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HQ 115150





September 27, 2000

VES-3-15-RR:IT:EC 115150 GEV

CATEGORY: CARRIER

Matthew D. Eisele, Esq.
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760

RE: Floating Storage and Off-Loading Unit; Coastwise Trade; Outer Continental Shelf Lands Act; 43 U.S.C. § 1333(a); 46 U.S.C. App. § 883

Dear Mr. Eisele:

This is in response to your letter dated September 6, 2000, requesting an expedited ruling pursuant to § 177.2(d), Customs Regulations (19 CFR § 177.2(d)), concerning your client’s proposed use of a floating storage and off-loading (“FSO”) unit. The ruling you seek is set forth below.

FACTS:

An oil tanker, designed to allow for permanent attachment to the seabed, will act as an FSO unit for oil collected from a well in a deep water field on the outer continental shelf. The oil stored in the FSO will be transported to shore-based facilities on shuttle tankers. You seek a ruling that would allow the FSO to relocate to other wells provided it does not transport oil between coastwise points. In the event such a movement is made, you state that the vessel’s cargo tanks will be empty.

You also request that the FSO be permitted to move off location, even when loaded with cargo, in the event of an emergency, provided it subsequently returns to the same location without having unladed its cargo. Emergency conditions might include disaster scenarios occasioned by the threat of fire, hurricane, or other conditions that threaten the structural integrity of the FSO and the physical safety of
its crew. In the event of such a movement, it is expected that the FSO and its cargo will return to the FSO’s original site after the emergency condition or circumstance has passed, if possible.

ISSUE:

Whether the use of an oil tanker as an FSO as described above is subject to the provisions of 46 U.S.C. App. § 883.

LAW AND ANALYSIS:

Title 46, United States Code Appendix, § 883 (46 U.S.C. App. § 883, the merchandise coastwise law 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 one that is coastwise-qualified (i.e., U.S.-built, owned and documented).

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 internal waters, landward of the territorial sea baseline, in cases where the baseline and the coastline differ.

Section 4(a) of the Outer Continental Shelf Lands Act of 1953, as amended (67 Stat. 462; 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.

The statute was substantively amended by the Act of September 18, 1978 (Pub. L. 95-372, Title II, § 203, 92 Stat. 635), to add, among other things, the language concerning temporary attachment to the seabed. The legislative history associated with this amendment is telling, wherein it is stated that:

...It is thus clear that Federal law is to be applicable to all activities or all devices in contact with the seabed for exploration, development, and production. The committee intends that Federal law is, therefore, to be applicable to activities on drilling rigs, and other watercraft, when they are connected to the seabed by drillstring, pipes, or other appurtenances, on the OCS for exploration, development, or production purposes. [House Report 95-590 on the OCSLA Amendment of 1978, page 128, reproduced at 1978 U.S.C.C.A.N. 1450, 1534.]

Under the foregoing provision, we have ruled that the Customs and navigation laws, including the coastwise laws, the laws on entrance and clearance of vessels, and the provisions for dutiability of merchandise, are extended to mobile oil drilling rigs during the period they are secured to or submerged onto the seabed of the OCS (Treasury Decision (T.D.) 54281(1)). We have applied the same principles to drilling platforms, artificial islands, and similar structures, as well as devices attached to the seabed of the OCS for the purpose of resource exploration operations, including warehouse vessels anchored over the OCS when used to supply drilling rigs on the OCS. (see Customs Service Decisions (C.S.D.s) 81-214 and 83-52, and Customs Ruling Letter 107579, dated May 9, 1985)

With respect to the proposed operations of the FSO vessel, upon reviewing the above-cited authority, it is readily apparent that notwithstanding its attachment to the OCS, neither of the movements herein described would violate 46 U.S.C. App. § 883. In this regard we note that § 4.80b(a), Customs Regulations (19 CFR § 4.80b(a)), promulgated pursuant to the aforementioned statute, provides, in pertinent part, as follows:

A coastwise transportation of merchandise takes place, within the meaning of the coastwise laws, when merchandise laden at a point embraced within the coastwise laws (“coastwise point”) is unladen at another coastwise point,”
(Emphasis added)

Neither the relocation of the FSO between coastwise points with its cargo tanks empty, nor its movement off location and subsequent return to that same location without unlading its cargo, constitute coastwise transportation as defined above.

HOLDING:

The use of an oil tanker as an FSO as described above is not subject to the provisions of 46 U.S.C. App. § 883.

Sincerely,

Larry L. Burton

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