H272806

HQ H272806 May 14, 2024 ENT 1 OT:RR:CTF:ER H272806 HvB Center Director Petroleum, Natural Gas, & Minerals Center of Excellence and Expertise U.S. Customs and Border Protection 2350 N. Sam Houston Parkway East, Suite 900 Houston, Texas 77032 Attn: Dorothy Bond, Entry Specialist; Mark Peeler, Supervisory Import Specialist Re: Application for Further Review of Protest 3401-15-150003; CHS, Inc.; Merchandise Processing Fees; Pipeline Dear Center Director: The purpose of this correspondence is to address the application for further review (“AFR”) of Protest Number 3401-15-150003, dated September 8, 2015, filed by CHS, Inc. (“CHS”), regarding the imposition of merchandise processing fees (“MPFs”) on entries of crude oil imported into the United States from Canada on the Front Range Pipeline LLC (“Front Range”). FACTS: CHS protests the liquidation of fourteen entries made at the Port of Sweetgrass, Montana (under the Port of Pembina) between February and October 2014, because CHS does not believe that daily MPFs are appropriate for entries of continuous stream pipeline crude oil. CHS is the importer of record for crude oil imported into the United States from Canada on the Front Range Pipeline. In most instances, CHS is the end-user of the imported oil. CHS files entry at the Port of Pembina for crude oil deliveries. CHS filed the entries at issue either once or twice a month between February and October 2014. CHS’s entries were liquidated between March and July 2015. CHS asserts that because of the nature of the continuous stream pipeline, it entered the crude oil once for a month’s worth of flow for the entries at issue and, accordingly, should only be subject to one MPF for each month-long entry. CHS argues that it should owe an MPF of $485 per entry or “release” (i.e., once a month), rather than being liable under the monthly consolidated entry program for up to the maximum MPF per daily importation, which could be $400 times 31 days or $12,400, pursuant to 19 C.F.R. § 24.23(b)(1)(i). CHS clarifies that it is not entering the crude oil through the monthly consolidated entry procedures, which is an optional program that consolidates daily entries into one monthly entry. CHS argues that the continuous stream crude oil pipeline, as its name suggests, is a continuous stream of oil that should be distinguished from batch-based pipeline processing or natural gas monthly flow processing. CHS states that, different from a continuous stream pipeline at issue here, batch-based pipelines can define the beginning and end of a batch and issue a batch ticket that suffices as a pipeline version of the bill of lading for each shipment that is then filed with a corresponding entry. CHS also distinguishes continuous stream pipelines from natural gas pipelines because, although pipeline operators only generate monthly statements for both, the monthly statement for natural gas pipelines indicate daily volume flow activity. CHS asserts that Front Range only issues a monthly pipeline statement that does not indicate daily volume flow activity. CHS states that there is no daily metering and there is no measurement of which days during the month there was a shipment. CHS argues that while Front Range monitors the pipeline meter daily to ensure that the pipeline is flowing properly, the daily monitoring is not done in accordance with API standards, which would be required to establish daily volumes for CBP reporting. According to CHS, Front Range executes bi-monthly meter readings that are in accordance with API standards. CHS argues that the monthly pipeline statements reflect a single discharge and, thus, are not subject to the ordinary entry and daily MPF requirements. CHS likens the pipeline to continuous discharge from a vessel that often spans more than a day but for which only one entry with the corresponding $485.00 MPF maximum is applicable. CHS indicates that it uses the majority of the imported oil in its own refinery system, but the price of any oil sold is the average of the daily prices during that month. Accordingly, CHS asserts that if CBP were to require daily entries or even participation in the monthly consolidated entry procedures, CHS would have to arbitrarily fabricate approximations about each day’s pipeline flow activity. Such approximations would not include the adjustments that are currently made to the monthly statements and are based on the actual meter readings done in accordance with API standards. CHS argues that there is no legal basis under which to require daily manifests and that CBP has held that pipelines are not subject to true manifesting requirements. The Petroleum, Natural Gas, and Minerals Center of Excellence and Expertise (“Petroleum CEE”) disagrees with CHS and argues that daily manifests and daily entries are required unless the entries are part of the monthly consolidated entry procedures. The Petroleum CEE argues that if each day’s flow is not entered under ordinary entry procedures, then the flow of petroleum from Canada through the pipeline without entry is contrary to law. ISSUE: Whether MPF should be assessed on a monthly, rather than a daily basis, for imports of crude oil on a continuous stream pipeline. LAW AND ANALYSIS: It is the opinion of your office that this protest meets the criteria for further review. We agree and are of the opinion that this protest involves questions of law and fact which have not been previously ruled upon. 19 C.F.R. § 174.24(b). CHS’s protest is timely, pursuant to 19 U.S.C. § 1514(c)(3)(A), because it was filed within 180 days after the date CBP liquidated the entries at issue. We agree that MPF is properly assessed on a daily basis for imports of crude oil in a continuous stream pipeline as determined by CBP’s statutory and regulatory provisions, prior CBP rulings, and by Customs practice, as evidenced by published guidelines and guidance. Pursuant to 19 U.S.C. § 58c(a)(9)(A), importers of record must pay MPFs upon formally entering their goods. Specifically, CBP “shall charge and collect” fees “[f]or the processing of merchandise that is formally entered or released during any fiscal year . . . .” 19 U.S.C. § 58c(a)(9)(A). See also 19 C.F.R § 24.23(b)(2). Merchandise is “entered or released, as the case may be, if the merchandise is entered or released from customs custody under [19 U.S.C. §] 1484(a)(1)(A) of this title.” Id. at § 58c(b)(8)(E)(ii). Pursuant to § 1484(a)(1)(A), an importer of record is required to “make entry” by filing “such information as is necessary to enable [CBP] to determine whether the merchandise may be released from [CBP] custody . . . .” Crude oil is “merchandise.” See 19 U.S.C. § 1401(c) (stating that “[t]he word ‘merchandise’ means goods, wares, and chattels of every description”). “All merchandise imported into the United States is required to be entered, unless specifically excepted.” 19 C.F.R. § 141.4(a). There is no enumerated exception for crude oil. The date of importation is “the date on which the merchandise arrives within the Customs territory of the United States.” 19 C.F.R. § 101.1. The date upon which the crude oil from a continuous stream pipeline arrives within the U.S. Customs territory is daily or each day. Thus, CBP’s statutory and regulatory provisions dictate that daily entries are required for the daily importation of crude oil into the Customs territory of the United States. Because MPFs are due upon the entry of merchandise, CBP properly assessed MPFs on a daily basis. This determination is further supported by the statutory and regulatory provisions implementing the monthly consolidated entry program. Historically, importers of record on pipelines filed daily entries for the flow of oil crossing into the United States. Consolidation of daily entries into one monthly entry was not permitted for certain entries until July 1, 1970, when CBP issued Circular ENT-1-AC (hereinafter “1970 Circular”) and provided guidelines (hereinafter “1970 Guidel

It is the opinion of your office that this protest meets the criteria for further review. We agree and are of the opinion that this protest involves questions of law and fact which have not been previously ruled upon. 19 C.F.R. § 174.24(b). CHS’s protest is timely, pursuant to 19 U.S.C. § 1514(c)(3)(A), because it was filed within 180 days after the date CBP liquidated the entries at issue. We agree that MPF is properly assessed on a daily basis for imports of crude oil in a continuous stream pipeline as determined by CBP’s statutory and regulatory provisions, prior CBP rulings, and by Customs practice, as evidenced by published guidelines and guidance. Pursuant to 19 U.S.C. § 58c(a)(9)(A), importers of record must pay MPFs upon formally entering their goods. Specifically, CBP “shall charge and collect” fees “[f]or the processing of merchandise that is formally entered or released during any fiscal year . . . .” 19 U.S.C. § 58c(a)(9)(A). See also 19 C.F.R § 24.23(b)(2). Merchandise is “entered or released, as the case may be, if the merchandise is entered or released from customs custody under [19 U.S.C. §] 1484(a)(1)(A) of this title.” Id. at § 58c(b)(8)(E)(ii). Pursuant to § 1484(a)(1)(A), an importer of record is required to “make entry” by filing “such information as is necessary to enable [CBP] to determine whether the merchandise may be released from [CBP] custody . . . .” Crude oil is “merchandise.” See 19 U.S.C. § 1401(c) (stating that “[t]he word ‘merchandise’ means goods, wares, and chattels of every description”). “All merchandise imported into the United States is required to be entered, unless specifically excepted.” 19 C.F.R. § 141.4(a). There is no enumerated exception for crude oil. The date of importation is “the date on which the merchandise arrives within the Customs territory of the United States.” 19 C.F.R. § 101.1. The date upon which the crude oil from a continuous stream pipeline arrives within the U.S. Customs territory is daily or each day.