HQ 115311 - Coastwise Trade; Outer Continental Shelf; Flexible and Umbilical Pipelay; 43 U.S.C. § 1333(a); 46 U.S.C. App. § 883 - United States International Trade Commision Rulings

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HQ 115311

May 10, 2001

VES-3-15-RR:IT:EC 115311 GEV

CATEGORY: CARRIER

Phyllis Price
Contract Engineer
Coflexip Stena Offshore Inc.
7660 Woodway, Suite 390
Houston, Texas 77063

RE: Coastwise Trade; Outer Continental Shelf; Flexible and Umbilical Pipelay; 43 U.S.C. § 1333(a); 46 U.S.C. App. § 883

Dear Ms. Price:

This is in response to your letter dated March 1, 2001, requesting a ruling regarding the use of a foreign-flagged installation vessel on the Outer Continental Shelf (OCS) that is scheduled to commence operations on June 1, 2001. Our ruling is set forth below.

FACTS:

Coflexip Stena Offshore Inc. (“Coflexip”) is to engage in an operation involving a foreign-flagged vessel to be used for the connection of four subsea wellheads on the OCS with a tension leg platform (“TLP”) that is moored in the Typhoon Field Development, Green Canyon blocks 236 and 237, in the Gulf of Mexico. The wellheads will be linked to the TLP with flexible flowlines and risers manufactured in France and umbilical lines from the U.S. The flowlines will include three 4.5-inch inside diameter lines and one 5.3-inch inside diameter line with varying lengths of 0.9 to 2.3 miles.

The planned installation will begin following the shipment of the flexible flowlines and risers by commercial vessel from Le Trait, France, to a U.S. port, where that equipment will be temporarily offloaded onto a dock or barge for immediate loading aboard a foreign-flag installation vessel. During the course of the installation,
the flexible flowlines and umbilical lines will not be unloaded like cargo but will be paid out from carousels and reels on board the installation vessel during the course of the installation operation on the OCS.

ISSUES:

Whether the use of a foreign-flagged vessel for the installation of flexible flowlines, umbilical lines and risers on the OCS as described above constitutes a violation of 46 U.S.C. App. § 883.

Whether the temporary offloading of the flexible flowlines and risers onto a dock or barge in a U.S. port, and their immediate loading aboard an installation vessel for transportation to and installation on the OCS, renders such articles nondutiable

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). Pursuant to § 4.80b(a), Customs Regulations (19 CFR § 4.80b(a)), promulgated pursuant to 46 U.S.C. App. § 883, a coastwise transportation of merchandise takes place when merchandise laden at one coastwise point is unladen at another coastwise point.

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 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. (See Treasury Decisions (T.D.s) 54281(1)), 71-179(1)m 78-225 and Customs Service Decision (C.S.D.) 85-54) 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 issues presented for our consideration, we note at the outset that the flexible flowlines and umbilical lines will be installed in the same manner as cable or pipe laid on the ocean floor (i.e., paid out, not unladed). Customs has long-held that the laying of cable between two points embraced within the coastwise laws of the United States is not coastwise trade. (see C.S.D. 79-346) It is therefore our
position that the installation of flowlines and umbilical lines as described above is not coastwise trade and the use of a foreign-flagged vessel to effect such installation is not a violation of 46 U.S.C. App. § 883.

The risers to be installed are part of the connection apparatus used to link the wellheads to the TLP. Although the risers will not be “paid out” as will the flexible flowlines and umbilical lines described above, we note that Customs has held that the use of a foreign-flag vessel to transport pipeline connectors and tools from a port in the United States to an OCS job site and to connect a pipeline to a drilling platform or subsea wellhead would not violate the coastwise laws if the work was done from the vessel, but would violate the coastwise laws if the vessel merely transported the connectors and tools to the drilling platform or subsea wellhead and the connection operation was not performed on or from that vessel. (see Customs ruling letter 108442, dated August 13, 1986; see also Treasury Decision (T.D.) 78-387) Accordingly, the proposed use of a foreign-flag vessel in installing the risers is not violative of 46 U.S.C. App. § 883 provided such installation is performed on or from that vessel.

With respect to the second issue presented for our consideration, all goods imported into the Customs territory of the United States from outside thereof are subject to duty or exempt therefrom as provided for by the Harmonized Tariff Schedule of the United States (HTSUS). General Note 1, HTSUS. The term “importation” is generally defined as “the bringing of goods within the jurisdictional limits of the United States with the intention to ulade them.” (See C.S.D. 89-39, Hollander Co. v. United States, 22 C.C.P.A. 645, 648 (1935) and United States v. Field & Co., 14 Ct. Cust. App. 406 (1927). Merchandise arriving on a vessel is deemed imported on “the date on which the vessel arrives within the limits of a port in the United States with intent then and there to unlade such merchandise.” (See United States v. Commodities Export Co., 733 F.Supp. 109 (1990) and 19 CFR

Accordingly, the subject flowlines and risers arriving from France will be deemed imported at the time when they are offloaded at a U.S. port. Pursuant to § 141.1(a), Customs Regulations (19 CFR § 141.1(a)), duties and the liability for their payment accrue upon imported merchandise on arrival of the importing vessel within a Customs port with intent then and there to unlade. Furthermore,

§ 141.4(a), Customs Regulations (19 CFR § 141.4(a)) provides that all merchandise imported into the United States is required to be entered, unless specifically excepted. Such exceptions, provided in § 141.4(b), Customs Regulations (19 CFR § 141.4(b)), do not include the flexible flowlines and risers under consideration. Consequently, these articles will be subject to Customs entry requirements and will be dutiable in their entirety when offloaded at a U.S. port notwithstanding their immediate reloading aboard an installation vessel and immediate transportation to and installation on the OCS.

Parenthetically, it should be noted that the procedures regarding immediate exportation (IE) set forth in § 18.25, Customs Regulations (19 CFR § 18.25) may not be implemented to obviate the aforementioned duty and entry requirements for this merchandise in view of the fact that a portion of it will either be attached to and rising along the platform to which U.S. Customs laws apply (see Customs ruling letters 110403, dated September 15, 1989, and 106454, dated November 16, 1983), while the remainder, although lying on the OCS, is not intended to be united to the mass of things belonging to a foreign country and therefore is not exported within the meaning of the applicable Customs laws and regulations. (See definition of the term “exportation” set forth in 19 CFR § 101.1)

HOLDINGS:

The use of a foreign-flagged vessel for the installation of flexible flowlines and umbilical lines on the OCS as described above does not constitute a violation of 46 U.S.C. App. § 883. With respect to the risers, their installation must be performed on or from the aforementioned vessel in order to be in compliance with 46 U.S.C. App. § 883.

The temporary offloading of the flexible flowlines and risers to a dock or barge in a U.S. port and their immediate loading aboard an installation vessel for transportation to an installation on the OCS does not render such articles nondutiable.

Sincerely,

Larry L. Burton
Chief

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