CUSTOMS AUTHORITY FOR ADVANCE RULINGS
NEW CUSTOM HOUSE, BALLARD ESTATE, MUMBAI - 400 001
E-MAIL: cus-advrulings.mum@gov.in
In
Application No. CAAR/CUS/APPL/06/2022 - O/o Commr.-CAAR-MUMBAI
Shri Mohit Prabhakar
Shri Ashwini Kumar Prabhakar
Ruling
M/s Pairan Pyrolysis Pvt. Ltd. filed an application seeking advance rulings on the classification of tyre pyrolysis oil and tyre pyrolysis recovered carbon; clarification on whether these products are covered under the negative list of the India-Sri Lanka Free Trade Agreement (ISFTA); and whether the impugned goods are allowed for free trade with exempted customs duty.
2. The applicant is a recycler of the end of life tyres using the pyrolysis process. Tyre pyrolysis oil (TPO) and recycled tyre carbon black are recovered under this procedure. It is submitted that they intend to shift the recycling plant to Sri Lanka and import the TPO and carbon black from the plant in Sri Lanka. Central Pollution Control Board (CPCB), New Delhi along with NEERI, Nagpur and IIT, New Delhi carried out a study on the adequacy of various tyre pyrolysis plants, including the plant of the applicant at Erode, to meet environmental concerns. This report, herein referred to as the CPCB report, has been cited by the applicant for explaining the processes involved in the tyre pyrolysis plant and the properties of the recovered goods. As per the CPCB report, the tyre pyrolysis process is used for the recovery of pyrolysis oil, carbon black and steel from waste tyres/end of life tyres (ELTs). A typical waste tyre /end of life tyre (ELT) consists of about 60 % volatile organics, 30 % fixed carbon and 10 % ash by weight. Pyrolysis is a chemical reaction that involves the molecular breakdown of larger molecules into smaller molecules by heating in absence of air. Pyrolysis is also known as thermal cracking, thermolysis, depolymerization, etc. Pyrolysis of tyres & rubber products results in pyrolysis oil, pyrolysis gas (pyro gas), carbon black & steel. The quantity and quality of each product depend on the type of waste tyre including process variables, temperature, pressure, and residence time. The process of tyre pyrolysis includes feeding scrap tyres into a reactor where they are heated in the absence of oxygen for the breakdown of long-chain hydrocarbons (polymers). The reactor is further connected with a series of condensers where the condensation of gases produces pyrolysis oil. The lighter fraction of the gases (uncondensed pyro gas) produced in the process is used as fuel for heating of reactor. The excess uncondensed pyro gas is either flared up or re-circulated for reactor heating or in some cases stored for subsequent usage. After the completion of the process, the carbon black & steel wire left inside the reactor is taken out.
2.1 The study observed the following characteristics of the TPO:
Tyre Pyrolysis Oil (TPO) has a high calorific value in the range of 6300 Kcal/kg tol0200 Kcal/kg and low sulphur content in the range of 0.87% to 1.28%, Ash content 0.087% wt., total halogen in the range of 146.27 ppm to 287.4 ppm. The carbon number varies from C4 - C30, flash point 52°C to 64°C, boiling range from 66.4°C to 312°C, sediment ranges from 0.002% to 0.0063% wt., PONA (paraffins, olefins, naphthenes and aromatics) ranges from 69.63% to 70.87% v/v, pour points varies from - 30°C to -6°C, Conradson carbon residue ranges from 0,62% to 3.41 % and kinematic viscosity at 40°C ranges from 3.67 to 6.12.
The applicant further stated that Customs Revenue Control Laboratory, Chennai has analysed a random import of tyre pyrolysis oil and reported- "The sample is in the form of brown coloured liquid. It is mainly composed of mineral hydrocarbon oil. It is other than fuel oil/petrol/diesel / kerosene".
As per the applicant, TPO is a dark colour viscous liquid with a tyre smell. It cannot be used in automotive engines due to its high density, high viscosity, carbon residue and lower cetane number. Hence, TPO is used predominantly as industrial liquid fuel oil in burners and other heat applications such as reactors, boilers, heat furnaces etc.
2.2 The applicant has stated that an independent test of recovered carbon black reported high calorific value from a range of 6000Kcal/kg to 6500 Kcal/Kg, 20% by wt of ash, 5% by wt of moisture content and the rest as volatile matter and fixed carbon. It is used in cement kilns for co-processing in calciner as solid industrial fuel.
2.3 The applicant has submitted that the TPO does not correspond to any specific BIS standard and the subject goods are being used as furnace oil. It may be fit to be classified under subheading 27101990 of the customs tariff. The applicant proposes the classification of the recovered carbon black under six digit entry 280300.
2.4 In relation to the above-mentioned goods, the questions on which advance rulings have been sought are as follows:-
1) Whether TPO and recovered carbon black are classifiable under subheadings 27101990 and 28030090, respectively? If not, then what are the suitable subheadings for both?
2) Whether, TPO and recovered carbon black are included in the negative list of the India-Sri Lanka Free Trade Agreement?
3) Whether, both the goods are allowed for free trade and exempted from customs duty in India?
3. In their CAAR-1 application, the applicant has stated that they would be importing under the jurisdiction of the Principal Commissioner/ Commissioner of Customs, Chennai, Tuticorin and Vishakhapatnam. Their application, therefore, was forwarded to the jurisdictional Principal Commissioners/ Commissioners of Customs for comments. However, no comments have been received from the jurisdictional commissionerates.
4. The application was listed for hearing on 01.03.2022. The applicant was represented by S/Shri Ezhil Arrasan, Director, Mohit Prabhakar and Ashwini Kumar Prabhakar. No one appeared on behalf of the jurisdictional Principal Commissioners/ Commissioners of Customs. Mr Ezhil explained the characteristics of the proposed items for import through an animated clip as well as their existing manufacturing facility at Erode, Tamilnadu.
4.1 The applicant was requested to clarify the following vide email dated 15.03.2022. The following reply was received on 16.03.2022:-
Q1: What are the hydrocarbon chains of the tyre pyrolysis oil and tyre pyrolysis recovered carbon?
Ans: The hydrocarbon chain of the TPO is C4-C30. The tyre pyrolysis recovered carbon is mostly above C30 and is hydrogen deficient hydrocarbon similar to original carbon black which is used as filler in tyre manufacturing but with higher ash content compared to original carbon black.
Q 2: What is the composition of the TPO and recovered carbon black?
Ans: Range depends upon the feedstock used for recycling. The figures for carbon black are provided on the basis of the report of NLC lab on tyre recovered carbon analysis, whereas for TPO, figures are provided on the basis of an online technical journal.
Q3: What is the intended use of the TPO and recovered carbon black?
Ans: TPO: As liquid fuel for industrial heat applications in boilers, hot air generators and reactor furnaces.
Recovered Carbon black: As solid fuel in calciners of cement kiln for co-processing in calcination process of cement manufacturing.
Q4: Whether the oils are distilled or not?
Ans: Oils are not distilled. It is as recovered from tyre pyrolysis units
Q5: What is the ratio of aromatic constituents compared to the non-aromatic constituent of TPO and recovered carbon black?
Ans: TPO: Aromatic: Non-Aromatic = 10% to 30%: 70% to 90%
Recovered carbon black: Aromatic: Non-Aromatic = 5% to 10%: 95% to 90%.
5. I have considered all the materials placed before me in respect of the subject goods. I have gone through the submissions made by the applicant during the personal hearing. In the absence of any comments from the jurisdictional Principal Commissioners/ Commissioners of Customs on the impugned subject matter, I proceed to render advance rulings on the basis of information available on record as well as information gathered from open sources. The issue before me is the classification of TPO and recovered carbon black, along with their treatment on import under ISFTA. It has been explained that tyre pyrolysis is the industrial process of breaking down large molecules of the used/ ELT tyre into smaller molecules of oil, gas and carbon black. The waste tyre pyrolysis process yields a gaseous fraction of mainly non-condensable gases, an oily fraction mainly composed of organic substances, and a solid fraction that comprises mainly carbon, metal, and other inert material. The composition of the primary pyrolysis products is influenced by process operating parameters such as the feed size, temperature and pressure, residence time, heating rate, and reactor configuration. The fuel characteristics of the tyre oil show that it is similar to gas oil or light fuel oil.
6. The TPO is not specifically mentioned in any of the tariff entries. Therefore, the item needs to be classified on the basis of physical, chemical and functional characteristics. There is no standardisation of TPO, as the properties of the TPO depend upon feedstock and process parameters. Therefore, in the present case, an appropriate classification entry would have to be based on the submissions made by the applicant. The item under consideration can be classified either as biodiesel under heading 3826 since it is derived from the rubber part of a tyre or alternatively, it can be classified as mineral fuel under chapter 27. As per GR1 I, the table of contents, alphabetical index, and titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the succeeding rules of classification. The explanatory notes to heading 3826 state that "Biodiesel consists of mono-alkyl esters of fatty acids of various chain lengths, immiscible with water, with a high boiling point, low vapour pressure and a viscosity similar to that of diesel oil produced from petroleum. Biodiesel is typically made by a chemical process called transesterification, whereby the fatty acids in oils or fats react with an alcohol (usually methanol or ethanol) in the presence of a catalyst to form the desired esters. It can be obtained from vegetable oils (e.g., rapeseed, soya-bean, palm, sunflower, cotton-seed, jatropha), from animal fats (e.g., lard, tallow) or from used oils or fats (e.g., frying oils, recycled cooking grease)." TPO is not a mono-alkyl ester of fatty acids. TPO is obtained from the pyrolysis process as compared to the process of transesterification followed to obtain biodiesel. Further, the source material for manufacturing biodiesel can be vegetable oils, animal fats or used oils or fats. The source material for TPO is the end of life tyre. Based on the above-mentioned differences, TPO does not appear to merit classification as biodiesel under heading 3826.
6.1 Chapter 27, on the other hand, covers coal and other natural mineral fuels, petroleum oils and oils obtained from bituminous minerals, their distillation products, and products of a similar kind obtained by any other process. In this chapter, oils are covered under headings 2707, 2709 and 2710. Heading 2709 covers crude petroleum oils and crude oils obtained from bituminous minerals (e.g., from shale, calcareous rock, sand), i.e., natural products, whatever their composition. As pyrolysis oil is not obtained from natural products, heading 2709 is not applicable. Heading 2707 covers oils and other products of the distillation of high-temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents. As per the submission made by the applicant, the weight of the non-aromatic constituents exceeds that of the aromatic constituents and the typical aromatic to non-aromatic ratio is 10%-30% to 70%-90%. As the weight of non-aromatic constituents exceeds that of the non-aromatic constituents, TPO under consideration is not classifiable under heading 2707. Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 % or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils are included in heading 2710. This heading covers oils obtained in more or less broad fractions by the distillation or refining of crude petroleum oils or of crude oils obtained from bituminous minerals and other oils having similar characteristics. Note 2 to Chapter 27 states- references in heading 2710 to "petroleum oils and oils obtained from bituminous minerals" include not only petroleum oils and oils obtained from bituminous minerals but also similar oils, as well as those consisting mainly of mixed unsaturated hydrocarbons, obtained by any process, provided that the weight of the nonaromatic constituents exceeds that of the aromatic constituents. The HSN explanatory notes to heading 2710 elaborate that the heading includes, inter-alia, other similar oils in which the weight of the nonaromatic constituents exceeds that of the aromatic constituents. TPO consist of mixed hydrocarbons and the weight of the non-aromatic constituents exceeds that of aromatic constituents. HSN explanatory notes further state that these oils may be obtained by the low-temperature distillation of coal, by hydrogenation or by any other process (e.g., by cracking, reforming, etc.). TPO is not obtained from crude. In the pyrolysis of the tyre, the polymers are cracked to obtain hydrocarbon oil. Pyrolysis is also referred to as cracking, which is one of the processes to obtain oils mentioned in heading 2710. Accordingly, the TPO under consideration is classifiable under heading 2710. Fuel specified in tariff entries of heading 2710, in general, has to satisfy a particular BIS standard associated with the item. As mentioned earlier, the TPO is not a standardised oil and its characteristics depend upon the feedstock and process variables. Therefore, the item merits classification under residual subheading 27101990 as the oil, other than crude oil, and not being a waste oil or biodiesel, having utility as industrial liquid fuel oil in burners and other heat applications such as reactors, boilers, heat furnaces etc.
7. In respect of the 2nd item under consideration, i.e., recovered carbon black, there is a specific entry in schedule-1 of the Customs Tariff Act, 1975 as 28030010. Carbon black is a finely divided form of amorphous carbon, usually obtained as soot from partial combustion of hydrocarbons. Note 1(a) to chapter 28 states that it contains separate chemical elements and separate chemically defined compounds, whether or not containing impurities. Carbon black is a chemically defined material. The HSN explanatory notes state that carbon black results from the incomplete combustion or cracking (by heating, by electric are or by electric sparks) of organic substances rich in carbon. In the present case, the carbon black is recovered under the pyrolysis of tyres. Further, HSN notes state that it may contain oil impurities. Primarily, carbon black is used as a pigment for the manufacture of paint, printing ink, shoe polish, etc., in making carbon paper, and as a reinforcing agent in the rubber industry. However, the carbon black recovered from tyre pyrolysis, as stated by the applicant, exhibits a high calorific value, making it possible for fuel applications. The applicant further stated that carbon black is intended to be used as solid fuel in calciners of cement kiln for co-processing in the calcination process of cement manufacturing. HSN notes exclude natural carbons in the form of solid fuels (anthracite, coal, lignite) of Chapter 27 from heading 2803. Solid fuels manufactured from coal are covered under subheading 270120. The source material for the solid fuel mentioned in subheading 270120 is natural coal. However, the carbon black recovered from tyre pyrolysis is not a natural carbon in the form of solid fuel. It is obtained as a result of the incomplete combustion of a hydrocarbon present in the used/ELT tyres. Therefore, recovered carbon black is not classifiable under subheading 270120. Accordingly, the carbon black under consideration is not excluded from heading 2803. Therefore, recovered carbon black merits classification under subheading 28030010.
8. In respect of questions no. 2 and 3 of para 2.4, the India- Sri Lanka Free Trade Agreement is referred to. Annex 2 to the agreement contains India's negative list under the ISFTA. Items under subheadings 27101990 and 28030010 are not covered under India's negative list.
9. As far as the question of free trade of both goods is concerned, it needs to be examined whether the subject matter comes within the purview of advance rulings in customs. Section 28H of the Customs Act, 1962 lists the issues on which advance rulings can be sought. The issue of free trade having no bearing on duty rate is not included in sec 28H. Therefore, ruling on this particular issue cannot be pronounced, as the question is beyond the scope of advance rulings.
10. Notification No. 26 of2000-Cus, dated 01.03.2000 specifies the goods eligible for concessional rate of duty on import under ISFTA. As per the said notification, as amended, both the items under consideration are exempted from the basic customs duty, i.e., as of now, the rate of customs duty is 0%, subject to satisfaction of the conditions specified in the said notification, ISFTA and any other law in force.
11. In view of the aforesaid discussions, I rule that the tyre pyrolysis oil and recovered carbon black merit classification under subheadings 27101990 and 28030010 respectively, of the first schedule of the Customs Tariff Act, 1975. These items are not covered under the negative list of ISFTA. The goods are exempted from basic customs duty under ISFTA. On the issue of free trade (importability) from Sri Lanka, no advance rulings is being pronounced.
(M.R. MOHANTY)
Customs Authority for Advance Rulings,
Mumbai