H332158

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H332158 November 17, 2023 OT:RR:BSTC:CCR H332158 SWM Matthew J. Thomas Blank Rome 1825 I Street, NW Washington, DC 20006 RE: 46 U.S.C. § 55102; 19 C.F.R. § 4.80b(a); New and Different Product; LNG Bunker Fuel Dear Mr. Thomas: This is in response to your letter of May 19, 2023, which requests a ruling on behalf of New Fortress Energy, Inc. (“the Company”). This letter requested a determination as to whether Liquified Natural Gas (“LNG”) for use as marine bunker fuel constitutes a new and different product from the pipeline natural gas from which it is produced, and whether the LNG’s proposed transportation by a non-coastwise-qualified vessel would constitute a violation of 46 U.S.C. § 55102. The Company has requested that confidential treatment be accorded to certain information submitted in connection with this ruling request. In consideration of the request and the sufficient justification presented pursuant to 19 C.F.R. § 177.2(b)(7), this office will not identify any business confidential information provided to U.S. Customs and Border Protection (“CBP”). Our decision follows. FACTS: The Company is a publicly traded, global energy infrastructure company that owns and operates natural gas and LNG infrastructure. The Company also operates an integrated fleet of ships and logistics assets that allow it to deliver a variety of energy solutions to global markets. At issue in this ruling request is the Company’s proposed liquefaction and refining of natural gas into LNG bunker fuel at an offshore refinery facility located in non-U.S. waters. This facility will consist of three fixed platforms that will receive U.S.-origin natural gas via a pipeline. The natural gas will then be chemically altered and liquified to change it into LNG that will be used in the Company’s downstream business. Transportation of the LNG produced at the refinery to its terminal at a coastwise point in Puerto Rico would be aboard non-coastwise-qualified vessels. The refinery will be located in a fixed position in non-U.S. waters several nautical miles off the coast of Altamira, Tamaulipas, Mexico in the Gulf of Mexico. It will receive U.S.-origin natural gas sourced from the U.S. state of Texas. The inlet feed gas will be transported to the refinery by the Sur-de-Texas Tuxpan offshore gas pipeline system via a newly constructed lateral pipeline that connects this pipeline to the new refinery at issue here. The Sur-de-Texas pipeline is, in turn, fed by the intrastate Texas Valley Crossing pipeline. Thus, the inlet natural gas received at the refinery is all U.S. specification pipeline gas. The refinery will consist of three platforms that will each perform a different function. Each of the three platforms is a converted jack-up rig lacking both propulsion and navigation equipment; as such, each will be towed into position by four offshore tugboats. Once on location, each platform will be raised to the required elevation above the sea surface. The legs of these platforms are designed to penetrate the seabed and are fitted with enlarged sections or footings called spud cans. Once all three platforms are in position, they will be permanently moored to the seabed floor and linked together by bridges, pipes, and cabling. None of the three platform structures can operate independently, as each platform contains different equipment. Platform I is the gas processing and treatment facility. The U.S.-origin natural gas (“Pipeline Feed Gas”) will be delivered to Platform I via a hard-bolted pipeline attached to a riser in one of the legs on Platform I. The chemical composition of the Pipeline Feed Gas can vary considerably depending on its origin. To address this variation, the gas is processed before the liquefaction process begins. This processing includes removing compounds that would freeze or prevent the gas from being liquefied prior to being transported internationally. Gas treatment steps include: (a) mercury removal, (b) amine treatment for carbon dioxide (“CO2”) removal, (c) water dehydration, and (d) heavy hydrocarbon separation. During this refining process, the inlet feed gas will be altered and chemically modified to create new components that are themselves different and marketable products. Specifically, the separated heavy hydrocarbons noted in section (d) can be marketed separately or used internally in the refinery’s fuel gas system. Platform II is the refinery’s liquefaction facility. The Company states that this liquefaction is necessary to create LNG marine fuel and to facilitate long-distance intercontinental transport of natural gas. Platform II contains the liquefaction unit modules, which house the refrigeration compressor and its gas turbine driver. LNG from liquefaction is sent to an LNG carrier that is moored at the project site to operate as a floating storage unit (“FSU”). Boil-off gas (“BOG”) from the FSU is received back to this platform. It is here that the heavy hydrocarbons from Platform 1, noted in subsection (d) above, are combined with the BOG to provide fuel for the entire facility. The Company also states that if the finished product LNG is returned to its gaseous state following this processing, the gas produced would have a different composition than the original pipeline gas that was first used to make the LNG. Platform III is the refinery’s accommodations and power generation facility. The accommodations block for operating personnel will be located on the refinery’s third platform. In addition, this platform is outfitted with utilities such as the primary power generation gas turbines and air compression facilities. Platform III also contains a helideck and is intended to support critical lifesaving and egress functions. The LNG produced by the refinery will be transferred to an FSU whose long-term mooring is adjacent to the refinery. The FSU will be the Marshall Islands registered vessel M/T GOLAR PENGUIN, a non-coastwise qualified vessel. The FSU will not transport the LNG; rather, it will remain stationary and moored at the production facility so that it can receive and store the LNG. The LNG will then be picked up by non-coastwise-qualified LNG tankers such as the M/T GASLOG SINGAPORE, M/T ORION SEA, or M/T ALPHA GAS. ISSUE: Whether, based on the product specifications provided, the proposed liquefaction operation would result in the creation of a “new and different product” within the meaning of 19 C.F.R. § 4.80b(a), such that the proposed transportation by a non-coastwise-qualified vessel would not be in violation of 46 U.S.C. § 55102. LAW AND ANALYSIS: Pursuant to 46 U.S.C. § 55102 (“the Jones Act”), 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 has a coastwise endorsement. 46 U.S.C. § 55102 (emphasis added). The CBP regulations promulgated under the authority of 46 U.S.C. § 55102(a), provide that “[a] coastwise transportation of merchandise takes place. . . 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.” 19 C.F.R. § 4.80b(a). However, Customs regulations provide an exception to 46 U.S.C. § 55102, if a “new and different product” is being transported. Specifically, 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. However, merchandise is not transported coastwise if at an intermediate port or place other than a coastwise point (that is at a foreign port or 

Pursuant to 46 U.S.C. § 55102 (“the Jones Act”), 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 has a coastwise endorsement. 46 U.S.C. § 55102 (emphasis added). The CBP regulations promulgated under the authority of 46 U.S.C. § 55102(a), provide that “[a] coastwise transportation of merchandise takes place. . . 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.” 19 C.F.R. § 4.80b(a). However, Customs regulations provide an exception to 46 U.S.C. § 55102, if a “new and different product” is being transported. Specifically, 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. However, merchandise is not transported coastwise if at an intermediate port or place other than a coastwise point (that is at a foreign port or place, or at a port or place in a territory or possession of the United States not subject to the coastwise laws), it is manufactured or processed into a new and different product, and the new and different product thereafter is transported to a coastwise point. 19 C.F.R. § 4.80b(a) (emphasis added).Here, while the feed gas will first transit through the United States via pipeline, it will then return to the United States via vessel. The Jones Act applies when “any part of the transportation of merchandise” occurs by water or land and water. Here, the fuel will be transported in part by water and we must determine if a violation would occur in this instance. See e.g., HQ H2530