Bauxite Pellets Used in Fracking Classifiable as Ores, Says CIT
Bauxite pellets containing additives that are used as proppants in the hydraulic fracking industry are classifiable as bauxite ore, and not as ceramic wares articles, said the Court of International Trade in a July 22 decision that was released publicly on Aug. 12. Over arguments to the contrary from the government, CIT found that dopants added to the bauxite during production to lower the firing temperature and increase the crush resistance of the final product did not change the basic character of the material as bauxite. It also ruled that the resulting products did not have to be used to make metal in order to be classified as an ore.
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Schlumberger Technology imported the bauxite proppants from China in 2010. Schlumberger, an oil well-site services provider, had intended to use the proppants as part of a fracturing fluid in oil and gas production, injected under high pressure into a rock formation to create a fracture. The proppants, which are specifically used to prevent the fractures from closing, are small pellets less than a millimeter in diameter, and were imported in 3,200 pound sacks and in bulk shipments. On liquidation, CBP classified the two relevant entries under subheading 6909.19.50 as “ceramic wares for laboratory, chemical or other technical uses, dutiable at 4%. Schlumberger filed suit, arguing they should have instead been classified under subheading 2606.00.00 as “aluminum ores and concentrates: bauxite, calcined: other,” which enters duty free.
Ruling in favor of Schlumberger, CIT said the proppants may be ceramics, but they are not “wares” as required for classification under heading 6909. The term “ware” generally refers to an “article” or “item resulting from a manufacturing process or craft, said CIT. On the other hand, the proppants imported by Schlumburger are crude or semi-processed, and are imported in bulk form. Nor are they classifiable under an alternative classification proposed by the government for “ceramic articles” under heading 6919. Unlike examples from the Explanatory Notes, which include stoves, flower pots, jars and containers, the proppants “are bulk substances that are not individual ‘articles’ in the normal sense of the word,” said the court.
On the other hand, although the proppants go through a production process that includes the addition of dopants, milling, granulation, firing and screening, they may still be considered bauxite for classification purposes. The Explanatory Notes to the HTS list a range of processes that ores may undergo and still be considered ores. All of the processes undergone by Schlumberger’s proppants are included on that list. The dopants added during production are naturally present in bauxite, and so do not alter the bauxite’s chemical or physical properties, said CIT. Finally, although the government argued that the proppants are not ore because they are not intended for use in aluminum production, the court said that note 2 to chapter 26 specifically includes ores “even if they are intended for nonmetallurgical purposes.”
(Schlumberger Tech. Corp. v. U.S., slip Op. 15-70, #11-00266, dated 07/22/15, public version issued 08/12/15, Judge Stanceu)
(Attorneys: Alexander Schaefer of Crowell & Moring for plaintiff Schlumberger Technology Corp.; Aimee Lee for defendant U.S. government)