HQ 0112611 - Entry and Clearance Requirements; non-self-propelled drilling rig arriving from the North Sea to point on the OCS; drilling exploratory wells on the OCS. - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1994 HQ Rulings > HQ 0112593 - HQ 0112781 > HQ 0112611

HQ 112611

June 23, 1993

VES-3-15/VES-5/VES-13:CO:R:IT:C 112611 BEW

CATEGORY: CARRIER

John W. McConnell, Jr., Esq.
Haight, Gardner, Poor & Havens
1300 I Street, N.W.
Washington, D.C. 20005

RE: Entry and Clearance Requirements; non-self-propelled drilling rig arriving from the North Sea to point on the OCS; drilling exploratory wells on the OCS.

Dear Mr. McConnell:

This is in reference to your letter of March 3, 1993, in which you request a ruling as to whether Customs report of arrival, entry and clearance procedures are applicable to a non-self-propelled semi-submersible drilling rig when it is brought into the United States from a location on the North Sea to a point on the Outer Continental Shelf (OCS) for purposes of drilling exploratory wells on the OCS.

FACTS:

You state that the vessel, which is documented under the laws of the United States, is presently being towed from the North Sea in Europe to a point on the OCS, located at 89~ 50' 25.3" west longitude and 28~ 34' 20.9" north latitude, which is outside the territorial waters of the United States, and approximately 40 plus miles from the nearest shore on the coast of the State of Louisiana.

It is planned that the vessel will attach to the seabed of the OCS at the point described above for the purpose of drilling an exploratory well. There will be at that time no installation or other devices or artificial islands permanently or temporarily attached to the seabed of the OCS for purposes of exploring for, developing or producing resources therefrom. The vessel will not call at any port of the United States or place within the jurisdiction of the customs laws of the United States.

After completion of one exploratory well, the vessel may move to another point or points on the OCS for the purpose of drilling other exploratory wells, at which points there will be no installation or other devices or artificial islands permanently or temporarily attached to the seabed of the OCS for purposes of exploring for, developing or producing resources therefrom. In addition, you state that the vessel, when it arrives at the initial point on the OCS, will be transporting only members of its regular complement, those personnel necessary for the routine functioning of the unit, including crew, industrial personnel and general maintenance and support personnel, and only legitimate equipments, stores and supplies for use in its nautical and drilling operations. It will not be transporting any passengers or any other equipment and materials as merchandise. The same will apply to the vessel when it moves from point to point on the OCS.

You state that since the vessel's last departure from a port of the United States, certain foreign repairs, alterations, and additions were made to, and certain equipment was purchased for the vessel, which may be subject to duty under the provisions of 19 U.S.C. 1466(a).

ISSUES:

1. Whether the subject vessel is required to report its arrival pursuant to 19 U.S.C. 1433 when it arrives at a point on the OCS where there is no installation or other devices or artificial islands permanently or temporarily attached to the seabed of the OCS for purposes of exploring for, developing or producing resources therefrom.

2. Whether under the circumstances set forth above, the subject vessel is required to enter and clear under the provisions of 19 U.S.C. 1434 and 46 U.S.C. App. 91, respectively.

3. Whether the vessel is subject to duties for foreign equipment purchases and repairs performed on the vessel subsequent to the vessel's departure from the United States pursuant to 19 U.S.C. 1466(a), when it arrives at a point on the Outer Continental Shelf for the purpose of drilling exploratory wells.

4. Whether the proposed movement of the vessel as stated above constitutes coastwise trade thereby necessitating compliance with the provisions of 46 U.S.C. App. 289, 883 and/or 316(a).

LAW AND ANALYSIS:

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, in pertinent part, that:

No merchandise, including merchandise owned by the United States Government, a State (as defined in section 2101 of the1 Title 46) or

1So in original a subdivision of a State, 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 transportation, 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, including Districts, Territories, and possessions thereof 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 ....

For purposes of the coastwise laws, a point in United States territorial waters is considered a point embraced within the coastwise laws. The territorial waters of the United States consist of the territorial sea, defined as the belt, 3 nautical miles wide, adjacent to the coast of the United States and seaward of the territorial sea baseline.

Section 4(a) of the Outer Continental Shelf Lands Act of 1953, as amended (67 Stat. 462; 43 U.S.C. 1333(a)) (OCSLA), provides, in pertinent part, that 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.

Section 203 of the OCSLA Amendments of 1978 (92 Stat. 629, 635) (1978 Amendments), amended section 4(a) of the OCSLA by substituting "... and all installations and other devices permanently or temporarily attached to the seabed ..." for "... and fixed structures ...." The purpose of this change was
stated in the legislative history to make it clear "... that Federal law is to be applicable to all activities on all devices in contact with the seabed for exploration, development, and production." Thus, Federal law was intended "... to be applicable to activities on drilling ships, semi-submersible drilling rigs, and other watercraft, when they are connected to the seabed by drillstring, pipes, or other appurtenances, on the OCS for exploration, development, or production purposes." (reproduced at 1978 U.S.C.C.A.N. 1450, 1534.).

Under these provisions, Customs has ruled that the coastwise laws and other Customs and navigation laws are extended to mobile oil drilling rigs during the period they are secured to or submerged onto the seabed of the United States OCS. The same principles have been applied to drilling platforms, artificial islands, and similar structures attached to the seabed of the OCS for the purpose of resource exploration operations, including warehouse vessels anchored over the OCS when used to supply drilling rigs on the OCS.

Before the 1978 amendments, the corresponding part of section 4(a) provided that the laws of the United States are extended to "... the subsoil and seabed of the outer Continental Shelf and to all artificial islands and fixed structures which may be erected thereon for the purpose of exploring for, developing, removing, and transporting resources therefrom, to the same extent as if the outer Continental Shelf were an area of exclusive Federal jurisdiction located within a State."

The intent of this change was stated to be "technical and perfecting and ... meant to restate and clarify and not change existing laws." (House Conf. Report No. 95-1474, p. 80 (1978 U.S.C.C.A.N. 1679)). It was also stated in this Report about this change that the conferees were informed--

... Under section 4(a)(1) of the conference report, Federal laws and "civil and political jurisdiction of the United States" are applicable to the subsoil and seabed of the OCS, to all artificial islands and "all installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon" to explore, develop, produce or transport OCS mineral resources. Thus customs laws apply - as within the
"political and civil jurisdiction" of the United States - to platforms constructed outside the United States and brought into OCS waters - as being "installations and other devices * * * which may be erected thereon". In response to the foregoing legislative history, the Customs Service issued Customs Service Decision (C.S.D.) 79-1. This deci- sion held that foreign-built drilling and production platforms which are not vessels are dutiable upon their attachment, whether temporary or permanent, to the seabed of the OCS. The C.S.D. emphasized that only drilling platforms which are not vessels are dutiable upon attachment to the OCS. It did not make vessels, whether drilling vessels or otherwise, subject to duty (vessels other than yachts and pleasure vessels are not subject to duty un- der the Harmonized Tariff Schedules of the United States), nor did it make them subject to vessel entrance and clearance requirements upon initial attachment to the OCS at a point at which there is no existing artificial island or installation or other device attached to the seabed for the purpose of exploring for, developing, or producing resources therefrom.

It was the position of the Customs Service before the 1978 Amendments and remains the position of the Customs Service that drilling vessels are not subject to the vessel entrance and clearance requirements at the time they "attach" to the OCS at a point at which there is no existing artificial island or installation or other device attached to the seabed for the purpose of exploring for, developing, or producing resources therefrom.

Under 19 U.S.C. 1466, equipment purchased in a foreign country for, and repairs made in a foreign country to a vessel documented under the laws of the United States to engage in the foreign or coasting trade or intended to be employed in such trade are dutiable "on the first arrival of such vessel in any port of the United States." In view of the specific language in section 1466 attaching duties on the first arrival in any port of the United States, we conclude that drilling vessels are not subject to vessel repair duties on their attachment to the OCS at a point at which there is no existing artificial island or installation or other device attached to the seabed for the purpose of exploring for, developing, or producing resources therefrom.

Under the foregoing, the subject drilling rig is not required to report its arrival pursuant to 19 U.S.C. 1433, or make entry pursuant to 19 U.S.C. 1434, when it arrives at a point on the OCS at which there is no existing artificial island or installation or other device attached to the seabed for the purpose of exploring for, developing, or producing resources therefrom. Furthermore, the subject drilling rig is not required to clear pursuant to 46 U.S.C. App. 91. In addition, the payment of duties under 1466(a) for the cost of foreign repairs or equipment purchases made to the vessel shall not accrue at the time that the vessel attaches to the seabed for the purpose of drilling exploratory wells where there is no existing artificial island or installation or other device attached to the seabed for the purpose of exploring for, developing, or producing resources therefrom.

In the case under consideration, you indicate that the drilling rig is non-self-propelled. In this regard you should know that section 316(a) of title 46, United States Code Appendix, as amended by the Act of May 19, 1986 (Pub. L. 99-307 (46 U.S.C. App. 316(a)), prohibits the towing between coastwise points of any vessel except a vessel in distress, by any vessel other than a vessel of the United States issued a certificate of documentation with a coastwise or Great Lakes endorsement (see 46 U.S.C. 12106, 12107). This restriction extends to certain territories and possessions of the United States, to towing between points within the same harbor, and to direct, indirect, or partial towing operations.

HOLDINGS:

1. The subject vessel is not required to report its arrival pursuant to 19 U.S.C. 1433 when it arrives at a point on the OCS where there is no installation or other devices or artificial islands permanently or temporarily attached to the seabed of the OCS for purposes of exploring for, developing or producing resources therefrom.

2. Under the circumstances set forth above, the subject vessel is not required to enter and clear under the provisions of 19 U.S.C. 1434 and 46 U.S.C. App. 91, respectively.

3. Ad valorem duties for foreign equipment purchases and repairs performed on the subject vessel subsequent to its departure from the United States do not accrue under the provisions of 19 U.S.C. 1466(a), when the vessel arrives at a point on the Outer Continental Shelf for the purpose of drilling exploratory wells under the circumstances set forth above.

4. The proposed movement of the vessel as stated above does not constitute coastwise trade thereby necessitating compliance with the provisions of 46 U.S.C. App. 289 and/or 883. In addition, the proposed movement of the vessel does not constitute a violation of the towing statute, 46 U.S.C. App. 316(a), provided that any towing of the drilling vessel between coastwise points (including points atttached to the OCS as discussed above) is done by a U.S. vessel which has been issued a certificate of documentation with a coastwise or Great Lakes endorsement (see 46 U.S.C. 12106, 12107).

Sincerely,

Acting Chief

Previous Ruling Next Ruling