CBP Review of 'New and Different Product' Ruling Affirms Finding on Jones Act Violation

CBP affirmed a recent ruling on whether the transport of a blended gasoline outside the U.S. constituted a Jones Act violation, it said in ruling HQ H233786. The ruling, dated Jan. 7, was in response to a request for reconsideration of a previous ruling that said the coastwise transfer of the blend on a foreign-flagged vessel would violate the Jones Act. The request for reconsideration of the original ruling came from Jeanne Grasso, a lawyer at Blank Rome, on the behalf of an undisclosed client.

At issue is the transportation of gasoline and naphtha from the U.S. to be blended in the Bahamas to produce "Reformulated Blendstock for Oxygenate Blending," which would then return to the U.S. on a foreign-flagged vessel. Grasso argued that the proposed transportation doesn't violate 46 USC Section 55102, known as the Jones Act, because the blended product makes for a "new and different product," which is allowed under the Jones Act. CBP disagreed, in part, because CBP's laboratory said not enough information was provided. The original August 9 ruling, HQ H219709, wasn't available on the Customs Rulings Online Search System.

CBP addressed several complaints lodged by Grasso in its subsequent review of the ruling. Grasso claimed that CBP used the incorrect legal standard to make its original determination that the blend wasn't a "new and different product" because it used different language that is associated with a different legal standard of "substantial transformation." CBP disagreed, saying it made specific mention of Jones Act regulations. Grasso also claimed that CBP's ruling included contradictory statements because the laboratory said it couldn't make a determination of the "new and different" issue, while the ruling said the blending wouldn't produce a "new and different" product. CBP said the two parts are separate. "Our initial determination in HQ 219709 was based upon the information provided, which [the lab] opined contained overly broad specifications from which they were unable to conclude that the proposed blending process, as initially described, would result in a new and different product," said CBP. "To the extent that [the lab] surmised that it could possibly reach a different result if provided with more information does not affect our determination in the case currently under consideration."

The agency also pushed back against Grasso's claim that CBP's ruling was inconsistent with previous rulings. CBP said Grasso is mistaken about a ruling from 1994, which she said created the standard for what makes for a new and different product, because it specifically points out the possibility of similarity between the original and finished products may mean the blend wouldn't result in a new product.

Grasso's client also provided revised specifications to CBP, which the lab again found to be insufficient, said the ruling. "Upon review of the revised specifications, [the lab] found that 'as in the original submission, these specifications are overly broad and imprecise.'" Therefore, the previous ruling is affirmed and "the proposed transportation of fuel oil on a foreign-flagged vessel to the Bahamas to be processed as described above, then transported by a foreign-flagged vessel back to the United States, would constitute a violation" of the Jones Act, said CBP.