46 U.S.C. § 55102; Continuity of Transportation

HQ H137120 December 13, 2010 VES- 3-OT-RR:BSTC:CCI H137120 GOB CATEGORY: Carriers Daniel A. Tadros, Esq. Joseph B. Marino, III, Esq. Chaffe McCall L.L.P. 2300 Energy Center 1100 Poydras Street New Orleans, LA 70163-2300 RE: 46 U.S.C. § 55102; Continuity of Transportation Dear Messrs. Tadros and Marino: This letter is in reply to your submission of December 7, 2010 on behalf of Arktis Carrier Shipping (“Arktis”), wherein you request a ruling as to whether the proposed transportation by the non-coastwise-qualified M/V MARINA WAVE would constitute a violation of 46 U.S.C. § 55102. Our ruling on this matter is set forth below. FACTS: You describe certain of the pertinent facts as follows: “On November 20, 2010, loading of a cargo of dry soy beans in bulk was completed while the vessel was berthed at the ADM grain facility in Reserve, Louisiana in the Port of New Orleans. After loading was complete, the vessel heaved anchor on November 22, 2010 and set sail for Cristobal, Panama for Panama Canal crossing into the Pacific Ocean. The cargo was scheduled for discharge in China. The MARINA WAVE departed the Mississippi River on November 22, 2010 at about 1830 local time. After passing the sea buoys, the MARINA WAVE, a 7-hatch bulk carrier carrying 58,129 m/t of dry soy beans, was struck by the ATB COURAGE, owned by Crowley Marine, which was apparently on its way to Corpus Christi, Texas from Tampa, Florida. As a result of the contact, a large hole was punctured in the MARINA WAVE’s shell plating and caused significant structural damage to MARINA WAVE’s port side. Lloyd’s Register of Shipping, the MARINA WAVE’s classification society, dispatched a surveyor to conduct an inspection of the hull and the structural damage that MARINA WAVE had sustained as a result of the collision. Following the inspection which took place on November 24, 2010 while the MARINA WAVE was located at the Fairway Anchorage, for the safety of the crew and the vessel itself, the Lloyd’s surveyor restricted MARINA WAVE’s movement to the Mississippi River where the extent of repairs would be determined. The MARINA WAVE has returned to the Mississippi River in the Port of New Orleans and is currently alongside at the Violet Dock where repairs have commenced. Part of the cargo will need to be discharged from at least hold No. 6 (8,700 metric tons) and possibly hold No. 1 (1,300-2,600 metric tons) in order to complete the repairs. The removal of cargo process cannot be performed at the same ADM facility in the Port of New Orleans where the cargo was originally loaded. As outlined above, Arktis plans to discharge the cargo at the Violet Dock which is also in the Port of New Orleans. Arktis currently envisions that it will arrange for barge hoppers to be brought alongside the MARINA WAVE at the Violet Dock and the amount of the cargo that is necessary for discharge will be removed from the vessel by floating cranes and placed into the barges. When repairs are completed, Arktis plans to reload the cargo from the barges and place it back into the ship’s cargo holds with the use of floating cranes.” [Arktis submission at pages 2-3.] You have provided the following documentation with your submission: Sheets from the official log book of the MARINA WAVE which describe the collision between the MARINA WAVE and the ATB COURAGE; photographs showing the damage to the MARINA WAVE caused by the collision; an interim certificate prepared by Lloyd’s Register describing the damage to the MARINA WAVE caused by the collision; the Customs and Border Protection (“CBP”) Vessel Entrance or Clearance Statement of November 19, 2010 for the MARINA WAVE, stating “bulk domestic cargo of soybeans laden at the port of NOLA for discharge at Lianyungang, China;” the Cargo Declaration (CBP Form 1302A) stating goods laden in New Orleans for discharge at Lianyungang, China; and three bills of lading for the MARINA WAVE reflecting yellow soybeans bound for Chinese ports. Arktis requests a ruling as to whether, under the above-stated circumstances wherein the severe damage resultant from the collision of the MARINA WAVE and the ATB COURAGE necessitated the unlading of certain of the soybeans at the Violet Dock in the port of New Orleans, a violation of 19 U.S.C. § 55102 would result. ISSUE: Whether, under the facts presented herein, the use of the non-coastwise-qualified MARINA WAVE for any portion of the transportation of the subject soy beans to a point in the United States other than its point of lading would constitute a violation of 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, 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 is wholly owned by citizens of the U.S. 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, in pertinent part: 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. There is no exception in 46 U.S.C. § 55102 or 19 CFR § 4.80b(a) for a temporary unlading of cargo. CBP rulings are reflective of this. See HQ 104889, dated October 1, 1980 and HQ H090873, dated January 15, 2010. The central issue in this case is whether the accident which occurred when the MARINA WAVE was struck by a second vessel broke the continuity of the transportation from the place of lading of the soy beans, the ADM grain facility in Reserve, Louisiana, to the place where the requester proposes to unlade certain of the soy beans, the Violet Dock in the port of New Orleans. CBP has had the occasion to consider continuity of transportation cases in the context of situations where merchandise is transported from one point in the United States, to a point in a foreign country, and then to another point in the United States. In considering these cases, CBP has relied upon the holding of the Supreme Court in The Bermuda, 70 U.S. 514 (1865). In that decision, the Court held that: A transportation from one coastwise point to another remains continuous, so long as intent remains unchanged, no matter what stoppages or transshipments intervene (70 U.S. at 553). The Court went on to reaffirm the longstanding rule that: [E]ven the landing of goods and payment of duties does not interrupt the continuity of the voyage of the cargo, unless there be an honest intention to bring them into the common stock of the country. If there be an intention, either formed at time of original shipment, or afterwards, to send the goods forward to an unlawful destination, the continuity of the voyage will not be broken, as to the cargo, by any transactions at the intermediate port (70 U.S. at 554). The Attorney General of the United States relied upon The Bermuda in his consideration of the applicability of the Jones Act to certain transportation. In 34 Op. Atty. Gen. 335 (1924) (See also 32 Op. Atty. Gen. 350 (1920), concerning the transportation of fish from Alaska to a United States point via Vancouver, British Columbia, Canada.), the Attorney General considered the applicability of the Jones Act to the transportation of grain from Chicago or Milwaukee to a Canadian port in non-coastwise-qualified vessels. The grain was unladen into an elevator where it remained for an indefinite time until it was loaded into railroad cars for transportation by rail to points in New England. In some instances the grain had already been sold for delivery at an American port when it reached the Canadian port, while in other instances there was an existing intent to ship the grain to the Canadian elevator for storage in anticipation of demands for future deliveries for domestic consumption in Canada, for export abroad, or for sale and delivery in the United States. The Attorney General's opinion was requested as to whether the transportation of the grain in the manner described violated 46 U.S.C. App. § 883, the predecessor to the current statute, 46 U.S.C. § 55102. As to grain which had been consigned through the Canadian port to a point in the United States or which had been shipped with the intention that the grain should ultimately be shipped to a point in the United States, it was the Attorney General's opinion "that such transportation is without a doubt in violation of [section 883]." 34 Op. Atty. Gen. at 357. When there was no intent by the shipper to transship the grain to a United States port or place, it was the Attorney General's opinion that "only general rules of law may be laid down." 34 Op. Atty. Gen. at 362. The general rule of law given by the Attorney General in this case was that "the intention of the shipper is the controlling factor." 34 Op. Atty. Gen. at 363. The Attorney General also stated that: . . . [W]hether the facts presented in any particular case come within such rules must be determined by the officer charged with the administration of that Act. 34 Op. Atty. Gen. at 362. CBP is the agency charged with the administration of 46 U.S.C. § 55102. We have issued a number of rulings on the applicability of 46 U.S.C. § 55102 to the transportation of merchandise between coastwise points via a foreign port. In these rulings, we have held, as did the Supreme Court in The Bermuda, that an "honest intention to bring the goods [transported] into the common stock of the [intermediate foreign] country" is required to break the continuity of transportation between coastwise points via a foreign point. We have held that an intent to export merchandise after its transportation from the United States to an intermediate foreign port is not, by itself, sufficient to break the continuity of the transportation, when the merchandise is transported onward from the intermediate foreign port to a second point in the United States. We have also held that when, at the time of shipment of merchandise from the United States to an intermediate foreign port, there existed the expectation that a substantial portion of the merchandise would not be consumed in the country of the foreign port, entry through the foreign country's customs and payment of duty is not considered to break the continuity of the transportation when any of the merchandise is transported onward to a second point in the United States. In HQ 116518, dated August 9, 2005, HQ 116533 dated September 8, 2005, and HQ 116557, dated October 25, 2005, CBP determined that, with respect to numerous shipments of corn from the United States to Japan aboard non-coastwise-qualified vessels, the ruling requester had provided documentation which was sufficient to establish that there was an intention on the part of the various involved parties for the corn to enter the commerce of Japan. Its subsequent rejection by the Japanese authorities was therefore sufficient to break the continuity of transportation such that it could be returned to the United States at other than its point of lading aboard non-coastwise-qualified vessels. With respect to the instant case, upon a review of all of the relevant facts and supporting documentation, we conclude that the record is sufficient to establish that there was a legitimate intention on the part of the relevant parties that the subject soy beans enter the commerce of China. Therefore, we find that the continuity of transportation of the goods was broken by the accident which occurred when the MARINA WAVE was struck by a second vessel. Accordingly, the unlading of certain of the subject soy beans at a place in the United States (Violet Dock in the port of New Orleans, Louisiana) which is other than their place of lading (the ADM grain facility in the port of New Orleans) will not be a violation of 46 U.S.C. § 55102. HOLDING: Under the facts presented herein, the unlading of certain of the subject soy beans at a place in the United States (Violet Dock in the port of New Orleans, Louisiana) which is other than their place of lading (the ADM grain facility in Reserve, Louisiana in the port of New Orleans) will not be a violation of 46 U.S.C. § 55102. Sincerely, George Frederick McCray Supervisory Attorney-Advisor/Chief Cargo Security, Carriers and Immigration Branch Office of International Trade, Regulations & Rulings U.S. Customs and Border Protection