Coastwise Transportation; 46 U.S.C. § 55102

HQ H117395 August 9, 2010 VES-3-02-OT:RR:BSTC:CCI H117395 WRB CATEGORY: Carriers Mr. Lance Nunez The Dow Chemical Company 1254 Enclave Parkway Houston, TX 77077-1607 RE: Coastwise Transportation; 46 U.S.C. § 55102 Dear Mr. Nunez: This letter is in response to your correspondence dated July 30, 2010, requesting a ruling on whether contaminated propylene oxide may be unladen at a point different from its original point of lading without violating the Jones Act, 46 U.S.C. § 55102. Our ruling on your request follows. FACTS On March 19, 2010, the non-coastwise-qualified M/T STOLT INSPIRATION loaded 1200 MT of propylene oxide in two tanks at Freeport, Texas. The cargo was intended to be discharged at a Dow plant in China. Enroute, the carrier notified Dow that the vessel’s propylene glycol cooling system leaked approximately 500 liters of propylene glycol into a tank holding 260 MT of the propylene oxide, contaminating it. The contaminated propylene oxide was discharged at a terminal in Map Ta Phut, Thailand. Due to the configuration of the Map Ta Phut terminal, when the contaminated propylene oxide is transshipped, it will be carried in 16 containers. Dow desires to ship the contaminated propylene oxide in containers to its facility in Plaquemine, Louisiana for reprocessing, through a container terminal located at either New Orleans, Louisiana or Houston, Texas. ISSUE Whether the transportation of merchandise by a non-coastwise-qualified vessel as described above constitutes a violation of 46 U.S.C. § 55102? LAW AND ANALYSIS The Jones Act, 46 U.S.C. § 55102, states 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 was built in and documented under the laws of the United States and owned by persons who are citizens of the United States. (Emphasis supplied) See also 19 C.F.R. §§ 4.80, 4.80b. Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, 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. The CBP Regulations promulgated under the authority of 46 U.S.C. § 55102 provide that coastwise transportation of merchandise takes place when merchandise laden at a coastwise point is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a). Under the proposed scenario, the merchandise will be transported from one coastwise point, namely, Freeport, Texas, on a foreign-flag vessel to Plaquemine, Louisiana, another coastwise point, via Houston, New Orleans, and a foreign port (Map Ta Phut, Thailand). Therefore, the aforementioned scenario falls within the scope of the statute. Continuity of Transportation You state in your letter that the contaminated propylene oxide was temporarily discharged at a terminal in Map Ta Phut, Thailand, where Dow and Stolt would continue to look for more permanent options for dealing with it. As stated in 34 Op. Atty. Gen. 355, at 363, when merchandise is transported in a foreign vessel from an American port to a foreign port “without existing intent on the part of those responsible for the transportation that [the merchandise] shall be transshipped to an American port...[w]hether the subsequent transportation of such [merchandise] to an American port is a violation of [section 55102] must be determined by the existing facts in each case.” Specifically, to avert such a violation, the continuity of the transportation must be affirmatively shown by the existing facts to have been broken, with no intention on the part of any of the parties involved that the merchandise would subsequently be returned to the United States. Customs Bureau telegram of February 23, 1973 (HQ 100381). In short, there must some affirmative action which reflects an “honest intention to bring [the merchandise] into the common stock of the country,” Id., at 359 (quoting The Bermuda, 70 U.S. 514, at 554 (1866)). We have previously addressed scenarios which illustrate actions that rise to a level sufficient to break the continuity of transportation. In HQ 100381, supra, which is favorably discussed in HQ 104277, two instances of actions were given which could be enough to break the continuity of transportation of the involved merchandise, in that matter, grain: (1) Sale of the grain in Canada to a buyer who takes possession and enters it into the commerce of Canada; or (2) Sale to a foreign buyer who takes possession of the grain which is about to be exported but which is thereafter sold to buyers in the United States “to meet emergency conditions.” Additionally, in HQ 116518 we held that the continuity of transportation was broken when grain was sold to buyers in Japan, and, after being unladed there, the Japanese Government refused to permit entry of the grain due to its genetic content, of which the Japanese purchasers and the original U.S. sellers had theretofore been unaware “and never would have undertaken the transactions in the first place if they had any knowledge of the [genetic] content.” Similarly, in HQ 116424, we held that continuity of transportation had been broken when wheat sold to a foreign purchaser was unable to be used due to its unintended and accidental failure to meet necessary, contracted-for specifications. The purchaser discovered this fault after it had been unladed at the foreign destination and rejected it, its transportation having been interdicted at that foreign destination. In the present case, the propylene oxide in this case was never sold to any purchaser in Thailand, or to any other foreign purchaser. Merely temporarily storing the merchandise in Thailand with the intent to transship or return it to the United States, would not, by itself, be sufficient to break the continuity of transportation between coastwise points. See HQ 109475, of October 4, 1988 (continuity of transportation not broken where fertilizer shipped by company to Canadian subsidiary for warehousing and sale in Canada and sales contracts specified “not for resale in the United States”); and HQ 100381, supra (shipment of grain by foreign vessel from United States to Canada “merely for warehousing and eventual sale to Canadian or foreign buyers will subject [the] grain to forfeiture under section 883, title 46, United States Code [now 46 U.S.C. 55102], if thereafter transported to a place in the United States”). See also 32 Op. Atty. Gen. 350 (1920) (transporting frozen fish from Ketchikan to Vancouver and to points in United States was continuous (not broken at Vancouver) since fish merely warehoused in Vancouver “for long periods of time” pending sale and consumption elsewhere and it was generally known that Vancouver was not “ultimate destination” of fish). In accordance with the cases cited here, the transportation of merchandise as proposed would be in violation of 46 U.S.C. § 55102. HOLDING The transportation of merchandise by a non-coastwise-qualified vessel as described above would constitute a violation of 46 U.S.C. § 55102. Sincerely, George F. McCray Chief Cargo Security, Carriers and Immigration Branch