HQ 113083: Coastwise Trade; Fuel Oil; 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 113083

                           May 11, 1994

VES-3-CO:R:IT:C 113083 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

Dear Mr. Gumbaz:

     This is in response to your letter dated May 9, 1994,
regarding the transportation of fuel oil.  Your letter offers two
alternative scenarios not included in your letter of April 14,
1994, to which we have previously responded (ruling 113080, dated
May 2, 1994).  Our ruling on these two new alternatives 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.

     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 two transportation scenarios involving a foreign-flag
vessel are offered for Customs consideration:
   
     1.  After lading the Yombo crude at St. Eustatius, 
     then proceeding to the CAPECO refinery dock and
     lading the CAPECO fuel oil for processing with
     the Yombo crude already on board, the foreign-flag 

                              - 2 -

     vessel would vacate the dock and sail to an 
     anchorage prior to completing the discharge of the 
     processed product back across the CAPECO dock.  At 
     some later time the vessel would return to the CAPECO
     dock from the anchorage to continue the discharge.

     2.  After lading the Yombo crude at St. Eustatius the 
     foreign-flag vessel would sail directly to the PREPA 
     dock.  The CAPECO fuel oil would then be transported
     from the CAPECO refinery by a U.S.-flag vessel to the
     foreign-flag vessel.  The CAPECO product would be 
     discharged from the U.S.-flag vessel onto the foreign-flag
     vessel for processing while the latter was berthed at the
     PREPA dock.  The processed product would be discharged
     across the PREPA dock with the foreign-flag vessel never
     having moved from the PREPA dock, except to the extent that
     it was forced to vacate the PREPA dock, go to an anchorage,
     and then return to the PREPA dock to commence or continue
     discharge.

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
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

                              - 3 -

          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.  
     
     Whether or not a new and different product has been created
by the processing in question for purposes of 19 CFR  4.80b(a)
is immaterial with regard both of the alternative scenarios
described above.  Although the processing in each case takes
place on board the vessel, there is no transportation between
coastwise points.  In Scenario #1 the CAPECO product is being
laded and unladed at the same coastwise point.  The movement of
the vessel from the dock to an anchorage and back to the dock is
not a coastwise movement provided the CAPECO product is not
discharged at the anchorage.  The same rationale applies in
Scenario #2 if the foreign-flag vessel is forced to vacate the
dock and later returns.  In addition, if the vessel is remaining
stationary and merely pumping the resultant product ashore, there
is no transportation between coastwise points.  In Scenario #2,
however, the vessel transporting the CAPECO fuel oil from the
CAPECO refinery dock to the PREPA dock must not only be U.S.-flagged, it must also be U.S.-built (i.e., coastwise-qualified). 
                              - 4 -

HOLDING:

     The proposed transportation of fuel oil as described in the
above scenarios is not in violation of 46 U.S.C. App.  883
provided the coastwise point of lading and unlading is the same,
and with respect to Scenario #2, the vessel transporting the
CAPECO fuel oil from the CAPECO refinery dock to the foreign-flag
vessel berthed at the PREPA dock must be coastwise-qualified.

                              Sincerely,




                              Arthur P. Schifflin
                              Chief
                              Carrier Rulings Branch