us-cbp-cross-rulings-hq-113080•HQ 113080: Coastwise Trade; Fuel Oil; 46 U.S.C. App. 883
HQ 113080: Coastwise Trade; Fuel Oil; 46 U.S.C. App. 883
us-cbp-cross-rulings-hq-113080HQ 113080: Coastwise Trade; Fuel Oil; 46 U.S.C. App. 883Guidance
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 113080
May 2, 1994
VES-3-07-CO:R:IT:C 113080 GEV
CATEGORY: Carriers
Ronald J. Gumbaz
Vice President
Delphi Petroleum Inc.
40 Ave. at the Common
Shrewsbury, New Jersey 07702-4532
RE: Coastwise Trade; Fuel Oil; 46 U.S.C. App. 883
This is in response to your letter dated April 14, 1994,
requesting a ruling regarding a proposed transportation of fuel
oil. Our ruling on this matter is set forth below.
FACTS:
Delphi Petroleum Inc. ("Delphi") is a Delaware corporation
engaged in the worldwide sale and trade of crude oil and refined
petroleum products and is currently under contract to supply fuel
oil to the Puerto Rico Electric Power Authority (PREPA) at San
Juan, P.R. Delphi has the opportunity to purchase viscous dirty
fuel oil manufactured by the Caribbean Petroleum Co. (CAPECO) at
its San Juan, P.R. refinery. However, this fuel oil cannot be
utilized by PREPA because it does not meet the quality
requirements of PREPA in the following four different areas:
viscosity, sulphur, vanadium and asphaltenes.
Delphi also has access to a quantity of Yombo crude of Congo
origin presently stored at St. Eustatius Terminal, N.A. Delphi
proposes to process in tank a quantity of approximately 50% of
the Yombo crude with approximately 50% of the CAPECO product with
the resultant product meeting PREPA's specifications. The
following four transportation scenarios involving a foreign-flag
vessel are offered for Customs consideration:
1. Transport the Yombo crude from St. Eustatius to
the CAPECO dock at San Juan, P.R. on a foreign-flag
vessel. At the CAPECO dock Delphi would load the
CAPECO dirty fuel oil onto the vessel and process it
it in tank with the Yombo material with the resultant
product meeting the quality specifications of PREPA.
The PREPA product would then be transported on the
foreign-flag vessel approximately 400 yards in San
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Juan Harbor to PREPA's dock, Sheds A and B of the
Port of San Juan, where it would be discharged to
PREPA. This is the safest and most efficient of the
four scenarios under consideration because it minimizes
the movement of this heavy oil in the environmentally
sensitive San Juan Harbor and neighboring waters and
results in the oil being discharged from the vessel in
the fastest possible time.
2. The resultant product meeting PREPA specifications
can be processed on the vessel as detailed in Scenario
#1 above, but rather than transport the product on the
foreign-flag vessel the approximately 400 yards to the
PREPA dock, the vessel would remain anchored at the
CAPECO dock. The product would be discharged back to
the CAPECO Refinery by the vessel while it remains at
the CAPECO dock. The CAPECO Refinery has a small
diameter pipeline connection with the PREPA facility.
However, because of the small diameter of the pipeline,
the pumping rate is very slow which would require the
product to remain on the vessel at the dock for a rather
long time. This scenario may not be practical because
the CAPECO dock is in frequent use and it may not be
possible for Delphi's vessel to remain at the dock for
the length of time required.
3. The Yombo crude oil could be discharged from the
vessel into the CAPECO facility and processed in tank
there with the resultant product subsequently loaded
onto the foreign-flag vessel and transported the
approximately 400 yards to the PREPA dock for discharge.
The disadvantage of this scenario is that the quantity
of oil moving across the dock is increased by 40%,
compared to Scenario #1, with an associated increase in
the risk of spillage. This scenario may also not be
physically possible because the CAPECO facility in
Puerto Rico may not have sufficient tankage to accept
the quantity of Yombo necessary to process the CAPECO
fuel oil to the required PREPA specification.
4. The final alternative is to transport the CAPECO
fuel oil to St. Eustatius on a foreign-flag vessel.
At St. Eustatius the product would be discharged in
the facility, processed in tank with the Yombo crude
oil with the resultant product subsequently loaded
on the foreign-flag vessel for transportation back to
PREPA's dock in San Juan. This scenario has the dis-
advantage of resulting in a movement of 100,000 barrels
of heavy oil currently located safely on shore in the
CAPECO Refinery in San Juan across the dock to the
vessel, through San Juan Harbor and the neighboring
waters to St. Eustatius, and then back to San Juan as
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a component of a resultant product. The additional
handling and transportation of the CAPECO viscous
dirty product carries with it the increased potential
for adverse environmental impact.
The specifications of the oil located in San Juan, Puerto
Rico (CAPECO), St. Eustatius (Yombo) and the resultant product
(PREPA) are set forth below.
CAPECO
TEST METHOD RESULT UNITS
Gravity, API @ 60 deg. F D1298 10.0 ---
Flash Point, P.M.C.C. D93 200 Degrees F
Sulfur Content D4294 2.25 WT%
Saybolt Furol Viscosity D2161 348 s.f.s.@122F
Kinematic Viscosity D445 737.9 CST @ 122F
Pour Point D97 45 Degree F
Water & Sediment D1796 0.05 VOL%
Heat of Combustion (Net) CALC. 17 195 B.T.U./lbs.
Heat of Combustion (Gross) CALC. 18 200 B.T.U./lbs.
N-Heptanes Insolubles D3279 8.9 WT%
Vanadium AA 239 PPM
Sodium & Potassium AA 5.4 PPM
Calcium AA 3 PPM
YOMBO
TEST METHOD RESULT UNITS
Gravity, A.P.I., Average ASTM-D-1298/90 16.3 Deg.
Flash Point, PMCC, ASTM-D-93/90 176.0 Deg.F
Corrected to 760 mmHg
Kinematic Viscosity @ ASTM-D-445/88 662 cSt
122 Degrees F, Average
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Saybolt Furol Seconds ASTM-D-2161/87 312 Secs
Viscosity @ 122 Deg. F
Pour Point (Upper) ASTM-D-97/87 32/0 DegF/C
Sulfur Content, Average ASTM-D-4294/90 0.35 %M/M
Water & Sediment ASTM-D-1796/90 0.45 %Vol
Ash Content (Sample Wt. ASTM-D-482/87 0.01 %Wt
24.1371 g)
PREPA
Quality Specifications
Sulphur, Wt. Pct. 1.50 max
Asphaltene Content, Wt. Pct. 8.00 max
Pour Point, Deg. F 75 max
Flash Point, Deg. F 150 min
Viscosity, SSF @ 122 Deg. F 100 min/350 max
API, Deg. F 8.0 min/18.0 max
BSW, Pct. Vol. 1.00 max
Vanadium, ppm 150 max
Ash, Wt. Pct. 0.10 max
Sodium & Potassium, ppm 25 max
ISSUE:
Whether the transportation of fuel oil as proposed in the
above scenarios is in violation of 46 U.S.C. App. 883.
LAW AND ANALYSIS:
Title 46, United States Code Appendix, 883 (the
merchandise coastwise law often called the "Jones Act") prohibits
the transportation of merchandise between United States coastwise
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points, 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.
In interpreting 883, Customs has ruled that a point in
United States territorial waters is a point in the United States
embraced within the coastwise laws. The territorial waters of
the United States consist of the territorial sea, defined as the
belt, 3 nautical miles wide, seaward of the territorial sea
baseline, and to points located in internal waters, landward of
the territorial sea baseline, in cases where the baseline and the
coastline differ. Furthermore, Customs has long-held 883
applicable to Puerto Rico pursuant 48 U.S.C. 744 and 46 U.S.C.
App. 877.
Section 4.80b(a), Customs Regulations, provides, in part,
that:
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 posses-
sion of the U.S. not subject to the
coastwise laws), it is manufactured or
processed into a new and different pro-
duct, and the new and different product
thereafter is transported to a coastwise
point.
In applying 4.80b(a), Customs has held that merchandise
manufactured or processed into a new and different product must
be landed and processed at an intermediate port or place other
than a coastwise point. The manufacturing or processing may not
take place on board a vessel. In regard to the processing of
fuel oil, pursuant to T.D. 91-32 published in the Federal
Register on April 10, 1991 (56 FR 14467) prior to reaching a
determination that a new and different product has in fact been
created for purposes of 4.80b(a), the procedures and specific
data of such operations should be submitted by the party seeking
such a determination. Customs will then review the data and make
the necessary determination which will form the basis for a
decision regarding any possible violation of 883.
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Regardless of whether the processing involved in this case
creates a new and different product for purposes of 19 CFR
4.80b(a), we note at the outset that Scenario Nos. 1 and 3 would
constitute violations of the coastwise laws. In Scenario #1 the
processing would take place on board the vessel, and in both
scenarios the resultant PREPA product would be transported
between two coastwise points (i.e., between points 400 yards
apart in San Juan Harbor) without the processing having taken
place at an intermediate foreign port or place. Accordingly,
both scenarios run contra to 19 CFR 4.80a(b).
Whether or not a new and different product has been created
by the processing in question is also not critical with regard to
Scenario #2. Although the processing takes place on board the
vessel, there is no transportation between coastwise points
inasmuch as the vessel is remaining stationary and merely pumping
the resultant product ashore. Consequently, Scenario #2 would be
in accord with 46 U.S.C. App. 883.
In regard to Scenario #4, our review of the specifications
of this particular processing is critical in determining whether
a violation of 46 U.S.C. App. 883 would occur. To that end we
note that although the gauger report for the CAPECO fuel oil
lists the product as a "No. 6 fuel oil", our review of the
specifications shows that the fuel oil does not meet the
specifications for any ASTM specification fuel oil, including No.
6 fuel oil. Rather, the specifications show that the product is
a low quality residual fuel oil. Since the CAPECO fuel oil is of
U.S. origin, its specifications were compared to the
specifications of the resultant product (the PREPA crude oil/fuel
oil blend), which will be transported to Puerto Rico. We
emphasize that the submitted gauger reports are only represen-
tative of the products, therefore, the specifications of the
actual shipments will probably vary. Further, the specification
ranges given for the finished blend are relatively wide, which
may allow for a significant variance in the specifications of the
resultant product transported to the United States.
Although no ranges are provided for the fuel oil (an actual
gauger report is provided which is typical of the fuel oils which
will be exported and blended), however, because of the apparent
crudeness of the fuel oil, it is almost certain that the
specifications will vary with each shipment. Therefore, the
issuance of this ruling may cover a broad range of fuel oils and
blends. In comparing the specifications of the blend and the
residual oil, we note that because of the broad specification
ranges, the specifications of the blends and fuel oil may
intersect at various key specifications, (i.e., viscosity, flash
point). Therefore, the possibility exists that the blends and
the exported U.S. fuel oil may be substantially similar. In the
instances where the key specifications intersect or are similar,
it is our opinion that the offshore blending process would not
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be sufficient to create a "new and different product" within the
meaning of 19 CFR 4.80b(a). Consequently, the proposed
transportation of the resultant product by a foreign-flag vessel
to Puerto Rico as described in Scenario #4 would constitute a
violation of 46 U.S.C. App. 883.
HOLDING:
With the exception of Scenario #2, the proposed
transportation of fuel oil as described above is in violation of
46 U.S.C. App. 883.
Sincerely,
Arthur P. Schifflin
Chief
Carrier Rulings Branch
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