OT:RR:BSTC:CCR H335011 AFM
Utsav Mathur
Norton Rose Fulbright US LLP
1301 McKinney, Suite 5100
Houston, TX 77010-3095
RE: 46 U.S.C. 55102; 19 C.F.R. 4.80b(a); New and Different Product; Proposed Transportation of Gasoline Blendstock
Dear Mr. Mathur:
This is in response to your October 6, 2023 letter, in which you request a ruling on behalf of your client, [
] (hereinafter "the Company") determining whether the proposed transportation of light naphtha by a non-coastwise-qualified vessel in conjunction with contemplated blending operations would constitute a violation of 46 U.S.C. 55102.[1] Our decision follows.
FACTS:
The following facts are from your October 6, 2023, ruling request and supplemental information provided on March 20, 2024. The Company proposes to transport light naphtha onboard a non-coastwise-qualified vessel from one or more U.S. coastwise points ("Export Coastwise Points") including but not limited to [
] to locations outside the United States. You
state that the blending components will be blended at an onshore facility within shore tanks or shore pipelines in a non-coastwise point location [
] with
non-U.S. blendstocks (i.e. foreign-origin hydrocarbon blending components) to produce three finished products; Conventional Blendstock for Oxygenated Blending ("CBOB"), Reformulated Blendstock for Oxygenated Blending ("RBOB"), and California Reformulated Gasoline Blendstock for Oxygenate Blending ("CARBOB") (collectively, the "Finished Products") that would be imported into the United States.
Following storing, blending, and testing, the resulting Finished Products will be transported aboard the non-coastwise qualified vessel from the non-coastwise point facility where blending occurred to the U.S. at a different coastwise point than the Export Coastwise Points ("Import Coastwise Points") and discharged. The Import Coastwise Points will be [
]. Oxygenate in the form of ethanol will be added to the
Finished Products after the Finished Products arrive in the United States to create a gasoline-oxygenate blend to be used as automotive fuel for ground vehicles equipped with spark-ignition engines in compliance with American Society for Testing Materials ("ASTM") standard D 4814 - 22. You provide specifications for the exported blending products and the resulting Finished Products to be returned to a U.S. coastwise point and state that "the light naphtha will be distinguishable from each Finished Product" because it would not meet the specifications even if 10% oxygenate in the form of ethanol were added to it. Therefore, the Company contends that each of the Finished Products are a "new and different" product than the light naphtha and seeks a ruling confirming that the contemplated blending activity described above would result in a new and different product such that its transportation between coastwise points would not violate 46 U.S.C. 55102.
ISSUE:
Whether, based on the product specifications provided, the proposed blending operations would result in the creation of "new and different products" 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.[2] 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.[3]
(Emphasis added.)
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.[4] In HQ H249067 (Mar. 6, 2014), CBP's Laboratories and Scientific Services Directorate ("LSSD") provided conditions that imported RBOB and CBOB must meet and indicated that, absent further processing, blending 10% ethanol with imported RBOB and CBOB to be used as motor fuel would not preclude the RBOB and CBOB from being considered a new and different product.[5]
Accordingly, we have sought advice from LSSD as to whether the proposed blending operation would result in a new and different product. Based on the information provided in your request, including specifications and blending processes, LSSD has advised that it appears that the light naphtha does not meet ASTM D4814, CBOB, RBOB, or CARBOB specifications after blending with 10% ethanol because of [ ]. Therefore, LSSD advised that, based on the characteristics provided for the light naphtha, a new and different article of commerce would be produced within the meaning of 19 C.F.R. 4.80b(a) when the light naphtha is blended to make RBOB, CBOB and CARBOB as long as the product meets the respective 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:
Based on the import and export specifications provided, 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 the facts at hand vary from the facts stipulated to herein, 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 (4).
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
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[1] You have asked this office for confidential treatment of all information contained in brackets, which includes your client's name. CBP Regulations at 19 C.F.R. 177.2(b)(7) provide that the requester of a ruling from our office may ask that privileged or confidential commercial or financial information supplied for purposes of preparing the requested ruling not be disclosed. Such requests will be considered if the information is clearly identified and the reasons for requesting that information not be disclosed are provided. If this office receives a Freedom of Information Act request for your submission, Regulations at 6 C.F.R. 5.12, et seq. regarding the disclosure of business information provide that the submitter of business information will be advised of receipt of a request for such information whenever the business submitter has in good faith designated the information as commercially or financially sensitive information. We accept your request for confidential treatment as a good faith request.
[2] 46 U.S.C. 55102 (emphasis added).
[3] 19 C.F.R. 4.80b(a) (emphasis added).
[4] See also HQ H190675 (Jan. 20, 2012); HQ H101115 (Apr. 23, 2010); HQ 116650 (June 9, 2006); HQ 116230 (May 28, 2004).
[5] See also HQ H259293 (Jan. 29, 2015).
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