VES-3-07-RR:IT:EC 114746 GEV
Rolf Marshall, Esq.
Preston Gates Ellis & Rouvelas Meeds LLP
1735 New York Avenue, NW
Suite 500
Washington, D.C. 20006-5209
RE: Coastwise Trade; Transportation of Cattle; 46 U.S.C. App. § 883
Dear Mr. Marshall:
This is in response to your letter dated June 29, 1999, on behalf of your client, the Hawaii Cattleman’s Council, requesting a ruling regarding the use of a non-coastwise-qualified vessel for a segment of a proposed movement of Hawaiian-bred cattle from that State to the U.S. mainland. Our ruling on this matter is set forth below.
FACTS:
The Hawaii Cattlemen’s Council (the “Council”) is a statewide umbrella organization comprised of county-level Cattlemen’s Associations in Hawaii. Its over 110 member ranchers represent 75 percent of all beef cattle in the State and are stewards of over 25 percent of the State’s total land mass. The present request focuses specifically on the following four tiers of production within the beef cattle industry in the United States and Mexico: the producers of breeding stock; commercial cow-calf operations; yearling-stocker operations; and feedlots. Collectively, these four tiers produce at least six distinct products that are marketed within the system, culminating in the sale of slaughter cattle to packing houses. A more detailed description of these four tiers is set forth below.
Seedstock Producers
The Seedstock segment of the industry produces the Breeding Stock employed elsewhere in the chain of production to build herds for the commercial production of beef cattle. Breeding Stock products consist primarily of bulls in the 14-30 month age range, but may also include some
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steers and heifers for feeding and some slaughter cows and bulls (i.e., animals used to produce the breeding stock that have passed the point at which they can usefully continue to provide that function).
Commercial Cow-Calf Producers
Employing Breeding Stock purchased or otherwise acquired from the Seedstock segment, Commercial Cow-Calf Producers develop and maintain the cow herds that are the foundation of the commercial beef cattle industry. A few Commercial Cow-Calf operations are “intensively” managed operations where cows remain in confinement on a year-round basis, but most are “extensively” managed with cows maintained on forage throughout the entire year either in high mountain valleys, plains, or desert areas. This segment produces primarily Calves (6-10 months old) weighing 300-700 lbs., with some by-products in the form of Slaughter Bulls and Cows (again, animals no longer capable of producing calves in desired numbers or required quality).
Yearling-Stocker Operators
The Yearling-Stocker segment is responsible for adding weight to weaned calves received from Commercial Cow-Calf operations and otherwise controlling the feeding of those calves so as to encourage necessary weight gain and the development of other economically important market characteristics. Such operations usually must have available forage for winter feeding as well as grazable forage of proper types for spring, summer, and fall feeding. This segment produces Feeder Steers and Heifers (“Feeder Cattle”) mostly in the 12-20 month age range and weighing 500-900 lbs. with other traits necessary to receive the full benefit of intensive feeding during the next stage.
Feedlots
Feedlots are confinement feeding operations where cattle are fed primarily tailored finishing rations to produce economically efficient weight gains and to improve the palatability of the beef prior to slaughter. Feedlots produce Slaughter Steers and Heifers (“Slaughter Cattle”) as well as Slaughter Cows and Bulls (received from either Seedstock or Commercial Cow-Calf operations and sent to Feedlots for final fattening prior to slaughter), all of which are marketed to Packing Houses for slaughter and further processing.
The production process outlined above can extend for from one to two years for any given animal, during which time it can be marketed as many as four separate times (from Seedstock to Cow-Calf Producer to Yearling-Stocker Operator to Feedlot to Packing House) as four separate and distinct products under standard industry classification schemes (Breeding Stock, Calves, Feeder Cattle, and Slaughter Cattle). Approximately 77 percent of the beef cattle produced in the United States move through this primary production chain. An additional 19 percent move out of Seedstock or Cow-Calf Operations as Slaughter Cows and Bulls, while the remaining 4 percent are marketed as veal products.
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The Hawaii cattle industry segments represented by the Council for purposes of this request operate principally in the Commercial Cow-Calf segment of the beef cattle industry as described above. For example, while Hawaii has on average approximately 78,000 beef cows
calving in an average year, it has only 2,000 head on feed in Yearling-Stocker or Feedlots. The products of that industry, and the merchandise to be transported under this request, include the following (under the standard industry product definitions outlined above):
Breeding Stock
Calves
Yearling/Stockers
Feeder Steers/Heifers
Slaughter Cows/Bulls
Slaughter Steers/Heifers
The specific transportation under consideration involves the lading of any of the above-listed products (collectively “Hawaii cattle”) in Hawaii on a non-coastwise-qualified vessel which proceeds from Hawaii to the Port of Ensenada, Mexico, or to any other port in Mexico not within the coastwise laws. On landing, the cattle will be transported by truck to the Mexicali Valley, which is about 200 miles east of Ensenada and extends along the U.S.-Mexican border south of the U.S. Port of Entry at Calexico, California. On arrival in the Mexicali Valley, the cattle would be rested for a few days before, depending on their size and development, processing as follows:
* if Breeding Stock, at a Commercial Cow-Calf Operation;
* if a Calf, at a Stocker Operator;
* if a Stocker, at a Feeder Operator; or
* if Feeder Cattle, at a Feedlot;
where the cattle engage in supervised feeding and other activities for which purpose they were transported to that place.
After that intervening activity, the cattle move respectively:
* if Stocker, to a Feeder Operator in the United States where
they engage in such feeding and other activities as necessary
to become Feeder Cattle;
* if Feeder Cattle, to a Feedlot in the United States where they
engage in such feeding and other activities as necessary to
become Slaughter Cattle; or
* if Slaughter Cattle, to a Packing Plant in the United States
Under any of the above scenarios, entry into the United States would occur through the Port of Calexico, California, or the Port of San Luis, Arizona.
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ISSUE:
Whether the Hawaii cattle are processed in Mexico into new and different products prior to their movement into the United States thereby rendering inapplicable the prohibition provided in 46 U.S.C. App. § 883 so that the prior transportation of such cattle from Hawaii to Mexico aboard a non-coastwise-qualified vessel is not violative of that statute.
LAW AND ANALYSIS:
The coastwise law pertaining to the transportation of merchandise, § 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, in pertinent part, 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 as determined by the Secretary of the Treasury, or
the actual cost of the transportation, whichever is greater, to be recovered
from any consignor, seller, owner, importer, consignee, agent, or other
person or persons so transporting or causing said merchandise to be trans-
ported), between points in the United States...embraced within the coast-
wise laws, either directly or via a foreign port, or for any part of the trans-
portation, 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...
Section 4.80b(a), Customs Regulations, promulgated pursuant to 46 U.S.C. App. § 883, provides, in part, that:
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 U.S. 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)
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The navigation laws and regulations administered by Customs, including 46 U.S.C. App.
§ 883 and 19 CFR § 4.80b(a), apply to points in 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.
It is the position of the Council under this scenario that an animal’s progression through several industry-recognized stages of development in Mexico constitutes a chain of production sufficient to change it into a “new and different product” at each of these respective stages thereby resulting in the continuity of its coastwise movement being broken. Consequently, the use of a non-coastwise-qualified vessel is stated not to be violative of 46 U.S.C. App. § 883.
Customs has previously had occasion to apply the above-cited judicial and regulatory authority to the standards of the cattle industry described herein. In Customs ruling letter 114476, dated November 2, 1998, the processing at issue, which was identical to that currently under consideration, was deemed sufficient to create a “new and different” product within the meaning of § 4.80b(a), Customs Regulations. The only difference in the facts of that case and those of this case is that in the former the processing in question took place in Canada whereas in the latter it would take place in Mexico.
Accordingly, any animal laded in Hawaii, processed in Mexico as described herein to the extent that the beef cattle industry recognizes it as being one of the above-listed products other than that which was laded in Hawaii, is considered a “new and different product” within the meaning of § 4.80b(a), Customs Regulations. Consequently, the use of a non-coastwise-qualified vessel for the waterborne segment of the transportation in question is not violative of 46 U.S.C. App. § 883.
HOLDINGS:
The processing in Mexico of Hawaii cattle into new and different products prior to their movement into the United States renders inapplicable the prohibition provided in 46 U.S.C. App. § 883. The prior transportation of such cattle from Hawaii to Mexico aboard a non-coastwise-qualified vessel is therefore not violative of that statute.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers Branch