VES-3/3-07-BSTC:CCI 116650 GOB
Andrea Grant, Esq.
Lynn Van Buren, Esq.
DLA Piper Rudnick Gray Cary US LLP
1200 Nineteenth Street, N.W.
Washington, DC 20036-2412
RE: Coastwise Trade; Oil Blending; 46 U.S.C. App. § 883; 19 CFR 4.80b(a); New and Different Product
Dear Ms. Grant and Ms. Van Buren:
This letter is with respect to your ruling request of April 28, 2006 on behalf of Irving Oil Terminals, Inc., Irving Oil Transportation Company, Irving Oil Corporation and Irving Oil Energy. You provided additional information in correspondence of May 16, 2006 and June 7, 2006. Our ruling follows.
FACTS:
In your April 28, 2006 letter, you describe the pertinent facts as follows:
Irving owns and operates a refinery in Saint John, New Brunswick, Canada. It produces gasoline, diesel fuel, jet fuel, kerosene, heating oil and other refined petroleum products for both Canadian and U.S. markets. The Company’s U.S. subsidiaries import product from the Saint John facility and other sources abroad. This petition is filed on behalf of these importers.
The Company plans, on an ongoing basis, to (1) purchase gasoline blendstocks such as, but not limited to, heavy naptha, reformate, raffinate, iso octane and iso octene in the United States; (2) ship the blendstocks to Canada on a foreign-flag vessel; (3) offload the blendstocks and blend them with other components at its refinery; (4) produce RBOB – “Reformulated Gasoline Blendstock for Oxygenate Blending [Footnote omitted.];” and (5) ship the finished RBOB to the United States on a foreign-flag vessel. In most cases, the product will be imported by the Company and entered at ports on the U.S. East Coast – the Company’s primary market area. The specifications of both the blendstocks used in the operation and the resulting RBOB will meet accepted industry standards.
Gasoline blendstocks are components of motor gasoline. They are very different from RBOB, which is essentially finished motor gasoline. RBOB is not sold as finished gasoline by the petroleum industry because it lacks oxygenate – typically ethanol – to meet Federal environmental and energy mandates.
. . .
In almost all instances, the Company will use the stated blendstocks to make RBOB. However, on rare occasions, it may blend the components into “conventional gasoline.” Conventional gasoline is gasoline that is not certified as reformulated gasoline and does not meet the same stringent environmental standards as reformulated gasoline. [Footnote omitted.]
You have submitted product specifications with your submissions.
ISSUE:
Whether the proposed blending operations would result in the creation of “new and different products” 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. App. § 883.
LAW AND ANALYSIS:
Title 46, United States Code Appendix, Section 883 (46 U.S.C. App. § 883), the coastwise merchandise statute often called the “Jones Act,” provides in part that no merchandise shall be transported 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 vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. Equipment and supplies of the transporting vessel are not considered “merchandise” for this purpose.
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.
Section 4.80b(a), Customs and Border Protection (“CBP”) Regulations
(19 CFR § 4.80b(a)), promulgated pursuant to 46 U.S.C. App. § 883, provides as follows:
§ 4.80b Coastwise transportation of merchandise.
(a) 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 Ruling 112895, dated February 2, 1994, we 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.
We have referred this matter to CBP’s Laboratories & Scientific Services (LSS), Office of Information and Technology, for its review. After a thorough consideration, LSS has determined that the proposed processing of the fuel oil in Canada into Reformulated Gasoline Blendstock for Oxygenate Blending (“RBOB”) and conventional gasoline will result new and different products.
Accordingly, we find that the proposed processing of the fuel oil in Canada into RBOB and conventional gasoline will result in the manufacture or processing into new and different products within the meaning of 19 CFR 4.80b(a).
Therefore, pursuant to 19 CFR § 4.80b(a), the proposed transportation is not considered coastwise transportation within the meaning of 46 U.S.C. App.
§ 883.
We emphasize that our determination does not relate in any way to the “blending process” itself. Our determination is solely that the products returning to the U.S. will be “new and different products,” within the meaning of 19 CFR § 4.80b(a) and 46 U.S.C. App. § 883, from that which left the U.S. Further, our determination applies only to the products and specifications explicitly described in your ruling submissions.
HOLDING:
The proposed blending operations would result in the creation of “new and different products” within the meaning of 19 CFR § 4.80b(a). Therefore, pursuant to 19 CFR 4.80b(a), the proposed transportation of the resultant products is not considered to be coastwise transportation with the meaning of 46 U.S.C. App. § 883.
Sincerely,
Glen E. Vereb
Chief
Cargo Security, Carriers, and Immigration Branch