HQ 0111889 - Coastwise trade; Merchandise; Passengers; Crew members; Equipment of vessels; Outer Continental Shelf; Oil production platform - United States International Trade Commision Rulings

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HQ 111889

February 11, 1992

VES-3-CO:R:IT:C 111889 LLB

CATEGORY: CARRIER

Mr. Patrick H. Patrick
Jones, Walker, Waechter, Poitevent,
Carrere and Denegre
201 St. Charles Avenue
New Orleans, Louisiana 70170-5100

RE: Coastwise trade; Merchandise; Passengers; Crew members; Equipment of vessels; Outer Continental Shelf; Oil production platform

Dear Mr. Patrick:

Reference is made to your letter of August 27, 1991, in which you request a ruling on issues associated with the use of a foreign-built, foreign-flag modified semi-submersible drilling vessel to be used as a stationary floating oil production station at a site on the outer Continental Shelf.

FACTS:

It is proposed that a foreign-built and foreign-registered semi-submersible drilling vessel be modified in a United States shipyard and towed by properly qualified vessel to a point on the high seas which overlies well heads already drilled on the outer Continental Shelf. The modified production vessel would have aboard at the time of its tow from a shoreside point to the well head site, equipment essential to its intended operation. It is our understanding that no vessel or other structure will be at the high seas site at which the production vessel will arrive and be anchored and subsequently attached to the seabed well heads. It is anticipated that the production vessels would remain stationary, except for incidental movement resulting from the action of winds, tides, and wave action, and would remain at the same site for a period of eight to ten years.

The vessel would operate as a production platform by means of a device known as a multi-well template which will be placed on the sea floor over several well heads. A flexible pipe known as a marine riser will be attached to the template for the purpose of funneling oil or natural gas from the wells to the vessel. Oil and natural gas would leave the production vessel via pipelines which would be installed. These lines would either lead ashore, or to an off shore gathering platform. It is stated that the only materials aboard would be necessary equipment, the only persons aboard would be production crew members, and any other vessels involved in moving between the production vessel and points within the jurisdiction of the United States would be coastwise qualified.

ISSUE:

Whether the movement and use of a foreign built and documented drilling vessel/production platform, as described in the Facts portion of this ruling, is permissible under the coastwise laws as administered by the Customs Service.

LAW AND ANALYSIS:

The coastwise law pertaining to the transportation of merchandise, section 27 of the Act of June 5, 1920, as amended (41 Stat. 999; 46 U.S.C. App. 883, often called the Jones Act), provides that:

No merchandise shall be transported by water, or by land and water, on penalty of forfeiture of the merchandise (or a monetary amount up to the value thereof as determined by the Secretary of the Treasury, or the actual cost of the trans- portation, whichever is greater, to be recovered from any consignor, seller, owner, importer, consignee, agent, or other person or persons so transporting or causing said merchandise to be transported), between points in the United States...embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States...

The Act of June 19, 1886, as amended (24 Stat. 81; 46 U.S.C. App. 289, sometimes called the coastwise passenger law), provides that:

No foreign vessel shall transport passengers between ports or places in the United States either directly or by way of a foreign port, under a penalty of $200 for each passenger so transported and landed.

For your general information, we have consistently interpreted this prohibition to apply to all vessels except United States-built, owned, and properly documented vessels (see 46 U.S.C. 12106, 12110, 46 U.S.C. App. 883, and 19 C.F.R. 4.80).

The coastwise laws generally 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 the internal waters, landward of the territorial sea baseline, in cases where the baseline and the coastline differ. These laws have also been interpreted to apply to transportation between points within a single harbor. Merchandise, as used in section 883, includes any article, including even materials of no value (see the amendment to section 883 by the Act of June 7, 1988, Pub. L. 100-329; 102 Stat. 588).

Under Section 4(a) of the Outer Continental Shelf Lands Act of 1953, as amended (43 U.S.C. 1333(a) (OCSLA)), the laws of the United States are extended to the subsoil and seabed of the Outer Continental Shelf and to all artificial islands, and all installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purpose of exploring for, developing, or producing resources therefrom to the same extent as if the Outer Continental Shelf were an area of exclusive Federal jurisdiction located within a State. The provisions for dutiability of merchandise, as well as the coastwise and other navigation laws, apply to production platforms. C.S.D. 83-52.

Not included within the general meaning of merchandise is the equipment of a vessel which will be used by that 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." (Treasury Decision 49815(4), March 13, 1939). Customs has specifically ruled that, "Vessel 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." (Customs Ruling Letter 102945, November 8, 1978). Decisions as to whether a given article comes within the definition of "vessel equipment" are made on a case by case basis.

For the purposes of the coastwise laws, the term "passenger" is defined in section 4.50 (b), Customs Regulations (19 CFR 4.50 (b)), as "...any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business."

In view of the fact that the vessel in question will have aboard only necessary equipment and crew members during its movement and, further, that it will be towed by a qualified vessel from a coastwise point to a point on the high seas overlying a point on the outer Continental Shelf at which there will be no surface installation, we have determined that no coastwise laws will be violated in the course of the proposed vessel movement. It should be noted, however, that the production vessel will itself become a coastwise point once attached to the seabed, and any further movements of equipment and personnel from a coastwise point to the production site must be accomplished by use of a coastwise qualified vessel.

HOLDING:

Following a thorough review of the facts and analysis of the relevant law and precedents, we have determined, in accord with the information set forth in the Law and Analysis section of this ruling letter, the proposed operation does not violate any of the coastwise laws administered by the Customs Service.

Sincerely,

B. James Fritz

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