HQ 113657 - 46 U.S.C. App. 289, 316(a), 883; Coastwise transportation; Outer Continental Shelf; Towing; Crane vessel - United States International Trade Commision Rulings

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HQ 113657

September 21, 1996

VES-3/VES-3-02/VES-3-15/VES-10-03-RR:IT:EC 113657 GOB

CATEGORY: CARRIER

Andrew Podolnick, Esq.
Senior Counsel
Law Department
Chevron U.S.A. Production Co.
935 Gravier Street
New Orleans, LA 70112

RE: 46 U.S.C. App. 289, 316(a), 883; Coastwise transportation; Outer Continental Shelf; Towing; Crane vessel

Dear Mr. Podolnick:

This is in response to your letter dated September 6, 1996.

FACTS:

In your letter of September 5, 1996, you state as follows:

Last year Chevron U.S.A. Inc. solicited an opinion from the Customs Department regarding the proposed operation of a semisubmerssible [sic] vessel (ssv) designed for the drilling and production of hydrocarbons. The ssv was to be anchored on the Outer Continental Shelf 150 miles off the coast of Louisiana...

Since last corresponding with Customs Department the project has changed and several issues have surfaced which need further clarification. Rather than modify an existing ssv, Chevron has elected to build a spar, which is a deep draft, single hull floating column caisson. The spar will be anchored to the OCS and, like an ssv, is capable of supporting both drilling and production operations. For all practical purposes the spar will function identically to an ssv...

The issue of primary concern is with respect to the installation of the topsides facilities and the drilling package that will be set on the spar once it has been anchored...
...
We would appreciate a response to the following questions. For the purposes of your response, please assume that the spar will be documented under the laws of a foreign nation.

1. Will the use of the foreign flagged derrick barge to install the topsides and the drilling package on the anchored spar violate the coastwise trade laws and in particular 46 U.S.C. App. 883? Until the topsides and drilling unit are installed, the spar will be incomplete and cannot perform its intended functions.

2. Must we use barges and tugs authorized to engage in coastwise trade to transport the topsides and the drilling unit to the location?

3. Drilling operations will be completed in approximately 3 years. Must we use vessels authorized to engage in coastwise trade to transport the drilling unit from the spar? In this regard, can we engage a foreign flagged derrick barge to perform the actual removal?

4. If during the life of the spar, we elect to rework the wells and need to install a second drilling unit can the installation work be performed by a foreign flagged derrick barge? Again, the barge that is performing the initial installation may be one of the only vessels world-wide that can perform this work. Can the unit be transported to the spar aboard the derrick barge or must it be loaded onto barges and tugs authorized to engage in coastwise trade?

ISSUE:

Whether the proposed activities may be accomplished in compliance with the coastwise laws.

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 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.

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 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.

Section 4.50(b), Customs Regulations (19 CFR 4.50(b)) states as follows:

A passenger within the meaning of this part is any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business.

46 U.S.C. App. 316(a) prohibits the use of a non-coastwise-qualified vessel to tow any vessel, other than a vessel in distress, between ports or places in the United States embraced within the coastwise laws, either directly or by way of a foreign port, or to do any part of such towing, or to tow any such vessel between points in a harbor of the United States.

Section 4(a) of the Outer Continental Shelf Lands Act of 1953, as amended (43 U.S.C. 1333(a); "OCSLA"), provides in 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 within a state."

Under the foregoing provision, we have 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 outer Continental Shelf ("OCS"). We have applied that principle to drilling platforms, artificial islands, and similar structures, as well as to devices attached to the seabed of the outer Continental Shelf for the purpose of resource exploration operations.

After a consideration of this matter, we make the following determinations based on the facts presented.

Your ruling request is a follow-up to Ruling 113439 dated May 18, 1995. Nothing contained herein changes the determinations of Ruling 113439, which we do not repeat here.

With respect to your first question, please be advised of the following. Once the spar is anchored on the outer continental shelf, it becomes a coastwise point. Pursuant to 46 U.S.C. App. 883 and 289, a non-coastwise-qualified vessel (e.g., the foreign-flag derrick barge) cannot transport merchandise (e.g., the topsides and/or drilling package) or passengers (i.e., any individual not connected with the operation, navigation, ownership, or business of the transporting vessel) from one coastwise point (e.g., a U.S. port) to a second coastwise point (e.g., the anchored spar). The foreign-flag derrick barge may participate in the installation and removal of the topsides and drilling unit provided that such activity does not involve the transportation of merchandise or passengers between coastwise points. If the foreign-flag derrick barge is stationary at the site of the spar, it may use a crane aboard the foreign-flag derrick barge to move the topsides and drilling unit from the transporting vessel to the spar. In this regard, in Ruling 109831 dated November 14, 1988, we stated:

The Customs Service has long held that the use of a non-coastwise qualified crane vessel to load and unload cargo is not coastwise trade and does not violate 46 U.S.C. App. 883, provided, that any movement of the merchandise is effected exclusively by the operation of the crane and not by movement of the vessel, except for necessary movement which is incidental to a lifting operation while it is taking place. (Emphasis in original.)

With respect to your second question, pursuant to 46 U.S.C. App. 883, a vessel which transports the topsides and the drilling unit from a coastwise point (e.g., a U.S. port) to a second coastwise point (e.g., the anchored spar) must be coastwise-qualified.

Further, pursuant to 46 U.S.C. App. 316(a), a vessel which tows another vessel from one coastwise point (e.g., a U.S. port) to a second coastwise point (e.g., the anchored spar) must be coastwise-qualified. Inasmuch as there are no structures of any kind at the surface location, such location is not a coastwise point until the spar is anchored at that location. Accordingly, 46 U.S.C. App. 316(a) does not apply to the towing of the vessel from a coastwise point to the surface location on the outer continental shelf prior to the anchoring of the spar.

With respect to your third question, pursuant to 46 U.S.C. App. 883, a vessel which transports the drilling unit from a coastwise point (e.g., the anchored spar) to a second coastwise point (e.g., a U.S. port) must be coastwise-qualified. You also ask with respect to the "actual removal" of the drilling unit. As stated supra, the foreign-flag derrick barge may participate in the installation and removal of the topsides and drilling unit provided that such activity does not involve the transportation of those items between coastwise points. If the foreign-flag derrick barge is stationary at the site of the spar, it may use a crane aboard the foreign-flag derrick barge to move the drilling unit from the spar to the transporting vessel.

Our response to your fourth question is the same as our response to your first question. The foreign-flag derrick barge may install a drilling unit on the spar provided that it does not transport the drilling unit between coastwise points. The foreign-flag derrick barge cannot transport the drilling unit from one coastwise point (e.g., a U.S. port) to a second coastwise point (e.g., the spar anchored on the outer continental shelf). Further, a vessel which tows another vessel from one coastwise point (e.g., a U.S. port) to a second coastwise point (e.g., the anchored spar) must be coastwise qualified.

HOLDING:

As detailed supra, certain of the proposed activities constitute coastwise trade such that those activities must be accomplished by coastwise-qualified vessels.

Sincerely,

Chief,
Entry and Carrier Rulings Branch

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