VES- 3-OT-RR:BSTC:CCI H190675 ALS
Jeanne M. Grasso, Esq.
Blank Rome, LLP
600 New Hampshire, N.W.
Washington, D.C. 20037
RE: 46 U.S.C. § 55102; Continuity of Transportation
Dear Ms. Grasso: This letter is in reply to your submission of October 11, 2011, on behalf of your client Brightoil Petroleum (USA), Inc., 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: Brightoil proposes to transport fuel oil from Freeport, Bahamas to a to-be-determined coastwise point, after it had been transported from a coastwise point to Freeport. Specifically, Brightoil proposes the following scenarios:
Scenario #1: One blendstock would be transported on a single vessel.
You state the following:
One blendstock meeting ASTM 396 specifications for No. 1, No. 2, No. 4, or No. 5 fuel oil or High Sulfur Fuel Oil, Viscosity > 50.0@100C (“HSFO”) would be loaded at a Gulf or East Coast port and transported to BORCO [“Bahamas Oil Refining Company”]. Upon arrival at the BORCO terminal, the blendstock would be discharged into shore tanks and blended with foreign-source product to produce a material that meets ASTM 396 for No. 6 fuel oil. The final product would be transported via a foreign-flag vessel from the BORCO terminal to a Gulf or East Coast port.
Scenario #2: Two or more blendstocks would be transported on a single vessel in segregated tanks.
You state the following:
HSFO and/or No. 1, No. 2, No. 4, or No. 5 fuel oil would be loaded at a Gulf or East Coast port, and any of those same products would be loaded at a different Gulf or East Coast port and transported on a single vessel in segregated tanks to the BORCO terminal. Upon arrival at the BORCO terminal, the two or more separate blendstocks would be discharged into shore tanks and blended, possibly also with foreign-source product, to produce a material that meets ASTM 396 for No. 6 fuel oil. The final product would be transported via a foreign-flag vessel from the BORCO terminal to a Gulf or East Coast port.
Scenario #3: Two or more blendstocks would be transported on a single vessel in non-segregated tanks.
You state the following:
HSFO and/or No. 1, No. 2, No. 4, or No. 5 fuel oil would be loaded at a Gulf or East Coast port into one tank, and any of those same products would be loaded at a different Gulf or East Coast port into the same tank and transported on a single vessel to the BORCO terminal. Upon arrival at the BORCO terminal, the combined blendstocks would be discharged into shore tanks and blended, possibly also with foreign-source product, to produce a material that meets ASTM 396 for No. 6 fuel oil. The final product would be transported via a foreign-flag vessel from the BORCO terminal to a Gulf or East Coast port.
ISSUE: Whether the use of a non-coastwise-qualified vessel to transport the fuel as proposed to a coastwise point within the United States, other than the point(s) of lading of the fuel transported from the United States to the Bahamas, would constitute a 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. A vessel that is built in, documented under the laws of, and owned by citizens of the United States, and which obtains a coastwise endorsement from the U.S. Coast Guard, 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), 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 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. 335, 362. 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, e.g., 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 contend that, with the blending of the fuel oil transported from the United States to the Bahamas while it is in the Bahamas, the fuel oil is not being transported coastwise because the blending results in a “new and different product.” We have sought and received advice from our Office of Laboratories and Scientific Services (OLSS) as to whether the processing you describe results in a new and different product.
OLSS has concluded that the blending process you propose in Scenarios #1 and #2 would result in a new and different product within the meaning of 19 CFR 4.80b(a), based on the information provided. OLSS specifically notes that while the resulting blended product would conform to ASTM standards for No. 6 fuel oil based on the information provided, the resulting product would be lower in quality than that of the product transported to the Bahamas.
With regard to Scenario #3, OLSS states that it “would be impossible to determine this scenario’s Jones Act status without having the specifications of the mixed product in the tank prior to departure. Placing the finished oils into the same tank on board a vessel would result in a crude blending process which would affect the grade of the product leaving the U.S. Therefore, a comparison of the product as it left the U.S. against a No. 6 fuel oil would not be able to be completed without review of the specifications of the mixed product on board the exporting vessel.”
In light of these findings, we find that the movement of fuel oil on a foreign-flagged vessel to the Bahamas to be processed into a new and different product as described in Scenarios #1 and #2, then transported by a foreign-flagged vessel back to the United States, does not violate 46 U.S.C. § 55102. Based on the information provided, we are unable to rule on Scenario #3. Please note that if the fuel oil transported to the Bahamas is processed in a manner different than what you described to us in your October 11, 2011 submission, subject to verification, then our finding herein does not apply.
HOLDING: Based on the facts presented herein as described in Scenarios #1 and #2, the use of a non-coastwise-qualified vessel for transportation of fuel oil from United States to The Bahamas to be processed as noted above, then transported back to a coastwise point(s) in the United States other than the points of lading of the exported fuel oil, will not be a violation 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