The US Bureau of Industry and Security listed six considerations it will use to help determine whether US-produced crude oil condensate is a petroleum product eligible for export.
A Dec. 30 notice under the US Department of Commerce agency’s Frequently Asked Questions reiterated its conclusion in late-June 2014 that lease condensate that has passed through a distillation tower qualifies as a petroleum products export under Section 752, Subsection A of its Export Administration Regulations (OGJ Online, June 25, 2014).
It said factors BIS will consider in determining whether a product meets that definition would include, among others:
• Whether the distillation process materially transforms the crude oil, by using heat to induce evaporation and condensation, into liquid streams that are chemically distinct from the crude oil input.
• The change in API gravity between the process’s input and output.
• The change in percentage of different types of hydrocarbons between the process’s input and output.
• Whether the streams resulting from distillation have purposes other than allowing the product to be classified as exportable petroleum products, such as petrochemical feedstock, diluent, and gasoline blend stock.
• Whether the distillation process uses temperature gradients and has significant internal structures, such as trays or packing, and differentiated output streams.
• Whether the distillation uses towers with more mechanical complexity and heat, higher residence time, internal structures that promote condensation and better separation, and consistent quality liquid streams (also called cuts or fractions) than equipment used to separate vapors and liquids for transportation needs.
“These factors are not intended to be categorical or exhaustive,” the agency emphasized. “In reviewing commodity classification applications, BIS will look at the particular circumstances of each application to determine whether the output of a process can be considered a petroleum product under the current regulatory definition.”
The guidance provides much-needed insight into how BIS interprets its crude oil export regulations, two Reed Smith LLP attorneys said in a Dec. 30 client alert.
“However, while BIS has provided additional tools for self-classification, exporters must take great care, utilizing the advice of counsel, to determine on a case-by-case basis whether the output of a given distillation process can be considered a petroleum product under the current regulatory definition,” cautioned Jeffrey Orenstein, an associate in the law firm’s Washington office, and Leah T. Rudniki, a partner in its Houston office.
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