OT:RR:BSTC:CCR H319592 AMW
Lisa Carpenter
Vice President, Compliance
Charter Brokerage, LLC
22763 Westheimer Parkway, Suite 500
Katy, TX 77450
RE: 46 U.S.C. § 55102; 19 CFR § 4.80b(a); New and Different Product; Proposed Transportation of Gasoline Blendstock.
Dear Ms. Carpenter:
This is in response to your July 8, 2021, letter in which you request a ruling on behalf of [ ] determining whether the proposed transportation of certain blendstocks by a non-coastwise-qualified vessel would constitute a violation of 46 U.S.C. § 55102. Our decision follows.
FACTS
The following facts are from your ruling request and follow-up information provided to this office on August 24, 2021. You propose to transport alkylate and gasoline blendstock from [ ], a U.S. coastwise port, to the [ ], a foreign port, onboard the non-coastwise-qualified M/V LARGO SEA (“the vessel”). The blendstock to be laden in the United States will not meet either the (1) ASTM standard for engine fuel nor (2) the published Colonial pipeline specifications for conventional blendstock for oxygenated blending (“CBOB”) and ASTM standard for engine fuel. You state that the first shipment will occur on September 21, 2021 with continuing shipments thereafter.
Upon arrival at [ ], the foreign port, the blendstock and alkylate will be discharged and blended on-shore to produce a product that you state will meet ASTM and Colonial Pipeline Company Product Codes and Specifications for CBOB. The resulting CBOB will then be transported onboard the vessel to a second U.S. coastwise port, [ ].
ISSUE
Whether, based on the product specifications provided, the proposed blending operation would result in the creation of a “new and different product” within the meaning of 19 CFR § 4.80b(a), such that the proposed transportation by a non-coastwise-qualified vessel would not be in violation of 46 U.S.C. § 55102.
LAW AND ANALYSIS
Pursuant to 46 U.S.C. § 55102, 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 has a coastwise endorsement.
(emphasis added).
Under 19 CFR § 4.80b(a):
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).
CBP has consistently held that in order for fuel oil to qualify as a new and different product, it must undergo a change in American Society for Testing Material (“ASTM”) grade. In HQ H101115 (Apr. 23, 2010), CBP stated that in adherence to industry standards, when fuel oil changes ASTM grades, it becomes a new and different product. In that case, CBP found that the transportation would not be in violation of 46 U.S.C. § 55102 because the merchandise was imported at one ASTM grade and exported at another ASTM grade. See also HQ H190675 (Jan. 20, 2012); HQ 116650 (June 9, 2006); HQ 116230 (May 28, 2004); HQ 112895 (Feb. 2, 1994); HQ 111846 (Apr. 28, 1992).
We have sought and received advice from CBP’s Laboratories and Scientific Services Directorate (“LSSD”) as to whether the subject blending operation results in a new and different product. Based on the information provided in your request, which includes specifications and blending processes, LSSD has advised that the blending process you propose would result in a new and different product within the meaning of 19 C.F.R. § 4.80b(a). LSSD determined that the CBOB created during blending operations in [ ] represents a new and different product in circumstances in which the gasoline blendstock exported from the United States has an “antiknock index” below 87 after the addition of ethanol.
The LSSD first reviewed the ASTM and Colonial Pipeline specifications for CBOB. Your request states that the 10% evaporation level at 170.4º F (with a range of 159º F – 190º F) for the exported alkylate does not meet the Colonial Pipeline specifications for CBOB, which is set at the maximum of 158º F. Second, your request also notes that the exported gasoline blendstock does not meet the antiknock index (“AKI”) for CBOB set at a minimum 87 (after blending with ethanol) by the Colonial Pipeline specification. According to ASTM D4814-21a, furthermore, the antiknock index is the arithmetic average of the research octane number (“RON”) and the motor octane number (“MON”). In other words, this formula can be expressed as follows: AKI = (RON + MON) / 2. The AKI is also known as the ‘octane rating’ of spark-ignition engine fuels. Your request states that the AKI with ethanol of the gasoline blendstock will be at 85.8 (range of 72.5 – 86.9).
The simulated certificate of analysis for the blended product provided in your request does appear to meet ASTM D4814-21a as well as Colonial Pipeline specifications for CBOB after blending with ethanol. We do note, however, that the upper limit of the combustion properties (RON and MON, and accordingly the AKI) for the gasoline blendstock will likely need to be lowered. Ethanol has a high AKI (about 100), and its addition to the gasoline blendstock will raise the AKI. If the AKI is close to 87, then the addition of ethanol will likely qualify the gasoline blendstock as CBOB per Colonial Pipeline specifications before blending with the alkylate. This would mean that a new and different product would not be produced from the proposed blending at [ ].
In summary, the blended product at [ ] meets ASTM D4814-21a and Colonial Pipeline specifications for CBOB. However, the gasoline blendstock’s AKI will need to be low enough such that the addition of ethanol will keep it below 87. Accordingly, a new and different product will be produced assuming that the gasoline blendstock’s AKI remains below 87 if ethanol were to be added to it. Consequently, we recommend that [ ] test and retains records for each batch of gasoline blendstock and alkylate undergoing this proposed blending operation to ensure that they do not meet ASTM D4814-21a and Colonial Pipeline specifications for CBOB.
Pursuant to 19 CFR § 4.80b(a), and in adherence to the LSSD findings, the proposed transportation would be in compliance with 46 U.S.C. § 55102 because the gasoline blendstocks and alkylates described in your request to be transported from [ ], will be transformed into CBOB, a new and different product, while at the [ ], a foreign place.
HOLDING
Based on the import and export specifications provided, the proposed blending operations would result in the creation of a new and different product within the meaning of 19 CFR § 4.80b(a); therefore, the proposed transportation by a non-coastwise-qualified vessel would be in compliance with the Jones Act, 46 U.S.C. § 55102.
Sincerely,
W. Richmond Beevers
Chief/Supervisory Attorney-Advisor
Cargo Security, Carriers and Restricted Merchandise Branch
Office of International Trade, Regulations and Rulings
U.S. Customs and Border Protection