HQ 111035 - Coastwise Trade; 19 U.S.C. App. 883; 19 CFR 4.80b(a); New and Different Product; Cattle; Beef Products - United States International Trade Commision Rulings

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HQ 111035

July 25, 1990

VES-3-CO:R:P:C
111035 RAH

Gorham W. Hussey
Executive Vice President
Agri Trends Researching Inc.
Suite 238, 6715 8th Street N.E. Calgary
Alberta, Canada T2EH7

RE: Coastwise Trade; 19 U.S.C. App. 883; 19 CFR 4.80b(a); New and Different Product; Cattle; Beef Products

This is in response to your letter of May 8, 1990, in which you stated that your client is interested in shipping Hawaiian produced and owned beef calves and feeder cattle to Canada for further feeding and later sale.

The cattle would be shipped on a specialized Danish livestock ship for Hawaii to Vancouver, British Columbia, where they would be fed and fattened (to almost double their original weight) over a 5 to 7 month period.

You ask whether your client would be restricted under the Jones Act or other U.S. regulations from selling and/or returning slaughtered beef products to a U.S. packer.

ISSUES:

1) Do cattle fattened to almost double their original weight at an intermediate port result in a new an different product pursuant to 19 CFR 4.80b(a);

2) Do cattle subsequently slaughtered and made into beef products at an intermediate port result in a new and different product pursuant to 19 CFR 4.80b(a);

3) Is the above merchandise transported from Hawaii to an intermediate port (Vancouver, British Columbia) so similar to the merchandise subsequently shipped back to the United States that the processing at Vancouver fails to interrupt an essentially single voyage of the cattle from Hawaii to the mainland United States, thereby constituting a coastwise violation?

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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 person who are citizens of the United States ....

Section 4.80b(a), Customs Regulations (19 CFR 4.80b(a)), promulgated un the authority of 46 U.S.C. App. 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.

In applying section 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 thana coastwise point. Furthermore, the manufacturing or processing may not take place on board a vessel.

In American Maritime Association v. Blumenthal, 590 F. 2d 1156 (1978), cert. den. 441 U.S. 943, the United States Court of Appeals, District of Columbia, considered whether Alaska crude oil could transported by on-coastwise-qualified vessels from Alaska to the United States Virgin Islands (a non-coastwise point) and there refined and then transported onward to a point in the continental United States. The court stated (590 F. 2d 1156, at 1161) that the "central issue, therefore, is whether the merchandise' (crude oil) transported from Valdez to St. Croix by Hess is so similar to the merchandise' (refined oil products) subsequently shipped from

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St. Croix to the continental United States that the processing at St. Croix fails to interrupt an essentially single voyage of the oil from Valdez, Alaska to the East Coast." (See also, footnote 38, 590 F. 2d 1156, at 1163, referring to letter rulings of Customs on this issue. The Court, in this footnote, noted that "[i]n these rulings the 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 ....") See Customs Ruling Letter 109504

The Court held in the AMA V. Blumenthal case that the transportation considered in that case did not violate 46 U.S. C. App. 883 because the continuity of the transportation was broken since the products of the crude oil transported after refining were "quite different" from the crude oil transported to the Virgin Islands, " i.e., [they were] products which are physically, chemically, and usefully different from the original crude oil." (590 F. 2d 1156, at 1162, 1163.)

Customs has issued a number of rulings concerning the point during a manufacturing process at which an item becomes a "new and different article of commerce" for purposes of braking the continuity of a transportation. If the continuity is thus broken, a transportation which would otherwise be considered coastwise in nature would not be so considered. We have held that partially milled rice transported in a foreign-flag vessel from California to the Virgin Islands where it is fumigated, cleaned and polished by friction, passed through an aspirator to remove all dust and small particles, graded to separate broken and unbroken kernels, coated with glucose and talc, cleaned again and "fortified" with niacin, thiamin, iron, and other minerals and then transported to Puerto Rico (Puerto Rico is embraced within the coastwise laws) is not considered to have been transported in violation of 46 U.S.C. App. 883 "because the continuity of the overall transportation from California to Puerto Rico is deemed broken in the Virgin Islands" (Treasury Decision (T.D.) 56272(2)). We have held that where rough or unsurfaced lumber is transported from the United States, without any intention that it be returned to a specific United States market, to Canada where it is planed, trimmed, graded, and packaged, the subsequent transportation of any of the packaged lumber by foreign-flag vessel to a coastwise point is not in violation of 46 U.S.C. App. 883 "because the continuity of the overall transportation is deemed broken in Canada" (T.D. 56320(2)). We have held that the blending of oil with other oils which results in a product with different sulphur content, specific gravity, pour point, and viscosity than the oils which were blended is a manufacture or processing into a new different product, within the meaning of 19 CFR 4.80b(a) (see rulings dated November 16, 1982 (105804),
October 19, 1984 (107071), and September 30, 1985 (107912)).

We have also ruled on the application of this principle to the transportation and processing of crab. Our ruling dated September 12, 1980 (104859, see also cases identified as 104955/104859 and 105021), concerned the transportation of King Crab clusters from Alaska to Vancouver, British Columbia, where the crabs would be processed from clusters, which are half a crab body with legs and claws attached, into section, which are individual legs or claws with the body trimmed, or freely offered for sale while kept in frozen storage in Canada. It was anticipated that one-third to one-half of the crabs would be sold in Canada, although the entire cargo was to be entered through Canadian Customs and was to be subject to Canadian Customs duties. Following the criteria set forth in the AMA v. Blumenthal decision, we held that the crab sections would not be considered new and different products, within the meaning of 19 CFR 4.80b(a), and that the fact of entry of the entire cargo of crab through Canadian Customs and payment of Canadian Customs duties would not be considered to break the continuity of transportation of the crab.

In the instant case, we believe that beef products, whether or not dressed, frozen, canned etc., are sufficiently different from the cattle from which they derive so that a new and different product results within the meaning of 19 CFR 4.80b(a). (See T.D. 56535(1), in which we held under the old Tariff Schedule of the United States that cattle exported to Mexico to be slaughtered and processed into dressed beef carcasses ready to be divided into halves, quarters, and other cuts of meat resulted in the production of new and different articles of commerce).

On the other hand, we find that although the cattle may have doubled in size there has been no refining or manufacturing process as contemplated under the Blumenthal decision. We find that the cattle in their "fattened" condition remain largely the same in such respects as form and composition so that a ne and different product within the meaning of 19 CFR 4.80b(a) does not result.

HOLDING:

1) Cattle transported from Hawaii to Vancouver, British Columbia, and fattened to almost double their original weight do not result in a new and different product pursuant to 19 CFR 4.80b(a) and subsequent transportation thereof from VanCouver to the
United States would result in a violation of 46 U.S.C. App 883.

2) Cattle transported from Hawaii to Vancouver, British Columbia, where they will be slaughtered, dressed or packed etc., result in a new and different product pursuant to
19 CFR 4.80b(a) and subsequent transportation thereof from VanCouver to the
United States would not result in a violation of 46 U.S.C. App. 883.

This letter addresses only those federal requirements that are administered by the
U.S. Customs Service pertaining to transportation of merchandise under 46 U.S.C. App. 883. This letter does not address other U.S. Custos issues that may be applicable to the transaction

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you propose , i.e. classification, marking, et cetera. Furthermore, 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.

If you have any further questions regarding this matter, please do not hesitate to contact our office.

Sincerely,

B. James Fritz
Chief
Carrier Rulings Branch

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