H332921

HQ H332921 February 12, 2024 VES-3-02-OT:RR:BSTC:CCR H332921 HKC CATEGORY: Carriers Helen M. Cousineau Managing Director, Global Trade Advisory Deloitte Tax LLP 111 South Wacker Drive Chicago, IL 60606 RE: Vessel Importation; Deepwater Ports Act; 33 U.S.C. § 1518; Title 19, U.S. Code Dear Ms. Cousineau, This letter is in response to your June 12, 2023, ruling request and subsequent correspondence on behalf of your client Delfin LNG LLC (“Delfin”) regarding whether Delfin’s Floating Liquefied Natural Gas Vessel (“FLNGV”) qualifies as a vessel, whether such vessel is subject to the customs laws in Title 19 of the U.S. Code (U.S.C.), and whether such vessel is exempt from importation-related customs duties. Our decision follows. FACTS The following facts are from your June 12, 2023, ruling request and subsequent correspondence. Delfin proposes to moor foreign-flagged FLNGVs at a deepwater port located on the Outer Continental Shelf (“OCS”) approximately 40 nautical miles off the coast of Cameron Parish, Louisiana. The FLNGVs will arrive at the deepwater port from Asia under their own power. While at the deepwater port, FLNGVs will be moored to the seafloor using Submerged Soft-Yoke systems (“SSYs”). Unlike permanent mooring systems, the SSYs will enable the FLNGVs to unmoor and disconnect from the deepwater port’s pipeline in a matter of hours. Once moored, the FLNGVs will take on natural gas from the deepwater port using a pipeline connection. The FLNGVs will then liquefy the natural gas to produce Liquefied Natural Gas (“LNG”) and store the LNG onboard in storage tanks. The FLNGV will then offload the LNG onto LNG tankers temporarily moored alongside it via loading arms using ship-to-ship transfer procedures. The deepwater port in question will solely be utilized to export U.S. origin LNG. As configured, Delfin’s deepwater port is incapable of importing foreign-origin LNG into the customs territory of the United States, and Delfin has not applied for a Department of Energy permit to do so. Accordingly, this ruling does not address the dutiability of oil and gas products imported through a deepwater port. The FLNGVs are capable of sailing under their own propulsion with LNG stored on board. They can also steer and dynamically position without assistance. Upon their return to the deepwater port, the FLNGVs are capable of reconnecting to the SSYs on their own. The United States Coast Guard (“USCG”) has issued Delfin a determination letter stating that for the purposes of Title 33 of the Code of Federal Regulations (CFR), the FLNGVs are vessels and not part of the deepwater port. The following schematic illustrating the superstructure and hull shape of an FLNGV was provided by Delfin: 
 ISSUES In correspondence subsequent to your ruling request, you requested that we rule on the following issues: 1. Under the facts presented, is Delfin’s FLNGV considered a vessel as contemplated by 19 U.S.C. § 1401(a) and 33 U.S.C. § 1502 (19)? 2. Under the facts presented, is Delfin’s FLNGV exempt from the customs laws administered by the Secretary of the Treasury within the meaning of 33 U.S.C. § 1518(d)? 3. Under the facts presented, is Delfin’s FLNGV exempt from importation into the customs territory of the United States and exempt from dutiability as merchandise for the purposes of Title 19 and Title 33 U.S. Code? LAW AND ANALYSIS The coastwise law applicable to the waiver of customs laws at a deepwater port is found at 33 U.S.C. § 1518(d) and provides: “(d) Customs laws inapplicable to deepwater port; duties and taxes on foreign articles imported into customs territory of United States – The customs laws administered by the Secretary of the Treasury shall not apply to any deepwater port licensed under this chapter, but all foreign articles to be used in the construction of any such deepwater port, including any component thereof, shall first be made subject to all applicable duties and taxes which would be imposed upon or by reason of their importation if they were imported for consumption in the United States. Duties and taxes shall be paid thereon in accordance with laws applicable to merchandise imported into the customs territory of the United States.” (Emphasis added). The term “customs laws administered by the Secretary of the Treasury” has been held by CBP to encompass the statutes contained in Title 19 U.S. Code. The term “deepwater port” is defined at 33 U.S.C. § 1502 (9), and vessels are specifically excluded from the definition: “(9) “deepwater port”— (A) means any fixed or floating manmade structure other than a vessel, or any group of such structures, that are located beyond State seaward boundaries and that are used or intended for use as a port or terminal for the transportation, storage, or further handling of oil or natural gas for transportation to or from any State, except as otherwise provided in section 1522 of this title, and for other uses not inconsistent with the purposes of this chapter, including transportation of oil or natural gas from the United States outer continental shelf; (B) includes all components and equipment, including pipelines, pumping stations, service platforms, buoys, mooring lines, and similar facilities to the extent they are located seaward of the high water mark; (C) in the case of a structure used or intended for such use with respect to natural gas, includes all components and equipment, including pipelines, pumping or compressor stations, service platforms, buoys, mooring lines, and similar facilities that are proposed or approved for construction and operation as part of a deepwater port, to the extent that they are located seaward of the high water mark and do not include interconnecting facilities; and (D) shall be considered a “new source” for purposes of the Clean Air Act (42 U.S.C. 7401 et seq.), and the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.).” (Emphasis added). The term “vessel” is defined at 1 U.S.C. § 3, saying: “The word “vessel” includes every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water.” For the purposes of the customs laws, Title 19 further defines “vessel” at 19 U.S.C. § 1401(a), incorporating the definition found in Title 1, and further specifically exempting aircraft, saying: “(a) Vessel - The word “vessel” includes every description of water craft or other contrivance used, or capable of being used, as a means of transportation in water, but does not include aircraft.” A similar definition of “vessel” for the purposes of Title 33 is codified at 33 U.S.C. § 1502 (19): “(19) “vessel” means every description of watercraft or other artificial contrivance used as a means of transportation on or through the water.” (Emphasis added). Inasmuch as these definitions of the term all include language of great breadth, “…every description of watercraft or other artificial contrivance…,” our consideration of the term “vessel” as utilized in statute should be broad in scope. Further, the courts have provided considerable guidance as to the physical characteristics of a vessel. The Supreme Court has opined that for the purposes of the Jones Act, a watercraft “capable of being used” as a means of transportation is a vessel, regardless of whether the watercraft was actually engaged in transportation. The Court applied the plain meaning definition of “vessel” in the U.S. Code, which included every watercraft “used, or capable of being used, as a means of transportation on water.” Special purpose structures not usually employed as means of transport, but designed to float on water, have also been held to be vessels. In Offshore Co. v Robinson, the 5th Circuit Court of Appeals (“5th Circuit”) held a drilling barge incapable of self-propulsion or holding cargo, but containing navigation lights, anchors, bitts, living quarters, and bilge pumps, to be a vessel. Conversely, the 5th Circuit in Richendollar v.

The coastwise law applicable to the waiver of customs laws at a deepwater port is found at 33 U.S.C. § 1518(d) and provides:“(d) Customs laws inapplicable to deepwater port; duties and taxes on foreign articles imported into customs territory of United States – The customs laws administered by the Secretary of the Treasury shall not apply to any deepwater port licensed under this chapter, but all foreign articles to be used in the construction of any such deepwater port, including any component thereof, shall first be made subject to all applicable duties and taxes which would be imposed upon or by reason of their importation if they were imported for consumption in the United States. Duties and taxes shall be paid thereon in accordance with laws applicable to merchandise imported into the customs territory of the United States.”(Emphasis added).The term “customs laws administered by the Secretary of the Treasury” has been held by CBP to encompass the statutes contained in Title 19 U.S. Code. The term “deepwater port” is defined at 33 U.S.C. § 1502 (9), and vessels are specifically excluded from the definition:“(9) “deepwater port”—(A) means any fixed or floating manmade structure other than a vessel, or any group of such structures, that are located beyond State seaward boundaries and that are used or intended for use as a port or terminal for the transportation, storage, or further handling of oil or natural gas for transportation to or from any State, except as otherwise provided in section 1522 of this title, and for other uses not inconsistent with the purposes of this chapter, including transportation of oil or natural gas from the United States outer continental shelf;(B) includes all components and equipment, including pipelines, pumping stations, service platforms, buoys, mooring lines, and similar facilities to the extent they are located seaward of the high water mark;(C) in the case of a structure used or intended for such use with respect to natural ga