product is tested to meet all 1-K specifications required by ASTM D 3699 and by Murphy’s pipeline distributor, Colonial Pipeline Company, for 55 grade kerosene. The product is then assessed the significantly higher federal excise tax on kerosene for home heating use, rather than the lower jet fuel rate.

Typically, kerosene products processed to be used as jet fuel contain various additives, such as antioxidants, metal deactivator, corrosion inhibitors, fuel system icing inhibitors, and biocides, among others. Additionally, jet fuel is required to be filtered to remove water and other contamination to prevent engine failure. The instant product does not contain any additives, nor is it filtered to meet jet fuel standards in its condition as imported.

ISSUE:

Does pure, unfiltered1-K kerosene, processed to meet the standards of ASTM D 3699 and actually used as home heating fuel, belong to the class or kind of goods principally used as jet fuel?

LAW AND ANALYSIS:

Merchandise imported into the United States is classified under the HTSUS. 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 requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.

GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in their appropriate order. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and, mutatis mutandis, to the GRIs.

In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).

Additional U.S. Note 1 states, in pertinent part, the following:

In the absence of special language or context which otherwise requires--

(a) a tariff classification controlled by use (other than actual use) is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use;

(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 of importation, the goods are so used and proof thereof is furnished within 3 years after the date the goods are entered;

The HTSUS (2001) provisions under consideration are as follows:

2710.00 Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations:

Motor fuel:

Motor fuel blending stock

2710.00.20 Kerosene (except motor fuel or motor fuel blending stock)

Chapter 27, Additional U.S. Notes 3 and 4 explicitly designated subheading 2710.00.15, HTSUS, as a principal use provision and subheading 2710.00.18, HTSUS, as an actual use provision (see below).

The HTSUS (2004) provisions under consideration are as follows:

2710 Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils: Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, other than waste oils:

2710.19 Other:

Kerosene-type jet fuel

Kerosene (except kerosene-type jet fuel):

Motor fuel

Motor fuel blending stock

Kerosene (except motor fuel or motor fuel blending stock)

Chapter 27, Additional U.S. Notes state, in pertinent part, the following:

3. For the purposes of subheading 2710.11.15, “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.

For the purposes of subheading 2710.11.18 and 2710.19.22, “motor fuel blending stock” means any product (except naphthas of subheading 2710.11.25) derived primarily from petroleum, shale oil or natural gas, whether or not containing additives, to be used for direct blending in the manufacture of motor fuel.

The question at issue involves the proper classification at the eight digit level. Therefore, we proceed under GRI 6. The instant merchandise is not intended to be used, nor is it actually used, as motor fuel blending stock. Therefore, it cannot be classified in subheading 2710.00.18, HTSUS (2001) or in subheading 2710.19.22, HTSUS (2004), an actual use provision per Chapter 27, note 4.

In the 2001 HTSUS, subheading 2710.00.15, the provision for motor fuel including kerosene jet fuel, was explicitly referred to in Chapter 27, Additional U.S. Note 3, as a principal use provision. Furthermore, the court in Clarendon Marketing, Inc. v. U.S., 144 F.3d 1464 (Fed. Cir. 1998) stated that subheading 2710.00.15, HTSUS, is a principal use provision. However, subheading 2710.00.15, HTSUS (2001) was divided into subheadings 2710.11.15, HTSUS, for light oil motor fuel and 2710.19.21, HTSUS, for kerosene motor fuel, in the 2002 HTSUS. Only subheading 2710.11.15, HTSUS, retained the designation as a principal use provision in Additional U.S. Note 3 to Chapter 27. Hence, in 2004, the provision for kerosene motor fuel, subheading 2710.19.21, HTSUS, is an eo nomine provision. As such, the merchandise at issue simply is not motor fuel as entered because it is not distilled, does not contain the necessary additives, and is not actually used as motor fuel in 2004. Therefore, with respect to the 2004 HTSUS, the subject 1-K kerosene is classified in subheading 2710.19.23, HTSUS.

For the question of classification in 2001, we will determine the class or kind of goods following the dictates of the court in United States v. Carborundum Co., 63 C.C.P.A. 98, 102, 536 F.2d 373, 377, cert. denied, 429 U.S. 979, 50 L. Ed. 2d 587, 97 S. Ct. 490 (1976) as follows:

1. General physical characteristics: Although Murphy 1-K kerosene meets the minimum chemical requirements for both ASTM D3699 and D1655, above, all commercial documents and Customs records certify that Murphy 1-K is refined specifically to meet the lower sulfur D3699 (home heating fuel) and Colonial 55 Pipeline requirements.

2. Expectations of ultimate purchasers: Murphy 1-K kerosene meets the ASTM D3699 and Energy Information Administration (EIA) definitions for 1-K kerosene that is commonly used for heating purposes. This is reflected in Murphy’s purchase agreements with its customers and truck manifests to the ultimate purchasers that specify the customer is purchasing 1-K pipeline 55 grade kerosene.

3. Channels of trade: Murphy’s 1-K kerosene is sold through various distribution channels, including the Colonial Pipeline System, that specify certain requirements such as the safer, lower sulfur and lower emission 1-K standards. Murphy has provided a sample origin “nomination” schedule for Colonial Grade 55 for pipeline movements which require 1-K specifications and separate injections into the line for 1-K versus jet fuel. The schedule indicates the intent to purchase 1-K kerosene specifically and not jet fuel, because 1-K kerosene is the only product permissible during that window of nomination.

4. Environment of sale: Based on the representative purchase agreement, manifest and meter ticket provided, Murphy’s buyers did not seek to purchase jet fuel, but rather a higher quality low sulfur 1-K kerosene. Murphy provided additional documentation for sale of 1-K kerosene via truck, barge and pipeline that clearly identifies the product as low sulfur 1-K kerosene at all points of transaction. Murphy Oil pays a significantly higher fuel tax imposed on home heating fuel and does not certify that its product qualifies for the tax exemption on aviation kerosene. Based on all of the above, we believe it is clear the purchaser is not intending to purchase jet fuel.

5. Use in the manner which defines class: Jet fuel typically contains various required additives such as antioxidants, metal deactivators, oxidation inhibitors, anti- static agents, lubricants, biocides, and deicers. Murphy 1-K contains none of these. Jet fuel must be filtered to remove water and other contamination detrimental to engine failure. Murphy emphasizes that its 1-K is not subjected to filtration systems at Murphy owned terminals or non-Murphy owned terminals as these impurities are not viewed as detrimental to the use of heaters and other 1-K consuming units. Murphy processes its product in a manner that differentiates it from jet fuel, specifically, to meet the low sulfur requirement necessary to safeguard against potential hazards in home heating and to reduce combustion pollutants. EIA provides separate statistics for ASTM D3699 1-K and D1655 jet fuel, clearly indicating two distinct classes of petroleum products.

6. Economic practicality of so using import: Because of higher processing costs required to meet ASTM D3699 and Colonial 55 low sulfur requirements, the market would not accept Murphy 1-K kerosene as jet fuel. Murphy’s plant includes a distillate hydrotreating unit to perform the required desulfurization resulting in significant additional annual costs.

7. Recognition in the trade of this use: Murphy 1-K kerosene is refined and sold as 1-K kerosene. ASTM D3699 and EIA requirements provide that 1-K is primarily used for heating purposes. Information provided shows that Murphy’s competitors market 1-K kerosene for heating purposes.

Lastly, HQ 962425, dated February 2, 1999, is distinguishable from the instant matter as the merchandise there was purified for use as a jet fuel and belonged to the class of merchandise so used.

Based on analysis of the principal use factors, Murphy Oil Corporation 1-K kerosene is principally used for home heating purposes and is classified in subheading 2710.00.20, HTSUS (2001), the provision for "Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations: Kerosene (except motor fuel or motor fuel blending stock)."

HOLDING:

For the reasons stated above, Murphy Oil Corporation 1-K kerosene entered in 2001 is classified in subheading 2710.00.20, HTSUS (2001), the provision for "Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations: Kerosene (except motor fuel or motor fuel blending stock)."

Under the 2004 HTSUS, Murphy Oil Corporation 1-K kerosene is classified in subheading 2710.19.23, HTSUS, the provision for "Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils: Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included containing by weight 70 percent or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, other than waste oils: Other: Kerosene (except kerosene-type jet fuel): Kerosene (except motor fuel or motor fuel blending stock)."

You are directed to mail this decision to the internal advice applicant, no later than 60 days from the date of this letter. On that date 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 public methods of distribution.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

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