VES-3-07-CO:R:IT:C 111888 BEW
Donald Zarin, Esquire
Milgrim Thomajan & Lee PC
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036-5405
RE: Coastwise Trade; Fuel Oil Blending; 46 U.S.C. App. 883, 19
CFR 4.80b(a)
Dear Mr. Zarin:
This is in response to your letter dated September 16, 1991,
requesting a ruling regarding the applicability of 46 U.S.C.
App. 883 to a proposed blending operation. Our ruling on this
matter is set forth below.
FACTS:
A U.S. corporation has loaded approximately 35,000 barrels
of heavy cycle oil, 10,000 barrels of carbon black oil, 5,000
barrels of light cycle oil, and 55,000 barrels of clarified
slurry oil onto a foreign flag vessel at a U.S. port.
Approximately 215,000 barrels of a high viscosity residual oil
will be loaded onto the same foreign-flag vessel at a foreign
port in a separate storage tank segregated from the U.S.
originated fuel oil. The company proposes to ship the segregated
oil to a port in the Caribbean, where the products would be off-
loaded and manufactured through blending in a shore tank leased
by the U.S. corporation. You state that all blending operations
of the U.S. origin and foreign origin oils will be performed in
the shore tank. The resultant new product of approximately
320,000 barrels would be classifiable as No. 6 fuel oil under the
American Standard for Testing Materials (ASTM) standard
specifications. The new product will be loaded onto a foreign-
flag vessel for shipment to and off-loading in a U.S. port.
ISSUE:
Whether the blending operation described above is
sufficient to create a "new and different product" within the
meaning of 19 CFR 4.80b(a) so that the proposed transportation of
the resultant blend by a foreign-flag vessel is not in violation
of 46 U.S.C. App. 883.
LAW AND ANALYSIS:
Title 46, United States Code Appendix, section 883 (the
merchandise coastwise law often called the "Jones Act") prohibits
the transportation of merchandise between United States coastwise
points, either directly or via a foreign port, or for any part of
the transportation, in any vessel other than a vessel built in
and documented under the laws of the United States and owned by
persons who are citizens of the United States.
In interpreting the coastwise laws, Customs has ruled that a
point in United States territorial waters is considered a point
embraced within the coastwise laws. The coastwise laws generally
apply to points in the territorial sea, defined as the belt,
three (3) nautical miles wide, adjacent to the coast of the
United States and seaward of the territorial sea baseline, and to
points located in internal waters, landward of the territorial
sea baseline, in cases where the baseline and the coastline
differ.
Section 4.80b(a), Customs Regulations, provides, in part,
that:
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 U.S. 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 than a coastwise point. The manufacturing or
processing may not take place on board a vessel. Pursuant to
T.D. 91-32 published in the Federal Register on April 10, 1991
(56 FR 14467) prior to reaching a determination that a new and
different product has in fact been created by a blending
operation for purposes of section 4.80b(a), the procedures and
specific data of such operations should be submitted by the party
seeking such a determination. Customs will then review the data
and make the necessary determination which will form the basis
for a decision regarding any possible violation of section 883.
Upon reviewing the specifications of this particular
blending operation, we note that the ASTM grades of the domestic
oil (No. 4 and No. 5) and that of the imported fuel oil blend
(No. 6) are different. Further, we note that a comparison of
the domestic oils and the imported No. 6 blend show significant
differences in the specifications for APT gravity, viscosity,
sulfur and heavy metals content and flash point not only between
the imported blend and domestic oils, but also among the domestic
oils.
Based on this data it is apparent that the petroleum
industry would consider the subject blending operation as having
created a product which is new and different that any of its
domestic oil components. Under the foregoing, we find than the
subject blending operation creates a new and different product
from that exported from the U.S. within the meaning of section
4.80b(a).
According, the transportation of the resultant blend by a
foreign-flag vessel would not be a violation of 46 U.S.C. App.
883.
HOLDING:
The blending operation described above is sufficient to
create a "new and different product" within the meaning of 19 CFR
4.80b(a) so that the proposed transportation of the resultant
blend by a foreign-flag vessel would not be a violation of 46
U.S.C. App. 883.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch