Coastwise Transportation; Fuel Oil Blending; 46 U.S.C. § 55102; 19 CFR § 4.80b(a); Request for Reconsideration of HQ H091497

HQ H095120 March 9, 2010 VES-3/3-07-OT-RR:BSTC:CCI H095120 GOB CATEGORY: Carriers Jeanne M. Grasso, Esq. Blank Rome LLP 600 New Hampshire Ave., N.W. Washington, DC 20037 RE: Coastwise Transportation; Fuel Oil Blending; 46 U.S.C. § 55102; 19 CFR § 4.80b(a); Request for Reconsideration of HQ H091497 Dear Ms. Grasso: This letter is in response to your letter of February 19, 2010 with respect to proposed diesel fuel oil blending operations at foreign locations by your client (the “requester”). You request reconsideration of HQ H091497, dated February 4, 2010. Our ruling is set forth below. FACTS: The requester proposes to blend certain diesel fuel oils at foreign storage facilities as follows: U.S.-origin Grade No. 2-D S15 diesel fuel would be blended with foreign-origin components, resulting in Grade No. 2-D S500 diesel fuel. U.S.-origin Grade No. 2-D S15 diesel fuel would be blended with foreign-origin components, resulting in Grade No. 2-D S5000 diesel fuel. U.S.-origin Grade No. 2-D S500 diesel fuel would be blended with foreign-origin components, resulting in Grade No. 2-D S5000 diesel fuel. The U.S.-origin diesel fuel oils, along with foreign-origin goods such as other diesel fuels or gas oils such as jet, kerosene, finished diesels, and distillate blendstock, would be transported to the foreign storage facilities on a foreign-flag vessel. After blending, the blended products would be transported to the United States on a foreign-flag vessel. In HQ H091497, Customs and Border Protection (“CBP”) found that the proposed blending of the diesel fuel oils at the foreign locations will not 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), CBP held that the proposed transportation would be considered coastwise transportation within the meaning of 46 U.S.C. § 55102 and that if such transportation is accomplished by a non-coastwise-qualified vessel, the transportation would be violative of 46 U.S.C. § 55102. The requester seeks reconsideration of HQ H091497, maintaining its position that the proposed blending operations would result in the creation of new and different products within the meaning of 19 CFR § 4.80b(a). 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. § 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, § 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 United States 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), CBP Regulations (19 CFR § 4.80b(a)) 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 HQ 112895, dated February 2, 1994, we stated: In its analysis, the Customs Service [now, 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. The Customs Service 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. LSS has determined that the subject diesel fuel oils are ASTM No. 2 diesel fuel oils both before and after the blending operation. LSS has therefore concluded that the diesel fuel oils blended at the foreign locations are not new and different products from the diesel fuel oils which were transported to the foreign locations. Accordingly, we find that the proposed blending of the diesel fuel oils at the foreign locations will not 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 would be considered coastwise transportation within the meaning of 46 U.S.C. § 55102. If such transportation is accomplished by a non-coastwise-qualified vessel, the transportation would be violative of 46 U.S.C. § 55102. HOLDING: The proposed blending operations would not 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 diesel fuel oils would be considered to be coastwise transportation with the meaning of 46 U.S.C. § 55102. If such transportation is accomplished by a non-coastwise-qualified vessel, the transportation would be violative of 46 U.S.C. § 55102. EFFECT ON OTHER RULINGS: HQ H091497 is affirmed. Sincerely, Glen E. Vereb Chief Cargo Security, Carriers, and Immigration Branch