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HQ H013642




July 30, 2007

VES-3-07: RR:BSTC:CCI H013642 ALS

CATEGORY: CARRIER

Ms. Andrea Grant
Ms. Lynn Van Buren
DLA Piper US, LLP
1200 19th Street, N.W.
Washington, D.C. 20036-2412

RE: Coastwise transportation; Merchandise; New and Different Product; 46 U.S.C. § 55102; 19 CFR 4.80b(a).

Dear Ms. Grant and Ms Van Buren:

This is in response to your letter dated June 29, 2007, on behalf of Irving Oil Terminals, Inc., Irving Oil Transportation LLC, Irving Oil Corporation, and Irving Oil Energy [hereinafter referred to collectively as “Irving” or “the client”), in which you request a ruling regarding the proposed coastwise transportation of a blended fuel oil product.

FACTS:

You state that Irving proposes to “conduct blending operations involving light cycle oil or “LCO.” You further state that “light cycle oil is a petroleum blendstock typically used as a “cutter stock” for several refined petroleum products, including No. 6 fuel oil. LCO does not meet the ASTM standards for No. 6 fuel oil.”

Irving further proposes to bring LCO from the United States to Canada on a foreign-flagged vessel, off-load the oil at its refinery in St. John, New Brunswick, and blend the LCO with other petroleum blendstocks in a storage tank. You state that “the resulting product would be No. 6 residuel fuel oil that meets ASTM Standard D 396, as amended to meet operational needs of the customer. It would be loaded on a foreign-flagged vessel and shipped to the United States. In almost all cases, the blended product will be entered at ports in the Northeastern United States.”

ISSUE:

Whether the proposed blending of LCO as specified in the scenario referenced above results in a new and different product within the meaning of 19 CFR 4.80b(a) so that the proposed use of a foreign-flagged vessel does not violate 46 U.S.C. § 55102.

LAW AND ANALYSIS:

Under 46 U.S.C. § 55102, no merchandise shall be transported by water between points in the United States, either directly or via a foreign port in any vessel other than a vessel built in and documented under the laws of the United States and owned by citizens of the United States (i.e., a coastwise-qualified vessel). Under 19 CFR 4.80b(a), the following is provided:

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. (Emphasis added.)

We have sought and received advice from our agency’s Laboratories and Scientific Services (LSS) as to whether the processing you describe results in a new and different product for the purposes of 19 CFR 4.80b(a).

LSS has concluded that the blending process you propose would result in a new and different product in certain circumstances. Specifically, the product with a viscosity range of 17-50 at 100 degrees Centigrade meets the American Society for Testing and Materials (ASTM) specifications of No. 6 fuel oil, and therefore is a new and different product from the exported LCO.

LSS further concludes, however, the product that has a viscosity of greater than 50 at 100 degrees Centigrade, would not meet the ASTM specifications for a No. 6 fuel oil. It is further explained that such a product would not be considered fuel oil, but rather “a petroleum intermediate that is used to produce a wide range of end products.” Therefore, the product with a viscosity of greater than 50 at 100 degrees Centigrade is not a new and different product when compared to the exported LCO.

In light of these findings, we find that the movement of LCO to Canada to be processed into No. 6 fuel oil with a viscosity range of 17-50 at 100 degrees Centigrade, which is a new and different product when compared to the exported LCO, then transported by a foreign-flagged vessel back to the United States, does not violate 46 U.S.C. § 55102. We also find that the product with a viscosity of greater than 50 at 100 degrees Centigrade, which is not a new and different product when compared to the exported LCO, would violate 46 U.S.C. § 55102 if transported by a foreign-flagged vessel back to the United States. Please note that if the LCO transported to Canada is processed in a manner different than what you described to us in your June 29, 2007 submission, then our finding herein does not apply.

HOLDING:

The proposed blending of the exported LCO as specified in the scenario referenced above results in a new and different product within the meaning of 19 CFR 4.80b(a) when the resulting product is No. 6 fuel oil with a viscosity range of 17-50 at 100 degrees Centigrade. Consequently, the proposed use of a foreign-flagged vessel to transport this product to the United States would not violate 46 U.S.C. § 55102.

The proposed blending of the exported LCO as specified in the scenario referenced above does not result in a new and different product within the meaning of 19 CFR 4.80b(a) when the resulting product has a viscosity of greater than 50 at 100 degrees Centigrade. Consequently, the proposed use of foreign-flagged vessels to transport this product to the United States would violate 46 U.S.C. § 55102.

Sincerely,

Glen E. Vereb

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