VES-3-07-OT:RR:BSTC:CCI H028458 JLB
Mr. Michael D. Sherman
Venable LLP
575 7th Street, NW
Washington, DC 20004-1601
RE: Coastwise Transportation; 46 U.S.C. § 55102
Dear Mr. Sherman:
This letter is in response to your correspondence dated May 14, 2008, in which you inquire about whether your client’s proposed scenarios for unlading contaminated gasoline in a U.S. facility constitute a violation of the Jones Act, 46 U.S.C. § 55102. Our ruling on your request follows.
FACTS
You represent Vitol Inc. of Houston, Texas, a corporation that is a significant trader and importer of gasoline in the United States. In both of the proposed scenarios, a foreign-flag vessel loads a cargo of gasoline from Dock #2 of a U.S. Gulf Coast facility. While the vessel is en route to a foreign port to discharge the subject gasoline, it is discovered that a portion of the gasoline is contaminated. The vessel is instructed to retain the contaminated gasoline onboard and return to the original loading facility for discharge after unlading the uncontaminated gasoline at the foreign port as intended. You proposed two different scenarios to unlade this contaminated gasoline, and they are described below.
The first scenario [hereinafter referred to as Scenario One] involves the owner of the U.S. facility instructing the vessel upon its return to call Dock #1 instead of Dock #2, where the cargo was initially loaded, to unload the remaining contaminated gasoline. Dock #2 is fully operational but not immediately available because other vessels are currently docked or scheduled to call that dock and the facility’s owner does not want to delay discharge of the contaminated gasoline. All of the gasoline lines for Dock #1 and Dock #2 connect to the same storage tanks.
It is your understanding that if the subject vessel were to unladen the contaminated gasoline at Dock #1, as proposed in Scenario One, then a violation of the Jones Act, 46 U.S.C. § 55102, would occur. Consequently, you inquire about whether local U.S. Customs and Border Protection (“CBP”) officials have the authority to waive the Jones Act. Specifically, you wish to know whether the signature of a port official, who is a District Supervisor acting on behalf of the Port Director, on a letter from the owner of the facility requesting confirmation by the port that the vessel can call at Dock #1, affixed with a CBP stamp, would constitute an acceptable waiver of the Jones Act requirements.
The second scenario [hereinafter referred to as Scenario Two] involves the subject foreign-flag vessel being instructed to call Dock #2, where the vessel was berthed when the cargo was initially laden, to unload the contaminated gasoline. While the subject gasoline, however, would be unladen at the initial place of loading, it would be placed into different storage tanks than those from which the gasoline was originally laden.
ISSUES
Whether the transportation of merchandise by a foreign-flag vessel as described in the above scenarios constitutes a violation of 46 U.S.C. § 55102?
If either of the above scenarios constitutes a violation of 46 U.S.C. § 55102, do CBP port officials have the authority to waive 46 U.S.C. § 55102?
LAW AND ANALYSIS
The Jones Act, former 46 U.S.C. App. § 883 recodified as 46 U.S.C. § 55102, pursuant to P.L. 109-304 (October 6, 2006), states that “a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port” unless the vessel was built in and documented under the laws of the United States and owned by persons who are citizens of the United States. (See also 19 C.F.R. §§ 4.80, 4.80b). Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise-qualified.” The coastwise laws generally apply to points in the territorial sea, which is defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline.
Pursuant to 19 U.S.C. § 1401(c), the word "merchandise" is defined as "goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31.” For purposes of the Jones Act, merchandise also includes “valueless material” should the contaminated gasoline in question be so deemed. See 46 U.S.C. § 55102(a)(2); Headquarters Ruling Letter 110979, dated July 11, 1990 (even if it were determined that the recovered oil was contaminated such that it no longer had commercial value, by virtue of the 1988 "valueless material" amendment to the Jones Act, the oil would still constitute merchandise).
Scenario One:
The CBP Regulations promulgated under the authority of 46 U.S.C. § 55102 provide that a coastwise transportation of merchandise takes place when merchandise laden at a coastwise point is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a). These regulations further clarify the term coastwise points as “including points within a harbor.” See 19 C.F.R. § 4.80(a). In addition, CBP has narrowly construed what constitutes the same coastwise point. In Headquarters Ruling Letter W115601, dated February 28, 2002, CBP found merchandise can be laden and unladen at the same location without violating 46 U.S.C. § 55102 but if the merchandise was unladen even a vessel width from the dock where it is laden (with no contact with the dock at any point) then a violation of 46 U.S.C. § 55102 has occurred.
The particulars of this case are as follows: chemicals were laden onto a foreign-flag vessel at the A-22 dock of a U.S. terminal, specifically at the dock face. While en route, it was decided that the chemicals needed to be returned for reprocessing. CBP held that if the chemicals were unladen at the “same exact point” of lading (i.e., the dock face of the A-22 dock at the same U.S. terminal), there was no violation of 46 U.S.C. § 55102. If the foreign-flag vessel, however, did not abut the dock face of the A-22 dock, the initial point of lading, but abutted a barge located between the subject vessel and the dock, thus resulting in the chemicals being unladen onto this barge and the subject vessel never making contact with the A-22 dock, then a violation of 46 U.S.C. § 55102 occurs. See Headquarters Ruling Letter W115601, dated February 28, 2002.
Similarly, under the proposed scenario, the merchandise will be transported from one coastwise point, namely, Dock #2 of the U.S. facility, on a foreign-flag vessel to Dock #1 of the same U.S. facility, another coastwise point, via a foreign port. Consequently, your understanding that the transportation of merchandise would be in violation of 46 U.S.C. § 55102 is correct.
As noted above, the navigation laws (including the Jones Act) can only be waived under the authority provided by 46 U.S.C. § 501. This statute provides, in pertinent part, that:
[w]hen the head of an agency responsible for the administration of the navigation or vessel-inspection laws considers it necessary in the interest of national defense, the individual may waive compliance with those laws to the extent, in the manner, and on the terms the individual prescribes. [Emphasis added]
At the outset we note that as it is readily apparent that the case in question is not related to national defense, a waiver is unavailable. With respect to your specific inquiry, it is also important to note that, pursuant to the express statutory language cited above, only the “head of the agency responsible for the administration of the navigation or vessel-inspection laws” (i.e. the Secretary of Homeland Security) may grant a Jones Act waiver. Accordingly, under your proposal the port official who is the District Supervisor, acting on behalf of the Port Director, lacks the statutory authority to waive the Jones Act.
Scenario Two:
In this scenario, while the foreign-flag vessel will return to the initial point of lading, Dock #2, the contaminated gasoline will be unladen from that location into different storage tanks than where it was originally stored. You are seeking clarification on whether the foreign-flag vessel has to only return to the same point of lading, or in addition to that, whether the vessel must also unladen the cargo into the same exact storage tank from which it was stored prior to lading in order to be in accordance with the Jones Act, 46 U.S.C. § 55102.
As stated above, CBP Regulations provide that a coastwise transportation of merchandise takes place when merchandise laden at a coastwise point is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a). “Unladen” is defined as “take out the cargo of,” “to discharge cargo” or “unload.” See Webster’s Third New International Dictionary 2502 (3rd ed. 1993). The term “unload” is defined as to “remove (goods) from a vehicle, ship, etc.” See Compact Oxford English Dictionary 2008. Based on the foregoing definitions, it is the position of CBP that it is the act of discharging or unlading the merchandise that must be performed at the same coastwise point in order to be in accordance with 46 U.S.C. § 55102. Once the cargo is unladen from the vessel, the storage place of the cargo is irrelevant for purposes of 46 U.S.C. § 55102.
For instance, in Headquarters Ruling Letter 110127, dated April 5, 1989, CBP held that a foreign-flag barge containing chemicals must return to the “same point” at which it was laden and “[t]o return it to any point other than that at which it was laded and then pump the chemical cargo to the shoreside chemical loading facility constitutes a violation of 46 U.S.C. App. § 883 [now 46 U.S.C. § 55102].” Similarly, in Headquarters Ruling Letter W115601, dated February 28, 2002, as discussed above, the determinative factor in concluding whether a coastwise transportation occurred was whether the vessel was unlading the chemicals at the same location as the point of lading. The fact that the chemicals were laden at storage tanks at the dock face of the A-22 dock of the U.S. terminal and were unladen into a barge for temporary storage until there was room to store the chemicals at the A-22 dock’s tank was immaterial.
Accordingly, in the present case, no violation of 46 U.S.C. § 55102 would arise when the foreign-flag vessel unlades the subject contaminated gasoline into different storage tanks than where the gasoline was initially stored since the vessel would be located at the same coastwise point during the time the lading and unlading occur.
HOLDINGS
The transportation of merchandise by a foreign-flagged vessel as described in the above scenarios constitutes a violation of 46 U.S.C. § 55102 with respect to Scenario One but not Scenario Two.
Pursuant to 46 U.S.C. § 501, CBP port officials do not have the authority to waive 46 U.S.C. § 55102.
Sincerely,
Glen E. Vereb, Chief
Cargo Security, Carriers and Immigration Branch