HQ 114556 - Dredging; Backhoe Dredge; 46 U.S.C. App. § 292; Pub. L. 102-587 - United States International Trade Commision Rulings

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HQ 114556

December 15, 1998

VES-10-02-RR:IT:EC 114556 GEV

CATEGORY: CARRIER

Jeffrey F. Lawrence, Esq.
Sher & Blackwell
Suite 900
1850 M Street, N.W.
Washington, D.C. 20036

RE: Dredging; Backhoe Dredge; 46 U.S.C. App. § 292; Pub. L. 102-587

Dear Mr. Lawrence:

This is in response to your letter of December 10, 1998, on behalf of your client, Stuyvesant Dredging Company ("SDC"), requesting a ruling that three backhoe dredge vessels to be documented under the U.S. flag with a registry endorsement and chartered to an entity in which SDC has an ownership interest may perform dredging operations in the United States. Our ruling is set forth below.

FACTS:

SDC is entering into a joint venture with Bean Horizon Corporation (“Bean”) to form a limited liability company to be called Bean Stuyvesant Dredging, LLC (“BSCD”). BSCD will be owned 50% by SDC and 50% by Bean. BSCD will be in the business of providing dredging services on projects to be performed in U.S. navigable waters.

BSCD expects to charter three U.S.-built, U.S.-flag backhoe dredges, the ANTONE, the HERCULES, and the BONACAVOR on a project-by-project basis. At present, these dredges are owned by United States citizens eligible to operate in the coastwise trade within the meaning of §2 of the Shipping Act, 1916 (a “§ 2 citizen”). The ANTONE is owned by The Dutra Group (“Dutra”). The HERCULES is owned by NationsBank Leasing Corporation and bareboat chartered to Dutra. The BONACAVOR is owned by Bean.

Title to the ANTONE will be transferred to NewCo. 1, a §2 citizen company which will bareboat charter the vessel back to Dutra for a period not to extend beyond December 31, 2000. At the end of the charter of the ANTONE to Dutra, NewCo. 1 will become a documentation citizen under 46 U.S.C. § 12102 (a “documentation citizen”).

Title to the BONACAVOR and the HERCULES will be transferred from Bean and Nationsbank, respectively, to NewCo. 2, a §2 citizen company which will bareboat charter the HERCULES back to Dutra for a period not to extend beyond June 30, 1999, and which will immediately time or demise charter the BONACAVOR to BSCD as set forth below. At the end of the HERCULES charter to Dutra, NewCo. 2 will also become a documentation citizen.

Ultimately, NewCo. 1 and NewCo. 2 will time or demise charter the ANTONE, the HERCULES, and the BONACAVOR to BSCD for use in the navigable waters of the United States, but only as necessary (a) to fulfill dredging obligations under a specific contract (including any extension periods) or (b) as temporary replacement capacity for a dredge which has been disabled but only for so long as the disability shall last and until the dredge is in a position to fully resume dredging operations.

To summarize, ownership of each dredge will be transferred to a U.S. corporation that qualifies as a documentation citizen. Thus, the corporation will be formed pursuant to the laws of a State of the United States and the corporation will meet the requirements for a corporation owning a registry vessel under 46 U.S.C. § 12102 (i.e., it will be a U.S. corporation with U.S. citizens as its president, chief executive officer and chairman of the board and non-U.S. citizens will not comprise more than a minority of the number necessary to constitute a quorum of the board of directors, but the shareholders may be non-U.S. citizens). The backhoe dredges will be documented under the laws of the United States and will fly the U.S. flag with a registry endorsement pursuant to 46 U.S.C. § 12102 et seq. and 46 CFR Part 67. The backhoe dredges will be time or demise chartered to BSCD, an entity in which SDC has an ownership interest, for use on a contract-by-contract basis for a series of specific projects and each charter of a backhoe dredge to BSCD will terminate when each project is completed.

ISSUE:

Whether the subject backhoe dredges, documented under the U.S. flag with a registry endorsement, can be time or demise chartered to BSCD for dredging operations in the navigable waters of the United States without violating the provisions of 46 U.S.C. App. § 292, as amended.

LAW AND ANALYSIS:

The navigation law pertaining to dredging is found at § 1 of the Act of May 24, 1906 (34 Stat. 204; 46 U.S.C. App. § 292). This statute, which provided that dredging in the United States was prohibited by any foreign-built dredging vessel except one of those named in § 2 of the Act of May 24, 1906, was amended by the Oceans Act of 1992 (Pub. L. 102-587, § 5501(a)(1) and (2), 106 Stat. 5039, 5084-85, effective November 4, 1992) to provide, inter alia, that the coastwise
eligibility requirements (i.e., U.S.-build, ownership and documentation) are applicable to vessels used as dredges as of the effective date of that legislation. However, pursuant to the statutory language of Pub. L. 102-587, the amendments contained therein were not made applicable to the vessel STUYVESANT, as well as various other vessels including:

...any other non-hopper dredging vessel documented under chapter 121 [section 12101 et seq. of Title 46] and chartered to Stuyvesant Dredging Company or to an entity in which it has an ownership interest, as is nec- essary (a) to fulfill dredging obligations under a specific contract, including any extension periods; or (b) as temporary replacement capacity which has become disabled but only for so long as the disability shall last and until the vessel is in a position to fully resume dredging operations; however, this exception expires on December 8, 2022 or when the vessel STUYVESANT ceases to be documented under chapter 121 [section 12101 et seq. of Title 46], whichever first occurs. (Pub. L. 102-587, § 5501(a)(2)(A)(iii))

With respect to the interpretation of the above provision, we note the well-established "plain language" principle which mandates that in determining legislative intent, the language of the statute must first be examined. Phone Mate, Inc. v. United States, 12 CIT 575, 690 F.Supp. 1048 (1988), aff’d, 867 F.2d 1404 (1989). In the absence of ambiguity, the plain meaning of that statute must prevail. United Stats v. RMS Electronics, Inc., 67 CCPA 79, C.A.D. 1249, 642 F.2d 1081 (1980) (See also Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980)

As regards the backhoe dredges under consideration, it is readily apparent that as proposed they would meet the following criteria clearly specified in the language of § 5501(a)(2)(A)(iii) of Pub. L. 102-587: (1) the vessels are non-hopper dredging vessels; (2) the vessels will be documented under Chapter 121 of Title 46; (3) the vessels would be chartered to BSCD, an entity in which SDC has an ownership interest, to fulfill dredging obligations under a specific contract; and (4) the dredging will take place prior to December 8, 2022, or when the vessel STUYVESANT ceases to be documented under Chapter 121 of Title 46.

Accordingly, compliance with the statutorily imposed criteria cited above renders permissible the use of the subject backhoe dredges by BSCD in the navigable waters of the United States.

HOLDING:

The subject backhoe dredges, documented under the U.S. flag with a registry endorsement, can be time or demise chartered to BSCD for dredging operations in the navigable waters of the United States pursuant to Pub. L. 102-587, § 5501(a)(2)(A)(iii) without violating the provisions of 46 U.S.C. App. § 292, as amended.

Sincerely,

Jerry Laderberg

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