Customs about-face could make Bahamas key source for U.S. gasoline
By Anna Louie Sussman
NEW YORK, April 23 (Reuters) - A massive oil storage facility in the Bahamas may offer nimble gasoline traders a new way to profit by shipping fuel in foreign ships from the oversupplied U.S. Gulf Coast to the gasoline-thirsty East Coast following a recent U.S. Customs ruling.
The March 6 judgment in favor of Buckeye Partners LP , which owns the Bahamas Oil Refining Company (BORCO) oil storage hub, allows traders to use lower-cost foreign ships to transport fuels between the Gulf and East Coast via BORCO, circumventing a near-century old law called the Jones Act.
The law requires U.S.-made fuels to be moved between domestic ports using a tiny fleet of U.S.-flagged, U.S.-built and U.S.-crewed ships. It costs three times more to transport with Jones Act ships than with foreign-flagged ships.
In its ruling, Customs said traders may export to the Bahamas certain blending components of gasoline on a foreign-flagged vessel and ship it back to the United States on a foreign-flagged ship if it is blended to produce the gasoline grades RBOB and CBOB.
The 25-million-barrel BORCO storage hub, the Caribbean's biggest, is located less than 100 miles (160 km) from the Florida coast.
The ruling states the blending must create a "new and different product" for it to be eligible for re-export to the United States on a foreign-flagged ship.
Industry participants said the ruling, which came after earlier petitions from Buckeye in January 2013 and August 2012 had failed, could potentially open up a new trading route from the Gulf Coast to the East Coast.
By giving traders an alternative to scarce and costly U.S.-flagged Jones Act ships, the new option could also back out imports from European and Canadian refiners who typically sell gasoline into the U.S. East Coast. Continued...