VES-3-24-OT:RR:BSTC:CCI H035678 LLB
Larry Hampel, Esquire
Jeanne M. Grasso, Esquire
Blank Rome, LLP
600 New Hampshire Avenue, N.W.
Washington, D.C. 20037
Re: 46 U.S.C. § 55102; 19 C.F.R. § 4.80b(a); Storage of oil on a foreign-flagged vessel within U.S. territorial waters; HQ 116007 (July 25, 2003); HQ H024374 (Mar. 13, 2008); Lading of oil into transfer pipeline; C.S.D. 80-46, 14 Cust. B. & Dec. 801; International Raw Materials, Ltd. V. Baker, 1988 U.S. Dist. LEXIS 4560 (E.D. Pa. 1988).
Dear Mr. Hampel and Ms. Grasso:
This is in response to your letter dated August 12, 2008, on behalf of your clients Shell Oil Products US and Shell Trading (US) Company (hereinafter “Shell”), in which you request a ruling on the applicability of 46 U.S.C. § 55102 to the scenarios presented below involving the use of foreign-flagged vessels to lade, unlade, and store petroleum products. Our decision follows.
FACTS
The following facts are from your August 12, 2008, letter. Shell intends to use foreign-flagged vessels to lade and unlade bunker fuel oil (BFO), high grade oil (HGO), and vacuum gas oil (VGO) at its Puget Sound Refinery (PSR) in Anacortes, Washington and its Martinez, California Refinery (MRZ). Shell proposes to use transfer lines or “dock lines” to move imported and exported BFO or VGO between the refineries’ shore tanks and the foreign-flagged vessels. These transfer lines typically hold whatever product was most recently laden onto or unladen from a vessel and will remain in those lines until the
product is moved out of the line, i.e. the lines are not drained after each use. In addition, because VGO will solidify if left in the transfer lines, it must be flushed out by HGO or BFO. As such, there are instances in which the quality of the product in the transfer line differs from the quality or type of the product to be laden or unladen from the vessel. In order to prevent “quality displacement” of these products, Shell proposes the following four scenarios, two export and two import, in which it would lade and unlade its product.
Export Scenarios
A. Vessel Push
A partial shipment of an export product, e.g. BFO, is laden aboard the vessel at one U.S. port, e.g. MRZ, which then transports the product to the transfer line within the territorial waters of another U.S. port, e.g. PSR, to load additional products. The vessel would have one tank holding the foregoing partial shipment of the BFO and the other tank would be empty. The PSR transfer line would be filled with HGO and the two PSR shore tanks would have HGO and BFO, respectively. The vessel would pump BFO into the transfer line thereby pushing the HGO into the HGO shore tank and filling the transfer line with BFO. The BFO from the vessel used to push the HGO into the shore tank does not enter the shore tank; instead, it is immediately withdrawn back to the vessel from the transfer line. The PSR BFO shore tank would then commence lading BFO onto the vessel using the transfer line. The vessel would then proceed to a foreign destination to unlade the BFO.
B. Shore Push
The export vessel would arrive at the MRZ or PSR transfer lines with at least two empty compartments. The transfer line would have HGO in it and the shore tanks would have HGO and BFO, respectively. The BFO refinery tank would then push the HGO into one of the empty holds on the vessel thereby filling the transfer line with the refinery’s BFO and continuing the push until the other empty tank aboard the vessel is laded with the refinery’s BFO. In order to return the HGO that was in the transfer line to its original position when the export vessel first arrived, the vessel would push the HGO from the vessel into the transfer line thereby pushing the refinery’s BFO in the transfer line back to the shore tank and filling the transfer line with the HGO. The vessel would then proceed to its foreign destination to unlade the BFO.
Import Scenarios
C. Shore Push
The import vessel will have been laded foreign with VGO and have at least one empty compartment upon arrival at the MRZ or PSR transfer line. The transfer line will be filled with BFO and the shore tanks will be filled with the refinery’s VGO and BFO, respectively. The refinery would push its VGO into the transfer line thereby pushing the BFO in the transfer line into the empty compartment on the import vessel. To unlade the foreign-laded VGO into the refinery’s shore tank, the vessel would push the foreign-laded VGO into the transfer line and continue to do so until the refinery’s VGO in the transfer line and the foreign-laded VGO are in the shore tank. As stated above, because VGO will solidify in the transfer line, any remaining VGO in the transfer line will be pushed out by the BFO that was originally pushed aboard the vessel when the vessel first arrived. Accordingly, the remaining VGO will be pushed to the shore tank, the transfer line will be filled with BFO in its original position, and the holds aboard the import vessel will be empty.
D. Double Push
All compartments of the import vessel will have been laded foreign with VGO. The transfer line will be filled with BFO and the shore tanks will be filled with the refinery’s VGO and BFO, respectively. The vessel would push the foreign-laded VGO into the transfer line thereby pushing the BFO in the transfer line into the refinery’s BFO shore tank. To unlade both of the foreign-laden VGO compartments into the refinery’s shore tank, the vessel would push the foreign-laden VGO into the transfer line and continue to do so until the foreign-laden VGO in both compartments are in the shore tank and the vessel compartments are empty. To empty the foreign-laden VGO that remains in the transfer line to the shore tank, the refinery’s BFO shore tank will push the VGO into an empty compartment on the vessel and then push additional BFO into the remaining empty tank. Then the refinery’s VGO shore tank will push VGO into the transfer line. The vessel will push the VGO from the compartment on the vessel to the refinery’s shore tank. Any remaining VGO in the transfer line will be pushed from the vessel by the BFO in the vessel compartment. Accordingly, at the end of this process, both vessel compartment’s will be empty, the foreign-laden VGO will have been completely unladen into the refinery’s VGO shore tank, and there would be BFO in the transfer line.
ISSUES
1. Whether the use of foreign-flagged vessels to lade oil at a coastwise point and temporarily unlade the oil in a dock transfer line at a different coastwise point, as described in Scenario A in the FACTS section above, constitutes engagement in the coastwise trade in violation of 46 U.S.C. § 55102.
2. Whether the use of the foreign-flagged vessels to lade, unlade, and store oil as described in scenarios B, C, and D in the FACTS section above constitutes engagement in the coastwise trade in violation of 46 U.S.C. § 55102.
LAW AND ANALYSIS
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. See 33 C.F.R. § 2.22(a)(2)(2008). The coastwise law pertaining to the transportation of merchandise, 46 U.S.C. § 55102, also known as the "Jones Act", provides in pertinent part, that the transportation of merchandise between points in the United States embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any vessel other 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, i.e. a coastwise-qualified vessel, is prohibited. The 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 point embraced within the coastwise laws ("coastwise point") is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a)(2008).
ISSUE 1
It is this agency's longstanding position that when merchandise is laden at one coastwise point destined for a foreign port and is unladen at another coastwise point, albeit temporarily, a coastwise violation results, even though the cargo is thereafter placed back onto the same vessel for transport to its intended foreign destination. In HQ 104889 (Oct. 1, 1980), steel pipe was laden aboard foreign barges in Houston, Texas, destined for Mexico. Thereafter, it was proposed to temporarily unlade the pipes in Galveston, Texas for coating before relading the pipes aboard the barges and recommencing the voyage to Mexico. CBP [then the U.S. Customs Service] held that “[i]f merchandise laden at a domestic port for a foreign port is, before it proceeds foreign, unladen at a domestic port, the merchandise will be deemed to have been transported on a coastwise voyage, regardless of whether the cargo is thereafter reladen aboard the same vessel for transportation to a foreign port.”
In a Customs Bureau Letter dated February 4, 1953, rice previously laden aboard a foreign vessel in New Orleans destined for Japan had to later be unladen at Savannah so that the vessel could be examined for damage after accidentally running aground during the voyage, but after the rice was laden in New Orleans. Despite the fact that the rice had to be unladen and reladen due to an accident, CBP held that “[w]hen the continuity of the transportation to a foreign port of merchandise laden on board a foreign vessel at a domestic port is broken by the landing of such cargo at another domestic port, the cargo so landed is subject to forfeiture under [46 U.S.C. § 55102] regardless of whether that cargo is thereafter reladen aboard the same vessel.” (emphasis added). Similarly, Scenario A of your ruling has a foreign vessel lading oil at a coastwise point in Martinez, California, destined for a foreign destination, temporarily unlading the oil at a coastwise point in Anacortes, Washington, and then relading the oil on the same foreign vessel. As such, the foregoing transportation of the oil would be in violation of 46 U.S.C. § 55102.
However, you offer several arguments to support you position that the procedures in Scenario A do not contravene 46 U.S.C. § 55102. First, you argue pursuant to HQ H019499 (Nov. 9, 2007), that insofar as importation is defined as bringing goods within the jurisdictional limits of the United States with the intent to unlade and the product that is laden for export in Martinez is not reimported when it calls in Anacortes to take on additional product for export, the subject merchandise is not imported. The issue in HQ H019499 involved whether a yacht could be brought into the United States for purposes of warranty work without being considered an importation and thereby subject to payment of customs duties. Whether the oil at issue in Scenario A will be imported is not at issue in the present case. Rather, the issue is whether the procedures in Scenario A will violate 46 U.S.C. § 55102. Further, as discussed below, intent is not an element that is germane to a finding of whether an impermissible coastwise transportation has occurred regarding a direct shipment between coastwise points.
Second, you argue that pursuant to HQ 115587 (Feb. 22, 2002), CBP considered the intent to unlade as the movement of cargo “from its place of stowage aboard a vessel to its first place of rest on shore.” The foregoing language from HQ 115587 was cited in the context of determining whether cranes carried by a Chinese-flagged vessel were stevedoring equipment under 19 C.F.R. § 4.93(a)(2). Insofar as the issue of whether the merchandise in question is stevedoring equipment is not at issue in the present case, HQ 115587 is inapplicable.
Last you assert that pursuant to HQ W116720 (Sept. 12, 2006), CBP has considered the shipper's intent with respect to questions of continuity of interruption of the progress of cargo. Nothwithstanding the fact that the scenario presented does not raise the issue of continuity-of-transportation, CBP has squarely rebuffed any contention that the shipper's intent is a requirement of 46 U.S.C. § 55102. See C.S.D. 80-46, 14 Cust. B. & Dec. 801 (holding that CBP does not consider 46 U.S.C. § 55102 to require an element of intent to prove the occurrence of a coastwise transportation and would not consider intent unless raised by the facts at hand); accord, International Raw Materials, Ltd. V. Baker, 1988 U.S. Dist. LEXIS 4560 (E.D. Pa. 1988)(holding that "[w]here the challenged shipment involves direct transport of merchandise between domestic ports, the violation of the [Jones] Act is clear at the time the merchandise is unladen at the domestic port. There is no need to consider the intent of the shipper).
Accordingly, because Scenario A involves the lading of merchandise at one coastwise point and and unlading of that merchandise at a second coastwise point, there would be violation of 46 U.S.C. § 55102.
ISSUE 2
In HQ 116007 (July 25, 2003), the ruling requester proposed lading butane onto a foreign-flagged storage vessel from its shore tanks at its refinery and then shifting to a lay berth or anchorage. Once the storage contract expired, the storage vessel would return to its original point of lading at the same refinery and return the full cargo of butane to the shore tanks. CBP held that the use of the foreign-flagged storage vessel would not be an engagement in coastwise trade since the cargo was laden and unladen at the same coastwise point. In HQ H024374 (Mar. 13, 2008), oil was laden onto a foreign-flagged storage vessel at a refinery in Louisiana, shifted to a lay berth or anchorage, and then returned to the same refinery. CBP held that such use of a foreign-flagged storage vessel would not be in violation of 46 U.S.C. § 55102. Similarly, in Scenarios B,C, and D, oil is being laden onto a vessel at one coastwise point via a transfer line from a shore tank and is returned via the same transfer line to the same coastwise point. As such, the scenarios presented in B,C, and D above would not constitute engagement in coastwise trade.
HOLDING
1. The use of foreign-flagged vessels to lade oil at a coastwise point and temporarily unlade the oil in a dock transfer line at a different coastwise point, as described in Scenario A in the FACTS section above, constitutes engagement in the coastwise trade in violation of 46 U.S.C. § 55102.
2. The use of the foreign-flagged vessels to lade, unlade, and store oil as described in Scenarios B, C, and D in the FACTS section above does not constitute engagement in the coastwise trade in violation of 46 U.S.C. § 55102.
Sincerely,
Glen E. Vereb, Chief
Cargo Security, Carriers and Immigration Branch