HQ 113176 - Coastwise trade; Dry towing; Outer continental shelf; Pristine site; 43 U.S.C. 1333; 46 U.S.C. App. 883 - United States International Trade Commision Rulings

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September 6, 1994

HQ 113176

VES-3-15-CO:R:IT:C 113176 LLB

CATEGORY: CARRIER

Mr. Harold E. Mesirow
Robins, Kaplan, Miller, and Ciresi
1801 K Street, N.W.
Washington, D.C. 20006-1301

RE: Coastwise trade; Dry towing; Outer continental shelf; Pristine site; 43 U.S.C. 1333; 46 U.S.C. App. 883

Dear Mr. Mesirow:

Reference is made to your letter of August 2, 1994, in which you request that Customs rule upon the applicability of the coastwise merchandise transportation statute (46 U.S.C. App. 883), commonly known as the Jones Act, to the proposed transportation of a jack-up type drilling rig from a site in the territorial waters off Alaska, to a site on the Outer continental shelf in the Gulf of Mexico at which no structure or development of any type currently exists. It is requested that confidential treatment be accorded the identifying information submitted with the ruling request.

FACTS:

It is proposed that a jack-up type drilling rig be transported as deck cargo aboard a self-propelled, semi-submersible foreign-flag vessel. The rig would be loaded aboard the foreign vessel while located in the territorial waters of Alaska. The vessel with the rig aboard would then proceed to a location on the Outer continental shelf in the Gulf of Mexico at which it is proposed to engage the rig in exploratory drilling operations. The rig, which to this point would have been transported as merchandise, would then be unladed from the foreign vessel and would undertake to begin drilling operations which would extend to between 30 days and six months in duration. The rig would be moved under wet tow, as a vessel, from the first well site to all subsequent sites by use of a coastwise-qualified towing vessel.

2

ISSUE:

Whether a non-coastwise-qualified vessel may be used to transport a drill rig as deck cargo from a site in Alaska to a site located on the Outer continental shelf (OCS) at which no surface or seabed structure exists, for the purpose of initiating exploratory drilling operations at that location, and further, whether that drill rig may then be wet-towed by qualified vessels to subsequent OCS sites at which structures do currently exist. 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...

When a vessel is carried aboard another vessel, it assumes the character of merchandise whose carriage is governed by the same requirements applicable to any other category of goods.

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.

As we understand the circumstances under consideration, the site contemplated for the unlading and employment of the drilling rig is a location at which no surface, sub-surface, or seabed structure of any sort currently exists, nor will be in existence at the time the rig arrives. As such the site, although located over the OCS, is not considered to be a point within the jurisdiction of the coastwise laws at the time of unlading.

There is in effect a Customs Service Decision of November 21, 1985 (C.S.D. 85-9), which prohibits the transportation of merchandise by vessel between coastwise points by use of what are known as dual-mode movements. Typically, these would involve the transportation of a vessel as cargo from a coastwise point to a point on the high seas (not a coastwise point) at which the transported vessel is placed in the water. Another vessel then is utilized to move the newly unladed vessel to a point within the jurisdiction of the coastwise laws (including sites on the OCS).

In the case under consideration, the rig will be utilized in exploratory drilling operations at its initial point of unlading (which has been determined not to be a coastwise point) for a period of from one to six months. We are of the opinion that this use in drilling operations acts to break the continuity of the voyage between Alaska and the first of the subsequent sites at which there is some existing structure.

Accordingly, the contemplated movement from Alaska to the pristine site over the OCS is not a movement within the contemplation of the coastwise merchandise transportation statute, and neither is the subsequent movement of the drilling rig considered a violative dual-mode transportation.

HOLDING:

Following a thorough review of the evidence and applicable law and precedents we find that, for the reasons stated in the Law and Analysis portion of this ruling, neither the initial nor subsequent movements of the drilling rig under consideration as described would be prohibited under the Jones Act, 46 U.S.C. App. 883.

Sincerely,

Arthur P. Schifflin

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