VES - 3 OT:RR:BSTC:CCI H219798 DAC
Jeanne M. Grasso, Esq.
Blank Rome, LLP
600 New Hampshire, N.W.
Washington, D.C. 20037
RE: Coastwise Trade; iron processing; 46 U.S.C. § 55102; 19 CFR 4.80b(a); new and different product
Dear Ms. Grasso:
This letter is in reply to your submission dated June 1, 2012, on behalf of your client, ArcelorMittal USA, (“Arcelor”) wherein you request a ruling as to whether the proposed transportation by a non-coastwise-qualified vessel would constitute a violation of 46 U.S.C. § 55102. Our ruling on this matter is set forth below.
FACTS:
In your submission, you state that Arcelor proposes to conduct processing and manufacturing of the Tilden fluxed iron ore pellets (“pellets”) located in Canada to create a new and different product of sinter feed. You describe the iron ore pellets as red marble-sized spheres. In your submission you state that the pellets and sinter feed are recognized as separate products in the iron ore and metal production industries, as the commercial use of the pellets is direct charging of a blast furnace for the creation of iron products, and the sinter feed is used to produce sinter, which is a coarse conglomerate of iron ore particles used in a sinter plant. Moreover, you state the sinter feed cannot be used to directly charge a blast furnace. You describe the sinter feed product as very small irregular particles. Additionally, you state the commercial use and function of the pellets and sinter feed are not the same as well as the products two different customer bases.
We further note that Van Nostrand’s Encyclopedia of Chemistry clearly distinguishes the pelletizing and sintering methods of iron ore processing as it explicitly states that:
[t]here are four major types of agglomerating processes: (1) sintering, (2) pelletizing, (3) briquetting, and (4) nodulizing. The first two processes have been the most popular.
(emphasis added.)
ISSUE:
Whether the proposed processing operations would result in the creation of a “new and different product” within the meaning of 19 CFR § 4.80b(a), and for such proposed transportation to not be in violation of 46 U.S.C. § 55102.
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, and which has obtained a coastwise endorsement from the U.S. Coast Guard. Such a vessel 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 46, United States Code, section 55102 (46 U.S.C. § 55102), the coastwise merchandise statute often called the “Jones Act,” provides in part that a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel is wholly owned by citizens of the U.S. for purposes of engaging in the coastwise trade and has been issued a certificate of documentation with a coastwise endorsement under chapter 121 of title 46 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.
Section 4.80b(a), Customs and Border Protection (“CBP”) Regulations (19 CFR 4.80b(a)) provides, in pertinent part:
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.
The plain meaning of the statute prohibits merchandise from being transported on a non-coastwise-qualified vessel between points in the United States. The words “either directly or via a foreign port” were inserted in the original statute by the Congress in 1893. Congress, seeing how easily the protection to American shipping would be vitiated by a simple transshipment of the same cargo, inserted these words to prohibit such transshipments.
In determining whether merchandise which is transported from one point in the United States, to a point in a foreign country, and then to another point in the United States is subject to the prohibition in 46 U.S.C. § 55102 by virtue of being transported between coastwise points “via a foreign point,” we have relied upon the holding of the Supreme Court in The Bermuda, 70 U.S. 514 (1865). In that decision, the Court held that a transportation from one coastwise point to another remains continuous, so long as intent remains unchanged, no matter what stoppages or transshipments intervene. The Bermuda, supra, at 553. The Court went on to reaffirm the longstanding rule that:
[E]ven the landing of goods and payment of duties does not interrupt the continuity of the voyage of the cargo, unless there be an honest intention to bring them into the common stock of the country. If there be an intention, either formed at time of original shipment, or afterwards, to send the goods forward to an unlawful destination, the continuity of the voyage will not be broken, as to the cargo, by any transactions at the intermediate port. The Bermuda, supra, at 554.
The Attorney General of the United States relied upon The Bermuda in his consideration of the applicability of the Jones Act to certain transportation. The Attorney General ruled that when there was no intent by the shipper to transship merchandise from a United States port or place to a United States port or place via a foreign place, “only general rules of law may be laid down.” 34 Op. Atty. Gen. 355, 362 (1924). The general rule of law given by the Attorney General in
this case was that “the intention of the shipper … is the controlling factor.” 34 Op. Atty. Gen., supra, at 363. See also 32 Op. Atty. Gen. 350 (1920); CBP Ruling HQ H114310 (July 13, 2010). The Attorney General also stated that “whether the facts presented in any particular case come within such rules must be determined by the officer charged with the administration of that Act.” 34 Op. Atty. Gen., supra, at 362.
CBP is the agency charged with the administration of 46 U.S.C. § 55102. We have issued a number of rulings on the applicability of 46 U.S.C. § 55102 to the transportation of merchandise between coastwise points via a foreign port. In these rulings, we have held, as did the Supreme Court in The Bermuda, that an “honest intention to bring the goods [transported] into the common stock of the [intermediate foreign] country” is required to break the continuity of transportation between coastwise points via a foreign point. See, e.g., HQ H114310, supra.; CBP Ruling HQ 116557 (October 25, 2005). We have held that intent to export merchandise after its transportation from the United States to an intermediate foreign port is not, by itself, sufficient to break the continuity of the transportation, when the merchandise is transported onward from the intermediate foreign port to a second point in the United States. See CBP Ruling HQ H032036 (July 10, 2008).
Under 19 CFR 4.80b(a), which was promulgated pursuant to 46 U.S.C. App. § 883 (the predecessor of 46 U.S.C. § 55102), 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.)
In the present case, you contend the proposed processing operations will result in a “new and different product” and the transportation of such articles from Canada to the United States is therefore not a coastwise transportation. We point out that Van Nostrand’s Encyclopedia Of Chemistry clearly distinguishes the pelletizing and sintering methods of iron ore processing.
We have referred this matter to CBP’s Laboratories & Scientific Services (LSS), Office of Information and Technology, for its review. After a thorough consideration, LSS has determined that the proposed processing operations are processing operations that result in articles with genuine distinctions and are used for clearly different purposes within the iron industry. Hence, for purposes of 19 CFR § 4.80b(a) only, in this particular instance, the proposed processing of the subject articles will result in a “new and different product” within the meaning of 19 CFR 4.80b(a).
In regards to your particular submission, CBP’s LSS specifically states that:
In formulating our response we reviewed the both the ASTM Standards and Encyclopedia of Chemical Technology, Fifth Edition, Kirk and Othmer. … Prior to steel making iron ore is beneficiated by the removal of most of the sand, clay and other impurities found as the mineral is taken out of the ground and then grinding to a consistent sieve size. However, once the ore is beneficiated and ground to an acceptable size the powder is usually too fine to be used directly into the steel making process or other processes that use iron ore. In order to make the iron ore powder usable in most manufacturing processes it must be agglomerated into different primary forms. These forms are usually pellets, sintered particles or briquettes. The type of agglomeration is determined by the processing that the iron ore will undergo. Some processes call for agglomeration in the form of pellets, some processes will call for the sintered form of agglomeration also known as “clinker” and some processes will use the briquetted form of the iron ore. …
…In the instant case the manufacturer has one agglomerated form of the ore (pellets), and is crushing the pellets in Canada to form a sinter feed. The sinter feed undergoes processing in the United States to form another agglomerated form of iron ore: sintered powder (clinker). In making the case that the pellets are a “new and different” article of commerce when compared to the crushed pellets Arcelor indicates that the pellets cannot be used as sinter feed. We concur with this statement in as much as the agglomeration process requires a powdered form of iron ore and not a pelletized form. … These primary iron ores are produced in different forms to accommodate the different types of furnaces into which it is placed and the processes that the ore must undergo. …
Based upon all of the information available, we find that the proposed processing operations of the subject articles will result in 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. § 55102. See also HQ H101115 (April 23, 2010); HQ 114746 (July 6, 1999); HQ 114476 (November 2, 1998); HQ H190675 (January 20, 2012); HQ 116650 (June 9, 2006); HQ 116230 (May 28, 2004); HQ 112895 (February 2, 1994); HQ 111846 (April 28, 1992).
We emphasize that our determination is based upon the information provided, is for purposes of 19 CFR § 4.80b(a) only and is limited to finding that the subject products proposed to be transported from Canada to the United States for the purposes described above are considered “new and different products” within the meaning of 19 CFR § 4.80b(a). Furthermore, our determination is limited to the subject products explicitly described in your ruling submission within the meaning of 19 CFR § 4.80b(a).
HOLDING:
The proposed processing operations described above would 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 from Canada to the United States of the resultant products is not considered to be a coastwise transportation with the meaning of 46 U.S.C. § 55102.
Sincerely,
George Frederick McCray
Supervisory Attorney-Advisor/Chief
Cargo Security, Carriers and Immigration Branch
Office of International Trade, Regulations & Rulings
U.S. Customs and Border Protection