VES-3/3-07-OT-RR:BSTC:CCI H101115 GOB
Peter H. Rodgers, Esq.
Benjamin Norris, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2415
RE: Coastwise Transportation; Fuel Oil Blending; 46 U.S.C. § 55102; 19 CFR § 4.80b(a)
Dear Messrs. Rodgers and Norris:
This letter is in response to your letter of April 12, 2010 with respect to proposed petroleum blending operations at a foreign location by your client (the “requester”). Our ruling is set forth below.
FACTS:
The requester proposes to load United States-origin petroleum blendstocks onto a foreign-flag vessel at a United States port; the potential ports of exportation include New Orleans, Louisiana; Lake Charles, Louisiana; Port Arthur, Texas; Houston, Texas; Galveston, Texas; and Corpus Christi, Texas. The petroleum blendstocks would not conform to any grade described in the American Standard for Testing Materials (“ASTM”) Standard Specification for Fuel Oils. The requester would ship the petroleum blendstocks to a foreign location, offload them into onshore tanks, and blend the products on shore with foreign-origin petroleum products; the potential ports where the blending will occur include Freeport, Bahamas and St. Eustatius, Netherlands Antilles. The resultant blended petroleum would allegedly meet the ASTM standard specifications for No. 6 Fuel Oil. The blended petroleum would then be loaded aboard a foreign-flag vessel and transported to a United States port for discharge and sale to United States customers; the potential ports of importation include all of the potential ports of export, listed above, and New Haven, Connecticut; Providence, Rhode Island; New York, New York; Newark, New Jersey; and Perth Amboy, New Jersey.
ISSUE:
Whether the proposed blending operations would result in the creation of a “new and different product” within the meaning of 19 CFR § 4.80b(a), so as to render inapplicable the prohibition against non-coastwise-qualified vessels set forth in 46 U.S.C. § 55102.
LAW AND ANALYSIS:
Generally, the coastwise laws prohibit the transportation of passengers or merchandise between points in the United States embraced within the coastwise laws in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. A vessel that is built in, documented under the laws of, and owned by citizens of the United States, and which obtains a coastwise endorsement from the U.S. Coast Guard, is referred to as "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.
Title 46, United States Code, § 55102 (46 U.S.C. § 55102), the coastwise merchandise statute often called the “Jones Act,” provides in part 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 is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade and has been issued a certificate of documentation with a coastwise endorsement under chapter 121 of title 46 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.
Section 4.80b(a), Customs and Border Protection (“CBP”) Regulations (19 CFR § 4.80b(a)) provides as follows:
§ 4.80b Coastwise transportation of merchandise.
Effect of manufacturing or processing at intermediate port or place. 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 possession of the United States not subject to the coastwise laws), it is manufactured or processed into a new and different product, and the new and different product thereafter is transported to a coastwise point.
In HQ 112895, dated February 2, 1994, we stated:
In its analysis, the Customs Service [now, CBP] has adopted for most cases standards established by the American Society for Testing Materials (ASTM), for such standards represent industry-developed criteria for characterizing fuel oils. The Customs Service will generally consider fuel oils of different ASTM grades as different products. Consequently, fuel oil that is loaded at a coastwise point, blended at a foreign port or place, and unloaded at another coastwise point must change ASTM grade to be considered a “new and different” product for purposes of the coastwise laws.
We have sought and received advice from CBP’s Laboratories & Scientific Services (“LSS”), Office of Information and Technology as to whether the processing you describe results in a “new and different product” within the meaning of 19 CFR § 4.80b(a). LSS has determined that the product resultant from the blending at the foreign locations listed above is a “new and different product” from the petroleum blendstocks which were transported to those foreign locations.
In light of this finding, we determine that the proposed blending of the petroleum blendstocks at the foreign locations will result in the manufacture or processing into a “new and different product” within the meaning of 19 CFR § 4.80b(a). Therefore, pursuant to 19 CFR § 4.80b(a), the proposed transportation would not be considered coastwise transportation within the meaning of 46 U.S.C. § 55102. If such transportation is accomplished by a non-coastwise-qualified vessel, the transportation not would be violative of 46 U.S.C. § 55102.
HOLDING:
The proposed blending operations would result in the creation of a “new and different product” within the meaning of 19 CFR § 4.80b(a). Therefore, pursuant to 19 CFR § 4.80b(a), the proposed transportation of the diesel fuel oils would not be considered to be coastwise transportation with the meaning
of 46 U.S.C. § 55102. If such transportation is accomplished by a non-coastwise-qualified vessel, the transportation would not be violative of 46 U.S.C. § 55102.
Sincerely,
Glen E. Vereb
Chief
Cargo Security, Carriers, and Immigration Branch