OT:RR:CTF:ER
H169017 MES
Port Director
U.S. Customs and Border Protection
Port of New York/Newark
1100 Raymond Blvd.
Newark, NJ 07012
Attn: Linda Birck, Supervisory Entry Officer
Dear Port Director,
This is in response to your request for internal advice, dated October 4, 2011, regarding issues relating to floating storage. In addition, on May 27, 2011, we received a request for a prospective ruling from Morgan Stanley Capital Group, Inc. (“Morgan Stanley”), inquiring about the vessel and merchandise entry requirements for the return of domestically produced or imported duty paid petroleum products stored in floating storage. Because this involved a completed transaction, we will treat this as an internal advice. See 19 CFR § 177.11. We regret the delay in our response.
FACTS:
Morgan Stanley intends to load petroleum distillate products onto foreign flagged ocean-going tanker vessels at the port of New York. The petroleum will either be produced in the United States or will have been previously imported into the United States and entered for consumption. In its request, and clarified through subsequent correspondence, Morgan Stanley stated that the petroleum will be loaded into the holding tank of a foreign flagged vessel and the vessel will sail to offshore locations for anchorage for 51 to 89 days. This process is referred to as floating storage. The anchorage distance will vary from shipment to shipment up to 75 miles from the port of lading (which is beyond the territorial sea). Eventually, the vessel will return from floating storage to the United States and offload the petroleum distillate products. Morgan Stanley states that the petroleum will leave for floating storage and later return to “the same berth at the same terminal in the same U.S. port at which it previously loaded the cargo for delivery.” Morgan Stanley states that during the period the petroleum is in floating storage it will not be sold, it will not be put up for sale, nor will it be shipped to a foreign country.
In your request for internal advice, you inquired whether the petroleum required entry upon return and if it would matter if the petroleum were foreign or domestic. In its May 27, 2011, request, Morgan Stanley asks CBP to address three questions:
Is the cargo that is delivered into floating storage considered to be exported for CBP purposes?
Is Morgan Stanley required to enter the cargo with CBP upon its return from floating storage?
If the cargo is not required to be entered with CBP upon its return, does it qualify for an exemption from the payment of the Harbor Maintenance Tax that otherwise is applicable to cargo transported domestically by vessel to/from certain U.S. ports?
As such, in addressing Morgan Stanley’s second question, we will be answering your specific questions as well. Additionally, the situation described in Morgan Stanley’s request raises an issue of interpretation under 46 U.S.C. § 55102 as well as issues regarding reporting and clearance requirements for the vessel itself. We will address these issues in turn.
ISSUES:
Whether the petroleum that is delivered into floating storage as described above is considered to be exported from the United States.
Whether entry of the cargo is required upon the vessel returning from floating storage.
Whether vessel entry and notice of arrival or clearance are required.
Whether the merchandise is subject to the Harbor Maintenance Tax.
Whether the movement is subject to the requirements of the Jones Act.
LAW & ANALYSIS:
1. Whether the petroleum that is delivered into floating storage as described is considered to be exported from the United States.
Morgan Stanley asks if the cargo being held in floating storage has been exported. The definition of “exportation” is contained at 19 CFR § 101.1 of the CBP regulations and it reads as follows:
“Exportation" means a severance of goods from the mass of things belonging to this country with the intention of uniting them to the mass of things belonging to some foreign country. The shipment of merchandise abroad with the intention of returning it to the United States with a design to circumvent provisions of restriction or limitation in the tariff laws or to secure a benefit accruing to imported merchandise is not an exportation. Merchandise of foreign origin returned from abroad under these circumstances is dutiable according to its nature, weight, and value at the time of its original arrival in this country.
Therefore, exportation cannot occur absent the intent of joining the petroleum to the mass of things belonging to some foreign country.
CBP has prior rulings regarding merchandise leaving the customs territory of the United States and whether the merchandise has been exported. In HQ 225098, dated June 6, 1994, we held that merchandise sold on a “cruise to nowhere” was not exported because the cruise would not stop at a foreign port. In that case, passengers on a "cruise to nowhere" were not able to purchase duty-free merchandise because a "cruise to nowhere" does not actually stop at any foreign ports and, thus, the merchandise would not be considered exported. In HQ H213415, dated July 8, 2014, we held that merchandise taken to a foreign country without the intent to introduce the merchandise into the foreign country for consumption, sale, or use does not constitute an exportation. In that case, imported duty-paid yachts were sailed from the United States to the Bahamas for the sole purpose of being transported back to the United States on a commercial vessel. Therefore, CBP has held that no exportation can occur, even if merchandise leaves the customs territory of the United States, absent an intended or actual introduction of the merchandise into a foreign country for consumption, sale, or use.
In the current situation, Morgan Stanley will load the petroleum cargo on a vessel, it will leave the customs territory of the United States for temporary storage, and it will return to the United States. In its request, Morgan Stanley states that the vessel will sail to offshore locations for anchorage for 51 to 89 days. The anchorage distance will vary from shipment to shipment but it will be beyond the customs territory of the United States. However, despite this, Morgan Stanley states in its letter that there is “no intention of delivering or introducing the cargo into the commerce of another country, and, for purposes of this ruling request, no such delivery will occur.” As such, because there is no intent to introduce the petroleum into a foreign country for consumption, sale, or use, the petroleum has not been exported.
Please note that in order to support the determination that an exportation did not occur, Morgan Stanley must demonstrate to the satisfaction of the port that the petroleum returning to the customs territory of the United States is the same that departed for floating storage. See, e.g., HQ 225339 (January 10, 1995) (holding that in order to confirm that an exportation did not take place, documentation will be required to verify exactly which equipment and supplies left the customs territory of the United States and that this is the same equipment and supplies returned to the United States), see also, HQ H213415. However, Morgan Stanley did not provide specific information regarding the issue of how the returning petroleum would be identified as that which went out for floating storage. As such, we do not reach a determination on this issue.
2. Whether entry of the cargo is required upon the vessel returning from floating storage.
Morgan Stanley asks whether entry is required upon the petroleum’s return from floating storage. Morgan Stanley states that the petroleum will either be produced in the United States or will have been previously imported into the United States and entered for consumption. In general, all merchandise imported into the United States is required to be entered, unless specifically excepted. See 19 CFR § 141.4(a). None of the exceptions pertain to the situation as described by Morgan Stanley or in your request for internal advice. Therefore, regardless of whether the petroleum is foreign or domestic, entry is required if the petroleum returning from floating storage is considered an importation.
CBP has addressed the question of whether an importation can occur for goods returning to the United States if no exportation occurred in prior rulings. In HQ 225339, dated January 10, 1995, we held that U.S. origin and imported duty paid oil spill equipment used outside the U.S. customs territory is not imported upon its return if no exportation occurred. Additionally, in
HQ 114291, dated May 7, 1998, we stated that “[i]f an article leaves the United States but is not deemed to be exported, then there is no importation upon its return to the United States.” In that case, foreign-origin sales samples that returned to the United States from Guam were not considered imported because their shipment to Guam did not qualify as exportation. Therefore, CBP has held that no importation occurs for goods returning to the United States if there was no exportation. See also, HQ H213415 (July 8, 2014) (holding that the merchandise was not reimported upon return to the United States because there was no intent to unite the goods to the mass of things belonging to another country for purposes of exportation).
In the current situation, Morgan Stanley will load the domestic or duty paid petroleum cargo on a vessel and it will leave the customs territory of the United States. However, as stated above, there is no exportation because there is no intent to introduce the petroleum into a foreign country for consumption, sale, or use. Therefore, because the domestic or duty paid petroleum was not exported, it will not be considered an importation upon its return to the United States. As such, no entry is required for the domestic or duty paid petroleum returning to the United States from floating storage. However, as explained above, it must demonstrate to the satisfaction of the port that the petroleum returning to the customs territory of the United States is the same that departed for floating storage.
3. Whether vessel entry and notice of arrival or clearance are required.
The situation described in Morgan Stanley’s request raises issues regarding vessel entry and clearance requirements. Regarding vessel entry, 19 U.S.C. § 1434(a) provides, in pertinent part:
Within 24 hours (or such other period of time as may be provided under subsection (c)(2)) after the arrival at any port or place in the United States of—
(1) any vessel from a foreign port or place; (2) any foreign vessel from a domestic port; (3) any vessel of the United States having on board or foreign merchandise for which entry has not been made; or (4) any vessel which has visited a hovering vessel or has delivered or received merchandise while outside the territorial sea;
the master of the vessel shall, unless otherwise provided by law, make formal entry at the nearest customs facility or such other place as the Secretary may prescribe by regulation.
As these non-coastwise-qualified tank vessels’ last ports of call would be domestic ports, they would be required to make formal entry, in accordance with 19 U.S.C. § 1434(a)(2).
Similarly, regarding vessel clearance requirements, 46 U.S.C. § 60105(b), provides, in pertinent part:
Except as otherwise provided by law, a vessel that is not a vessel of the United States shall obtain clearance from the Secretary before proceeding from a port or place in the United States—
(1) for a foreign port or place;
(2) for another port or place in the United States; or
(3) outside the territorial sea to visit a hovering vessel or to receive or deliver merchandise while outside the territorial sea.
In its request, Morgan Stanley states that the anchorage of the storage tank vessels’ will not exceed 75 nautical miles from the port of New York. The territorial sea 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. See 33 U.S.C. §1362(8). Should the subject vessels proceed to anchorages outside of the territorial sea, they will have proceeded from ports in the United States to foreign places and would therefore be required to clear, and pay any applicable fees pursuant 46 U.S.C. § 60105.
4. Whether the merchandise is subject to the Harbor Maintenance Tax.
Morgan Stanley inquires whether the movement of the cargo is subject to the Harbor Maintenance Tax (HMT). The statutory authority for HMT is found in the Water Resources Development Act of 1986 (the “1986 Act”). Under the 1986 Act, a tax is imposed for the use of a port, defined as any channel or harbor or component thereof in the United States which is not an inland waterway, is open to public navigation, and at which federal funds have been used since 1977 for construction, maintenance, or operation.
Pursuant to 26 U.S.C. § 4462(g)(2), intraport movements are exempt from imposition of the HMT. See also, 19 CFR § 24.24(d)(1). The New York Harbor “[i]ncludes all points in New York and New Jersey with the Port of New York on the waters inshore of a line between Sandy Hook and Rockaway Point and south of Tappan Zee Bridge on the Hudson and west of Throgs Neck Bridge of the East River. Movements between these and all points within the New York Port District boundaries described in New York Code (Chapter 154, Laws of New York, 1921), are intraport.” 19 CFR § 24.24(b)(1).
It is not clear from the facts provided by Morgan Stanley whether the vessels will leave the New York port limits as described in 19 CFR 24.24(b)(1). We cannot conclude that the movement of vessel between points within a port limit via a point outside the port limits constitutes an “intraport” movement. Accordingly, should the vessels leave the New York port limits it would not be eligible for an exemption from HMT pursuant to 26 U.S.C. § 4462(g)(2).
5. Whether the movement is subject to the requirements of the Jones Act.
The situation described in Morgan Stanley’s request raises possible issues relating to the Jones Act for the foreign flagged vessels. The Jones Act, 46 U.S.C. § 55102, provides, in pertinent 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 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 CFR §§ 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. See 33 U.S.C. §1362(8).
Pursuant to section 46 U.S.C. § 12102 and 19 CFR § 4.80(a)(2), no foreign-built vessel, regardless of its tonnage, may engage in the coastwise trade. Section 4.80b(a), CBP Regulations (19 CFR § 4.80b(a)) provides, in pertinent part:
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.
Morgan Stanley states that the cargo will be returned to the same berth at the same terminal in the same U.S. port at which it was previously loaded for delivery into floating storage. As such, no coastwise transportation, as defined in 19 CFR § 4.80b(a), will have occurred. Accordingly, the proposed operation described above does not constitute an engagement in the coastwise trade for purposes of 46 U.S.C. § 55102.
HOLDING:
The petroleum cargo delivered into floating storage as described is not considered to be exported from the United States and entry of the cargo is not required upon the vessel returning from floating storage, provided the port director is satisfied that the petroleum returning is the same petroleum that departed for floating storage. The vessel must report its arrival, make entry upon returning to the United States and may be subject to the Harbor Maintenance Tax. The movement of the cargo from the berth where it will be laden back to the same berth where it would be unladen would not be a violation of the Jones Act.
You are to mail this decision to counsel no later than sixty days from the date of this decision. At that time, Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public, on the CBP Home Page on the World Wide Web at http://www.cbp.gov, by means of the Freedom of Information Act, and other methods of publication.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division