VES-3 OT:RR:BSTC:CCI H219709 DAC
Jeanne M. Grasso, Esq.
Blank Rome, LLP
600 New Hampshire, N.W.
Washington, D.C. 20037
RE: Coastwise Trade; petroleum blending; 46 U.S.C. § 55102; 19 CFR 4.80b(a); new and different product
Dear Ms. Grasso:
This letter is in reply to your submission dated June 1, 2012, on behalf of your client, wherein you request a ruling as to whether the proposed transportation by a non-coastwise-qualified vessel would constitute a violation of 46 U.S.C. § 55102. Our ruling on this matter is set forth below.
FACTS:
In your submission, you state that your client would incur an adverse commercial impact if the identity of the entity were to be published. In this determination, such client is hereinafter referred to as the “Partnership”, so as to avoid any such adverse commercial impact. The Partnership proposes to transport two petroleum-based components aboard foreign flag vessels from points in the United States located on the Gulf Coast to a marine terminal in the Bahamas owned by the Bahamas Oil Refining Company International Limited (“BORCO”). The subject components consist of one gasoline blendstock and a naphtha product, which will be blended at BORCO in the Bahamas to create Reformulated Blendstock for Oxygenate Blending (“RBOB”). After such blending in the Bahamas, the RBOB will be transported on foreign flag vessels to points in the United States. The RBOB will have ethanol added to it in the United States in order to create a gasoline-oxygenated blend meeting United States motor gasoline requirements. In your submission you have included product information and specifications in a table labeled Attachment 1.
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), and whether such proposed transportation would be in violation of 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, and which has obtained a coastwise endorsement from the U.S. Coast Guard. Such a vessel 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, section 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 U.S. 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), of the Customs and Border Protection (“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.
The plain meaning of the statute prohibits merchandise from being transported on a non-coastwise-qualified vessel between points in the United States. The words “either directly or via a foreign port” were inserted in the original statute by the Congress in 1893. Congress, seeing how easily the protection to American shipping would be vitiated by a simple transshipment of the same cargo, inserted these words to prohibit such transshipments.
In determining whether merchandise which is transported from one point in the United States, to a point in a foreign country, and then to another point in the United States is subject to the prohibition in 46 U.S.C. § 55102 by virtue of being transported between coastwise points “via a foreign point,” we have consistently relied upon the holding of the Supreme Court in The Bermuda, 70 U.S. 514 (1865). In that decision, the Court held that a transportation from one coastwise point to another remains continuous, so long as intent remains unchanged, no matter what stoppages or transshipments intervene. The Bermuda, supra, at 553. The Court went on to reaffirm the longstanding rule that:
[E]ven the landing of goods and payment of duties does not interrupt the continuity of the voyage of the cargo, unless there be an honest intention to bring them into the common stock of the country. If there be an intention, either formed at time of original shipment, or afterwards, to send the goods forward to an unlawful destination, the continuity of the voyage will not be broken, as to the cargo, by any transactions at the intermediate port. The Bermuda, supra, at 554.
The Attorney General of the United States relied upon The Bermuda in his consideration of the applicability of the Jones Act to certain transportation. The Attorney General ruled that when there was no intent by the shipper to transship merchandise from a United States port or place to a United States port or place via a foreign place, “only general rules of law may be laid down.” 34 Op. Atty. Gen. 355, 362 (1924). The general rule of law given by the Attorney General in this case was that “the intention of the shipper … is the controlling factor.” 34 Op. Atty. Gen., supra, at 363. See also 32 Op. Atty. Gen. 350 (1920); CBP Ruling HQ H114310 (July 13, 2010). The Attorney General also stated that “whether the facts presented in any particular case come within such rules must be determined by the officer charged with the administration of that Act.” 34 Op. Atty. Gen., supra, at 362.
CBP is the agency charged with the administration of 46 U.S.C. § 55102. We have issued a number of rulings on the applicability of 46 U.S.C. § 55102 to the transportation of merchandise between coastwise points via a foreign port. In these rulings, we have held, as did the Supreme Court in The Bermuda, that an “honest intention to bring the goods [transported] into the common stock of the [intermediate foreign] country” is required to break the continuity of transportation between coastwise points via a foreign point. See, e.g., HQ H114310, supra.; CBP Ruling HQ 116557 (October 25, 2005). We have held that intent to export merchandise after its transportation from the United States to an intermediate foreign port is not, by itself, sufficient to break the continuity of the transportation, when the merchandise is transported onward from the intermediate foreign port to a second point in the United States. See CBP Ruling HQ H032036 (July 10, 2008).
Under 19 CFR § 4.80b(a), which was promulgated pursuant to 46 U.S.C. App. § 883 (the predecessor of 46 U.S.C. § 55102), the following is provided:
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. (emphasis added.)
In the present case, you claim that the subject products that are proposed to be transported from the United States to the Bahamas, and then blended within the Bahamas will result in a “new and different product” within the meaning of 19 CFR § 4.80b(a). We have referred this matter to CBP’s Office of Information and Technology, Laboratories & Scientific Services (LSS) for its review and opinion. After a thorough consideration based upon the information and specifications provided, the CBP LSS has determined that the proposed processing of the subject petroleum products in the Bahamas would not produce a “new and different” article of commerce within the meaning of 19 CFR 4.80b(a).
In regards to your particular submission, CBP’s LSS specifically states that:
[I]t has been a long commercial practice to consider petroleum fuel oils of different ASTM grades as different marketable products. Similarly, U.S. Customs Service/Customs and Border Protection has had a long standing practice of following the ASTM standards for fuel oil when determining whether or not a “new and different” article of commerce has been manufactured with regard to the Jones Act. In reviewing this casewe have applied this long standing practice during our analysis. …
[D]ue to the number of specification variables relating to “Blend stock 1” and in the “RBOB” in which either product may or may not meet the ASTM requirements for conventional gasoline, it will be not be possible to make a determination as to whether or not these shipments will be legal under the Jones Act. Further-information relating to the instant shipments will be necessary.
Accordingly, we are unable to provide blanket guidance on the Jones Act status of the shipments based on the documentation provided in the current submission. In order to determine the Jones Act status for these shipments we [CBP LSS] will need the specifications at the time of export from the U.S. for the “Blendstock 1” and the specifications of “RBOB” at the time of import to determine whether or not they meet the ASTM specifications for gasoline. (italics added.) …
[I]t is our opinion that the blending process would not produce a “new and different” article of commerce.
We emphasize that in CBP Ruling HQ 112895, dated February 2, 1994, we previously stated:
In its analysis, the Customs Service [now U.S. Customs and Border Protection (“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. [CBP] 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.
Accordingly, we find that the proposed processing of the subject petroleum products in the Bahamas will not result in 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, as described within the particular information and specifications within your submission, would be considered a coastwise transportation within the meaning of 46 U.S.C. § 55102. 19 CFR § 4.80b(a). See also HQ H190675 (January 20, 2012); HQ 116650 (June 9, 2006); HQ 116230 (May 28, 2004); HQ 112895 (February 2, 1994); HQ 111846 (April 28, 1992).
We emphasize that our determination does not control any other “blending process” transaction described by different facts and specifications from those provided within your particular submission. Our determination is based upon the information provided and is limited to finding only that the subject proposed “blending process” as described by the information and specifications within this particular submission, would not be considered a “new and different product” within the meaning of 19 CFR § 4.80b(a).
In closing, we reiterate that with regards to your submission, the CBP LSS states:
In order to determine the Jones Act status for these [proposed] shipments we [CBP LSS] will need the specifications at the time of export from the U.S. for the “Blendstock 1” and the specifications of “RBOB” at the time of import to determine whether or not they meet the ASTM specifications… (italics added.)
HOLDING:
Based upon the specifications provided and all of the discussion above, we find that the subject proposed “blending operations,” as specifically described within this particular submission, would not 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 would be considered a coastwise transportation with the meaning of 46 U.S.C. § 55102.
Sincerely,
George Frederick McCray
Supervisory Attorney-Advisor/Chief
Cargo Security, Carriers and Immigration Branch
Office of International Trade, Regulations & Rulings
U.S. Customs and Border Protection