VES-3-07-OT:RR:BSTC:CCI H032036 JLB
Mr. Joseph F. Donohue, Jr.
Donohue and Donohue
26 Broadway Suite 2300
New York, New York 10004
RE: Coastwise Transportation; 46 U.S.C. § 55102; Continuity of Transportation
Dear Mr. Donohue:
This letter is in response to your correspondence dated June 25, 2008, on behalf of Hess Energy Trading Company, LLC, in which you inquire about whether your client’s proposed scenarios for transporting alkylate from the United States to Turkey and then back to the United States constitute a violation of the Jones Act, 46 U.S.C. § 55102. Our ruling on your request follows.
FACTS
You represent Hess Energy Trading Company, LLC (“HETCO”), a subsidiary of Hess Corporation, which engages in the sale and trade of crude oil, natural gas and petroleum products in the United States and worldwide. In February 2007, HETCO entered into an agreement with OPET Trade (Ireland) Ltd. (“OPET”), a company that also engages in the sale and trading of crude oil and petroleum products. Under this Strategic Trading Agreement, the two companies agreed to work together to purchase, store, sell and trade petroleum and petroleum products on the world market. This partnership is advantageous to both parties as HETCO has considerable experience in Asia and Northwest Europe, while OPET has experience in the Eastern Mediterranean, Turkey and Black Sea regions.
Pursuant to the agreement, HETCO and OPET have the right to use a petroleum storage facility (including storage tanks and marine terminals) in Marmara, Turkey, which is owned and operated by OPET’s Turkish affiliate. HETCO purchases, stores and resells jet fuel, gasoline and gasoline blendstocks from this facility. All such purchases have been sourced from outside the United States and all sales have been to purchasers outside the United States. HETCO has not sold any of the products stored at the Turkish facility to purchasers in the United States. In fact, all of HETCO’s sales from this facility have been FOB Turkey and have either been made to OPET or to two customers, identified as customers “A” and “B” for confidentiality purposes. This is the first and only instance where HETCO’s merchandise originated in the United States and is to be returned to the United States.
Unrelated to the Strategic Trade Agreement with OPET, HETCO also leases a storage tank, identified as Tank No. 375, at Magellan Terminals in Galena Park, Texas, which is situated on the Houston ship channel. In order for a vessel to laden or unladen a product to or from Tank No. 375, the vessel must be berthed at one of two docks at the terminal facility, either No. 1 ship dock or No. 2 ship dock. The No. 1 ship dock and the No. 2 ship dock are at right angles to each other and occupy a common bulkhead (or pier). When two vessels are berthed at each dock, they virtually abut each other. The two docks have separate gangways, hose connections and related equipment.
On December 31, 2007, HETCO shipped approximately 330,000 barrels of U.S.-produced alkylate, a high-octane gasoline blendstock, from Tank No. 375 to the Turkish storage facility with the intention of selling the alkylate on the international market pursuant to the Strategic Trade Agreement. The alkylate was laden at the No. 1 ship dock aboard a non-coastwise-qualified vessel. Due to a dramatic change in market conditions in Europe, however, the alkylate has remained in storage, unsold and HETCO is considering returning it to the United States for sale in the United States market. You have submitted the following documentation to demonstrate HETCO’s intention to sell the merchandise in the international market: an affidavit by the managing director of HETCO; a list of the sales from the Turkish facility including the destination, if known, of the product; the origin, product, customer and sales terms; and a bill of lading for the subject shipment of alkylate stating that the “ultimate country of destination” is Turkey.
You have presented several scenarios to return the alkylate to the United States using a non-coastwise-qualified vessel. Your present proposal would be to return the alkylate to Tank No. 375, from which it was originally laden. Dock space at the Magellan Terminals cannot be reserved, however, since it is available on a first-come, first-serve basis. If the No. 1 ship dock, where the alkylate was originally laden, is not available at arrival, HETCO would seek to unladen the cargo at the No. 2 ship dock instead. Pursuant to this proposal, HETCO inquires whether unlading the alkylate at the No. 1 ship dock constitutes a violation of 46 U.S.C. § 55102 [hereinafter referred to as Scenario One]. Scenario Two constitutes unlading the alkylate at the No. 2 ship dock. The final scenario presented [hereinafter referred to as Scenario Three] would be to return the alkylate to a different United States location, other than the Magellan Terminals in Galena Park, Texas. You state that this scenario would be possible if unknown market conditions develop that would make delivery to another United States location preferable.
ISSUES
Whether the transportation of merchandise from the United States to Turkey and back to the United States aboard a non-coastwise-qualified vessel as described above constitutes a continuous voyage in violation of 46 U.S.C. § 55102?
If such a transportation does constitute a continuous voyage, then does the transportation of the merchandise from the initial point of lading to the abovementioned points of unlading constitute a violation of 46 U.S.C. § 55102?
LAW AND ANALYSIS
The Jones Act, former 46 U.S.C. App. § 883 recodified as 46 U.S.C. § 55102, pursuant to P.L. 109-304 (October 6, 2006), states 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 was built in and documented under the laws of the United States and owned by persons who are citizens of the United States. (See also 19 C.F.R. §§ 4.80, 4.80b). Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “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.
Pursuant to 19 U.S.C. § 1401(c), the word "merchandise" is defined as "goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31.” For purposes of the Jones Act, merchandise also includes “valueless material.” See 46 U.S.C. § 55102(a)(2). The U.S. Customs and Border Protection (“CBP”) Regulations promulgated under the authority of 46 U.S.C. § 55102 provide that a coastwise transportation of merchandise takes place when merchandise laden at a coastwise point is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a).
Congress inserted the phrase “either directly or via a foreign port” in the abovementioned statute to ensure the protection of the American shipping industry upon realizing that transshipments of the same cargo would be permissible under the statute that was then in effect. In order to determine whether merchandise can be transported from a U.S. point to a foreign point and then back to another U.S. point without violating 46 U.S.C. § 55102, which specifically prohibits the transportation of merchandise between coastwise points "via a foreign port," it is necessary to examine the holding of the Supreme Court in The Bermuda, 70 U.S. 514 (1865). In that case, the Supreme Court held that such transportation between points remains a continuous voyage, if the intent is unchanged, no matter how many transshipments intervene. The Court also asserted 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 the 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, 70 U.S. at 554.
The Attorney General further expounded on this rule by finding that when there was no intent by the shipper to transship the cargo to a U.S. port then “only general rules of law may be laid down,” and thus “the intention of the shipper is the controlling factor.” 34 Op. Atty. Gen. 335, 362-363 (1924). According to the Attorney General, the intention of the shipper is to be determined by “the officer charged with the administration of that Act.” See id. As the agency “charged with the administration” of 46 U.S.C. § 55102, CBP is empowered to determine this intent. The intent of the shipper is a subjective determination and accordingly, is determined on a case-by-case basis.
It is our long-standing and consistently applied administrative policy, in accordance with the ruling 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. 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. We have also held that when, at the time of shipment of merchandise from the United States to an intermediate foreign port, there existed the expectation that a substantial portion of the merchandise would not be consumed in the country of the foreign port, entry through the foreign country's customs and payment of duty is not considered to break the continuity of the transportation when any of the merchandise is transported onward to a second point in the United States. See, e.g., Headquarters Ruling Letter 116518, dated August 9, 2005; Headquarters Ruling Letter 112295, dated July 20, 1992; Headquarters Ruling Letter 109475, dated October 4, 1988.
In Headquarters Ruling Letter 116424, dated March 25, 2005, a non-coastwise-qualified vessel was laden with wheat at Louisiana for transportation to Trinidad, West Indies. It was thereafter determined that the wheat did not meet the contractual specifications and accordingly, the wheat was stored in a facility in Trinidad. CBP held that there was an intent to transport the merchandise to a foreign port given such evidence as a bill of lading and certificate of U.S. origin, which notably depict a flour mill in Trinidad as the customer, and both of which provided that “these commodities licensed by the United States for ultimate destination Trinidad W.I.” Given that the continuity of the transportation was broken at Trinidad, we found that the wheat could be transported to Puerto Rico aboard a non-coastwise-qualified vessel without violating 46 U.S.C. § 55102 since it would constitute a new and different transportation rather than a resumption of the initial voyage which begun in Louisiana. See Headquarters Ruling Letter 116424, dated March 25, 2005; see also Headquarters Ruling Letter 116518, dated August 9, 2005 (a shipment of corn containing genetic traits that was denied entry in Japan for safety reasons had its continuity of transportation broken by that denial of entry since it was established that it was the parties’ intention to sell the corn in the commerce of Japan rather than return it to the U.S.).
The continuity of the voyage is not broken, on the other hand, when it was the shipper’s intent at the time of the original transportation from the U.S. point to the foreign point to transport the merchandise back to the U.S. In 34 Op. Atty. Gen. 335 (1924), grain was transported in a non-coastwise-qualified vessel from Chicago or Milwaukee to Canada where it was unladen into an elevator for an indefinite time until it was transported via railroad to New England. In some cases, the grain had already been sold for delivery at a U.S. port when it reached Canada and in other cases, the grain was intended for Canadian domestic consumption, export abroad or sale in the U.S. The Attorney General determined that the shipment of grain shipped to Canada with the intention that its ultimate destination would be the U.S. constituted a continuous voyage and thus was in violation of 46 U.S.C. § 55102. See also Headquarters Ruling Letter 109475, dated October 4, 1988 (a shipment of fertilizer transported from Florida to Canada and then sold by the shipper’s Canadian subsidiary under the terms Canada F.O.B. the warehouse with the sales contract stipulating “not for resale in the United States,” with this stipulation being the only evidence of an intention to bring the fertilizer into the common stock of Canada, is not sufficient to break the continuity of transportation).
In Headquarters Ruling Letter 112246, dated June 23, 1992, it was established that certain evidence constitutes acceptable proof that merchandise was intended to be introduced into the common stock of a country. Such acceptable evidence includes, but is not limited to: shipping manifests; foreign country customs and duties receipts; lists containing names of purchasers of merchandise from said vessels indicating type and quantity of such merchandise; auction notices or similar publication documentation evidencing the fact that such goods will be offered on the foreign country's market; and an affidavit from a foreign purchaser testifying that the goods are indeed intended to be introduced into the common stock of that country. See also Headquarters Ruling Letter 112295, dated July 20, 1992; Headquarters Ruling Letter 112587, dated April 21, 1993.
In the case in question, none of the aforementioned evidence is made available. The only evidence provided to demonstrate that the alkylate was intended to be introduced into the international market is HETCO’s affidavit from their own managing director, a list of their prior sales from the Turkish facility and a bill of lading that states that the “ultimate country of destination” is Turkey. Nevertheless, HETCO asserts that its activities are consistent with an intent to enter the merchandise into the international market. We, however, find insufficient evidence to break the continuity of transportation. While we have considered evidence that when returning even a portion of the shipments to the United States is a losing proposition for the business involved in the transactions, and that this was evidence of intent to introduce the merchandise into the foreign country, it was only one relevant factor in such a determination. See Headquarters Ruling Letter 116533, dated September 8, 2005. In the abovementioned case, the shipper provided more evidence of intent to bring the merchandise into the foreign market than was provided in this instance, including customer affidavits stating that at no point did the purchasers intend to resell the corn in the United States.
In the present case, the merchandise remains unsold and thus has no such purchaser. Despite the bill of lading stating the “ultimate country of destination” is Turkey, HETCO has not provided evidence that its customers do not intend to resell the merchandise in the United States or even that its past customers have not done so. Despite HETCO’s assurances that it made no sales for delivery to the United States market, given that half of the listed sales (see Attachment “A”) have an unknown ultimate destination, this assertion is not verifiable. Mere evidence that prior sales from the Turkish facility, pursuant to the Strategic Trade Agreement, have been made FOB Turkey is insufficient. See Headquarters Ruling Letter 109475, dated October 4, 1988 (fertilizer sold under the terms Canada F.O.B. the warehouse with the sales contract stipulating “not for resale in the United States,” is insufficient to break the continuity of the voyage). Accordingly, the transportation of merchandise from the U.S. to Turkey and back to the U.S. constitutes a continuous voyage.
Scenario One:
As stated above, CBP Regulations provide that a coastwise transportation of merchandise takes place when merchandise laden at a coastwise point is unladen at another coastwise point, regardless of origin or ultimate destination. Consequently, given that the alkylate was originally laden at the No. 1 ship dock, it may be unladen at the No. 1 ship dock (i.e., the same coastwise point) after being transported aboard a non-coastwise-qualified vessel via a foreign port, without violating 46 U.S.C. § 55102.
Scenario Two:
This scenario involves the unlading of the alkylate at the No. 2 ship dock even though the subject merchandise was laden onboard the non-coastwise-qualified vessel at the No. 1 ship dock. You assert, however, that the No. 1 ship dock and the No. 2 ship dock are virtually one facility given their close proximity to each other and the fact that when a vessel is berthed in each dock, they practically abut each other. Accordingly, while conceding that they are “[t]wo separate docks with separate gangways, hose connections and related equipment,” you state that the docks should constitute the same coastwise point since they occupy a common bulkhead, and service the same tank from which the alkylate was withdrawn and will be returned.
We note that you state that “a review of history of the statute suggests that Congress intended to prohibit movements from one port to another port, not movements within a port.” We disagree. The express language of the statute both before and after the 2006 recodification proscribes the use of non-coastwise-qualified vessels to transport merchandise “between points in the United States.” We note the well-established "plain language" principle which mandates that in determining legislative intent, the language of the statute must first be examined. See Phone Mate, Inc. v. United States, 12 CIT 575, 690 F.Supp. 1048 (1988), aff"d, 867 F.2d 1404 (1989). Where the content of the statute is in "reasonably plain terms, that language must ordinarily be regarded as conclusive." See Negonsott v. Samuels, 507 U.S. 99, 113 S.Ct. 1119, 1122-23, 122 L.Ed.2d 457 (1993) quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 570, 102 S.Ct. 3245, 3249, 73 L.Ed.2d 973 (1982). Furthermore, in the absence of ambiguity, the plain meaning of that statute must prevail. See United States v. RMS Electronics, Inc., 67 CCPA 79, C.A.D. 1249, 642 F.2d 1081 (1980); see also Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). Consequently, it is our position that Congress did intend to prohibit unlawful movements within a port. This position is reflected in the CBP Regulations promulgated pursuant to the statute which clearly define the term coastwise points as “including points within a harbor.” See 19 C.F.R. § 4.80(a). See also Headquarters Ruling Letter W115601, dated February 28, 2002 (where CBP determined that merchandise unladen even a vessel width from the dock where it is laden (with no contact with the dock at any point) is in violation of 46 U.S.C. § 55102); see Headquarters Ruling Letter H028458, dated June 19, 2008 (merchandise transported from one coastwise point, namely, Dock #2 of a U.S. facility, on a non-coastwise-qualified vessel to Dock #1 of the same U.S. facility, another coastwise point, via a foreign port was a violation of 46 U.S.C. § 55102).
As to your assertion that the two docks, while separate, are virtually one facility given that they “service not only the same terminal, but the same tank from which the alkylate was withdrawn and into which it will be returned,” we have addressed a similar issue in a recent ruling request. In Headquarters Ruling Letter H028458, dated June 19, 2008, a non-coastwise-qualified vessel wished to unladen contaminated gasoline at the initial place of lading (namely, Dock #2 of the same U.S. facility) but to return the gasoline to different storage tanks from where it was originally withdrawn. In that case, we noted that “unladen” is defined as “take out the cargo of,” “to discharge cargo” or “unload.” See Webster’s Third New International Dictionary 2502 (3rd ed. 1993). The term “unload” is defined as to “remove (goods) from a vehicle, ship, etc.” See Compact Oxford English Dictionary 2008. Based on the foregoing definitions, it is the position of CBP that it is the act of discharging or unlading the merchandise that must be performed at the same coastwise point in order to be in accordance with 46 U.S.C. § 55102. Once the cargo is unladen from the vessel, the storage place of the cargo is irrelevant for purposes of 46 U.S.C. § 55102.
Accordingly, in the present case, the No. 1 ship dock and the No. 2 ship dock do not constitute the same coastwise point. Given that the non-coastwise-qualified vessel would be unlading the alkylate at the No. 2 ship dock, not the initial place of lading, the scenario presented would constitute a violation of 46 U.S.C. § 55102.
Scenario Three:
Given our determination that the transportation of the merchandise from the U.S. to Turkey and back to the U.S. is a continuous voyage, delivery of the alkylate by a non-coastwise-qualified vessel to any location in the U.S. other than the point of lading is a violation of 46 U.S.C. § 55102.
HOLDINGS
The transportation of merchandise from the United States to Turkey and back to the United States as described above constitutes a continuous voyage.
The transportation of merchandise by a non-coastwise-qualified vessel as described in the above scenarios constitutes a violation of 46 U.S.C. § 55102 with respect to Scenarios Two and Three but not Scenario One.
Sincerely,
Glen E. Vereb, Chief
Cargo Security, Carriers and Immigration Branch