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HQ 111998


November 26, 1991

VES-3-07-CO:R:IT:C 111998 GEV

CATEGORY: CARRIER

Donald J. Mulvihill, Esq.
Cahill Gordon & Reindel
1990 K Street, N.W.
Washington, D.C. 20006

RE: Coastwise Trade; Fuel Oil Blending; 46 U.S.C. App. 883

Dear Mr. Mulvihill:

This is in response to your letter dated November 21, 1991, on behalf of your client, Phibro Energy, Inc. ("PEI") requesting a ruling regarding the applicability of 46 U.S.C. App. 883 to a proposed fuel oil blending operation.

FACTS:

PEI, a company located in Greenwich, Connecticut, recently shipped a quantity of fuel oil from Louisiana to St. Eustatius, Netherlands, Antilles, aboard a non-coastwise-qualified vessel. At the time of shipment PEI intended to process the fuel oil and subsequently ship it, or sell it for shipment, to Europe. PEI has now determined that after the blending operation in St. Eustatius it wants to ship the resultant blend to the United States.

The specifications for the existing product and the approximate specifications which would result from the foreign blending operation are as follows:

Existing Product Blended Product
(approximate)

SULFUR 2.12% 2.5%
GRAVITY 11.6 11.0
POUR POINT 32 degrees F 40 degrees F
VISCOSITY 131SSF 225SSF
VANADIUM 20 260
U.S. CONTENT 100% 50%

ISSUE:

Whether the blending operation described above is sufficient to create a "new and different product" within the meaning of 19 CFR 4.80b(a) so that the proposed transportation of the resultant blend to the United States is not in violation of 46 U.S.C. App. 883.

LAW AND ANALYSIS:

Title 46, United States Code Appendix, 883 (the merchandise coastwise law often called the "Jones Act") prohibits the transportation of merchandise between United States coastwise points, either directly or via a foreign port, or for any part of the transportation, in any vessel other 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.

In interpreting 883, Customs has ruled that a point in United States territorial waters is a point in the United States embraced within the coastwise laws. The territorial waters of the United States consist of the territorial sea, defined as the belt, 3 nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline, in cases where the baseline and the coastline differ.

Section 4.80b(a), Customs Regulations, provides, in part, that:

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 posses- sion of the U.S. not subject to the coastwise laws), it is manufactured or processed into a new and different pro- duct, and the new and different product thereafter is transported to a coastwise point.

In applying 4.80b(a), Customs has held that merchandise manufactured or processed into a new and different product must be landed and processed at an intermediate port or place other than a coastwise point. The manufacturing or processing may not take place on board a vessel. Pursuant to T.D. 91-32 published in the Federal Register on April 10, 1991 (56 FR 14467) prior to reaching a determination that a new and different product has in fact been created by a blending operation for purposes of 4.80b(a), the procedures and specific data of such operations should be submitted by the party seeking such a determination. Customs will then review the data and make the necessary determination which will form the basis for a decision regarding any possible violation of 883.

Upon reviewing the specifications of this particular blending operation, we note that the specifications for the existing product (which was transported from Louisiana to St. Eustatius, N.A., aboard a non-coastwise-qualified vessel) and the resultant blend meet the American Society for Testing Materials (ASTM) specifications for No. 6 fuel. It is therefore apparent that the blending operation under consideration did not create a new and different product within the meaning of section 4.80b(a), Customs Regulations. Accordingly, the proposed transportation of the resultant blend to the United States is in violation of 46 U.S.C. App. 883. This letter confirms our telephone conversation of November 22, 1991, on this matter.

HOLDING:

The blending operation described above is insufficient to create a "new and different product" within the meaning of 19 CFR 4.80b(a) so that the proposed transportation of the resultant blend to the United States is in violation of 46 U.S.C. App. 883.

Sincerely,

B. James Fritz

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