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HQ H167437
June 17, 2011
VES- 3-OT-RR:BSTC:CCI H167437 DAC
CATEGORY: Carriers
Robert W. Hawn Inchcape Shipping Services 15635 Jacintoport Blvd, Suite 200 Houston, Texas 77015-6534 RE: 46 U.S.C. § 55102; Continuity of Transportation
Dear Mr. Hawn: This letter is in reply to your submission of May 19, 2011, on behalf of Stolt Tankers BV, (hereinafter referred to as “Stolt”), wherein you request a ruling as to whether the proposed transportation by a non-coastwise-qualified vessel would constitute a violation of 46 U.S.C. § 55102. Our ruling on this matter is set forth below.

FACTS: Stolt proposes to transport contaminated chemical cargoes, which departed from the Port of Houston, Texas, bound for the Port of Callao, Peru, and are proposed to return to the Port of Houston, Texas, because the subject chemical cargoes were contaminated and refused for discharge at the Port of Callao, Peru. The three subject chemical cargoes, carried on the M/T STOLT FACTO on voyage number 007-1LAS, (Bill of Lading nos. “320”, “330”, “354”) consisted of the following commodities: a) “320 … arcol polyol F-3040,” 1948.22 barrels, 81825.19 gallons, 694455.30 pounds); b) “330 … CAT Z, 1 lot in bulk corrosive liquids…sodium hydrosulfide solution (45% or less)”, 1,534.098 metric tons; and c) “354 … EHC 60 … lubricating oil”, 501.002 metric tons (3,680,630 barrels, 154,586.460 gallons, 1,104,520.260 pounds), loaded aboard the M/T STOLT FACTO (“vessel”) at the Port of Houston, Texas, on or about March 30, 2011. The Bills of Lading provide that the subject merchandise is to be delivered to the port of Callao, Peru.

You state that while at sea, and unbeknownst to the ship’s crew, a crack developed in an internal, transverse bulkhead, resulting in leakage among and cross contamination of several different chemical cargoes in the various tanks around the crack. You state the damage to the vessel was not discovered until the ship reached the Port of Callao, Peru, on May 8, 2011, where the three subject chemical cargoes were originally to be discharged. You state samples of the subject chemical cargoes were taken prior to the planned discharge at Callao and the contamination of the cargoes was then discovered. As a result of such contamination, the three subject chemical cargoes were refused for discharge, and the vessel was forced to proceed with the voyage, with the contaminated cargoes onboard. You also state that the carriage of the subject contaminated cargoes was “undertaken by the carrier, under contract with the respective shippers, with the honest intention to enter the cargoes into the common stock of the nation of Peru.” You have provided reports that state the subject cargoes were actually contaminated, unsuitable for use by the consignees, and refused discharge, which are described below.

You have provided a report, dated May 9, 2011 (ref. no. 221754), from SGS Peru, an inspection, verification, testing and certification company, signed by Mr. Hidalgo of SGS Peru, that provides findings for the cargo that was supposed to consist of “arcol polyol F-3040”, carried aboard the “M/T STOLT FACTO,” destined for “Callao – Peru.” See Bill of Lading no. 320. Such report dated May 9, 2011, states that, “during cargo tank 8-P (arcol polyol F3040) sampling abnormal smell & product appearance was verified (not clear & bright product appearance & strange odour).” Additionally, such report dated May 9, 2011, states that, “the above mentioned cargo findings in vessel’s tank 8-P, the arcol polyol F-3040 cargo is contaminated and unacceptable to be used for our client.”
You have provided a report, dated May 10, 2011 (ref. no 221830), signed by Mr. Hidalgo of SGS Peru, that provides findings for the cargo that was supposed to consist of “sodium hydrosulfide solution”, carried aboard the “M/T STOLT FACTO,” destined for “Callao – Peru”. See Bill of Lading no. 330. Such report dated May 10, 2011, states that, “the above mentioned cargo findings in vessel tank’s 10-S, the sodium hidrosulfide solution [sic] …cargo is contaminated and unacceptable to be used for our client.” Additionally, you provided a letter dated May 9, 2011, signed by Mr. Burns of TDC, the shipper for such bill of lading, that states, “[b]ased on observations by Stolt personnel and SGS surveyors in the Port of Matarani there was a color change in the Sodium Hydrosulfide product during the commingling of the materials due to the breach. … Contaminated NaHS product is not consistent with product formulation for NaHS.”
You have provided a report, dated May 9, 2011, signed by Mr. Ayres of Mobile Oil del Peru S.R.L., that provides findings for the cargo that was supposed to consist of “EHC 60”, carried aboard the vessel “STOLT FACTO”, destined for “Callao 4B – Peru.” See Bill of Lading no. 354. Such report dated May 9, 2011, states that “[o]n behalf of our principal (s), we notify you that today during the approval laboratory analysis was detected [sic] Sodium Hydrosulfide Solution (NASH) in the EHC 60 (Stock 6805) bottom sample from the stowage 9P.” Additionally, such letter of May 9, 2011, states, “[t]he current EHC 60 bottom sample does not have the visual and odor typical characteristics, as a consequence the CARGO is contaminated. According to the high corrosive, flamable [sic] and reactive NASH characteristics the EHC 60 will not be allowed off-load in the plant.”
You state that the carrier has communicated with the shippers and charterers to attempt to remediate the situation, however none of the shippers have the means to receive the subject contaminated cargoes at the original facility in Houston, Texas. You state that the carrier proposes to retain the contaminated cargoes onboard until the vessel returns to Houston, Texas. You have proposed that in late June or early July 2011, the subject contaminated cargoes will be off-loaded into a shore based storage tank facility. You state the cargo contamination is a result of the vessel casualty, specifically a crack in the bulkhead that resulted in such contamination of the cargoes, and the extent of such contamination was sufficient to cause refusal of the discharge of the subject chemical cargoes by the originally intended consignees. You further state that a barge may be used to deliver the merchandise to the to-be-determined facility.

ISSUE: Whether the use of a non-coastwise-qualified vessel to transport the subject contaminated chemical cargoes within the subject vessel for return to a different point for unlading than the original point of lading within the Port of Houston, Texas, would constitute a violation of 46 U.S.C. § 55102. LAW AND ANALYSIS: Generally, the coastwise laws prohibit the transportation of passengers or merchandise between points in the United States embraced within the coastwise laws in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. A vessel that is built in, documented under the laws of, and owned by citizens of the United States, and which obtains a coastwise endorsement from the U.S. Coast Guard, is referred to as “coastwise-qualified.” The coastwise laws generally apply to points in the territorial sea, which is defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline. Title 46, United States Code, section 55102 (46 U.S.C. § 55102), the coastwise merchandise statute often called the “Jones Act,” provides in part that a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel is wholly owned by citizens of the U.S. for purposes of engaging in the coastwise trade and has been issued a certificate of documentation with a coastwise endorsement under chapter 121 of title 46 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement. Section 4.80b(a), Customs and Border Protection (“CBP”) Regulations (19 CFR 4.80b(a)) provides, in pertinent part:
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.


The plain meaning of the statute prohibits merchandise from being transported on a non-coastwise-qualified vessel between points in the United States. The words “either directly or via a foreign port” were inserted in the original statute by the Congress in 1893. Congress, seeing how easily the protection to American shipping would be vitiated by a simple transshipment of the same cargo, inserted these words to prohibit such transshipments. We note that, absent a situation where the continuity of transportation of merchandise is broken (such as is under consideration herein), where merchandise is laden on a vessel in a U.S. port and the same merchandise is subsequently unladen from the vessel at a different location in the same U.S. port, there has been the coastwise transportation of such merchandise.

In determining whether merchandise which is transported from one point in the United States, to a point in a foreign country, and then to another point in the United States is subject to the prohibition in 46 U.S.C. § 55102 by virtue of being transported between coastwise points “via a foreign point,” we have relied upon the holding of the Supreme Court in The Bermuda, 70 U.S. 514 (1865). In that decision, the Court held that a transportation from one coastwise point to another remains continuous, so long as intent remains unchanged, no matter what stoppages or transshipments intervene. The Bermuda, supra, at 553. The Court went on to reaffirm the longstanding rule that:

[E]ven the landing of goods and payment of duties does not interrupt the continuity of the voyage of the cargo, unless there be an honest intention to bring them into the common stock of the country. If there be an intention, either formed at time of original shipment, or afterwards, to send the goods forward to an unlawful destination, the continuity of the voyage will not be broken, as to the cargo, by any transactions at the intermediate port. The Bermuda, supra, at 554.

The Attorney General of the United States relied upon The Bermuda in his consideration of the applicability of the Jones Act to certain transportation. The Attorney General ruled that when there was no intent by the shipper to transship merchandise from a United States port or place to a United States port or place via a foreign place, “only general rules of law may be laid down.” 34 Op. Atty. Gen. 355, 362 (1924). The general rule of law given by the Attorney General in this case was that “the intention of the shipper is the controlling factor.” 34 Op. Atty. Gen., supra, at 363. See also 32 Op. Atty. Gen. 350 (1920); CBP Ruling HQ H114310 (July 13, 2010). The Attorney General also stated that “whether the facts presented in any particular case come within such rules must be determined by the officer charged with the administration of that Act.” 34 Op. Atty. Gen., supra, at 362. CBP is the agency charged with the administration of 46 U.S.C. § 55102. We have issued a number of rulings on the applicability of 46 U.S.C. § 55102 to the transportation of merchandise between coastwise points via a foreign port. In these rulings, we have held, as did the Supreme Court in The Bermuda, that an “honest intention to bring the goods [transported] into the common stock of the [intermediate foreign] country” is required to break the continuity of transportation between coastwise points via a foreign point. See HQ 116557 (October 25, 2005). We have held that intent to export merchandise after its transportation from the United States to an intermediate foreign port is not, by itself, sufficient to break the continuity of the transportation, when the merchandise is transported onward from the intermediate foreign port to a second point in the United States. See CBP Ruling HQ H032036 (July 10, 2008). In the present case, you contend that the carriage of the subject contaminated cargoes was “undertaken by the carrier, under contract with the respective shippers, with the honest intention to enter the cargoes into the common stock of the nation of Peru.” You have provided documentation that demonstrates the subject cargoes have been contaminated, to include the reports which are described above. The supporting documents submitted are consistent with your statements and assertions.
Upon a review of all of the documentation, facts and circumstances, we find the transportation of the chemical cargoes from the Port of Houston, Texas, with intent to discharge such cargoes at the Port of Callao, Peru, and the subsequent transportation of the subject contaminated chemical cargoes on a return voyage to the Port of Houston, Texas, is indeed caused by the contamination of the chemical cargoes to the extent that such contaminated cargoes were refused in Peru and therefore retained onboard the vessel. Therefore, we find that the continuity of transportation of the subject goods was broken by such contamination and refusal in Peru to accept delivery of the contaminated chemical cargoes. In this particular instance, we find the proposed use of the M/T STOLT FACTO for transportation of the subject contaminated chemical cargoes to the Port of Houston, Texas will not be a violation of 46 U.S.C. § 55102.

If the subject merchandise is unladen from the M/T STOLT FACTO onto a barge in U.S. territorial waters, and such merchandise is subsequently unladen from the barge at a different point in U.S. territorial waters, the barge must be coastwise-qualified in order for such transportation to be in compliance with 46 U.S.C. § 55102.

HOLDING: Based on the totality of the facts and circumstances presented, the use of the M/T STOLT FACTO for transportation of the subject contaminated chemical cargoes to the Port of Houston, Texas, will not be a violation of 46 U.S.C. § 55102.



If the subject merchandise is unladen from the M/T STOLT FACTO onto a barge in U.S. territorial waters, and such merchandise is subsequently unladen from the barge at a different point in U.S. territorial waters, the barge must be coastwise-qualified in order for such transportation to be in compliance with 46 U.S.C. § 55102.
Sincerely,
George Frederick McCray Supervisory Attorney-Advisor/Chief Cargo Security, Carriers and Immigration Branch Office of International Trade, Regulations & Rulings U.S. Customs and Border Protection