HQ 0112559 - Coastwise trade; 46 U.S.C. App. 883; Transportation of cattle; Hawaiian cattle transported to Canada; Open auction; Subsequent transportation to United States - United States International Trade Commision Rulings

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HQ 112559

February 24, 1993

VES-3-06 CO:R:IT:C 112559 LLB

CATEGORY: CARRIER

Mr. Tom Mackay
Tom Mackay Livestock
P.O. Box 70
Hermiston, Oregon 97838

RE: Coastwise trade; 46 U.S.C. App. 883; Transportation of cattle; Hawaiian cattle transported to Canada; Open auction; Subsequent transportation to United States

Dear Mr. Mackay:

Reference is made to your letter of December 21, 1992, in which you request that we rule on the transportation by non- coastwise-qualified vessel of cattle from Hawaii to Canada under circumstances which may involve the subsequent re-importation of those same cattle into the United States.

FACTS:

It is becoming an increasingly common occurrence that cattle are transported from the State of Hawaii to British Columbia, Canada, aboard non-coastwise-qualified vessels. Customs does not permit cattle so transported to be merely transshipped through Canada and subsequently sent to points in the Continental United States, whether by vessel or otherwise, without consequence under the coastwise merchandise transportation statute, 46 U.S.C. App. 883, popularly known as the Jones Act. The question now arises whether any cattle so transported and entered, duty-paid under Canadian law and sold at open auction, may be brought back into the United States by third party purchasers without Jones Act consequence.

ISSUE:

Whether cattle transported by non-coastwise-qualified vessel from Hawaii to Canada and entered duty-paid in that country may, if sold at an open and free auction, be subsequently transported to another United States location by a purchaser without incurring a violation of 46 U.S.C. App. 883.

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....

The plain meaning of the statute prohibits merchandise from being transported on a non-coastwise-qualified vessel between points in the United States. The words "either directly or via a foreign port" were inserted in the original statute (46 U.S.C. App. 883) by the Congress in 1893. Congress, seeing how easily the protection to American shipping would be vitiated by a simple transshipment of the same cargo, inserted the words "either directly or via a foreign port" to prohibit such transshipments.

In determining whether merchandise which 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 is subject to the prohibition in section 883 by virtue of being transported between coastwise points "via a foreign point," we have relied upon the holding of the Supreme Court in The Bermuda, 70 U.S. 514 (1865). In that decision, the Supreme 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 Supreme 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 section 883 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 section 883 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 section 883. 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).

The Customs Service is the agency "charged with the administration" of section 883. We have issued a number of rulings on the applicability of section 883 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.

Turning to the case at hand, there is no manufacturing or processing of the cattle when first unladen in Canada which breaks the continuity of the transportation under section 4.80b(a). Although section 4.80b(a) is inapplicable to the facts of this case because the cattle will not be manufactured into a new and different product in Canada prior to their shipment to the United States, it should be noted that we have held that cattle transported from Hawaii to Canada and fattened to almost twice their original weight also do not result in a new and different product pursuant to 19 CFR 4.80b(a). Thus, any subsequent transportation of such cattle from Canada to the United States would result in a violation of 46 U.S.C. App. 883. (Headquarters Ruling Letter 111035, July 25, 1990). Conversely, cattle transported from Hawaii to Canada where they will be slaughtered, dressed or packed etc., will result in a new and different product pursuant to 19 CFR 4.80b(a) and subsequent transportation thereof from Canada to the United States would not result in a violation of 46 U.S.C. App. 883 (Headquarters Ruling Letter 111035, supra).

In the present case, it is possible that some cattle, after being brought into Canada with the honest intention that they be introduced into the common stock of that country, will nonetheless be purchased by buyers in the U.S. who are intent on importing such cattle into the U.S. As stated, the determination as to whether 46 U.S.C. App. 883 will apply to such a case rests upon whether or not the merchandise in question was intended to become part of the common stock of goods of a foreign country. If such a circumstance can be shown, it will be enough to break the continuity of the transportation. In Headquarters Ruling Letter 112246 (June 23, 1992), it was established that certain evidence will constitute acceptable proof that such merchandise was indeed intended to be introduced into the common stock of a country. Such acceptable evidence includes, but is not limited to: shipping manifests; foreign country customs and duty receipts; lists containing names of purchasers of merchandise from said vessels indicating type and quantity of such merchandise; auction notices or similar publication documentation - 5 -
evidencing the fact that such goods will be offered on the foreign country's market; and an affidavit from a foreign purchaser testifying that the goods are indeed intended to be introduced into the common stock of that country.

HOLDING:

As to the case in question, provision of the above enumerated evidence will be sufficient to validate such a transaction and insulate it from penalty under 46 U.S.C. App. 883.

This ruling letter does not address any other transactions or questions which are essentially hypothetical in nature. See 19 CFR 177.7. This letter addresses only those federal requirements that are administered by the U.S. Customs Service. Although we are unaware of any other federal or state agency requirements that might pertain to the undertaking you describe, it is possible that such requirements exist.

Sincerely,

Acting Chief

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