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HQ 113247

October 26, 1994

VES-3-16-CO:R:IT:C 113247 GOB

CATEGORY: CARRIER

L.J. Dickson
International Marketing Manager
Stena Offshore Inc.
Suite 210
9432 Old Katy Road
Houston, Texas 77055

RE: Coastwise transportation; Pipe laying; 46 U.S.C. App. 883

Dear Mr. Dickson:

This is in response to your letter dated October 19, 1994.

FACTS:

You state, in pertinent part:

...The vessel now known as "Stena Apache" is registered under the Bahamian Flag...
...
The fact that we install pipe in a less than conventional manner would need to be addressed, especially when the need to comply with certain aspects of the "Jones Act", whereby the transport of pipe from a shore fabrication site to the offshore installation location would be undertaken by the vessel itself.
...
We believe we may be allowed an exemption to the Jones Act in this regard due to the nature of the vessel's operation and the fact that although we are operating in coastwise trade, we are being employed to install offshore pipelines in a manner by which the pipe is being continuously offloaded.

To summarize the above, Stena Offshore would wish to request your approval in principle to allow this vessel to operate within the coastal waters of the United States for the specific intention of installing offshore pipelines.

In an attachment to your letter of October 19, 1994, it is stated:

The pre-welded pipe is spooled onto the reel which is located on the vessel while the vessel is in port. The vessel can then transit to the offshore installation location and lay the pipeline along the designated pipeline route in a continuous length without the disruption of welding as would be the case if a conventional pipelay vessel was used.

ISSUE:

Whether a foreign-flag vessel may engage in pipe laying activity within the territorial waters of the United States.

LAW AND ANALYSIS:

Generally, the coastwise laws prohibit the transportation of passengers or merchandise between points in the United States embraced within the coastwise laws in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States.

The coastwise law applicable to the carriage of passengers is found in 46 U.S.C. App. 289 and 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.

46 U.S.C. App. 883, the coastwise merchandise statute often called the "Jones Act", provides in part that no merchandise shall 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 vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States.

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.

In C.S.D. 79-321, we stated:

The Customs Service has held that the sole use of a vessel in laying pipe is not considered a use in the coastwise trade of the United States, even when the pipe is laid between two points in the United States embraced within the coastwise laws. The fact that the pipe is not landed as cargo but is only paid out in the course of the laying operation makes such operation permissible. Further, since - 3 -
the use of a vessel in pipelaying is not a use in the coastwise trade, a foreign-flag vessel may carry pipe which it is to lay between such points. However, the transportation of pipe by any vessel other than a pipelaying vessel to a pipelaying location at a point within U.S. territorial waters would be considered coastwise trade and would therefore have to be accomplished by a vessel meeting the statutory requirements entitling it to engage in such trade.

See also T.D. 78-387 and Ruling 112032 dated January 21, 1992.

Accordingly, the subject foreign-flag vessel may engage in pipe laying within the territorial waters of the United States as described supra.

HOLDING:

The subject foreign-flag vessel may engage in pipe laying within the territorial waters of the United States as described supra.

Sincerely,

Arthur P. Schifflin
Chief

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