OT:RR:BSTC:CCR H331021 AFM
Matthew Thomas
BLANK ROME
1825 I Street, NW
Washington, D.C. 20006
RE: 46 U.S.C. § 55102; 19 C.F.R. § 4.80b(a); New and Different Product; Proposed Transportation of Gasoline Blendstock
Dear Mr. Thomas:
This is in response to your March 28, 2023 letter, resubmitted on May 11, 2023, in which you request a ruling on behalf of your client, [ ] (hereinafter “the Company”) determining whether the proposed transportation of certain petroleum products by a non-coastwise-qualified vessel in conjunction with contemplated blending operations would constitute a violation of 46 U.S.C. § 55102. Our decision follows.
FACTS:
The following facts are from your ruling request and supplemental information provided to this office on April 21, 2023, May 11, 2023, May 19, 2023, and July 20, 2023. The Company proposes to transport naphtha and C5 blending components onboard a non-coastwise-qualified vessel [ ] from a U.S. port [
], to a non-coastwise point petroleum terminal located in [ ]. You state that the blending components will be blended at a facility in a non-coastwise point location [ ] with non-U.S. blendstocks (i.e. Eurograde gasoline) to produce Colonial Regular Gasoline.
Following blending and testing, some or all of the resulting Colonial Regular Gasoline will be transported aboard the non-coastwise qualified vessel from the non-coastwise point facility to a [ ] U.S. port [
]. The proposed operations are estimated to occur between [
]. You provide storage agreements for the non-coastwise point facilities and specifications for the exported blending products and the resulting Colonial Regular Gasoline to be returned to a U.S. port [ ], and state as follows:
The finished product will conform to specifications set forth in the Colonial Pipeline Shippers Manual in effect at the time of importation;
Each product transported back to the U.S. will comply with EPA fuel certification standards set forth in 40 C.F.R. § 80 and meet the ASTM D4814 Standard Specifications for Automotive Spark-Ignition Engine Fuel (after blending with 10% ethanol);
The naphtha and C5 transported to the foreign blending location will not meet the ASTM D4814 Standard Specification for Automotive Spark-Ignition Engine Fuel or the regulations for finished motor gasoline set forth in 40 C.F.R. § 80 with the addition of 10% ethanol; and,
A product meeting the specifications for a blending component will not meet the specifications for Conventional Gasoline at the same time due to significant differences between the blendstocks and finished product specifications.
The Company seeks a ruling determining whether blending U.S.-origin product blendstocks at a facility at a non-coastwise point location to create Colonial Regular Gasoline, would create a new and different product not subject to the coastwise laws of the United States.
ISSUE:
Whether, based on the product specifications provided, the proposed blending operation would result in the creation of a “new and different product” within the meaning of 19 C.F.R. § 4.80b(a), such that the proposed transportation by a non-coastwise-qualified vessel would not be in violation of 46 U.S.C. § 55102.
LAW AND ANALYSIS:
Pursuant to 46 U.S.C. § 55102 (“the Jones Act”), 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 has a coastwise endorsement. Additionally, under 19 C.F.R. § 4.80b(a):
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.
CBP has consistently held that in order for fuel oil to qualify as a new and different product, it must undergo a change in American Society for Testing Material (“ASTM”) grade. In Headquarters Ruling (“HQ”) 112895 (Feb. 2, 1994), the Customs Service (now, CBP) stated that in adherence to industry standards, when fuel oil changes ASTM grades, it becomes a new and different product. In that case, CBP found that the transportation would not be in violation of 46 U.S.C. App. § 883 (now, 46 U.S.C. § 55102) because the merchandise when imported would not meet the ASTM specifications for gasoline but would be exported as unleaded gasoline meeting the ASTM specifications.
Accordingly, we have sought advice from CBP’s Laboratories and Scientific Services Directorate (“LSSD”) as to whether the proposed blending operation would result in a new and different product. Based on the information provided in your request and responses to our requests for additional information, including specifications and blending processes, LSSD has advised that the C5 does not meet ASTM D4814 specifications after blending with 10% ethanol because of low octane and low distillation temperature at T50, and that the naphtha does not meet ASTM D4814 specifications because of low octane. Therefore, LLSD advised that, based on the characteristics provided for both C5 and naphtha, a new and different product is produced within the meaning of 19 C.F.R. § 4.80b(a) when the C5 and naphtha are blended with Eurograde gasoline as long as the product meets ASTM D4814 specifications after blending with 10% ethanol. Therefore, we find that the blending operations proposed would result in a new and different product. Thus, under 19 C.F.R. § 4.80b, the subsequent transportation of the finished product aboard a non-coastwise qualified vessel would not be in violation of 46 U.S.C. § 55102.
HOLDING:
The proposed blending operation as described above would result in the creation of a new and different product within the meaning of 19 C.F.R. § 4.80b(a). Therefore, the proposed transportation by a non-coastwise-qualified vessel would not be in violation of the Jones Act, 46 U.S.C. § 55102.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruing letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” If any fact in the transaction varies from the facts stipulated to herein, or CBP ascertains discrepancies based upon a review of any other pertinent information, this decision shall not be binding on CBP as provided for in 19 C.F.R. § 177.2(b)(1), (2) and (4), and § 177.9(b)(1) and (2).
Sincerely,
W. Richmond Beevers
Chief, Cargo Security, Carriers and Restricted Merchandise Branch
Office of International Trade, Regulations and Rulings
U.S. Customs and Border Protection