CAFC Affirms Classification of Fired Bauxite Pellets for Fracking as Ores, Not Ceramics
The U.S. Court of Appeals for the Federal Circuit on Jan. 9 affirmed (here) a lower court ruling that bauxite proppants used for hydraulic fracking are classifiable as ores, not ceramic wares or articles. The pellets can’t be classified as the latter because they do not have a definite shape, varying widely in size. They can be classified as ores because, even though they are intended for non-metallurgical purposes, they still include minerals that are precursors to aluminum and have not undergone any processes that aren’t used in the metallurgical industry, CAFC said.
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Schlumberger Technology imported the bauxite proppants from China in 2010. The proppants, which are small pellets used to prevent the fractures from closing, start as bauxite ground to a fine powder that is agglomerated and sifted to organize them based on size before and after firing. The size of the pellets is allowed to vary up to 100%.
On liquidation, CBP classified the proppants under subheading 6909.19.50 as “ceramic wares for laboratory, chemical or other technical uses,” dutiable at 4%. Alternatively, CBP argued they should be classified in subheading 6914.90.80 as “other ceramic articles,” dutiable at 5.6%. Schlumberger wanted them classified under subheading 2606.00.00 as “aluminum ores and concentrates: bauxite, calcined: other,” which enters duty-free. CIT ruled in the importer’s favor in 2015 (see 1508130049).
The Federal Circuit agreed, finding the proppants can’t be classified as ceramic products. Note 1 to Chapter 69 says ceramic products can only be classified in that chapter if they “have been fired after shaping,” and Schlumberger’s proppants vary so much in size that they cannot be said to have been shaped. “Possessing some shape does not equate to the definite shape required to enter under HTSUS Chapter 69,” it said. Wares and articles listed in headings 6909 and 6914 are all individual articles with definite forms, while Schlumberger’s proppants are bulk substances with a variable form, CAFC said.
On the other hand, the proppants can be classified as ores of Chapter 26, the Appeals Court said. Note 2 to Chapter 26 sets two requirements: “ores” are minerals actually used in the metallurgical industry for the extraction of metals, even if they are intended for non-metallurgical purposes; and “ores” do not include materials that “have been submitted to processes not normal to the metallurgical industry.” Schlumberger’s proppants satisfy them both. Even though they are intended for fracking, they are of the same mineral used to produce aluminum, CAFC said. Though they undergo crushing, screening and agglomeration of powders into grains or balls, those are all processes listed in the Explanatory Note to Chapter 26 as normal processes for aluminum ores of heading 2606, it said.
(Schlumberger Technology Corp. v. U.S., CAFC #2015-2076, dated 01/09/17, Judges O’Malley, Wallach and Taranto)
(Attorneys: Alexander Schaefer of Crowell & Moring for plaintiff-appellee Schlumberger; Aimee Lee for defendant-appellant U.S. government)