HQ 226964 - Towing; Distress; Continuous Tow; Foreign-flag tug; 46 U.S.C. App. ? 316(a) - United States International Trade Commision Rulings

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HQ 226964

May 17, 1996

VES-10-03-RR:IT:EC 226964 GEV

CATEGORY: CARRIER

Edward L. Merrigan, Esq.
Jones, Walker, Waechter, Poitevent,
Carrre & Dengre, L.L.P.
Suite 245, Republic Place
1776 Eye Street, N.W.
Washington, D.C. 20006

RE: Towing; Distress; Continuous Tow; Foreign-flag tug; 46 U.S.C. App. ? 316(a)

Dear Mr. Merrigan:

This is in response to your letters dated May 13 and 14, 1996, and your telefax memoranda of May 15 and 17, 1996, on behalf of your client, Waterman Steamship Corporation ("Waterman") regarding the use of a foreign-flag tug in towing the ROBERT E. LEE to a U.S. drydock facility for repairs. Our ruling on this matter is set forth below.

FACTS:

On May 8, 1996, at approximately 3:00 a.m., when the ROBERT E. LEE was in the Atlantic Ocean approximately 90 miles off Charleston, South Carolina, en route to Morehead City, North Carolina, the vessel suddenly lost all operating power and was unable to proceed. At the time, the vessel was carrying 75 LASH barges loaded with approximately 23,600 long tons of cargo, and was scheduled to stop in Morehead City to pick up 13 additional LASH barges containing approximately 2,200 long tons of cargo prior to departing for foreign.

Subsequent to the subject vessel's loss of power, it dropped its anchors and a dive boat was summoned to determine the cause of this occurrence. Divers from the dive boat discovered that the vessel's shaft bolts had been sheared resulting in the inability to generate propulsion. In view of the fact that the vessel was rendered "dead in the water" in the open Atlantic, Waterman officials were notified of the incident and immediately began to contact towage companies in order to procure the services of an ocean going tug capable of towing the disabled vessel to a drydock facility for repairs. Waterman subsequently determined that there were no suitable
coastwise-qualified tugs available to render such services and that the only available tug capable of performing the tow in question was the SOLANO, a Panamanian-flag vessel owned and operated by International Transport Contractors Management B.V. Waterman also determined that the nearest available drydock facility capable of repairing the ROBERT E. LEE was GMD Shipyard in Brooklyn, New York.

Upon obtaining the services of the SOLANO, Waterman directed that the tug tow the ROBERT E. LEE from its position in the Atlantic to Morehead City to off-load its LASH barges which were to be loaded upon a different Waterman vessel for subsequent foreign delivery. The tug was then to tow the ROBERT E. LEE, without cargo, to the GMD Shipyard for repairs. Upon arriving at Morehead City at approximately 11:30 p.m. on Sunday, May 12, 1996, the cargo was off-loaded. The vessels remained at that location with their towing lines connected until Thursday, May 16, 1996, when the SOLANO proceeded to tow the ROBERT E. LEE to anchorage just offshore of Morehead City (at the Pilot House location) pending the final resolution of the legality of the tow to Brooklyn.

In response to Customs request for documentation supporting Waterman's request to allow the SOLANO to tow the ROBERT E. LEE to the GMD Shipyard, the following has been submitted: an affidavit of Ronald R. Rose, Senior Vice President, Operations, Waterman Steamship Corporation, dated May 14, 1996; copies of the log of the ROBERT E. LEE from May 8 and 9, 1996 (Exhibits A-1, A-2); a copy of a U.S. Coast Guard Report of Vessel Casualty or Accident (CG-2692) (Exhibit A-3); an affidavit of W. M. Harrison, Fleet Manager, LASH Marine Services, Inc., Agent for Waterman Steamship Corporation, dated May 14, 1996; a memorandum from John Vickers, Nautical Department, The Salvage Association, to Waterman, dated May 14, 1996 (Exhibit B); a telefax memorandum from Waterman's counsel to Customs, dated May 14, 1996; a telefax memorandum from Waterman's counsel to Customs, dated May 15, 1996, transmitting a letter from Ronald R. Rose, Senior Vice President, Operations, Waterman Steamship Corporation, dated May 15, 1996; a fax from the owners of the SOLANO, dated May 11, 1996, to Mr. Hugo Hansen; a fax from Ronald R. Rose, Senior Vice President, Operations, Waterman Steamship Corporation, to the ROBERT E. LEE, dated May 8, 1996; a letter from Robert T. Chambers, Manager, East Coast Operations, Waterman Steamship Corporation, to Customs, dated May 15, 1996; a telefax from Waterman's counsel to Customs, dated May 15, 1996, transmitting a fax from the owners of the SOLANO to Waterman, dated May 8, 1996; a fax from Ronald R. Rose, Senior Vice President, Operations, Waterman Steamship Corporation, to NFA Rotterdam NL-TX, dated May 8, 1996; a fax from HFH-NFA/Rotterdam to RRR-WSC/NOLA, dated May 11, 1996; and a fax from the owners of the SOLANO to Waterman, dated May 10, 1996, and a telefax memorandum from Waterman's counsel to Customs, dated May 17, 1996.

ISSUE:

Whether the tow of a disabled vessel by a foreign-flag tug from a point beyond U.S. territorial waters to a coastwise point where the disabled vessel's cargo is off-loaded, and then to a different coastwise point where the disabled vessel will be repaired, with the tow lines between the two vessels at all times remaining connected, is prohibited by 46 U.S.C. App. ? 316(a).

LAW AND ANALYSIS:

Title 46, United States Code Appendix, ? 316(a) (46 U.S.C. App. ? 316(a), the coastwise towing statute) prohibits the use of any vessel not having in force a certificate of documentation endorsed for the coastwise or Great Lakes trades (46 U.S.C. 12106, 12107, respectively) to tow any vessel other than a vessel in distress, from any point or place embraced within the coastwise laws of the United States to another such port or place, either directly or by way of a foreign port or place, or for any part of such towing.

Points embraced within the coastwise laws include all points within the territorial waters of the United States, including points within a harbor. The territorial waters of the United States consist of the territorial sea, 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 coastline differ.

In Waterman's initial request of Monday, May 13, 1996, counsel contended that the use of the SOLANO to tow the ROBERT E. LEE from a point in the Atlantic Ocean beyond U.S. territorial waters where it became disabled to Morehead City for the off-loading of it's cargo, and then to Brooklyn for repairs is not in contravention of the above-referenced statute for the following three reasons: (1) the ROBERT E. LEE suffered a total loss of its propulsion system and therefore was in "distress" within the meaning of the statute; (2) there was no drydock in Morehead City capable of doing the repairs needed; and (2) there was no suitable coastwise-qualified tug available.

In regard to the first of the three above-referenced contentions, we note that the legislative history of 46 U.S.C. App. ? 316(a) is devoid of language which might be helpful in defining "distress" for purposes of its administration. Thereby invested with discretion to define the term administratively in such fashion as best to give full effect to the intent of the statute, Customs has done so by:

...[defining] distress situations as those in which immediate aid is necessary to prevent injury to persons or to prevent substantial loss of property. (Emphasis added)

(Customs Ruling Letter 109631, dated July 19, 1988, citing Customs Ruling Letter 102965, dated August 5, 1977)

The above interpretation by Customs is in accord with the commonly accepted definition of "distress" in the context of the maritime arena as set forth below:

A term used when a ship requires immediate assistance from unlooked for damage or danger, such as important breakdown, lack of food, or any accident. (Emphasis added)

(International Maritime Dictionary, DeKerchove, 2d Edition, p. 226)

As applied to the facts currently under consideration, with respect to the first of the three reasons proffered for allowing the tow in question, we concur that the ROBERT E. LEE was in "distress" within the meaning of 46 U.S.C. App. ? 316(a) when it became disabled in the Atlantic Ocean and that it remained so until it arrived under tow in Morehead City and was berthed. At that time, the vessel ceased to be in distress in view of the fact that the requisite immediacy for such a condition to exist as specified in the above definitions was no longer present. Consequently, the towing of the ROBERT E. LEE by the SOLANO from Morehead City to Brooklyn would not be pursuant to the "distress" provision set forth in 46 U.S.C. App. ? 316(a).

Counsel cites to Customs Ruling Letter 110977, dated July 11, 1990, which addressed the proposed use of a foreign-flag tug to provide towing services from points originating in Canadian waters and terminating at United States refinery sites in the State of Washington. Counsel cites to p. 3 the ruling which provides, in pertinent part:

"...we find that the towing of vessels in U.S. waters when they are disabled due to engine failure is considered an aid to a distressed vessel. The statute (section 316(a)) permits the towing by a foreign- flag vessel in U.S. waters of a vessel in distress."

Counsel misinterprets the above statement as Customs considering a disabled vessel's "distress" for purposes of 46 U.S.C. App. ? 316(a) to continue indefinitely until it is finally repaired notwithstanding the fact that safe harbor was reached in the interim. As discussed above, a non-coastwise-qualified tug may tow a distressed vessel in U.S. territorial waters until such time as the condition of distress has ceased.

In regard to counsel's remaining two contentions that the proposed tow by the SOLANO is in accord with 46 U.S.C. App. ? 316(a) (i.e., non-availability of both a capable drydock and a suitable coastwise-qualified tug), both are irrelevant in view of the fact that the aforementioned statute it devoid of any language exempting a non-coastwise-qualified tug from the restrictions therein based on those two factors. Parenthetically, however, we note that notwithstanding counsel's assertions to the contrary, the U.S. Maritime Administration has informed us that three coastwise-qualified tugs are capable of towing the ROBERT E. LEE from Morehead City to Brooklyn.

By counsel's telefax memorandum of Wednesday, May 15, 1996, a new argument was offered in support of Waterman's proposal. It was contended that the SOLANO is engaged in a continuous tow which commenced at the point outside U.S. territorial waters in the Atlantic where the tow lines were originally attached to the ROBERT E. LEE, proceeded to Morehead City where the tow lines between the two vessels at all times remained connected, and will ultimately end at the GMD Shipyard in Brooklyn. In support of this position, counsel cites Customs Ruling 113092, dated December 6, 1994, which addressed the towing of a Canadian barge by a Canadian-flag tug between two coastwise points. Counsel cites to p. 2 of that ruling which provides, in pertinent part:

"In the matter under consideration, the initial tow would begin in
Canada, proceed to a shore point in the United States where certain materials would be laded aboard the barge and continue to a point in the United States waters where the barge would be anchored. Up to that point no violation would have occurred, because even though the tow stopped at a U.S. point to load materials and then proceeded to a second U.S. point, the vessels remain connected and the tow remained continuous from the Canadian point of origin."

Customs has previously had occasion to consider instances where a tow by a foreign tug began at a foreign location and touched at one or more United States ports before ending at a United States port. In this regard we note that Customs has interpreted 46 U.S.C. App. ? 316(a) in concert with 46 U.S.C. App. ? 883 (the coastwise merchandise statute known as the "Jones Act" which prohibits merchandise loaded at one United States port aboard a non-coastwise-qualified vessel from being transported to another United States port and off-loaded). Consequently, it is Customs position that 46 U.S.C. App. ? 316(a) would not prohibit the continuous towing by the same foreign (or otherwise non-coastwise-qualified) tug of a vessel engaged solely in foreign trade on a voyage from a foreign port to a United States port or ports merely because both tug and tow stop at other United States ports to load export cargo or unload import cargo. (Customs Ruling Letters 101071, dated June 11, 1974, 103632, dated September 13, 1978, and 108596, dated September 23, 1996, citing Treasury Decision (T.D.) 70-223(19))

In regard to the case under consideration, the following facts are undisputed: (1) the tow in question commenced at a non-coastwise-point (i.e., a location approximately 90 miles off the coast of Charleston, South Carolina); and (2) once in Morehead City, the tow lines of the SOLANO at all times remained connected to the ROBERT E. LEE (certified as so by Robert T. Chambers, Waterman's Manager of East Coast Operations, in his letter of May 15, 1996, and confirmed by Customs officials in Morehead City). Furthermore, on Thursday, May 17, 1996, the SOLANO proceeded to tow the ROBERT E. LEE to anchorage offshore of Morehead City (at the Pilot House location) pending final resolution of this matter. In addition, upon reviewing the documentation exchanged between Waterman and the owners of the SOLANO in procuring the - 6 -
services of the subject tug, it is readily apparent that Morehead City is not the final destination of the tow, a fact confirmed by the ROBERT E. LEE both remaining at its berth and being towed to the aforementioned anchorage in the same state of disrepair incurred in the Atlantic.

Accordingly, it is Customs position that the facts and evidence presented indicate that the tow by the subject tug is in fact a continuous tow which originated at a non-coastwise point beyond U.S. territorial waters in the Atlantic, touched at an intervening coastwise point (Morehead City) for the purpose of off-loading export cargo to be delivered foreign by another vessel, and will proceed to another coastwise point (Brooklyn) where the disabled vessel will enter a drydock for repairs and the tow will be disconnected. Such a continuous tow does not give rise to a violation of 46 U.S.C. App. ? 316(a). Pursuant to T.D. 70-223(19), this interpretation of the aforementioned statute is in accord with Customs position of construing it consistently with 46 U.S.C. App. ? 883 inasmuch as the application of the latter to similar facts would not result in its being violated (i.e., a foreign-flag vessel transporting merchandise loaded at a foreign location, proceeding to a coastwise point to off-load the merchandise, not loading any new merchandise at that point, and then proceeding in ballast to a second coastwise point where it entered a drydock for repairs, would not result in a violation of 46 U.S.C. App. ? 883).

HOLDING:

The tow of a disabled vessel by a foreign-flag tug from a point beyond U.S. territorial waters to a coastwise point where the disabled vessel's cargo is off-loaded, and then to a different coastwise point where the disabled vessel will be repaired, with the tow lines between the two vessels at all times remaining connected, is not prohibited by 46 U.S.C. App. ? 316(a).

Sincerely,

William G. Rosoff

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