H337347

HQ H337347 March 14, 2024 OT:RR:BSTC:CCR H337347 AFM CATEGORY: Carriers William S. Davis III Host Agency, LLC 150 W. Main Street 16TH Floor Norfolk, VA 23510 RE: 46 U.S.C. § 55102; 19 C.F.R. § 4.80b; Coastwise Transportation; Dunnage. Dear Mr. Davis: This is in response to your correspondence of February 12, 2024, in which you requested a ruling regarding whether the proposed transportation of dunnage under the circumstances described below would violate 46 U.S.C. § 55102 (“the Jones Act”). Our decision follows. FACTS: The following facts are taken from your February 12, 2024, ruling request and subsequent responses to our requests for supplemental information. Pacific Basin Shipping Limited (“Owners”) have employed the M/V ST CERGUE (the “Vessel”), a foreign-flagged vessel, to load a cargo of steel slabs in bulk at Paradip, India. The cargo is accompanied by approximately 350 cubic meters of 10-foot long, 4” x 4” wooden boards used as dunnage to secure the steel cargo inside the holds of the Vessel. You state the dunnage is not packaging material affixed to the cargo itself and is the property of the vessel owner. The Vessel is underway to the United States and is scheduled to arrive at the port of Brownsville, Texas on or around March 14, 2024. Host Agency LLC and Owners (jointly, “Inquirers”) propose to offload the cargo of steel slabs at the port of Brownsville, Texas, and then transit with the foreign-laden dunnage aboard the vessel to the port of Houston, Texas, where the dunnage will be removed and disposed of as ships waste. ISSUES: Whether the subject dunnage is merchandise, vessel equipment, and/or instruments of international traffic (“IITs”). Whether a violation of the Jones Act would occur if the dunnage were removed from the Vessel at Brownsville, either by spilling or intentionally landing the dunnage on the dock in Brownsville and re-stowed onto the Vessel for transport to Houston. Whether the status of the dunnage changes once the cargo is removed from the Vessel. LAW AND ANALYSIS: Issue 1: Whether the dunnage is merchandise, vessel equipment, and/or IITs. The Inquirers argue that the subject dunnage may be considered either merchandise, vessel equipment, and/or IITs and assert that the dunnage in question should be classified as vessel equipment, specifically stevedoring materials used in the transport of the cargo, due to the way in which vessel equipment was addressed in Customs Bulletin Vol. 53 No. 45, and the original intent of the Tariff Act of 1930 and T.D. 49815(4) (Mar. 13, 1939). Dunnage is defined as “[p]ieces of wood, matting, or similar material used to keep a cargo in position in a ship's hold,” and as “loose wood or other material used in a ship’s hold for the protection of cargo.” The subject dunnage consists of loose wooden boards used to secure the Vessel’s cargo. Merchandise The coastwise law applicable to the transportation of merchandise, known 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. Title 46 United States Code § 55101 supplies the geographic reach of the coastwise laws, providing: Except as provided in subsection (b), the coastwise laws apply to the United States, including the island territories and possessions of the United States. (b) The coastwise laws do not apply to— (1) American Samoa; (2) the Northern Mariana Islands, except as provided in section 502(b) of the Covenant To Establish a Commonwealth of the Northern Mariana Islands in Political Union With the United States of America (48 U.S.C. 1801 note); or (3) the Virgin Islands until the President declares by proclamation that the coastwise laws apply to the Virgin Islands. The coastwise laws generally apply to points in the territorial sea, which is defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline. The U.S. Customs and Border Protection (CBP) regulations promulgated under the authority of 46 U.S.C. § 55102 provide 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. 19 C.F.R. § 4.80b(a). The Jones Act specifically prohibits the coastwise transportation of “merchandise” between coastwise points by non-coastwise qualified vessels. Pursuant to 19 U.S.C. § 1401(c), the word “merchandise” is defined as “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.” Also, the Jones Act provides at 46 U.S.C. § 55102(a): “[m]erchandise includes (1) merchandise owned by the United States Government, a State, or a subdivision of a State; and (2) valueless material.” It is noteworthy that, for Jones Act purposes, merchandise also specifically encompasses “valueless material.” As such, any cargo, regardless of its value or ownership, would be considered merchandise for the purposes of 46 U.S.C. § 55102. Notably, the Jones Act prohibits a non-coastwise-qualified vessel from performing “any part” of the transportation of merchandise between two U.S. points to which the coastwise laws apply, meaning a violation would occur even if the merchandise is transferred to a coastwise-qualified vessel before reaching its destination. Additionally, a Jones Act violation occurs even if the merchandise is carried to a non-coastwise point by a non-coastwise-qualified vessel, prior to being carried to its coastwise destination by a coastwise-qualified vessel. Vessel Equipment Not included within the general meaning of merchandise for Jones Act purposes, however, is the equipment of a vessel. Such materials have been defined as articles, "...necessary and appropriate for the navigation, operation or maintenance of the vessel and for the comfort and safety of the persons on board." Accordingly, CBP has consistently held that “vessel equipment” or “equipment of the vessel” is not included within the general meaning of merchandise. CBP clarified its consideration of vessel equipment in 2019, indicating that vessel equipment includes “all articles or physical resources serving to equip the vessel, including the implements used in the vessel’s operation or activity.” CBP elaborated that items considered “necessary and appropriate for the operation of the vessel” are those items that are “integral to the function of the vessel and are carried by the vessel.” Whether such articles constitute vessel equipment is a fact-specific, case-by-case determination. Additionally CBP has held that “[v]essel equipment placed aboard a vessel at one United States port may be removed from the vessel at another United States port at a later date without violation of the coastwise laws.” Wooden boards used as dunnage to secure the steel cargo inside the holds of the Vessel do not constitute articles which are “...necessary and appropriate for the navigation, operation or maintenance of the vessel and for the comfort and safety of the persons on board,” such as to qualify as vessel equipment because “necessary and appropriate for the operation of the vessel” is defin

Issue 1: Whether the dunnage is merchandise, vessel equipment, and/or IITs.The Inquirers argue that the subject dunnage may be considered either merchandise, vessel equipment, and/or IITs and assert that the dunnage in question should be classified as vessel equipment, specifically stevedoring materials used in the transport of the cargo, due to the way in which vessel equipment was addressed in Customs Bulletin Vol. 53 No. 45, and the original intent of the Tariff Act of 1930 and T.D. 49815(4) (Mar. 13, 1939). Dunnage is defined as “[p]ieces of wood, matting, or similar material used to keep a cargo in position in a ship's hold,” and as “loose wood or other material used in a ship’s hold for the protection of cargo.” The subject dunnage consists of loose wooden boards used to secure the Vessel’s cargo.MerchandiseThe coastwise law applicable to the transportation of merchandise, known 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; andhas 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.Title 46 United States Code § 55101 supplies the geographic reach of the coastwise laws, providing: Except as provided in subsection (b), the coastwise laws apply to the United States, including the island territories and possessions of the United States.(b) The coastwise laws do not apply to—(1) American Samoa;(2) the Northern Mariana Islands, except as provided in section 502(b) of the Covenant To Establish a