Coastwise Transportation; Blending of Coal; 46 U.S.C. § 55102; 19 CFR § 4.80b(a); New and Different Product

HQ H075178 October 26, 2009 VES-3/3-07-RR-BSTC:CCI H075178 GOB CATEGORY: Carriers Steven J. Read Sales & Marketing Manager Rio Tinto Energy America 8051 E. Maplewood Avenue, Bldg. 4 Greenwood Village, CO 80111 RE: Coastwise Transportation; Blending of Coal; 46 U.S.C. § 55102; 19 CFR § 4.80b(a); New and Different Product Dear Mr. Read: This letter is in response to your ruling request of September 9, 2009 on behalf of Rio Tinto Energy America (“Rio Tinto”). Our ruling is set forth below. FACTS: Rio Tinto owns the Spring Creek Mine near Decker, Montana, where it mines sub-bituminous coal (hereinafter referred to as “Spring Creek coal”). It transports certain of its production via rail to Westshore Terminal near Vancouver, Canada. Most of this coal is then shipped to Japan, China, or South Korea. Rio Tinto proposes to blend Spring Creek coal with certain bituminous Canadian coal (hereinafter referred to as “Teck Thermal coal”) at Westshore Terminal. Rio Tinto would then load the blended coal onto a vessel destined for Barber’s Point, Hawaii. We assume the transporting vessel is non-coastwise-qualified. You have submitted specifications for the products to be blended, i.e., the Spring Creek coal and the Teck Thermal coal. ISSUE: Whether the proposed blending operation would result in the creation of a “new and different product” 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. § 55102. LAW AND ANALYSIS: 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: (1) is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and (2) has been issued a certificate of documentation with a coastwise endorsement or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement. A vessel which has been issued a certificate of documentation with a coastwise endorsement or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement is said to be 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. Section 4.80b(a), Customs and Border Protection (“CBP”) Regulations (19 CFR § 4.80b(a)), promulgated pursuant to 46 U.S.C. App. § 55102, 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. We have referred this matter to CBP’s Laboratories & Scientific Services (“LSS”) for its review. After a thorough consideration, LSS has determined that the blended coal product produced at Westshore Terminal near Vancouver, Canada is not a “new and different product” from that product which was transported from the U.S. by rail to that location, i.e., the Spring Creek coal. LSS found that while the addition of the Teck Thermal coal does reduce the ash and moisture content and marginally raise the calorific value of the Spring Creek coal, this is an adjustment of certain of the properties of the coal and not the production of a new and different product. The blended coal is still a coal having essentially the same properties as the Spring Creek coal. Essentially, both the U.S.-originating Spring Creek coal and the blended coal are a low calorific coal with differences in ash and moisture content. Accordingly, we find that the proposed blending of the Spring Creek coal and the Teck Terminal coal at Westshore Terminal near Vancouver, Canada will not result in the manufacture or processing of a “new and different product,” within the meaning of 19 CFR § 4.80b(a), from the Spring Creek coal. Therefore, pursuant to 19 CFR § 4.80b(a), the proposed transportation is considered coastwise transportation within the meaning of 46 U.S.C. § 55102. Consequently, the use of a non-coastwise-qualified vessel to effect such transportation would constitute a violation of that statute. HOLDING: The proposed blending operation will not result in the creation of a “new and different product” within the meaning of 19 CFR § 4.80b(a). Therefore, the proposed transportation of the resultant product by a non-coastwise-qualified vessel would constitute a violation of 46 U.S.C. § 55102. Sincerely, Glen E. Vereb Chief Cargo Security, Carriers, and Immigration Branch