HQ 0111718 - Coastwise; Pipelaying; Foreign Registry; Equipment; Passengers; LORELAY; 46 U.S.C. App. 883. - United States International Trade Commision Rulings

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HQ 111718

August 12, 1991

VES-3-16 CO:R:IT:C 111718 JBW

CATEGORY: CARRIER

Thomas A. Lorensen, Esquire
Paul, Hastings, Janofsky & Walker
Twelfth Floor
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036

RE: Coastwise; Pipelaying; Foreign Registry; Equipment; Passengers; LORELAY; 46 U.S.C. App. 883.

Dear Mr. Lorensen:

This letter is in response to your letter of July 8, 1991, in which you seek a ruling on the application of the United States coastwise laws to the use of a foreign-flagged vessel in a pipelaying project in southern California.

FACTS:

Allseas Marine Contractors, S.A. ("Allseas"), is under contract with the Exxon Corporation to install offshore pipelines as part of Exxon's Santa Ynez Unit Expansion Project. Allseas wishes to use the LORELAY, a vessel registered in Panama, built in Germany, and modified in the Netherlands. The LORELAY is described as a state of the art pipelaying vessel, with a large capacity hold and a positioning system that allows it to operate with anchors or the assistance of anchor-holding tugs. Other support vessels of "U.S. registry" will be used in the pipelaying project.

The project will entail the installation of five steel pipelines and a flexible pipe riser in the Santa Barbara Channel. The LORELAY will arrive at Port Hueneme, Ventura County, California from its base in the North Sea with a crew of 120 personnel; the remainder of the crew will arrive in Los Angeles by air. The LORELAY will be prepared for service by removing from its hold its gondola barge and by offloading the stinger extension and connecting it to the LORELAY's stinger. Two thousand feet of flexible pipeline will be offloaded and stored at the dock. Material and equipment will be loaded onto the vessel at this time. You state that certain large pieces of equipment that were manufactured in Europe and loaded in Rotterdam will be used in the operation. Two of these pieces are large support decks that will be offloaded the LORELAY and then reloaded and transported to existing jackets. Also, seventeen buoyancy tanks will be stored on the gondola barge and transported to the work site for subsea installation.

The pipelines will be laid on the seabed between the Heritage, Harmony, and Hondo jackets and the existing near shore pipeline. From the map supplied, these points each are over three miles from the shore. The pipelaying operation involves the loading of the pipe into the LORELAY's hold at Port Hueneme. This pipe will include the pipe described in the previous paragraph and pipe that will be supplied by Exxon. The pipe will then be transported to the work site and installed. You state that "U.S.-flagged ships" will transport personnel and materials to and from the project site.

ISSUES:

Whether a foreign-flag vessel may load and transport pipe that is to be laid by the vessel between points embraced within the coastwise laws.

LAW AND ANALYSIS:

The coastwise laws generally prohibit the transportation of passengers or merchandise between points in the United States embraced within the coastwise laws in any vessel other than a United States built, owned, and documented vessel. 46 U.S.C. App. 289 (Supp. III 1985) & 46 U.S.C.A. App. 883 (West Supp. 1991). The coastwise laws apply to points in the territorial sea, 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, in cases where the baseline and the coastline differ.

The Customs Service has held that the sole use of a non- coastwise-qualified vessel to lay pipe between points in the United States or in international waters does not violate the coastwise laws. C.S.D. 79-321, 13 Cust. B. & Dec. 1481, 1481- 82 (1979). Further, we have held that, since the use of a vessel in pipelaying is not a use in coastwise trade, a foreign-flag vessel may carry pipe which it is to lay between coastwise points. Id. However, the transportation of pipe by any vessel other than a pipelaying vessel to a pipelaying location at a point within United States territorial waters would be considered coastwise trade. Id. Legitimate equipment and stores of the pipelaying ship, including pipe laden to be paid out in the course of operations, are not considered merchandise within the purview of section 883; articles, however, that are not legitimate equipment and stores of the pipelaying vessel must be transported in coastwise-qualified vessels. Id.

For purposes of section 289, the Customs Regulations define passenger to include " any person carried on board a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business." 19 C.F.R. 4.50(b) (1991); 19 C.F.R. 4.80a(a)(5) (1991). The Customs Service has held that crew members, including technicians necessary to assist the vessel's pipelaying operation, are not considered passengers, nor are construction company personnel and employees of the various subcontractors who may be on the ship in connection with the pipelaying operation. C.S.D. 79-321.

Pursuant to Section 4(a) of the Outer Continental Shelf Lands Act of 1953 (OCSLA), as amended, 43 U.S.C. 1333(a) (1982), the Customs Service has ruled that the coastwise laws are extended to mobile oil drilling rigs during the period they are secured to or submerged onto the seabed of the Untied States outer continental shelf. T.D. 54281(1), 92 Treas. Dec. 8 (1957); see also, C.S.D. 89-115, 23 Cust. B. & Dec., No. 45, 7, 13-14 (1989). The Customs Service has applied this principle to drilling platforms, artificial islands, and similar structures, as well as devices attached to the seabed of the outer continental shelf for the purpose of resource exploration operations, including warehouse vessels anchored over the outer continental shelf when used to supply drilling rigs on the outer continental shelf. Id. Further, the platform itself will become a coastwise point. Therefore, any vessel moving merchandise or passengers between the stationary platform and another coastwise point must be documented for the coastwise trade. 46 U.S.C. App. 289 & 883.

Applying these principles, we determine that the foreign- flagged LORELAY may be used to transport and to lay pipe in the above described project. However, any pipe loaded on the LORELAY at one United States point that, instead of being laid as part of the project, is unloaded at another United States point, would result in a coastwise violation. Further, the LORELAY may transport its crew, technicians, workers, and their equipment and materials associated with the pipelaying operation.

In your letter, you relate a number of specifically described operations that implicate coastwise issues. We agree that the off-loading and attachment of the stinger extension, which is considered vessel equipment, is a permitted transportation. C.S.D. 79-331, 13 Cust. B. & Dec. 1496, 1498 (1979). Further, the unloading and reloading of the pipe and buoyancy tanks is permitted provided that those objects are installed as part of the pipelaying operation. The transportation of the two support decks is not problematic in view of the fact that they will be loaded in Rotterdam and will not be offloaded from the LORELAY until the vessel arrives at the SYU Expansion Project site where they will be placed on the Heritage and Harmony jackets. Although the existing jackets are considered coastwise points, the transportation of these decks from Rotterdam to either jacket is a direct arrival from foreign rather than a coastwise movement and therefore would not constitute a violation of 46 U.S.C. App. 883.

Finally, as a point of clarification, you state that "U.S.- registered" vessels will be used to transport supplies and workers. The terms "U.S.-registered" and "coastwise-qualified" are not synonymous, for a vessel may be have a United States registry, but not be eligible to engage in the coastwise trade. Also, the flexible piping that is off-loaded at Port Huenume is subject to duty. Headquarters Ruling Letter 109355, dated March 1, 1988.

HOLDING:

With the exceptions noted in the body of the ruling, the foreign-flagged LORELAY may be used to transport and to lay pipe in the above described project. However, any pipe loaded on the LORELAY at one United States point that, instead of being laid as part of the project, is unloaded at another United States point, would result in a coastwise violation. Further, the LORELAY may transport its crew, technicians, workers, and their equipment and materials associated with the pipelaying operation.

Sincerely,

B. James Fritz
Chief

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