Mr. Jonathan Ferguson
Canada Imperial Oil Limited
P.O. Box 2480, Station M
Calgary, AB T2P 3M9
Date of issuance of ruling:
This is in response to your request for an advance ruling on the tariff classification of diluent for heavy crude oil. This product will be received from several sources in the Midwest and Gulf Coast regions of the United States of America then imported by common pipeline.
This good is commonly called a diluent. The diluent is comprised of a mixture of natural gas condensate, naphthas, and natural gasoline, which may be present in the mixture in varying relative portions. The diluent components are functionally identical in their properties. The components do not possess distinctly different characteristics and their relative volume percentages do not influence the end use of the mixture. The diluent is used to thin heavy crude petroleum oil (bitumen) sourced from oil sands in order to permit the pipeline transmission of crude oil to different locations.
Analysis and Justification
Consideration was given to the terms of headings 27.09 and 27.10 of the Customs Tariff and the relevant World Customs Organization (WCO) Explanatory Notes to the Harmonized Commodity Description and Coding System (EN) for those headings.
The good consists of a mixture of components that are classifiable in heading 27.09, which provides for crude petroleum oils and includes natural gas (or lease) condensate, and in heading 27.10, which provides for petroleum oils, other than crude, and includes naphthas and natural gasoline. The EN to heading 27.10 state that the petroleum and related products of this heading are "those which have undergone any process other than those specified in the EN to heading 27.09". The naphthas and natural gasoline components are obtained by distillation processes which are not allowed for products of heading 27.09 and thus, are classifiable in heading 27.10. As the good consists of a mixture of components that are classifiable in heading 27.09 and other components that are classifiable in heading 27.10, the diluent cannot be classified according to the headings or Chapter notes as directed by the General Rules for the Interpretation of the Harmonized System (GIR) 1.
GIR 2(a) is not applicable to the good as it is imported in a complete or finished form. Also, GIR 2(b) does not apply as the good is prima facie classifiable under two headings.
As the good consists of more than one material or substance that are classifiable under two tariff headings, the classification is to be determined according to the principles of GIR 3. As each of these headings refers to part only of the materials or substances contained in the mixture, these headings are regarded as equally specific and GIR 3(a) is not applicable. The lease condensate, natural gasoline and naphtha components of the diluent possess substantially the same technical properties, and they share a common commercial use, i.e., the thinning of highly viscous heavy oil to facilitate pipeline transportation. Moreover, each such component possesses essentially the same technical properties as the finished diluent. As such, it cannot be said that one component contributes more than the other to the "essential character" of the good. Their character fundamentally is the same. Therefore, the criterion of "essential character" for GIR 3(b) is inapplicable.
GIR 3(c) directs that when goods cannot be classified by reference to Rule 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. As such, the diluent is classified in heading 27.10 as it appears last in numerical order.
Section 10 of the Customs Tariff directs that classification of imported goods shall be determined in accordance with the General Rules for the Interpretation of the Harmonized System. Section 11 of the Customs Tariff states that in interpreting the headings and subheadings, regard shall be had to the World Customs Organization's (WCO) Explanatory Notes to the Harmonized Commodity Description and Coding System.
General Interpretative Rule 1 (GIR 1) directs that titles of Sections, Chapters and sub-Chapters are provided for ease of reference only. For legal purposes, classification shall be determined according to the terms of the heading and any relative Section and Chapter Notes. Similarly, General Interpretative Rule 6 (GIR 6) directs that classification shall be determined according to the terms of those subheadings and any related Subheading Notes.
The diluent is classified under tariff classification 2710.12.90.99 of the Customs Tariff in accordance with GIR 3(c).
This ruling has been issued under paragraph 43.1(1)(c) of the Customs Act and will be honoured by the CBSA for future importations of the goods specified, provided the material facts and circumstances remain as originally presented; all conditions in the ruling have been met; the ruling has not been modified, revoked, revised, or cancelled; and the Customs Tariff legislation has not changed. Should there be a change in the material facts or circumstances pertaining to the goods, you must notify the CBSA as soon as possible. You may request that the Advance Ruling be modified or revoked as of the date of the change.
Importers should quote the advance ruling number at the time of importation in either the description field of the B3 entry document or on the Canada Customs Invoice. Exporters or producers should quote the advance ruling number on the Certificate of Origin or commercial invoice accompanying the goods.
Should you disagree with this advance ruling, you may file a dispute notice under subsection 60(2) of the Customs Act within 90 days of the date of issuance. Please see the procedures outlined in Appendix C of the CBSA's Memorandum D11-11-3, Advance Rulings for Tariff Classification.
This advance ruling is considered 'reason to believe' for the purposes of section 32.2 of the Customs Act and the CBSA's Administrative Monetary Penalty System, described in Memorandum D22-1-1.
All Memoranda referenced in this letter may be accessed on the CBSA website.
Consent to the Public Release of the Advance Ruling
As per your consent statement, we will release this advance ruling to the public, in both official languages, in accordance with the procedures described in Memorandum D11-11-3. The ruling will be published on the CBSA website in 30 days.
Manager, Tariff Policy Unit 'B'
Trade Policy Division
- Date modified: