HQ 109610: Coastwise Transportation of Waste Oil

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                      HQ 109610

                                    July 6, 1988

          VES-3-12 CO:R:P:C 109610 PH

          CATEGORY: Carriers

          Mr. M. Paul Taylor, P.E.
          Vice President, Alaska Operations
          White Pass & Yukon Route
          Post Office Box 435
          Skagway, Alaska 99840

          RE:  Coastwise Transportation of Waste Oil

          Dear Mr. Taylor:

              This in response to your letter of June 20, 1988, in
          which you request a ruling on the applicability of the
          coastwise laws to the transportation in a foreign-flag vessel
          of waste oil from Ketchikan to Skagway, Alaska.

          FACTS:

              You state that your Canadian-flag container vessel, the
          M/V FRANK H. BROWN, makes regular bi-weekly sailings out of
          Vancou- ver, British Columbia, to Skagway, Alaska, touching
          the Alaskan port of Wrangell on the northward movement and
          the Alaskan ports of Haines and Ketchikan on the southward
          movement.  You state that you have a 6,000 gallon tank on the
          dock in Ketchikan which you allow Ketchikan area fishing
          vessels to use as a depository for used crankcase oil.  This
          oil is a waste product, you state, and you do not buy it.

              The waste oil deposited in the tank currently is brought
          to Skagway on an Alaska Marine Lines barge and you use it in
          a restored steam engine that hauls tourists from one end of
          Skagway to the other.  This steam locomotive operates only in
          the summer months.

              You ask whether, since the oil is a United States waste
          product which is given to you, you could load the tank of oil
          on- to the M/V FRANK H. BROWN in Ketchikan, leave it aboard
          for the Ketchikan-Vancouver-Wrangell-Skagway segment of the
          voyage, and then land it in Skagway for use in your steam
          locomotive.


          ISSUE:

              Does the use of a foreign-flag vessel to transport waste
          oil, given to and to be used by the owner of the transporting
          vessel, between the Alaskan ports of Ketchikan and Skagway,
          via several other ports, including Vancouver, violate the
          coastwise laws?

          LAW AND ANALYSIS:

              Section 27 of the Act of June 5, 1920, as amended (41
          Stat.  999; 46 U.S.C. App. 883, often called the Jones Act),
          provides, in pertinent part, that:

                    No merchandise shall be transported by water, or by
                    land and water, on penalty of forfeiture of the
                    mer- chandise (or a monetary amount up to the value
                    thereof as determined by the Secretary of the
                    Treasury to be recovered from any consignor,
                    seller, owner, importer, consignee, agent, or other
                    person or persons so trans- porting or causing said
                    merchandise to be transport- ed), 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 other vessel
                    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 ....

              This law was recently amended by the Act of June 7, 1988
          (Public Law 100-329).  Under this amendment, the term
          "merchan- dise" includes valueless material and the
          prohibition in section 883 applies to the transportation of
          "valueless material or any dredged material regardless of
          whether it has commercial value, from a point or place in the
          United States or a point or place on the high seas within the
          Exclusive Economic Zone as defined in the Presidential
          Proclamation of March 10, 1983 [(EEZ), general- ly, the zone
          197 miles outward from the outer limit of United States
          territorial waters], to another point or place in the United
          States or a point or place on the high seas within that
          [EEZ]."  Public Law 100-329 amended the penalty provision in
          section 883 so that the penalty now is forfeiture of the
          merchandise transported or a monetary amount up to the value
          thereof, "or the actual cost of the transportation, whichever
          is greater."

              The transportation which you describe would consist of
          the loading of waste oil which is "given" to you from
          Ketchikan onto a foreign-flag vessel which would proceed, via
          Vancouver and Wrangell, with the oil to Skagway where the oil
          would be unloaded and used in a steam locomotive owned by
          your company.  Thus, the waste oil would clearly be
          transported between "points in the United States ... embraced
          within the coastwise laws ... via a foreign port."  You
          contend, however, that this is not the haul- ing of "cargo"
          between two United States ports since you derive no revenue
          from hauling the tank nor do you pay any money for the waste
          oil.

              Before enactment of Public Law 100-329, we had
          consistently held that waste material which has no apparent
          value and is transported solely for disposal is not
          "merchandise," for purpos- es of the coastwise laws (see,
          e.g., Customs Service Decision 87- 15, copy enclosed).  We
          held that the transportation of such material between
          coastwise points by a non-coastwise-qualified vessel is not
          prohibited by the coastwise laws.  The Courts upheld this
          interpretation of 46 U.S.C. App. 883 (see Great Lakes Dredge
          & Dock Co. v. Ludwig, 486 F. Supp. 1305 (W.D. New York 1980),
          and 106 Mile Transport Associates v. Koch, 86 Civ. 7190 (JMW)
          (S.D. New York March 27, 1987)).

              Even under this interpretation, the waste oil under
          consideration would have been considered to be "merchandise,"
          for purposes of section 883, because it has a commercial use
          (i.e., it is used for your restored steam engine in
          Skagway).  The enactment of Public Law 100-329, making 46
          U.S.C. App. 883 applicable to the transportation of
          "valueless material," makes it clear that the described
          transportation would be prohibited by section 883.

          HOLDING:

              The use of a foreign-flag vessel to transport waste oil,
          given to and to be used by the owner of the transporting
          vessel, between the Alaskan ports of Ketchikan and Skagway,
          via several other ports, including Vancouver, is prohibited
          by 46 U.S.C. App.  883.


                                        Sincerely,


                                        B. James Fritz
                                        Chief
                                        Carrier Rulings Branch