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HQ 115343

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April 26, 2001

VES-3-15-RR:IT:EC 115343 GEV

CATEGORY: CARRIER

James H. Hohenstein, Esq.
Haight Gardner Holland & Knight
195 Broadway
New York, New York 10007-3189

RE: Coastwise Trade; 46 U.S.C. App. § 883

Dear Mr. Hohenstein:

This is in response to your letter dated March 30, 2001, on behalf of your client, Dockwise N.V. (“Dockwise”), requesting a ruling regarding a proposed operation involving non-coastwise-qualified vessels. Our ruling is set forth below.

FACTS:

Dockwise, formerly a Belgium corporation, now a Dutch corporation as of April 1, 2001, is a specialist heavy transport shipping company. It manages a versatile fleet of 13 semi-submersible vessels, providing a worldwide range of services to the marine and oil and gas industries. Dockwise acts as the exclusive commercial and operational managers for the following two foreign-owned, built and flagged vessels under consideration: the MIGHTY SERVANT 1; and the MIGHTY SERVANT 3.

Aker Gulf Marine (“Aker”), a partnership located in Texas, operates an offshore oil exploration and production fabrication yard located in Ingleside, Texas. Aker is involved specifically in the construction of components of extraordinarily large offshore oil exploration and production facilities.

The transaction under consideration pertains to offshore exploration and production equipment known as a “truss spar”. This unit is new and has not been previously constructed or deployed. The truss spar facility has two main components: the “hard tank” and the “truss”. The hard tank is a barrel-like top section and resembles the classic spar but it is in only one section. The truss is a lattice-like support structure which is joined to the bottom of the hard tank.

Currently, two hard tanks are under construction in Finland. It is contemplated that Dockwise vessels will transport the two hard tanks in consecutive voyages to the Aker facility in Texas. The truss sections of the truss spars are being fabricated at the Aker facility.

Once the hard tank is delivered to the Aker facility in Texas, the truss must be joined to the hard tank to form the complete truss spar unit. The operation joining the two components could take place on land at the Aker facility or on board the Dockwise vessel.

Aker and Dockwise are considering the use of a Dockwise vessel in the actions prefatory to the movement of the completed unit to its permanent location in the U.S. Gulf. The first aspect of the project would be to align the Dockwise vessel to the contemplated truss spar unit at the Aker facility. As may be noted at this point, the Dockwise vessel would be anchored by the use of two anchor chains.

Once the vessel is aligned with the Aker quay, the truss spar unit would be skidded on the vessel. (In the alternative, as noted above, the task might also be done by skidding on the vessel only the truss and joining it to the hard tank on the vessel itself.) When the unit is completely on board the Dockwise vessel, the vessel would haul in the two anchor chains, be moved in a reverse direction by the U.S. flag tugs (the engines of the Dockwise vessel would not be engaged), and would then align itself, with the truss spar unit on board, over the “deep submergence hole” in the Corpus Christi ship channel. The “deep submergence hole” in the channel is the only location where this operation can take place, given the size of the spar unit and the depth of the water in other parts of the channel. Once the requisite depth had been reached, the truss spar unit would be floated off the vessel. Prior to the floating off of the truss spar unit, it would be secured to the nearby wharf. The truss spar unit would thereafter be secured next to the wharf. Once that operation is completed, the

Dockwise vessel would depart the area. As to the completed truss spar unit, once further work on it is finished, it will be towed to its permanent location by U.S.-flag tugs. The entire operation is depicted in diagrams labeled Steps 1-8 submitted with your letter.

With respect to the operation described above, you wish to make further observations.

First, at all times while the truss spar unit is physically on the Dockwise vessel, the Dockwise vessel will be physically moored/anchored and its main engines not engaged.

Second, the distance from the Aker wharf to the Corpus Christi channel deep submergence hole is approximately 200 yards.

Third, the components of this oil exploration and production facility are extraordinarily large. Yet the operation to float the unit is extraordinarily delicate. As stated above, as the truss spar unit is a new design of oil exploration and production facility, this particular operation has not been attempted previously. However, it is respectfully submitted that using a Dockwise vessel in the above-described transaction will allow the project to be done easier, safer and cheaper than if alternative means were used, such as a semi-submersible barge.

The ballast system on the Dockwise vessels is much more controllable than on any barge. It is far more sophisticated and precise in its ability to match the vessel’s position to that of a pier as well as its ability to compensate for the transfer of an extraordinarily heavy weight from the quay to the ship.

Moreover, the entire operation will be made more efficient by the use of the Dockwise vessels since the hard tank will be transported to the United States from Finland on the Dockwise vessel. To be required to off-load the hard tank so that the project could be done by a barge would take more time, be more expensive and would expose the unit to more potential damage due to increased handling.

Finally, it must be emphasized that the hard tanks are very large, heavy, round and expensive structures that require extensive engineering in order to design and install the cribbing, seafastenings and cradles necessary to hold them in place during transportation as well as loading and discharging. Discharging can be particularly difficult and delicate because the cargo is round and while submerging
for discharge, the unit does not contribute to flotation or buoyancy until a considerable part of it is in the water. Thus, there is an inherent instability at the beginning of the operation that requires precise control over the ballasting procedure.

ISSUE:

Whether the use of foreign-built, owned and flagged vessels in the operation described above is violative 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).

Section 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)

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.

With respect to the operation in question, it is readily apparent that the truss spar unit (or, in the alternative scenario, only the truss) will be laden at one coastwise point (the Aker wharf) and unladen at another coastwise point (the deep submergence hole in the Corpus Christi ship channel). The circumstances of this case that are proffered as obviating the provisions of the Jones Act (e.g., the delicate nature of the cargo, the mooring/anchoring of the vessel with its engines not
engaged, the approximate 200 yard distance) are of no consequence with respect to the administration of this statute. (See, e.g., 19 CFR § 4.80(a) whereby non-coastwise-qualified vessels are prohibited from transporting merchandise between points within a harbor.) The transportation of merchandise in this operation would be effected between coastwise points by a non-coastwise-qualified vessel, a clear violation of 46 U.S.C. App. § 883.

The case of United States v. 1,500 Cords, More or Less, Jackpine Pulpwood, 204 F.2d 760 (1953) is cited in support of your position. In that case the court held that the use of a Canadian-flag tug in gathering floating logs into and between the booms attached to a U.S.-flag steamer in U.S. waters preparatory to the logs being towed coastwise by that steamer did not constitute a transportation of merchandise within the purview of 46 U.S.C. App. § 883. The facts of that case are distinguishable from those currently under consideration. In the former, the Canadian-flag tug did not engage in a lading and unlading of merchandise within the meaning of the Jones Act (see 19 CFR § 4.80b(a), above), whereas the MIGHTY SEVANT 1 and the MIGHTY SERVANT 3 would in fact be engaged in the transportation of merchandise that was laden and unladen at two different coastwise points, an activity expressly prohibited by 46 U.S.C. App. § 883 and the Customs Regulations promulgated thereunder. Consequently, the case cited above is not controlling in this matter.

HOLDING:

The use of foreign-built, owned and flagged vessels in the operation described above is violative of 46 U.S.C. App. § 883.

Sincerely,

Larry L. Burton

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