Reconsideration of H258592 (Dec. 8, 2014); 46 U.S.C. § 55102; 19 C.F.R. § 4.80b(a); New and Different Product; Proposed Transportation of Iron Ore Pellets; United States Steel Corporation (“U.S. Steel”); iron ore pellets; sinter feed.

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H261457 May 7, 2015 OT:RR:BSTC:CCR H261457 KLQ CATEGORY: Carriers Joshua P. Stein Cozen O'Connor The Army and Navy Building, Suite 1100 1627 I Street, NW Washington, DC 20006 RE: Reconsideration of H258592 (Dec. 8, 2014); 46 U.S.C. § 55102; 19 C.F.R. § 4.80b(a); New and Different Product; Proposed Transportation of Iron Ore Pellets; United States Steel Corporation (“U.S. Steel”); iron ore pellets; sinter feed. Dear Mr. Stein: This is in response to your January 27, 2015 letter, and March 9, 2015 letter, in which you request a reconsideration of H258592 (Dec. 8, 2014). In H258592 Customs and Border Protection (“CBP”) held that the screening of iron ore pellets in Canada would not result in a new and different product. Thus, CBP held that the transportation by non-coastwise-qualified vessel would constitute a violation of 46 U.S.C. § 55102. We have reviewed your request for reconsideration. Our decision follows. FACTS The following facts are from H258592. Your client proposes to transport iron ore pellets by non-coastwise-qualified vessels from Superior, Wisconsin; Duluth, Minnesota; and Two Harbors, Minnesota to a marine terminal in Nanticoke, Ontario in Canada. These vessels will transport the subject merchandise between the United States and Canada nine to fifteen times a month during the navigation season on Lake Erie. While in Canada, the iron ore pellets will undergo a screening process at the Lake Erie Works (“LEW”) facility to separate the large iron ore pellets from the small iron ore pellets. The large iron ore pellets will be fed into a blast furnace. Non-coastwise-qualified vessels will transport the smaller iron ore pellets, as sinter feed, from Nanticoke, Ontario to Gary, Indiana and other U.S. ports. Your client provided this office with a description of the import and export specifications for these transportations. ISSUE Whether based on the import and export specifications provided, the proposed screening operations would result in the creation of a “new and different product” within the meaning of 19 C.F.R. § 4.80(b)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, 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. (emphasis added). 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. (emphasis added). In your request for reconsideration, you argue that CBP “improperly relied on the common chemical and structural composition of ore pellets and sinter feed as the sole and determinative factor in assessing whether a new and different product has been produced.” In your request, you argue that CBP should have weighed a number of factors such as form, composition, value and function. In American Maritime Association v. Blumenthal, 458 F.Supp. 849 (1977), the court addressed the transportation of crude oil by a foreign-flag tanker from Valdez, Alaska to the U.S. Virgin Islands, and the subsequent transportation of products refined from that oil from the Virgin Islands to the continental United States. The refining process turned the Alaskan crude oil into eleven different products, each different in name, physical and chemical character, and use, both from each other and from the crude oil. On appeal, in American Maritime Association v. Blumenthal, 590 F.2d 1156 (1978), the court referenced and gave deference to CBP rulings concerning new and different products under 46 U.S.C. § 55102 and affirmed that in these rulings: [T]he degree to which a product has been altered by processing at the point of transshipment has generally been dispositive of whether the continuity of its transportation has been broken at that point and of whether the product, for purposes of the Jones Act, is the same or different ‘merchandise’ upon re-entry to the United States The court clarified that a substantial change should occur. At the crux of Blumenthal, 590 F.2d 1156 (1978) and the CBP rulings is whether manufacturing and processing results in the creation of a new and different product. In the present case, your client proposes to transport iron ore pellets from the United States to Canada. Once in Canada, the pellets are sorted by size. The larger pellets are used in the blast furnace at the LEW facility. Pellets that are too small to be used in the LEW blast furnace are returned to the United States. The Laboratories and Scientific Services Directorate (“LSSD”) determined that the only difference between the pellets used in the LEW furnace and the pellets returned to the United States is one of size and not of a chemical or structural difference. Both products are iron ore. Moreover, the distinguishing factor between the two products is that the iron ore leaving Canada is not large enough for use in the specific blast furnace at the LEW facility. However, this does not preclude the possibility that the iron ore pellets deemed too small for use in the LEW furnace, would qualify as large enough for use in a furnace at another facility. The LSSD determined that size requirements are not particular to the industry as a whole, but rather to a particular furnace. In sum, the product transported from the United States is a mix of large and small pellets. The products returned to the United States are the small pellets from the original batch. Therefore, no processing or manufacturing occurs that results in one product transforming into another. Merely sorting pellets by size is not processing or manufacturing for purposes of 46 U.S.C. § 55102. In support of your argument you cite to HQ 112423 (Sept. 1, 1992) and HQ H219798 (Aug. 21, 2012). In HQ 112423, certain headed and gutted fish were transported from Alaska to China where they were thawed, skinned, boned, filleted, graded to size, frozen, boxed and then returned to the United States. CBP held that this processing resulted in a new and different product for purposes of 46 U.S.C. § 55102. In comparison, in the present case, your client merely proposes to separate the iron ore pellets by size. In H219798, the manufacturer transported iron ore pellets from the United States to Canada where it was crushed to form sinter feed. The sinter feed was transported back to the United States for further processing. CBP found that the crushing constituted a manufacturing and processing that resulted in a new and different product. H219798 is distinguishable from the facts of the present matter. The pellets in H219798 were crushed in Canada and this evidences manufacturing and processing into a new and different product. Merely sorting pellets by size is not processing or manufacturing a substance into a new and different product. You also cite to HQ 114476 (Nov. 2, 1998) in support of your argument. In HQ 114476, cattle were laden on a foreign-flagged vessel in Hawaii, processed in Canada, and returned to the continental United States. CBP determined that the cattle returning to the United States were new and different products when compared to the cattle that left Hawaii. CBP found that after processing, the new cattle were distinct from the original cattle “in their respective names, physical character, use, value and marketability.” The present case is distinguishable from HQ 114476. Even though the smaller pellets may have a different name, use and value in the industry than the larger pellets, there has not been any manufacturing or processing, only sorting. Merely sorting pellets by size is not processing or manufacturing for purposes of 46 U.S.C. § 55102. Your argument is that in the present case, CBP failed to consider multiple factors in determining whether a new and different product would be created. However, as the court in Blumenthal, 590 F.2d 1156 (1978) stated, the degree to which a product is altered is dispositive of whether the manufacturing or processing resulted in a new and different product. Your client proposes to transport a blend of large and small iron ore pellets to Canada. Once in Canada, the only operation that will occur is the separation of the large iron ore pellets from the small iron pellets. Even if the industry considers small and large pellets to be different products, for purposes of 46 U.S.C § 55102, no manufacturing or processing occurs that results in the creation of a new and different product because the same small pellets transported from the United States to Canada are transported back to the United States. Therefore, pursuant to 19 C.F.R. § 4.80b(a), and in adherence to the LSSD findings, the proposed transportation would be in violation of 46 U.S.C. § 55102 because the non-coastwise-qualified vessels would transport the same product from Superior, Wisconsin; Duluth, Minnesota; and Two Harbors, Minnesota to Gary, Indiana via Canada. HOLDING Based on the import and export specifications provided, the proposed screening operations would not result in the creation of a new and different product within the meaning of 19 C.F.R § 4.80(b)a; therefore, the proposed transportation by non-coastwise-qualified vessels would be a violation of 46 U.S.C. § 55102. H258592 is hereby affirmed. Sincerely, Glen E. Vereb Director Border Security & Trade Compliance Division Office of International Trade, Regulations and Rulings U.S. Customs and Border Protection