HQ 0950197 - Petrocleaner (Unit types 300 and 700); "vessel"; 8421.29.00; EN 89.05(A) HQ 105463; HQ 106520; HQ 110276; HQ 110386; HQ 110994; HQ 111275; Note 1(l) to Sect. XVI; EN to Chapter 89; General Headnote 5(g), TSUS; 19 U.S.C.A. 1401(a); 49 U.S.C.A. App. 883; ("Jones Act"); 50 U.S.C.A. App. 2406(d); 33 CFR 2.05- 25(a)(3)(i); 33 CFR 329.4; C.S.D. 89-85; T.D. 75-276; Elizabeth River Terminals, Inc. v. U.S.; Hitner Sons Co. v. U.S.; Todd Shipyards Corp. v. U.S.; U.S. v. Moran Towing and Transportation Co. - United States International Trade Commision Rulings

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HQ 950197

June 4, 1992

CLA-2 CO:R:C:M 950197 LTO

CATEGORY: CLASSIFICATION

TARIFF NO.: 8905.90.50

Ms. Judy Campbell
W.Y. Moberly, Inc.
P.O. Box 164
Sweetgrass, Montana 59484

RE: Petrocleaner (Unit types 300 and 700); "vessel"; 8421.29.00; EN 89.05(A) HQ 105463; HQ 106520; HQ 110276; HQ 110386; HQ 110994; HQ 111275; Note 1(l) to Sect. XVI; EN to Chapter 89; General Headnote 5(g), TSUS; 19 U.S.C.A. 1401(a); 49 U.S.C.A. App. 883; ("Jones Act"); 50 U.S.C.A. App. 2406(d); 33 CFR 2.05- 25(a)(3)(i); 33 CFR 329.4; C.S.D. 89-85; T.D. 75-276; Elizabeth River Terminals, Inc. v. U.S.; Hitner Sons Co. v. U.S.; Todd Shipyards Corp. v. U.S.; U.S. v. Moran Towing and Transportation Co.

Dear Ms. Campbell:

This is in response to your letter of July 15, 1991, to the District Director of Customs in New York, concerning the tariff classification of the Petrocleaner (Unit types 300 and 700) under the Harmonized Tariff Schedule of the United States (HTSUS). Your letter was referred to this office for a response.

FACTS:

The merchandise under consideration is an oil skimming device called the "Petrocleaner." The primary use of the Petrocleaner is in oil spill recovery on open water, but it may also be used for separation of one fluid floating on top of another in more contained or artificial areas such as storage ponds or lagoons. The Petrocleaner operates by using a multi- blade screw that compresses and conveys contaminated water and thereby expels purified water underneath and pushes thickened surface material into a rear chamber.

Two models of the Petrocleaner are offered for sale. Type 300 is smaller and is sold in kit form for assembly at the job
site. This model floats and is self-powered, but is remotely controlled. Type 700 floats on pontoons and can carry three people. It is self-propelled and is steered by an on-board operator. Neither model has oil storage capacity: Type 300 typically pumps oil to a shore tank and Type 700 pumps oil to a separate storage vessel.

ISSUE:

1. Whether recovery or transportation of oil by a skimming vessel constitutes coastwise trade.

2. Whether the Petrocleaner is properly classifiable under subheading 8421.29.00, HTSUS, which describes filtering or purifying machinery and apparatus, for liquids or gases, or under subheading 8905.90.50, HTSUS, which describes other vessels the navigability of which is subsidiary to their main function.

LAW AND ANALYSIS:

1. Use of the Foreign-Built Skimmers in U.S. Waters

The coastwise laws of the United States prohibit the transportation of merchandise between points in the United States embraced within the coastwise laws, either directly or via a foreign port, in any vessel other 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. 46 U.S.C.A. App. 883 (West Supp. 1991)(referred to as "the Jones Act").

The term "merchandise" is defined in the coastwise statute to include valueless materials. 46 U.S.C. App. 883. The statute further provides that the transportation of valueless material, regardless of its commercial value, from a point or place in the United States or a point or place on the high seas within the Exclusive Economic Zone, as defined in the Presidential Proclamation of March 10, 1983, to another point or place in the United States or a point or place on the high seas within the Exclusive Economic Zone falls within the ambit of the coastwise statute.

From this statutory framework, the Customs Service has concluded that the coastwise laws prohibit the use of a non- coastwise-qualified mobile vessel for recovery or transportation of oil in waters within the jurisdiction of the coastwise laws. HQ 110386, dated September 29, 1989. However, Customs has held that the use of a non-coastwise-qualified vessel as a stationary facility for lodging, processing, storing, or other activities is not a "transportation" that is prohibited by section 883. Id.

If such a stationary vessel is being loaded or unloaded and must be moved to another location temporarily due to stress of weather or other reason involving the safety of the vessel, the coastwise laws are not violated so long as no loading or unloading occurs at any other coastwise point and the vessel is subsequently returned to its original location once the danger has passed. Id. The description provided on the use of the Petrocleaners indicates that these skimmers are mobile recovery vessels. Their use would constitute an engagement in the coastwise trade.

Only coastwise-qualified vessels may accept the transfer of the recovered oil at a coastwise point for transportation to another coastwise point, regardless of whether the vessel leaves the territorial waters or exclusive economic zone of the United States. HQ 110276, dated June 15, 1989. Transportation by a non-coastwise-qualified vessel is permitted only if the oil is unloaded at a foreign point. Id. However, you should be aware that under 50 U.S.C.A. App. 2406(d) (1988), the exportation of domestically produced crude oil that has been transported via the Trans-Alaska Pipeline is prohibited, with certain narrow exceptions.

Generally, the coastwise laws apply to points within the territorial sea of the United States, 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. HQ 111275, dated November 13, 1990. Further, the coastwise merchandise statute is applicable only to those activities in the navigable waters of the United States, its territories and possessions. The United States Coast Guard determines whether a particular body of water is deemed to be navigable waters of the United States in order to ascertain its own jurisdiction to enforce the laws it administers. The Customs Service, in ascertaining its own jurisdiction to enforce the navigation laws it administers, is strongly disposed to follow determinations of the Coast Guard in the absence of United States judicial decisions or Congressional enactments. C.S.D. 89-85.

The test for navigability has been established by the federal courts through the years. This test consists of four essential elements that, when taken together, state that a navigable waterway of the United States must (1) be or have been (2) used or susceptible of use (3) in the customary modes of trade and travel on the water (4) as a highway for foreign or interstate commerce. See HQ 110994, dated May 24, 1990, and cases cited therein; accord 33 CFR 2.05-25(a)(3)(i) (Coast Guard regulations), 33 CFR 329.4 (Army Corps of Engineers regulations).

The Petrocleaners will be used both on open waters and on other water surfaces such as lagoons and water storage ponds. These descriptions suggest that the principal use of Petrocleaners will be on navigable waters, and use of the Petrocleaners would be subject to coastwise restrictions. The water storage ponds, which appear to be man-made containment areas, do not appear to be navigable waters; the use of the Petrocleaner on such waters would not be subject to coastwise restrictions.

2. Classification of the Petrocleaner

The General Rules of Interpretation (GRI's) to the HTSUS govern the classification of goods in the tariff schedule. GRI 1 states that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes . . . ."

The headings at issue are as follows:

8421 [F]iltering or purifying machinery and apparatus, for liquids

8905 Light-vessels, fire-floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function

Note 1(l) to Section XVI states that Section XVI does not cover articles of Section XVII. Thus, if the Petrocleaners are classifiable under Heading 8905 (a Section XVII heading), HTSUS, they are excluded from Heading 8421 (a Section XVI heading), HTSUS.

The Harmonized Commodity Description and Coding System Explanatory Notes (EN) constitute the Customs Co-operation Council's official interpretation of the Harmonized System. While not legally binding, they provide a commentary on the scope of each heading of the Harmonized System and are generally indicative of proper interpretation of these headings.

The Petrocleaner's primary use is in oil spill recovery on open water. The heart of the Petrocleaner is a multi-blade screw in a casing, the blades of which change pitch over its length, compressing and conveying the material rearward, expelling water underneath and containing the thickened surface material in a rear chamber for easy pumping.

Prior to implementation of the HTSUS, the focus of Customs
in examining skimmers was on whether the article under consideration was considered a "vessel." Under the Tariff Schedules of the United States (TSUS), such a determination would establish the eligibility of the skimmer to be exempt from entry and payment of duty under General Headnote 5(g), TSUS.

Section 1401(a) of the Tariff Act of 1930, as amended, [19 U.S.C. 1401(a)] defines the term "vessel" so as to include "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." The term "vessel" has been further refined by judicial and administrative interpretation to limit vessels included under General Headnote 5(g), TSUS, to watercraft that are instrumentalities of commerce as opposed to articles of commerce. Elizabeth River Terminals, Inc. v. United States, 1 C.I.T. 165, 170, 509 F. Supp. 517, 520 (1981). The structure of the watercraft was considered secondary to the actual or possible use of the watercraft as a means of transportation on water in commerce or navigation. See Hitner Sons Co. v. United States, 13 Ct. Cust. App. 216, 221, T.D. 41175 (1922); Todd Shipyards Corp. v. United States, 9 C.I.T. 464, 466, 624 F. Supp. 1553, 1556 (1985). The Customs Service has found oil skimmers to be vessels. See HQ 106520, dated December 3, 1983; T.D. 75-276, 9 Cust. B. & Dec. 607 (1975).

The HTSUS introduced to United States customs law a new nomenclature, including some new provisions relating to ships. Chapter 89, HTSUS, includes ships, boats, and floating structures. The Harmonized Commodity Description and Coding System Explanatory Note to Chapter 89, pg. 1449, include within this chapter "ships, boats and other vessels of all kinds (whether or not self-propelled)...."

Among the new provisions to the tariff schedules is Heading 8905, HTSUS, which includes light vessels, fire-floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms. EN 89.05(A), pg. 1452, states that the heading includes:
light vessels; drill ships; fire-floats; dredgers of all kinds (e.g., grab or suction dredgers); salvage ships for the recovery of sunken vessels; permanently moored air-sea rescue floats; bathyscaphes; pontoons fitted with lifting or handling machines (e.g., derricks, cranes, grain elevators) and pontoons clearly designed to serve as a base for these machines.

In contrast to the rulings under the TSUS, this heading of the HTSUS places greater emphasis on function than on navigability. Moreover, this heading includes items previously not considered to be vessels, such as, floating docks. See Todd Shipyards, 9 C.I.T. at 467, 624 F. Supp. at 1556. Thus, a previous determination that an item was not a vessel will not a fortiori exclude such item from classification in Chapter 89, HTSUS.

Unit type 300 is self-floating and self-powered, but carries no persons. It is remotely controlled, generally from land, and has no self-steering capabilities. Unit type 700 floats on two pontoons, is self-propelled, and can carry three persons. While they can only travel at two knots per hour, both are navigable and both are similar to those vessels listed in the Heading and the Explanatory Notes. Therefore, it is the opinion of this office that the Petrocleaner (Unit type 300 and 700) is a "vessel" contemplated by Heading 8905, HTSUS, and described by subheading 8905.90.50, HTSUS.

Finally, it is necessary to comment on the fact that the United States Coast Guard does not consider skimmers of this kind to be vessels. The courts have recognized that different considerations may affect decisions made by the Customs Service when evaluating classification and dutiability and the Coast Guard when evaluating documentation. United States v. Moran Towing and Transportation Co., 374 F.2d 656, 664 (1967). Thus, given the different mandates, it is inevitable that some craft may be considered differently by the Customs Service and the Coast Guard. See HQ 105463, dated March 3, 1982.

HOLDING:

1. The use of the Petrocleaner on navigable waters is subject to coastwise restrictions. However, the use of the Petrocleaner on non-navigable waters, such as, man-made storage ponds, is not subject to these restrictions.

2. The Petrocleaner is classifiable under subheading 8905.90.50, HTSUS, which provides for "[l]ight-vessels, fire- floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function . . . [o]ther . . . [o]ther." The applicable rate of duty for these articles is "Free."

Sincerely,

John Durant, Director

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