HQ 0109532 - Applicability of 46 U.S.C. App. 883 to transportation of raw materials from the continental United States or foreign countries to the Virgin Islands where they are manufactured into Portland Cement which is then transported to the continental United States - United States International Trade Commision Rulings

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HQ 109532

August 3, 1988

VES-3 CO:R:P:C 109532 PH

CATEGORY: CARRIER

Nicolas Jimenez, Esq.
Jimenez, Graffam & Lausell
Suite 505, Midtown Building
421 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918

RE: Applicability of 46 U.S.C. App. 883 to transportation of raw materials from the continental United States or foreign countries to the Virgin Islands where they are manufactured into Portland Cement which is then transported to the continental United States

Dear Mr. Jimenez:

This in response to your letters of May 20, 1988, in which you request a ruling on the purchase and shipment of raw materi- als from the continental United States or foreign countries to the United States Virgin Islands where the raw materials are manufactured into Portland Cement and that cement is transported to the continental United States. We are unable to answer your questions about the applicability of tariff duties to, and the rate of duties on, the cement. The office responsible for such questions is the Classification and Value Division in the New York Region of Customs. The mailing address of that office is:

Assistant Area Director (C & V)
U.S. Customs Service
6 World Trade Center, Room 473
New York, New York 10048-0945

FACTS:

You state that you represent a client who may manufacture Portland cement in the United States Virgin Islands. You request a ruling on two alternatives. In the first, raw materials would be purchased in the continental United States and shipped from a United States port to the Virgin Islands where they would be
manufactured into Portland cement. The cement would then be transported back to the continental United States for marketing. You ask whether the raw materials and the cement may be trans- ported in foreign vessels from the continental United States to the Virgin Islands and from the Virgin Islands to the United States, respectively, and about tariff duties on the cement.

In the second alternative, the raw materials would be purchased in foreign countries and transported in foreign vessels to the Virgin Islands where they would be manufactured into Port- land cement. The cement would then be transported to the conti- nental United States for marketing. You ask whether the cement may be transported in foreign vessels from the Virgin Islands to the United States and about tariff duties on the cement.

ISSUES:

1. May raw materials be transported in non-coastwise- qualified vessels from the continental United States to the Unit- ed States Virgin Islands when the raw materials are manufactured or processed in the Virgin Islands into Portland cement which is transported back to the continental United States?

2. May Portland cement be transported in non-coastwise- qualified vessels from the United States Virgin Islands to the continental United States when the Portland cement was manufac- tured or processed in the Virgin Islands from raw materials which were transported from the continental United States to the United States Virgin Islands?

3. May Portland cement be transported in non-coastwise- qualified vessels from the United States Virgin Islands to the continental United States when the Portland cement was manufac- tured or processed in the Virgin Islands from raw materials which were transported to the Virgin Islands from foreign countries?

LAW AND ANALYSIS:

Section 27 of the Act of June 5, 1920, as amended (41 Stat. 999; 46 U.S.C. App. 883, often called the Jones Act), provides that:

No merchandise shall be transported by water, or by land and water, on penalty of forfeiture of the merchandise (or a monetary amount up to the value thereof ...), between points in the United States ... embraced within the coastwise laws, either directly or via a foreign port, or for any part of the
transportation, in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States ....

Section 21 of the Act of June 5, 1920 (41 Stat. 997; 46 U.S.C. App. 877), provides that:

... the coastwise laws of the United States shall not extend to the Virgin Islands of the United States until the President of the United States shall, by proclama- tion, declare that such coastwise laws shall extend to the Virgin Islands and fix a date for the going into effect of the same.

No such proclamation has been issued by the President. Accordingly, the coastwise laws, including 46 U.S.C. App. 883, are not applicable to the United States Virgin Islands.

Section 4.80b(a), Customs Regulations (19 CFR 4.80b(a)) (see also, American Maritime Association v. Blumenthal, 590 F. 2d 1156 (1978), cert. den. 441 U.S. 943, concerning the applicability of 46 U.S.C. App. 883 to the transportation of oil from Alaska to the Virgin Islands where the oil was refined and after which the refined oil products were transported onward to other points in the continental United States), promulgated under the authority of section 883, provides that:

... 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.

Because the coastwise laws are inapplicable to the Virgin Islands, they would not prohibit the use of a non-coastwise- qualified vessel, including a foreign vessel, to transport Port- land cement manufactured in the Virgin Islands from raw materials brought to the Virgin Islands from foreign countries. Unless the manufacturing or processing in the Virgin Islands is such that the Portland cement is a "new and different" product from the raw materials brought to the Virgin Islands, 46 U.S.C. App. 883 would prohibit the transportation in a non-coastwise-qualified vessel of raw materials from the continental United States to the Virgin Islands if the raw materials were manufactured into Portland
cement in the Virgin Islands and then transported back to the continental United States. Section 883 would also prohibit the transportation in a non-coastwise-qualified vessel of the Port- land cement manufactured in the Virgin Islands from the raw mate- rials transported to the Virgin Islands from the continental United States, unless, as stated above, the manufacturing or processing in the Virgin Islands is such that the Portland cement is a new and different product from the raw materials brought to the Virgin Islands.

You have not provided us with enough information to enable us to issue a ruling on whether the manufacturing or processing in the Virgin Islands results in the raw materials brought there be- ing manufactured or processed into a new and different product. In order to issue such a ruling, we would need a complete description of the raw materials transported from the continental United States to the Virgin Islands and of the Portland cement transported back to the continental United States, as well as a complete description of the manufacturing or processing proce- dures in the Virgin Islands. We suggest that you review the Court's decision in the AMA v. Blumenthal decision to assist you in determining what information we will need, and what arguments you want to make, if you decide to request a ruling on this issue.

HOLDINGS:

1. Raw materials may not be transported in non-coastwise- qualified vessels from the continental United States to the Unit- ed States Virgin Islands when the raw materials are manufactured or processed in the Virgin Islands into Portland cement which is transported back to the continental United States, unless the manufacturing or processing in the Virgin Islands is such that the Portland cement is a "new and different" product from the raw materials.

2. Portland cement may not be transported in non-coastwise- qualified vessels from the United States Virgin Islands to the continental United States when the Portland cement was manufac- tured or processed in the Virgin Islands from raw materials which were transported from the continental United States to the United States Virgin Islands, unless the manufacturing or processing in the Virgin Islands is such that the Portland cement is a "new and different" product from the raw materials.

3. Portland cement may be transported in non-coastwise- qualified vessels from the United States Virgin Islands to the continental United States when the Portland cement was manufac- tured or processed in the Virgin Islands from raw materials which were transported to the Virgin Islands from foreign countries.

Sincerely,

B. James Fritz

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