VES-3-07 CO:R:IT:C 111846 JBW

Margaret R. Polito, Esquire
Coudert Brothers
200 Park Avenue
New York, New York 10166

RE: Coastwise Trade; Fuel Oil Blending; 46 U.S.C. App. 883; 19 C.F.R. 4.80b(a).

Dear Ms. Polito:

This letter is in response to your letters, dated February 12, 1992, and April 8, 1992, in which you provide additional information and clarification on certain gasoline blending components as requested in our ruling letter 111846, dated January 6, 1992.

FACTS:

In Headquarter Ruling Letter 111846, this office evaluated different blending operations and blending componets used by Vitol Energy (Bermuda) Ltd. ("Vitol") in making unleaded premium gasoline to determine whether such blending operations create or whether such components are manufactured into "new and different products" with the meaning of 19 C.F.R. 4.80b(a) so that the proposed transportation of the blend by a foreign-flag vessel is not in violation of 46 U.S.C. App. 883. For reasons stated in that letter, we withheld final consideration on the use of Light Cat Gas, Trinidad Reformate, Heavy Cat Gas, and Heavy Pygas pending further test results. You provided information on these components, and other components, in your letter of February 12, 1992. By telephone, this office requested further clarification on some of these components, which you provided by letter of April 8, 1992. The components specifications are as follows:

NAME SG RON MON R+M/2 LEAD 50PCT SULP MERC RVP DEG C PCT PPM PSI WT

ASTM LIMITS 82.0 87.0 77 MIN (2) MIN MIN (1) MAX MAX

Light Cat Gas 0.70 90.3 79.3 84.8 0 78.0 0.01 3 11.1

Alkylate 0.70 95.0 92.3 93.7 0 104.0 0.01 3 7.5

Venezuelan Cat Gas 0.76 91.0 80.0 85.5 0 105.0 0.07 3 8.0

Trinidad Reformate 0.78 94.5 85.0 89.8 0 125.0 0.02 3 8.5

Heavy Cat Gas 0.80 89.8 79.7 84.8 0 145.0 0.15 4 2.0

Pygas (Heavy) 0.86 97.2 82.4 89.8 0 154.0 0.01 3 2.0

Amoco Light Cat Gas 0.68 93.4 80.8 87.1 0 56.0 0.01 3 11.2

NAME 10PCT 90PCT FBP DIST COP EXIST OXID V/L DEG C DEG C DEG RES COR GUM STAB PCT MG/ VOL 100ML

ASTM LIMITS 225 2PCT 5 MAX MAX MAX

Light Cat Gas 49 194 192 1.0 1 2 240+ 50.3

Alkylate 4 132 197 2.5 1 2 360+ 53.9

Venezuelan Cat Gas 57 199 220 3.0 1 2 360+ 63.5

Trinidad Reformate 66 171 235 1.0 1 2 240+ 67.8

Heavy Cat Gas 80 180 210 1.0 1 3 240+ 88.6

Pygas (Heavy) 120 165 188 3.0 1B 10 150 98.1

Amoco Light Cat Gas 44 96 128 1.0 1 2 360+ 45.3

The vapor liquid ratio (V/L) was calculated using the formula: 52.47 - 0.33RVP + 0.20T10 + 0.17T50, where T10 is the distillation temperature in degrees C for 10 % evaporated, T50 is the distillation temperature in degrees C for 50 % evaporated, and RVP is RVP in kPA.

ISSUE:

Whether the blending components described above, when used to make ASTM D4814 unleaded gasoline, become "new and different products" within the meaning of 19 C.F.R. 4.80b(a) so that the proposed transportation of the blending components by a foreign- flag vessel is not in violation of 46 U.S.C. App. 883.

LAW AND ANALYSIS:

Section 883 of Title 46, United States Code Appendix, provides, in pertinent part:

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 as determined by the Secretary of the Treasury, or the actual cost of the transportation, whichever is greater...), between points in the United States, including Districts, Territories, and possessions thereof 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 persons who are citizens of the United States....

46 U.S.C. App. 883. The Customs Service has ruled that a point within the territorial waters of the United States is a point 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 to points located in internal waters, landward of the territorial sea baseline, in cases where the baseline and the coastline differ.

Section 4.80b(a) of the Customs Regulations provides, in part, that:

[M]erchandise 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.

19 C.F.R. 4.80b(a). In applying this section, the Customs Service 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.

Pursuant to Treasury Decision 91-32, 56 Fed. Reg. 14467 (April 10, 1991), the Customs Service requires the submission of data on the procedures of and materials used in a fuel oil blending operation to determine whether the merchandise is subject to the provisions of 46 U.S.C. App. 883. In its analysis, the Customs Service 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 products of different ASTM grades as different products. Consequently, either gasoline or blending components of the gasoline that are 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.

We have reviewed the information that you have provided and conclude that they do not meet the ASTM standards as gasoline and can be regarded as new and different products when used to make unleaded gasoline meeting the ASTM specifications. Therefore, the transportation of these blendstocks by foreign-flag vessels will not result in a violation of 46 U.S.C. App. 883.

Finally, in your letter of April 8, 1992, you supply additional data on the distillation residues of certain components. You also raise a number of issues regarding the appropriated testing method to determine the vapor liquid ratio. We find that the specifications given for the blendstocks which clarify the issue of the distillation residues are valid. Moreover, we concur with your statement that ASTM D2533 testing is unnecessary for blendstocks that fail to meet several other ASTM D4814 specifications. We are of the opinion that the D2533 testing is necessary for unleaded gasolines.

HOLDING:

The blending components listed above do not meet the ASTM standards as gasoline and can be regarded as new and different products when used to make unleaded gasoline meeting the ASTM specifications. Therefore, the transportation of these blendstocks by foreign-flag vessels will not result in a violation of 46 U.S.C. App. 883.


Sincerely,

B. James Fritz
Chief
Carrier Rulings Branch