United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 2005 HQ Rulings > HQ 116494 - HQ 230983 > HQ 116515

Previous Ruling Next Ruling
HQ 116515

---

August 9, 2005

VES-3-RR:IT:EC 116515 GOB

CATEGORY: CARRIER

Jeanne M. Grasso, Esq.
Blank Rome
600 New Hampshire Ave., N.W.
Washington, D.C. 20037

RE: Coastwise Trade; 46 U.S.C. App. § 883; Commingled Merchandise

Dear Ms. Grasso:

This letter is in reply to your letter of July 28, 2005 on behalf of Shell Trading (US) Company (the "Company"), requesting a ruling with respect to the transportation of a product on a foreign flag vessel from the United States to a foreign port, where it will be blended with other components, and then transported back to the United States. Our ruling on this matter is set forth below.

FACTS:

You describe the pertinent facts as follows:

The Company proposes to transport a product on a foreign-flag vessel from the United States to a foreign facility, where the U.S.-source product will be blended with other products. The ASTM grade of the U.S.-source product and the ultimate blended product will be the same after blending. Because the ASTM grade remains the same, a "new and different" product will not be formed as a result of the blending operation.

However, the Company proposes to first sell to a foreign destination an amount of blended product equivalent to or greater than the amount of U.S.-source product included in the blend, and then ship the remaining blended product back to the United States. Thus, the Company would keep an amount of the blended product equal to the amount of the U.S.-source product from first entering the United States until the equivalent amount is first sold to a foreign destination. The Company would maintain regular business records supporting the receipt into the tank(s), inventories, removal from the tank(s), and subsequent shipments to foreign destinations and the United States.

We assume that the product with which the U.S. source product is to be blended is foreign-sourced.

ISSUE:

Whether the proposed activity is violative of 46 U.S.C. App. § 883?

LAW AND ANALYSIS:

Generally, the coastwise laws prohibit the transportation of passengers or merchandise between points in the United States embraced within the coastwise laws in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. A vessel that is built in, documented under the laws of, and owned by citizens of the United States, and which obtains a coastwise endorsement from the U.S. Coast Guard, is referred to as "coastwise-qualified."

The coastwise laws generally apply to points in the territorial sea, which is defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline.

Title 19, United States Code Appendix, § 883 (46 U.S.C. App. § 883), the coastwise merchandise statute often called the “Jones Act,” provides in part that no merchandise shall be transported 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 vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. Equipment and supplies of the transporting vessel are not considered “merchandise” for this purpose.

19 CFR § 4.80b(a) provides as follows:

§ 4.80b Coastwise transportation of merchandise.

(a) Effect of manufacturing or processing at intermediate port or place. 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 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 Ruling 112895, dated February 2, 1994, we stated:

In its analysis, the Customs Service [now, Customs and Border Protection] has adopted for most cases standards established by the American Society for Testing Materials (ASTM), for such standards represent industry-developed criteria for characterizing fuel oils. The Customs Service will generally consider fuel oils of different ASTM grades as different products. Consequently, fuel oil that is loaded at a coastwise point, blended at a foreign port or place, and unloaded at another coastwise point must change ASTM grade to be considered a “new and different” product for purposes of the coastwise laws.

In HQ 114172, dated June 18, 1998, we determined that the transportation of caustic soda from the United States to Canada on a coastwise-qualified vessel, its commingling in Canada with fungible soda shipped to Canada on non-coastwise-qualified vessels, and its subsequent return by truck to the United States, did not violate 46 U.S.C. App. § 883, provided that adequate records were maintained to show that an amount of the commingled soda equal to the amount transported to Canada on non-coastwise-qualified vessels was first sold foreign.

In HQ 115762 dated September 3, 2002, we held that:

The transportation of LNG from Alaska [to Mexico] by a foreign-flag vessel in the proposed scenario does not constitute a violation of 46 U.S.C. App. § 883 if, after the Alaska-source LNG is commingled with the foreign-source LNG and processed into gas form, an amount of product equal to the amount brought from Alaska is first sold in Mexico and remains in Mexico. Adequate records must be maintained to verify that an amount equal to that transported to Mexico on foreign-flag vessels is first sold in Mexico. The failure to maintain such records would subject the Company to penalties for violation of the aforementioned statute.

After a careful consideration of your request, we find that the proposed activity will not be violative of 46 U.S.C. App. § 883 provided that: an amount of the blended product at least equal to the amount of U.S.-sourced product is sold to a foreign source at a foreign location prior to the transportation of any of the blended product to the U.S.; complete and adequate records are maintained with respect to all material aspects of the proposed activity; and such records will be promptly made available to Customs and Border Protections officials upon written request.

Our determination is consistent with HQ 114172 and 115762, supra.

HOLDING:

The transportation of a product on a foreign flag vessel from the U.S. to a foreign facility for blending, with the product subsequently returned to the U.S., does not constitute a violation of 46 U.S.C. App. § 883 provided that: after the U.S.-sourced product is blended with foreign-sourced product, an amount of the blended product at least equal to the amount of U.S.-sourced product is sold to a foreign source at a foreign location prior to the transportation of any of the blended product to the U.S.; complete and adequate records are maintained with respect to all material aspects of the proposed activity; and such records will be promptly made available to Customs and Border Protection officials upon written request.

Sincerely,

Glen E. Vereb
Chief

Previous Ruling Next Ruling