VES-3-02-OT:RR:BSTC:CCR H335463 DMK
Alice Colarossi, Esq.
Reed Smith, LLP
599 Lexington Ave,
New York, NY 10022
RE: Coastwise Transportation; 46 U.S.C. § 55102; Merchandise; Liquefied Natural Gas Release; 19 C.F.R. § 4.80; 19 C.F.R. § 4.80b.
Dear Ms. Colarossi;
This letter is in response to your November 2, 2023, ruling request submitted on behalf of your client, [ ] (the “Company”), regarding whether the lading of Liquefied Natural Gas (“LNG”) at two U.S. ports, as described below, would violate the coastwise laws. Our decision follows.
FACTS
The following facts are from your client’s ruling request and supporting information dated November 2, 2023, as well as supplemental information submitted on November 8, 2023. Your client has requested U.S. Customs and Border Protection (“CBP”) to determine whether the lading of LNG at two U.S. ports by a non-coastwise-qualified vessel would violate the Jones Act, 46 U.S.C. § 55102.
The Company intends to use a non-coastwise qualified tanker, the [
] (“the Vessel”) to load two parcels of LNG in the U.S. and transport them to LNG terminal(s) outside the U.S. The first parcel of LNG will be loaded in [ ] (“Port A”). After loading the LNG at Port A, the Vessel will transit to [ ] (“Port B”). At Port B, the Vessel will load a second parcel of LNG.
To keep the pressure of the LNG loaded in Port A at safe levels while loading the second parcel, the Vessel will open its vapor lines, where an amount of vaporized gas which was loaded as LNG at Port A may be released and reach the shore at Port B. LNG which reaches shore will be directed to liquefaction trains for recapture, after which it may be consumed by the operators of Port B or it may be liquefied and exported to future customers. Some of the recaptured vapor may go into onshore storage tanks. No vaporized gas will be released to the atmosphere. After the second parcel is loaded, the Vessel will leave U.S. waters and deliver the LNG to foreign locations, without any plan or intent to bring the LNG back to the U.S.
ISSUE
Whether loading LNG in Port A, a portion of which will be released as vapor for safety reasons at Port B, by a non-coastwise-qualified vessel violates the Jones Act, 46 U.S.C § 55102?
LAW AND ANALYSIS
Generally, the coastwise laws prohibit the transportation of 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. Such a vessel, after it has obtained a certificate of documentation with a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise qualified.”
The coastwise law applicable to the transportation of merchandise, often referred to as “the Jones Act,” is found at 46 U.S.C. § 55102, and provides in pertinent part:
Except as otherwise provided in this chapter or chapter 121 of this title, 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 United States for purposes of engaging in the coastwise trade; and
has been issued a certificate of documentation with a coastwise endorsement under chapter 121 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.
The Jones Act only partially defines the term “merchandise,” setting forth that merchandise “includes … merchandise owned by the United States Government, a State, or a subdivision of a State” and “valueless material.” See 46 U.S.C. § 55102(a). CBP utilizes as well the definition of “merchandise” in 19 U.S.C. § 1401(c): “goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31.”
With regard to your question as to whether loading LNG in Port A, a portion of which will be released as vapor for safety reasons at Port B, by a non-coastwise-qualified vessel violates the Jones Act, 46 U.S.C § 55102, CBP examines the points at which merchandise is laden and unladen. HQ H316313 (Feb. 4, 2021). In the present case, you state that the LNG will be transported from Port A to Port B, both U.S. ports. At Port B, a portion of the LNG laden in Port A will be released as vapor and reach shore, where it will be either used by Port B, sold to other customers, or stored onshore. This would constitute transportation between coastwise points. While you have noted this release will be due to safety reasons, the Jones Act does not contain an exception for safety considerations, which would permit the transaction as described above.
We therefore determine that the transaction as described consists of coastwise transportation of merchandise, performance of which by a non-coastwise qualified vessel would violate 46 U.S.C. § 55102 and 19 CFR § 4.80.
HOLDING
The proposed transportation of Liquefied Natural Gas from Port A to Port B, a portion of which will be released as vapor for safety reasons at Port B, which will be directed to liquefaction trains for recapture ashore, by a non-coastwise-qualified vessel violates the Jones Act, 46 U.S.C § 55102.
Sincerely,
W. Richmond Beevers
Chief, Cargo Security, Carriers and Restricted Merchandise Branch
Office of Trade; Regulations and Rulings
U.S. Customs and Border Protection