OT:RR:BSTC:CCR H333725 SEH
Shara L. Aranoff
Nicolle Wainer
Covington & Burling LLP
One CityCenter
850 Tenth Street, NW
Washington, DC 20001
RE: 46 U.S.C. 55102; 19 C.F.R. 4.80b(a); New and Different Product; Proposed Transportation of Gasoline Blendstock
Dear Ms. Aranoff:
This is in response to your August 9, 2023 letter ("ruling request"), in which you request a ruling on behalf of your client [ ] (hereinafter "the Company") from U.S. Customs and Border Protection ("CBP") determining whether the proposed transportation of certain identified components and resulting blended product(s) by a non-coastwise-qualified vessel in conjunction with contemplated blending operations would constitute a violation of 46 U.S.C. 55102.[1] Our decision follows.
FACTS:
The following facts are from the ruling request. The Company proposes to transport gasoline components from ports along the Gulf Coast or in Florida to a marine terminal in [
] (the "foreign terminal") aboard foreign-flag vessels. The components may include one or more of the following: heavy naphtha, light naphtha, raffinate, reformate, alkylate, butane, and catalytic-cracked gasoline ("CatGas").[2]
At the foreign terminal, these components will undergo a blending process using the facility's tank mixing capabilities to produce one or more types of gasoline, such as Blendstock for Oxygenate Blending ("BOB") (including RBOB, i.e. Reformulated BOB, and CBOB, i.e. Conventional BOB), which requires the addition of ethanol after importation and prior to use as U.S. motor gasoline, or Finished Gasoline, which does not require the post-importation addition of ethanol. The Finished Gasoline would include 87 Octane Index Conventional Gasoline (M Grade-Conventional) and 93 Octane Index Conventional Gasoline (V Grade-Premium). Foreign-source components or blendstocks may be added during the blending process.
The Company proposes to then transport the BOB or Finished Gasoline back to the United States by foreign-flag vessels for unloading at ports in the Northeast, along the Gulf Coast, or in Florida. Once returned to the United States, the BOB or Finished Gasoline will undergo no further processing except that RBOB or CBOB will be blended with ethanol as needed to meet U.S. motor gasoline requirements.
The ruling request included import and export specifications for the proposed transportations. On June 25, 2024, counsel submitted revised import and export specifications to CBP on behalf of the Company. The Company claims that none of the blend components will be suitable for use as a fuel in spark-ignition, internal combustion engines in the U.S. as required by applicable ASTM standards, Colonial Pipeline standards, or EPA requirements.[3] The Company claims additionally, that the blending operation will produce RBOB and/or CBOB which (after blending with ethanol as required) will meet applicable ASTM, EPA, and Colonial Pipeline standards and that the Finished Gasoline the blending operation will also produce will meet applicable ASTM, EPA, and Colonial Pipeline standards.[4]
The Company contends, "[t]herefore, the transportation of the gasoline components, as described ... from the United States, and their subsequent return to the United States on foreign-flag vessels after blending at the foreign terminal with foreign gasoline components to create BOB or Finished Gasoline does not fall within 46 U.S.C. 55102 because the blending at the foreign terminal creates a "new and different product" under 19 C.F.R. 4.80b(a)."[5]
ISSUE:
Whether based on the import export specifications provided on June 25, 2024, in an updated version of Exhibit A to [ ] Jones Act ruling request of August 9, 2023 ("Revised Exhibit A"), the proposed blending operations would result in the creation of a "new and different product" within the meaning of 19 C.F.R. 4.80b(a), such that the proposed transportation by non-coastwise-qualified vessels would not be in violation of 46 U.S.C. 55102.
LAW AND ANALYSIS:
Pursuant to 46 U.S.C. 55102 ("the Jones Act"), 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.[6] Under 19 C.F.R. 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.[7]
(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 Headquarters Ruling ("HQ") 112895 (Feb. 2, 1994), the Customs Service (now 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. App. 883 (now 46 U.S.C. 55102) because the merchandise when imported would not meet the ASTM specifications for gasoline but would be exported as unleaded gasoline meeting the ASTM specifications.[8] In HQ H249067 (Mar. 6, 2014), CBP's Laboratories and Scientific Services Directorate ("LSSD") provided conditions that imported RBOB and CBOB must meet and indicated that, absent further processing, blending 10% ethanol with imported RBOB and CBOB to be used as motor fuel would not preclude the RBOB and CBOB from being considered a new and different product.[9]
Accordingly, we have sought advice from LSSD as to whether the proposed blending operations would result in a new and different product. Having reviewed the specification ranges for all of the blend components in this ruling request, LSSD has advised that based on the information provided, it does appear that heavy naphtha, light naphtha, raffinate, reformate, and butane do not qualify as CBOB, RBOB, or finished gasoline (M Grade or V Grade[10]) for various reasons. However, LSSD has advised further that the range of characteristics provided for the alkylate and the CatGas indicate that they can qualify as CBOB, RBOB, or finished gasoline (M Grade or V Grade) before blending with other components. For the alkylate, it will qualify as CBOB, RBOB, or finished gasoline before blending if the distillation temperature at 10% evaporated is at 158 deg F or below. This means, according to LSSD, that blending an alkylate with this characteristic will not produce a 'new and different' article of commerce because all of the other specifications provided in the Revised Exhibit A qualify the alkylate for CBOB, RBOB, or finished gasoline. For the CatGas, both the RVP and the Bz (benzene and toluene content) qualify for CBOB, RBOB, or finished gasoline. The provided ranges of the octane rating, sulfur content, and distillation temperatures all include values that qualify the CatGas as CBOB, RBOB, or finished gasoline. This means, according to LSSD, that blends with the CatGas will not produce a 'new and different' article of commerce if it qualifies as CBOB, RBOB, or finished gasoline before blending. As a result, LSSD recommends that the company test each shipment of the alkylate and the CatGas to ensure they do not qualify as CBOB, RBOB, or finished gasoline (M Grade or V Grade) before shipping and blending.
Therefore, we find, subject to the exceptions articulated by LSSD regarding the use of either alkylate or CatGas that already possesses each of the characteristics to qualify as CBOB, RBOB, or finished gasoline (M Grade or V Grade) before blending, that the blending operations proposed would result in a new and different product. Thus, under 19 CFR 4.80b, the subsequent transportation of the finished product(s) aboard a non-coastwise qualified vessel would not be in violation of 46 U.S.C. 55102.
As a condition of reliance on this ruling, the Company shall ensure that the aforementioned testing that LSSD recommends for each shipment of alkylate and CatGas is carried out and that the Company retains records of such testing.
HOLDING:
1. Blends with an alkylate that qualifies as CBOB, RBOB, or finished gasoline before blending, i.e., if the alkylate distillation temperature at 10% evaporated is at 158 deg F or below, will not produce a "new and different" article of commerce. Transportation of such merchandise by a non-coastwise-qualified vessel would be in violation of 46 U.S.C. 55102. Accordingly, the company must test each shipment of the alkylate to ensure it does not qualify as CBOB, RBOB, or finished gasoline (M Grade or V Grade) before shipping and blending in order to avoid violation of 46 U.S.C. 55102.
2. Blends with CatGas that qualifies as CBOB, RBOB, or finished gasoline before blending, as described above, will not produce a "new and different" article of commerce. Transportation of such merchandise by a non-coastwise-qualified vessel would be in violation of 46 U.S.C. 55102. Accordingly, the company must test each shipment of the CatGas to ensure it does not qualify as CBOB, RBOB, or finished gasoline (M Grade or V Grade) before shipping and blending in order to avoid violation of 46 U.S.C. 55102.
3. All other proposed blending operations as described above would result in the creation of new and different product(s) within the meaning of 19 CFR 4.80b(a). Therefore, the proposed transportation by a non-coastwise-qualified vessel would not violate the Jones Act, 46 U.S.C. 55102.
Please note that 19 C.F.R. 177.9(b)(1) provides that "[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based." If the facts at hand vary from the facts stipulated to herein, this decision shall not be binding on CBP as provided for in 19 C.F.R. 177.2(b)(1), (2) and (4), and 177.9(b)(1) and (4).
Sincerely,
W. Richmond Beevers
Chief, Cargo Security, Carriers and Restricted Merchandise Branch
Office of International Trade, Regulations and Rulings
U.S. Customs and Border Protection
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[1] You have asked this office for confidential treatment of all information contained in brackets, which includes your client's name. CBP Regulations at 19 C.F.R. 177.2(b)(7) provide that the requester of a ruling from our office may ask that privileged or confidential commercial or financial information supplied for purposes of preparing the requested ruling not be disclosed. Such requests will be considered if the information is clearly identified and the reasons for requesting that information not be disclosed are provided. If this office receives a Freedom of Information Act request for your submission, Regulations at 6 C.F.R. 5.12, et seq. regarding the disclosure of business information provide that the submitter of business information will be advised of receipt of a request for such information whenever the business submitter has in good faith designated the information as commercially or financially sensitive information. We accept your request for confidential treatment as a good faith request.
[2] Ruling Request at 2-3.
[3] Ruling Request at 5-6.
[4] Id.
[5] Ruling Request at 6.
[6] 46 U.S.C. 55102 (emphasis added).
[7] 19 C.F.R. 4.80b(a) (emphasis added).
[8] See also HQ 116650 (June 9, 2006); HQ 111846 (Apr. 28, 1992).
[9] See also HQ H259293 (Jan. 29, 2015).
[10] M Grade refers to M Grade Specification for Conventional Regular Gasoline 87 Octane Index from Colonial Pipeline Company's Product Codes and Specifications. V Grade refers to V Grade Specification for Conventional Premium Gasoline 93 Octane Index from Colonial Pipeline Company's Product Codes and Specifications.
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