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HQ 113095

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December 13, 1994

VES-3-CO:R:IT:C 113095 GOB

CATEGORY: CARRIER

Ronald J. Gumbaz
Vice President
Delphi Petroleum Inc.
40 Ave. at the Common
Shrewsbury, New Jersey 07702-4532

RE: Coastwise trade; Fuel oil; 46 U.S.C. App. 883

Dear Mr. Gumbaz:

This is in response to your letter dated December 2, 1994.

FACTS:

Your letter states as follows:

Delphi Petroleum, Inc. has the opportunity to purchase vacuum tower bottoms meeting all the specifications for No. 6 fuel oil as specified in ASTM except that the viscosity is greater than the maximum viscosity allowed by such specifications, ie. 50 centistokes at 100 Deg. C. Delphi anticipates shipping the vacuum tower bottoms on a foreign flag vessel from the U.S. Gulf Coast to Statia Terminals, St. Eustatius, N.A. The vacuum tower bottoms will be discharged and will be blended in the terminal with a viscosity cutter stock, probably a product that itself meets all the specifications for No. 6 fuel oil as specified by ASTM.

The blending of the vacuum tower bottoms will result in a product which meets all the ASTM specifications for No. 6 fuel oil, ie. the viscosity of the vacuum tower bottoms will be reduced below 50 centistokes at 100 Deg. C.

The blended product will then be transported on the same vessel from St. Eustatius to Puerto Rico, where it will be discharged.

ISSUE:

Whether the transportation of fuel oil as proposed is 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 46 U.S.C. App. 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, three nautical miles wide, seaward of the territorial sea baseline, and points located in internal waters, landward of the territorial sea baseline, in cases where the baseline and the coastline differ. Furthermore, Customs has long-held 46 U.S.C. App. 883 applicable to Puerto Rico pursuant 48 U.S.C. 744 and 46 U.S.C. App. 877.

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 possession of the U.S. 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.

In applying 19 CFR 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. In regard to the processing of fuel oil, 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 for purposes of 10 CFR 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 46 U.S.C. App. 883.

After a review of the facts in this case, we have determined that, for purposes of 46 U.S.C. App. 883 only, the oil after the processing at St. Eustatius is a new and different product from the oil prior to such processing. Accordingly, such oil may be transported as proposed in a non-coastwise-qualified vessel.

Please note that, with respect to future requests of this type, we would prefer to see specifications of the oil products.

HOLDING:

For purposes of 46 U.S.C. App. 883, the oil after the processing at St. Eustatius is a new and different product from the oil prior to such processing. Accordingly, such oil may be transported as proposed in a non-coastwise-qualified vessel.

Sincerely,

Arthur P. Schifflin
Chief

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