CBP: Daily Merchandise Processing Fees for CHS Crude Imports Via Pipeline Is Appropriate

In a decision rendered on May 14 and addressed to the center director for CBP’s Petroleum, Natural Gas & Minerals Center of Excellence and Expertise in Houston, CBP said that MPFs should be assessed on a daily basis for crude oil imports via a continuous stream pipeline instead of a monthly basis, which is the time frame that CHS was seeking.

The proceeding was concerning 14 entries made at the Port of Sweetgrass, Montana, between February and October 2014.

CHS had argued that because of the nature of the continuous stream pipeline, the company had entered the crude oil once for a month’s worth of flow for the entries at issue and as such, it should only be subject to one MPF for each month-long entry. Continuous stream pipelines are different from batch-based pipeline processing or natural gas monthly flow processing, which have a defined beginning and end of a batch, according to CBP’s summarization of CHS’s argument.

“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,” CBP said. “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.”

If CHS were to produce daily entries, it would have to arbitrarily fabricate approximations about each day’s pipeline flow activity, CBP summarized: “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.”

But CBP’s Petroleum Center of Excellence and Expertise disagreed, arguing that daily manifests and daily entries are required unless the entries are part of the monthly consolidated entry procedures. Not doing so would be contrary to law, according to the center.

CBP’s headquarters backed the center’s argument in its May 14 ruling, saying that MPFs should be assessed on a daily basis for crude oil imports in a continuous stream pipeline.

“Crude oil is ‘merchandise’” per regulatory code, CBP said. “There is no enumerated exception for crude oil. ... 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.”

The agency concluded: “No matter how CHS chooses to conduct its business, however, MPFs are owed upon entry of the merchandise, which is required upon importation, which occurs when the merchandise enters the U.S. Customs territory. In the case of a continuous stream pipeline, such importation occurs daily as the crude oil crosses into the Customs territory of the United States. Thus, regardless of whether CHS chooses to take advantage of the monthly consolidated entry program or file daily entries, MPFs are owed daily as dictated by CBP’s statutory and regulatory provisions, a prior CBP ruling, and by Customs practice as evidenced by published guidelines and guidance.”