VES-3-CO:R:P:C
111035 RAH
Gorham W. Hussey
Executive Vice President
Agri Trends Researching Inc.
Suite 238, 6715 8th Street N.E. Calgary
Alberta, Canada T2EH7
RE: Coastwise Trade; 19 U.S.C. App. 883; 19 CFR 4.80b(a);
New and Different Product; Cattle; Beef Products
This is in response to your letter of May 8, 1990, in which
you stated that your client is interested in shipping Hawaiian
produced and owned beef calves and feeder cattle to Canada for
further feeding and later sale.
The cattle would be shipped on a specialized Danish
livestock ship for Hawaii to Vancouver, British Columbia, where
they would be fed and fattened (to almost double their original
weight) over a 5 to 7 month period.
You ask whether your client would be restricted under the
Jones Act or other U.S. regulations from selling and/or returning
slaughtered beef products to a U.S. packer.
ISSUES:
1) Do cattle fattened to almost double their original weight at
an intermediate port result
in a new an different product pursuant to 19 CFR 4.80b(a);
2) Do cattle subsequently slaughtered and made into beef
products at an intermediate port result in a new and different
product pursuant to 19 CFR 4.80b(a);
3) Is the above merchandise transported from Hawaii to an
intermediate port (Vancouver, British Columbia) so similar
to the merchandise subsequently shipped back to the United
States that the processing at Vancouver fails to interrupt
an essentially single voyage of the cattle from Hawaii to the
mainland United States, thereby constituting a coastwise
violation?
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LAW AND ANALYSIS:
Section 27 of the Act of June 5, 1920, as amended (41 Stat.
999; 46 U.S.C. App. 883, often called the Jones Act), provides
that:
No merchandise shall be transported by water,
or by land and water, on penalty of
forfeiture of the merchandise (or a monetary
amount up to the value thereof...), between
points in the United States ... embraced
within the coastwise laws, either directly or
via a foreign port, or for any part of the
transportation, in any other vessel than a
vessel built in and documented under the laws
of the United States and owned by person who
are citizens of the United States ....
Section 4.80b(a), Customs Regulations (19 CFR 4.80b(a)),
promulgated un the authority of 46 U.S.C. App. 883, provides
that:
... 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 applying section 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 thana coastwise point. Furthermore, the
manufacturing or processing may not take place on board a vessel.
In American Maritime Association v. Blumenthal, 590 F. 2d
1156 (1978), cert. den. 441 U.S. 943, the United States Court of
Appeals, District of Columbia, considered whether Alaska crude
oil could transported by on-coastwise-qualified vessels from
Alaska to the United States Virgin Islands (a non-coastwise
point) and there refined and then transported onward to a point
in the continental United States. The court stated (590 F. 2d
1156, at 1161) that the "central issue, therefore, is whether the
merchandise' (crude oil) transported from Valdez to St. Croix by
Hess is so similar to the merchandise' (refined oil products)
subsequently shipped from
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St. Croix to the continental United States that the processing at
St. Croix fails to interrupt an
essentially single voyage of the oil from Valdez, Alaska to the
East Coast." (See also, footnote 38, 590 F. 2d 1156, at 1163,
referring to letter rulings of Customs on this issue. The Court,
in this footnote, noted that "[i]n these rulings the degree to
which a product has been altered by processing at the point of
transshipment has generally been dispositive of whether the
continuity
of its transportation has been broken at that point ....") See
Customs Ruling Letter 109504
PH (8-12-88).
The Court held in the AMA V. Blumenthal case that the
transportation considered in that case did not violate 46 U.S. C.
App. 883 because the continuity of the transportation was broken
since the products of the crude oil transported after refining
were "quite different" from the crude oil transported to the
Virgin Islands, " i.e., [they were] products which are
physically,
chemically, and usefully different from the original crude oil."
(590 F. 2d 1156, at 1162, 1163.)
Customs has issued a number of rulings concerning the point
during a manufacturing process at which an item becomes a "new
and different article of commerce" for purposes of braking the
continuity of a transportation. If the continuity is thus
broken, a transportation which would otherwise be considered
coastwise in nature would not be so considered. We have held
that partially milled rice transported in a foreign-flag vessel
from California to the Virgin Islands where it is fumigated,
cleaned and polished by friction, passed through an aspirator to
remove all dust and small particles, graded to separate broken
and unbroken kernels, coated with glucose and talc, cleaned again
and "fortified" with niacin, thiamin, iron, and other minerals
and then transported to Puerto Rico (Puerto Rico is embraced
within the coastwise laws) is not considered to have been
transported in violation of 46 U.S.C. App. 883 "because the
continuity of the overall transportation from California to
Puerto Rico is deemed broken in the Virgin Islands" (Treasury
Decision (T.D.) 56272(2)). We have held that where rough or
unsurfaced lumber is transported from the United States, without
any intention that it be returned to a specific United States
market, to Canada where it is planed, trimmed, graded, and
packaged, the subsequent transportation of any of the packaged
lumber by foreign-flag vessel to a coastwise point is not in
violation of 46 U.S.C. App. 883 "because the continuity of the
overall transportation is deemed broken in Canada" (T.D.
56320(2)). We have held that the blending of oil with other oils
which results in a product with different sulphur content,
specific gravity, pour point, and viscosity than the oils which
were blended is a manufacture or processing into a new different
product, within the meaning of 19 CFR 4.80b(a) (see rulings dated
November 16, 1982 (105804),
October 19, 1984 (107071), and September 30, 1985 (107912)).
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We have also ruled on the application of this principle to
the transportation and processing of crab. Our ruling dated
September 12, 1980 (104859, see also cases identified as
104955/104859 and 105021), concerned the transportation of King
Crab clusters from Alaska to Vancouver, British Columbia, where
the crabs would be processed from clusters, which are half a crab
body with legs and claws attached, into section, which are
individual legs or claws with the body trimmed, or freely offered
for sale while kept in frozen storage in Canada. It was
anticipated that one-third to one-half of the crabs would be sold
in Canada, although the entire cargo was to be entered through
Canadian Customs and was to be subject to Canadian Customs
duties. Following the criteria set forth in the AMA v.
Blumenthal decision, we held that the crab sections would not be
considered new and different products, within the meaning of 19
CFR 4.80b(a), and that the fact of entry of the entire cargo of
crab through Canadian Customs and payment of Canadian Customs
duties would not be considered to break the continuity of
transportation of the crab.
In the instant case, we believe that beef products, whether
or not dressed, frozen, canned etc., are sufficiently different
from the cattle from which they derive so that a new and
different product results within the meaning of 19 CFR 4.80b(a).
(See T.D. 56535(1), in which we held under the old Tariff
Schedule of the United States that cattle exported to Mexico to
be slaughtered and processed into dressed beef carcasses ready to
be divided into halves, quarters, and other cuts of meat resulted
in the production of new and different articles of commerce).
On the other hand, we find that although the cattle may have
doubled in size there has been no refining or manufacturing
process as contemplated under the Blumenthal decision. We find
that the cattle in their "fattened" condition remain largely the
same in such respects as form and composition so that a ne and
different product within the meaning of 19 CFR 4.80b(a) does not
result.
HOLDING:
1) Cattle transported from Hawaii to Vancouver, British
Columbia, and fattened to almost double their original weight
do not result in a new and different product pursuant to
19 CFR 4.80b(a) and subsequent transportation thereof from
VanCouver to the
United States would result in a violation of 46 U.S.C. App
883.
2) Cattle transported from Hawaii to Vancouver, British
Columbia, where they will be
slaughtered, dressed or packed etc., result in a new and
different product pursuant to
19 CFR 4.80b(a) and subsequent transportation thereof from
VanCouver to the
United States would not result in a violation of 46 U.S.C.
App. 883.
This letter addresses only those federal requirements that
are administered by the
U.S. Customs Service pertaining to transportation of merchandise
under 46 U.S.C. App. 883. This letter does not address other
U.S. Custos issues that may be applicable to the transaction
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you propose , i.e. classification, marking, et cetera.
Furthermore, although we are unaware of
any other federal or state agency requirements that might pertain
to the undertaking you describe, it is possible that such
requirements exist.
If you have any further questions regarding this matter,
please do not hesitate to
contact our office.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch