Court Upholds Classification of Fracking Materials in Duty-Free Provision
The Court of Appeals for the Federal Circuit has affirmed a Court of International Trade decision that bauxite proppants, which help increase oil well productivity by preventing fractures in rock formations from closing, are properly classified as bauxite under HTSUS 2606.00.0060 (duty-free).
U.S. Customs and Border Protection had classified these products as other ceramic wares under HTSUS 6909.19.50 (4 percent duty) and argued that alternatively they could be classified as ceramic articles under HTSUS 6914 90.80 (5.6 percent duty). However, the CAFC found that these subheadings cover articles shaped into definite forms, whereas the proppants are bulk substances that lack a definite form.
Heading 2606 covers aluminum ores and concentrates, and Note 2 to Chapter 26 explains that the term “ores” means minerals of mineralogical species actually used in the metallurgical industry for the extraction of certain metals, even if they are intended for non-metallurgical purposes. The CAFC ruled that the proppants meet this criterion because they are produced from non-metallurgical grade bauxite, which is used in the extraction of aluminum, even though they are used for a different purposes.
Note 2 further excludes from heading 2606 minerals that have been submitted to processes not normal to the metallurgical industry, but the court found that the proppants underwent the very steps allowed by the Explanatory Notes to Chapter 26 for aluminum ore classifiable under heading 2606 (crushing, grinding, screening, etc.). The CAFC also found no support for CBP’s argument that heading 2606 is limited to primary materials that will be further processed after importation, noting that an eo nomine provision like heading 2606 includes all forms of the named article.