VES-3-07-CO:R:IT:C 111998 GEV
Donald J. Mulvihill, Esq.
Cahill Gordon & Reindel
1990 K Street, N.W.
Washington, D.C. 20006
RE: Coastwise Trade; Fuel Oil Blending; 46 U.S.C. App. 883
Dear Mr. Mulvihill:
This is in response to your letter dated November 21, 1991,
on behalf of your client, Phibro Energy, Inc. ("PEI") requesting
a ruling regarding the applicability of 46 U.S.C. App. 883 to a
proposed fuel oil blending operation.
FACTS:
PEI, a company located in Greenwich, Connecticut, recently
shipped a quantity of fuel oil from Louisiana to St. Eustatius,
Netherlands, Antilles, aboard a non-coastwise-qualified vessel.
At the time of shipment PEI intended to process the fuel oil and
subsequently ship it, or sell it for shipment, to Europe. PEI
has now determined that after the blending operation in St.
Eustatius it wants to ship the resultant blend to the United
States.
The specifications for the existing product and the
approximate specifications which would result from the foreign
blending operation are as follows:
Existing Product Blended Product
(approximate)
SULFUR 2.12% 2.5%
GRAVITY 11.6 11.0
POUR POINT 32 degrees F 40 degrees F
VISCOSITY 131SSF 225SSF
VANADIUM 20 260
U.S. CONTENT 100% 50%
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ISSUE:
Whether the blending operation described above is
sufficient to create a "new and different product" within the
meaning of 19 CFR 4.80b(a) so that the proposed transportation of
the resultant blend to the United States is not in violation of
46 U.S.C. App. 883.
LAW AND ANALYSIS:
Title 46, United States Code Appendix, 883 (the merchandise
coastwise law often called the "Jones Act") prohibits the
transportation of merchandise between United States coastwise
points, either directly or via a foreign port, or for any part of
the transportation, in any vessel other than a vessel built in
and documented under the laws of the United States and owned by
persons who are citizens of the United States.
In interpreting 883, Customs has ruled that a point in
United States territorial waters is a point in the United States
embraced within the coastwise laws. The territorial waters of
the United States consist of the territorial sea, defined as the
belt, 3 nautical miles wide, seaward of the territorial sea
baseline, and to points located in internal waters, landward of
the territorial sea baseline, in cases where the baseline and the
coastline differ.
Section 4.80b(a), Customs Regulations, provides, in part,
that:
A coastwise transportation of merchandise
takes place, within the meaning of the
coastwise laws, when merchandise laden at
a point embraced within the coastwise laws
("coastwise point") is unladen at another
coastwise point, regardless of the origin
or ultimate destination of the merchandise.
However, merchandise is not transported
coastwise if at an intermediate port or
place other than a coastwise point (that
is, at a foreign port or place, or at a
port or place in a territory or posses-
sion of the U.S. not subject to the
coastwise laws), it is manufactured or
processed into a new and different pro-
duct, and the new and different product
thereafter is transported to a coastwise
point.
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In applying 4.80b(a), Customs has held that merchandise
manufactured or processed into a new and different product must
be landed and processed at an intermediate port or place other
than a coastwise point. The manufacturing or processing may not
take place on board a vessel. Pursuant to T.D. 91-32 published
in the Federal Register on April 10, 1991 (56 FR 14467) prior to
reaching a determination that a new and different product has in
fact been created by a blending operation for purposes of
4.80b(a), the procedures and specific data of such operations
should be submitted by the party seeking such a determination.
Customs will then review the data and make the necessary
determination which will form the basis for a decision regarding
any possible violation of 883.
Upon reviewing the specifications of this particular
blending operation, we note that the specifications for the
existing product (which was transported from Louisiana to St.
Eustatius, N.A., aboard a non-coastwise-qualified vessel) and the
resultant blend meet the American Society for Testing Materials
(ASTM) specifications for No. 6 fuel. It is therefore apparent
that the blending operation under consideration did not create a
new and different product within the meaning of section 4.80b(a),
Customs Regulations. Accordingly, the proposed transportation of
the resultant blend to the United States is in violation of 46
U.S.C. App. 883. This letter confirms our telephone conversation
of November 22, 1991, on this matter.
HOLDING:
The blending operation described above is insufficient to
create a "new and different product" within the meaning of 19 CFR
4.80b(a) so that the proposed transportation of the resultant
blend to the United States is in violation of 46 U.S.C. App.
883.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch