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HQ 224477

May 28, 1993

ENT-1-03-CO:R:C:E 224477 PH

CATEGORY: ENTRY

District Director
Houston, Texas 77052

RE: Internal Advice Request; Importation, Time of; Outer Continental Shelf; Tension Leg Drilling Platform; 19 CFR 101.1(h); C.A.D. 612; C.S.D. 79-1; C.S.D. 80-235; 8905.20.00, HTSUS; 8907.90.00, HTSUS; Ruling 110808, August 20, 1990, Modified

Dear Madame:

With your memorandum of February 11, 1993 (File: ENT-1-H:CO MPL), you forwarded a request for internal advice submitted by Panalpina, Inc., on behalf of Shell Offshore Inc. with regard to the entry, classification, and dutiability of the Shell "Auger" Tension Leg Platform (TLP). Representatives of the private interests involved met with Headquarters personnel about this matter on March 25 and April 30, 1993. Two additional briefs (dated May 7 and 19, 1983) were sent to this office by one of the representatives of the private interests involved (copies of these additional briefs are enclosed). This ruling is based on the material you forwarded to us with the internal advice request, information provided at the March 25 and April 30 meetings, the May 7 and 19 additional briefs, and the August 20, 1990, ruling (File: VES 3-15 CO:R:P:C 110808 BEW) issued by the Carrier Rulings Branch of the Customs Service about this operation. Our ruling follows.

In the brief submitted with the May 7, 1993, letter, it is stated that it is understood that "[Customs] believes that if the hull for the [TLP] arrives at Freeport, Texas and only standby activities are performed prior to sending it out of the Customs territory for mating with the deck, no importation or other event requiring entry will occur [and] that after mating the hull and deck will be classified as a floating production platform under item 8905.20.00, HTSUS." Although Customs officials may have orally indicated that this might be Customs positions, oral opinions or advice are, of course, not binding on the Customs Service (19 CFR 177.1(b) and 177.4(a)). At the meetings referred to above, this (i.e., the effect of oral opinions or advice) was emphasized to the private parties concerned.

FACTS:

You describe the completed TLP as "... a complete floating drilling and production platform consisting of the equipment required for drilling and production, such as derricks, cranes, pumps, cementing units, etc., helicopter landing pads and living quarters for personnel." The TLP will be attached to the seafloor for drilling in the seabed by connection with tubular tendons to a previously installed subsea template.

The support structure or hull of the TLP is being manufactured in Italy and is being towed from there. The deck of the TLP is being manufactured domestically. The hull and deck are to be mated in the Gulf of Mexico outside United States territorial waters.

The hull of the TLP is now being towed from Italy by two tugs. It is scheduled to arrive in the United States (plans are to berth it at Freeport, Texas) before the deck is completed. It is anticipated that the hull will remain in Freeport, in "safe harbor," for approximately 1 to 3 months. "Some minor activities" may be performed on the hull while it is in Freeport awaiting completion of the deck. These activities, described as facilitating the mating process, were stated at the meetings referred to above as consisting of the addition of fenders and the addition of a temporary generator.

Upon completion of the deck, the hull and the deck will be towed (the deck will be towed on a barge) outside United States territorial waters over the outer continental shelf (OCS) and will there be mated. The mating process will take approximately 2 weeks. After mating, the mated TLP will be returned to Freeport to complete the welding together of the hull and deck and to "interconnect" piping and electrical components. These operations will take approximately 2 months.

After completion of these last operations, the TLP will be towed to the OCS installation site for permanent attachment to the seabed. After this attachment to the OCS, drilling and production operations will immediately commence. Upon attachment to the seabed, it is the intent of the company involved to file appropriate entry documentation with Customs.

ISSUES:

(1) When is the hull of the TLP or the completed TLP, as described in the FACTS portion of this ruling, considered to be imported?

(2) What is the tariff classification and applicable duty for the hull of the TLP (i.e., if importation is considered to take place before mating of the hull and deck of the TLP)?

(3) What is the tariff classification and applicable duty for the TLP after mating of the hull and deck of the TLP?

LAW AND ANALYSIS:

Initially, we note that the Carrier Rulings Branch, in its August 20, 1990, ruling (referred to above), held that "[the TLP] is not a vessel and as such is subject to Customs duty upon importation into the United States." (See General Note 1 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) (19 U.S.C. 1202), under which "[a]ll goods provided for in [the HTS] and imported into the customs territory of the United States from outside thereof are subject to duty or exempt therefrom as prescribed in general notes 3 and 4.")

The initial issue in this case is, when does importation into the United States occur? The time of importation for Customs purposes is defined in 19 CFR 101.1(h) as, "in the case of merchandise imported otherwise than by vessel, the date on which the merchandise arrives within the [c]ustoms territory of the United States [and] [i]n the case of merchandise imported by vessel ... the date on which the vessel arrives within the limits of a port in the United States with intent then and there to unlade such merchandise." Although this definition of importation has been recognized as inapplicable to cases in which the merchandise to be imported is a vessel (see Pritchard v. United States, 43 CCPA 85, 87, C.A.D. 612 (1956); American Customs Brokerage Co., Inc. [the "Astral"] v. United States, 72 Cust. Ct. 245, 253, 375 F. Supp. 1360, C.D. 4546 (1974)), the hull of the TLP and the TLP (after mating of the hull and deck) have been held not to be vessels.

As contended in the May 7, 1993, brief, the hull of the TLP will be brought to Freeport "by" vessel (if brought to Freeport otherwise than by vessel, it would be considered imported when it arrived in the Customs territory). Even though it is towed to Freeport, and not brought there "in" a vessel, the means or agency which brings it to Freeport will be vessels (i.e., the towing vessels) (see definition of "by" in Webster's New World Dictionary, 3rd College Ed., (1988), "4 expressing means or agency through the means, work, or operations of" (emphasis in original); see also Treasury Decision (T.D.) 89-13). Therefore, in order to determine whether the hull of the TLP is imported when it arrives in Freeport, we must determine whether, when it is towed into the limits of that port, there is "then and there" an intent to unlade the hull of the TLP.

We note that Customs has ruled "... that merchandise which is not intended to be unladen at the port of arrival (the first port of entry), but which is intended to be unladen at a second port of entry in the United States, is not considered imported merchandise when it arrives at the first port because there is no intent then and there to unlade ..." (Customs Service Decision (C.S.D.) 80-235). In this ruling, Customs also explained that C.S.D. 79-1, which is cited by the inquirer in this case as support for its position, "... was concerned primarily with the usual situation when merchandise is towed directly from a foreign port to be affixed to the [OCS] [and] was not intended to preclude an importer from bringing such merchandise into the port of entry and entering it there prior to its unlading and attachment to the

Thus, the issue of whether the hull of the TLP is imported when it arrives at Freeport is determined by the meaning of the word "unladen." The Customs Courts have adopted the dictionary definition for the term "unlade" (American Mail Line v. United States, 6 Cust. Ct. 90, 93, C.D. 435 (1941); quoted in United States v. Commodities Export Co., 14 CIT 166, 170-171, 733 F. Supp. 109 (1990)). Webster's Third New International Dictionary (1986), defines unlade as "1: to take the load from: take out the cargo of [,] 2: to have removed (as a load or burden): DISCHARGE, UNLOAD ...."

In a case such as this, in which merchandise which is not a vessel is towed on its own bottom into the United States, it is clear that "unlade" cannot mean to unload from a vessel. Otherwise, such merchandise would never be imported. Instead, we must analogize this situation to that of merchandise which arrives in a vessel.

It has long been Customs position, as well as that of other authorities, that an unlading takes place even when merchandise is transferred from the arriving vessel to another vessel (The Fame, 8 Fed. Cases 982 (1858); T.D. 21324 (1899); 27 Op. Att'y Gen. 446 (1909); see also, United States v. Ultramar Shipping Co., Inc., 685 F. Supp. 887, 695 (S.D.N.Y. 1987), "... unloading into lighters is considered discharge in most circumstances"). The unloading of merchandise transported in a vessel is analogous to the termination of the towing of a vessel or other merchandise towed by a towing vessel (i.e., when the tow is terminated, the towed vessel or merchandise is "discharged" from the towing vessel; note the use of the word "discharge" as a secondary meaning of "unlade" in the definition quoted above). In this regard, we note that Customs has taken the position that the change of the towing vessel in a towing operation terminates the tow (i.e., the tow is not considered to be continuous) (see T.D. 70-223(19), interpreting the coastwise towing statute (46 U.S.C. App. 316(a))). This interpretation is consistent with the above-described general rule (i.e., unlading of merchandise brought to the United States in a vessel takes place when the merchandise is discharged from the transporting vessel; unlading of merchandise brought to the United States by a towing vessel takes place when the merchandise is discharged (i.e., disconnected) from the towing vessel).

In the case under consideration, the hull of the TLP is to be towed to Freeport and we understand that the hull of the TLP is to be disconnected from the towing vessels in Freeport (temporary fenders and/or a temporary generator may be added to the hull of the TLP while it is in Freeport). In this situation, the hull of the TLP would be considered imported when it arrives in the limits of Freeport because "then and there" it would be intended to discharge the hull of the TLP from the vessels by which it is brought to the United States. If the hull of the TLP is not intended to be disconnected in Freeport from the vessels which tow it into the Customs territory and if it is not actually so disconnected before leaving the Customs territory (see East Asiatic Co., Inc. v. United States, 27 CCPA 364, C.A.D. 112 (1940)), it would not be considered to be imported when it arrives in the limits of Freeport, regardless of whether the temporary fenders and/or temporary generator are added to the hull of the TLP while it is in Freeport.

As for the classification issues, the General Rules of Interpretation (GRI's) to the HTSUS govern the classification of goods in the tariff schedule. GRI 1 states in pertinent part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes . . . ." Heading 8905, HTSUS, provides for floating or submersible drilling or production platforms.

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, the Ens provide a commentary on the scope of each heading of the Harmonized System, and are generally indicative of the proper interpretation of these headings.

EN 89.05, pg. 1452, states that the floating or submersible drilling or production platforms of heading 8905, HTSUS, "are generally designed for the discovery or exploitation of off-shore deposits of oil or natural gas. Apart from the equipment required for drilling or production, such as derricks, cranes, pumps, cementing units, silos, etc., these platforms have living quarters for the personnel." The heading covers self-elevating platforms, "which, apart from the working platform itself, are fitted with devices (hulls, caissons, etc.) which enable them to float, and with retractable legs which are lowered on the work site so that they are supported on the sea bed and raise the working platform above the water level [emphasis added]."

The TLP is designed for the discovery or exploitation of off- shore deposits of oil. The TLP's deck includes derricks, cranes, pumps, cementing units, helicopter landing pads, living quarters for personnel and other equipment required for drilling or production. The working platform, the deck, is fitted with a device which enables the deck to float, the hull. As such, the TLP, after the mating of the deck and hull, is described by the terms of heading 8905, HTSUS. Accordingly, the complete TLP would be classifiable under subheading 8905.20.00, HTSUS, which provides for floating or submersible drilling or production platforms.

However, before the mating of the hull and deck of the TLP, the hull could not be classified under heading 8905, HTSUS, as it is not covered by the terms of the heading, nor does it have the essential character of a complete drilling or production platform described therein. See GRI 2(a). The remaining headings at issue are as follows:

8906 Other vessels, including warships and lifeboats other than row boats

8907 Other floating structures (for example, rafts, tanks, cofferdams, landing-stages, buoys and beacons)

EN 89.06, pg. 1453, states that heading 8906, HTSUS, "covers all vessels not included in the more specific headings 89.01 to 89.05 [emphasis added]." In its August 20, 1990, ruling, the Carrier Rulings Branch determined that the hull in question was not a vessel. Therefore, the hull is not covered by heading 8906, HTSUS.

EN 89.07, pg. 1454, states that heading 8907, HTSUS, "covers certain floating structures not having the character of vessels." The structures covered by this heading are generally stationary when in use. The hull in question, which does not have the character of a vessel, is classifiable under heading 8907, HTSUS, specifically under subheading 8907.90.00, HTSUS, which provides for other floating structures.

For your information, the specific arguments made by the representatives of the private interests in this case are briefly addressed below. As to the argument that past Customs rulings have enunciated a special rule under which floating drilling or production platforms are only imported when attached to the OCS (see, e.g., C.S.D. 79-1), as stated above, this rule is applicable only when the platform is towed directly from a foreign port to be affixed to the OCS (see C.S.D. 80-235). As to the argument that the August 20, 1990, Carrier Rulings Branch ruling holds that the time of importation of the TLP is when it is attached to the seabed of the OCS, although the ruling can be so interpreted, it does not explicitly so state. To the extent that the instant ruling is inconsistent with the August 20, 1990, ruling, the latter ruling is modified. If reliance on the August 20, 1990, ruling is intended to be established so that the effect of the instant ruling is delayed, the requirements of 19 CFR 177.9(e) must be met (i.e., specific application for delay of the effective date of a modifying ruling must be made and consistent past treatment, as well as reasonable reliance by the affected party, must be established to the satisfaction of Customs).

The lay order and general order provisions (see 19 U.S.C. 1448, 1490, 1491), referred to in the May 7, 1993, brief, are inappropriate because these provisions are applicable after importation. Because classification (as opposed to the effective duty rate) is effective as of the time of importation, these provisions could not operate to delay the time of classification of the hull of the TLP until after mating (see, e.g., Roser Customs Service (Continental Ore Corp.) v. United States, 64 Cust. Ct. 20, C.D. 3953 (1970)). Nor are the provisions in 19 U.S.C. 1449 and 19 CFR 4.33 (providing for the unlading of mer-chandise at a port other than the original port of destination) applicable (i.e., these provisions contemplate a situation in which the merchandise has not been unladen at the original port of destination). The same is true of the provisions cited to enable the date of entry to be delayed or to permit operations on the merchandise after importation (i.e., for classification purposes, the date of importation, not entry, controls, so delay of the date of entry, or operations performed on the merchandise after the date of importation, would not affect classification of the hull of the TLP once it is imported).

Although it is generally true that there must be an element of intent with regard to unlading (as discussed above, but see East Asiatic Co., Inc. v. United States, supra), the contention that intent to import is required is incorrect (see, e.g., American Mail Line, supra, 6 Cust. Ct. at 93-94, "[t]he fact that the merchandise in question was not intended to be sold or to be mingled with and become a part of the commerce of the United States is immaterial"). As for the argument that the definition of importation in this case should be governed by the Court decisions regarding yachts (see Pritchard and Astral, supra), we note that the yachts in those cases were vessels and the hull of the TLP has been ruled not to be a vessel (as discussed above). In The Conqueror, 166 U.S. 110 (1897), the Supreme Court stated that "from the foundation of the government, vessels [in that case, a yacht] have been treated as sui generis, and subject to an entirely different set of laws and regulations from those applied to imported articles" (166 U.S. 118), in holding that vessels are not dutiable under the tariff schedules. By legislation, an exception to this general rule was created for yachts (i.e., they were made dutiable; see paragraph 370, Tariff Act of 1930, items 696.05 and 696.10, TSUS, and heading 8903, HTSUSA). Nevertheless, they remain vessels and, as stated by the courts in both Pritchard and Astral, the general definition of importation cannot be applied to them (43 CCPA at 87, 72 Cust. Ct. at 253). (It is argued in the May 19, 1993, brief that yachts are not vessels. This is clearly wrong (see 19 U.S.C. 1401(a), 1 U.S.C. 3, 46 U.S.C. 2101(25); see also St. Hilaire Moye v. Henderson, 496 F. 2d 973, 979 (1974, Ark.), cert. den., 419 U.S. 884 (1974)).) We reiterate that the hull of the TLP has been held not to be a vessel.

HOLDING:

(1) The time of importation of the hull of the TLP, which will be towed to the United States, is the time that it arrives in a port of the United States with the intent that it be disconnected in that port from the towing vessels or the time that it arrives in a port of the United States if it is actually disconnected in that port from the towing vessels (even if such was not the intent at the time of arrival). That is, if it is intended to disconnect the hull of the TLP from the towing vessels in Freeport, the hull of the TLP is considered to be imported when it arrives in the limits of Freeport. If the hull of the TLP is not intended to be disconnected in Freeport from the towing vessels and it is not actually so disconnected before leaving the Customs territory, it is not considered to be imported when it arrives in the limits of Freeport, regardless of whether the temporary fenders and/or temporary generator are added to the hull of the TLP while it is in Freeport.

(2) The hull of the TLP, if imported separately, is classifiable under subheading 8907.90.00, HTSUS, which provides for other floating structures, such as rafts, tanks, cofferdams, landing-stages, buoys and beacons. The corresponding rate of duty for articles of this subheading is 3.8% ad valorem.

(3) The complete TLP (after the mating of the deck and hull) is classifiable under subheading 8905.20.00, HTSUS, which provides for floating or submersible drilling or production platforms. The corresponding rate of duty for articles of this subheading is free.

EFFECTS ON OTHER RULINGS:

Ruling 110808, August 20, 1990, is MODIFIED, to the extent that it is inconsistent with this ruling.

Sincerely,

John Durant, Director

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See also:

• Tariff No.: 8905.20.00 - Floating or submersible drilling or production platforms
• Tariff No.: 8907.90.00 - Floating structures nesoi (for example, rafts, other than inflatable rafts, tanks, cofferdams, landing stages, buoys and beacons)