US reaffirms non-Jones Act gasoline move

OREANDA-NEWS. April 08, 2015. US regulators reaffirmed that shippers may supply domestic destinations with finished gasoline using foreign-flagged ships if the product is blended at a foreign terminal.

In a January letter made public last week, the US Customs and Border Protection Service affirmed to an undisclosed company that US gasoline blendstocks could be shipped to a marine terminal for blending into new, more complete gasoline products for delivery on to US destinations, all on foreign-flagged vessels. Shipments between US ports generally require costlier vessels constructed and registered in the US and with US crews under a more than 80-year-old law called the Jones Act.

The customs determination, first made more than a year ago, turns on logic similar to the interpretation of US policy that allows the export of very light crude oil called condensate. The movement complies with US law because the gasoline components are combined into a new product.

The opinion specifically discusses the creation of CBOB, RBOB, M Grade CBOB and V Grade premium gasoline. Those products must be further blended with gasoline for the US fuel supply.

Buckeye Pipeline confirmed in August that the midstream company had landed a long-term customer for gasoline blending at its massive BORCO terminal in the Bahamas, months after the original customs ruling.

But it is not clear how much advantage the movement offers shippers willing to pass through a Caribbean terminal. Storage, blending and foreign-flagged transportation costs reduce the advantage to Jones Act transportation. Arbitrage for the movement has remained closed, according to traders.