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HQ W116731

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November 7, 2006

VES-3/3-07-BSTC:CCI W116731 GOB

CATEGORY: CARRIER

Kirstin I. Silberschlag, Esq.
International Trade Counsel
Valero Marketing & Supply Company
P.O. Box 696000
San Antonio, Texas 78269-6000

RE: Coastwise Trade; Oil Blending; 46 U.S.C. App. § 883; 19 CFR 4.80b(a); New and Different Product

Dear Ms. Silberschlag:

This letter is with respect to your ruling request of October 9, 2006 on behalf of Valero Marketing & Supply Company (“Valero”). Our ruling is set forth below.

FACTS:

You describe the pertinent facts as follows:

Valero proposes to transport, aboard foreign-flag vessels, U.S.-origin Light Cycle Oil (“LCO”) from various ports in the U.S. Gulf Coast to Valero’s Aruba refinery, located in San Nicolas, Aruba. This LCO at issue is a high aromatic/high sulfur product produced from catalytic cracking units in the refinery process. . . .

The LCO at issue does not fall under any standard ASTM specifications; however, OPIS does publish a summary of industry specifications and market guidelines for certain products, including LCO. . . .

Once the LCO arrives in Aruba, it will be landed and processed at tankage in Aruba. Specifically, the LCO will be blended with Aruban-origin Low Sulfur Diesel (“LSD”) produced at the Aruba refinery. . . .

The blending operations in Aruba described above will result in a Heating Oil/High Sulfur Diesel (“HSD”) product . . .

This HSD will meet the ASTM D 975 standards specifications for diesel fuel oil (“ASTM 975”). . . . After being blended in Aruba, the HSD product will be transported from Aruba back to the United States aboard foreign-flag vessels, primarily to the U.S. East Coast for sale. Upon arrival in the United States, the blended products would be sold as Heating Oil or High Sulfur Diesel Oil, meeting ASTM standard specifications for diesel fuel oils.

You have submitted specifications for the products to be blended, the U.S.-origin Light Cycle Oil (“LCO”) and the Aruban-origin Low Sulfur Diesel (“LSD”), and for the blended product, Heating Oil/High Sulfur Diesel (“HSD”).

ISSUE:

Whether the proposed blending operation would result in the creation of a “new and different product” within the meaning of 19 CFR § 4.80b(a), so as to render inapplicable the prohibition against non-coastwise-qualified vessels set forth in 46 U.S.C. App. § 883.

LAW AND ANALYSIS:

Title 46, United States Code Appendix, Section 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.

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.

Section 4.80b(a), Customs and Border Protection (“CBP”) Regulations (19 CFR § 4.80b(a)), promulgated pursuant to 46 U.S.C. App. § 883, 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.

We have referred this matter to CBP’s Laboratories & Scientific Services (“LSS”) for its review. After a thorough consideration, LSS has determined that the product produced in Aruba is a “new and different product” from that which was transported to Aruba.

Accordingly, we find that the proposed processing of the fuel oil in Aruba will result in the manufacture or processing into a “new and different product” within the meaning of 19 CFR § 4.80b(a).

Therefore, pursuant to 19 CFR § 4.80b(a), the proposed transportation is not considered coastwise transportation within the meaning of 46 U.S.C. App.

We emphasize that our determination does not relate in any way to the blending process itself. Our determination is solely that the product returning to the U.S. will be a “new and different product,” within the meaning of 19 CFR § 4.80b(a) and 46 U.S.C. App. § 883, from that which left the U.S. Further, our determination applies only to the products and specifications explicitly described in your ruling submissions.

HOLDING:

The proposed blending operations will result in the creation of a “new and different product” within the meaning of 19 CFR § 4.80b(a). Therefore, pursuant to 19 CFR 4.80b(a), the proposed transportation of the resultant products is not considered to be coastwise transportation with the meaning of 46 U.S.C. App. § 883.

Sincerely,

Glen E. Vereb
Chief

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