HQ 111606: Coastwise Trade; Blending; 46 U.S.C. App. 883

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 111606

                          May 13, 1991

VES-3-07-CO:R:IT:C 111606 GEV

CATEGORY:  Carriers

William H. Bode, Esq.
Bode & Hainline
1150 Connecticut Avenue, N.W.
Washington, D.C. 20036

RE:  Coastwise Trade; Blending; 46 U.S.C. App. 883

Dear Mr. Bode:

     This is in response to your letter dated March 25, 1991,
requesting a ruling regarding the applicability of 46 U.S.C. App.
883 to a proposed blending operation.  Our ruling on this matter
is set forth below.

FACTS:

     A U.S. corporation intends to load in California
approximately 40,000 barrels of 93 octane unleaded gasoline and
ship this product on a foreign-flag vessel to a port in the
Netherlands Antilles.  In a separate shipment on a different
foreign-flag vessel, the corporation would load in Houston, Texas
approximately 60,000 barrels of 87 octane unleaded gasoline, then
ship this product to the same port.

     The corporation would off-load these different products and
blend them in a single on-shore tank leased by the corporation. 
This blending operation would produce approximately 100,000
barrels of a 89 octane gasoline.  The corporation then would load
this blended product onto a foreign-flag vessel for shipment to
and off-loading in New York, New York.

ISSUE:

     Whether the blending operation described above is sufficient
to create a "new and different product" within the meaning of 19
CFR 4.80b(a) so that the proposed transportation of the resultant
blend by a foreign-flag vessel is not in violation of 46 U.S.C.
App. 883.
                              - 2 -

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
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.

     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.  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 by a blending operation 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 
                              - 3 -

determination which will form the basis for a decision regarding
any possible violation of  883.  

     Upon reviewing the specifications of this particular
blending operation, we note at the outset that the adjustment of
a gasoline's octane rating is a minor operation which petroleum
blenders perform on a routine basis.  However, the downgrading of
a gasoline with an octane rating of 93 to an octane rating of 89
is not a normal practice in commerce.  In addition, we note that
the blended 89 octane gasoline can easily be converted back to
its original gasoline components.  Furthermore, the 89 octane
gasoline can be converted to 93 octane gasoline by the addition
of MTBE (methyl tert-butyl ether).  The 87 octane gasoline can be
produced from 89 octane gasoline by diluting the higher octane
gas with lower octane rated blendstocks.

     Both blend components as well as the resultant blend meet
the stringent requirements for automotive spark-ignition engine
fuel (gasoline) as stated in ASTM D4814-88a.  Based on this ASTM
standard, in order for a product to be defined commercially as
gasoline it must have a minimum anti-knock rating of 85.  We note
that the value of the commercial product will rise proportionally
with the octane rating, however, because all of the products
under review meet the minimum octane rating required by the ASTM
standard, the difference among them is one of grading rather than
change of product type.  In view of the fact that all of the
products under consideration meet the ASTM requirements for
gasoline and as a result, may be commercially defined as
gasoline, it is apparent that the blending operation under
consideration did not create a "new and different product" within
the meaning of  4.80b(a), Customs Regulations.  Accordingly, the
proposed transportation of the resultant blend by a foreign-flag
vessel is in violation of 46 U.S.C. App. 883.

HOLDING:

     The blending operation described above is insufficient to
create a "new and different product" within the meaning of 19 CFR
4.80b(a) so that the proposed transportation of the resultant
blend by a foreign-flag vessel is in violation of 46 U.S.C. App.
883.

                              Sincerely,




                              B. James Fritz
                              Chief