HQ 115439 - Coastwise Trade; 46 U.S.C. App. § 883 - United States International Trade Commision Rulings

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HQ 115439

August 9, 2001

VES-3-07-RR:IT:EC 115439 GEV

CATEGORY: CARRIER

Jeff W. Ivy
Manager, Government Affairs
Williams Companies, Inc.
1800 South Baltimore
Tulsa, Oklahoma 74119-5284

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

Dear Mr. Ivy:

This is in response to your letter dated July 18, 2001, requesting a ruling regarding the tanker transportation of natural gas, natural gas by-products, and refined products. Our ruling on this matter is set forth below.

FACTS:

The Williams Company, Inc. (“Williams”) is a publicly traded corporation that is engaged in the production, marketing, and transportation of natural gas, natural gas by-products, and refined products across the United States and offshore Gulf of Mexico. Natural gas represents the great majority of the fuel that feeds new electricity generation capacity in the United States. Furthermore, natural gas demand is forecasted to grow significantly in the United States over the next 5 to 10 years. As such, reliable economical supply is vital to the long-term health of the U.S. economy.

As technology develops, thereby allowing the safe recovery of natural gas from offshore fields that are deeper and less accessible to pipeline transportation, Williams is investigating the feasibility of shuttle tankering compressed natural gas as a vehicle for delivery to U.S. markets. The cargo delivered would be compressed natural gas primarily composed of methane, but would also include other
hydrocarbons and inert components that are naturally produced from gas well production. The cargo would be loaded onto the vessel at foreign ports, buoys or offshore production platforms located in foreign or international waters.

ISSUES:

Whether a vessel which loads cargo at foreign ports, buoys or offshore production platforms located in foreign or international waters for delivery to the United States is required to be coastwise-qualified pursuant to 46 U.S.C. App. § 883?

2. Whether a vessel operating in the manner described above which makes deliveries of cargo into multiple United States ports without returning to its international port of supply is required to be coastwise-qualified pursuant to 46 U.S.C. App. § 883.

LAW AND ANALYSIS:

The coastwise law pertaining to the transportation of merchandise, § 27 of the Act of June 5, 1920, as amended (41 Stat. 999; 46 U.S.C. App. § 883, often called the “Jones Act”), provides, in pertinent part, that::

No merchandise,... shall be transported by water, or by land and water,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 other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States...

Section 4.80b(a), Customs Regulations, promulgated pursuant to 46 U.S.C. App. § 883, provides, in pertinent part, that:

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, regardless of the origin or ultimate destination of the merchandise.
(Emphasis added)

The navigation laws and regulations administered by Customs, including 46 U.S.C. App. § 883 and 19 CFR § 4.80b(a), 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.

Furthermore, § 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 first issue presented for our consideration, cargo which is loaded at foreign ports, buoys or offshore production platforms located in foreign or international waters for delivery to the United States is not considered to be transported coastwise within the meaning of 19 CFR § 4.80b(a) in view of the fact that such points of loading are not coastwise points. Consequently, a vessel engaging in such transportation is not required to be coastwise-qualified (i.e., U.S.-built, owned and documented). It should be noted, however, that buoys or offshore production platforms that are beyond the 3-mile U.S. territorial sea but attached to the OCS for purposes of exploration, development or production are considered coastwise points pursuant to the OCSLA as discussed above. Vessels transporting cargo loaded at such locations for delivery to the United States are required to be coastwise-qualified.

In regard to the second issue, multiple coastwise points of delivery do not constitute an engagement in the coastwise trade when the point of lading for the delivered cargo is foreign. A vessel engaging in such transportation is therefore not required to be coastwise-qualified. Consequently, a non-coastwise-qualified vessel may, for example, load cargo in Canada and deliver a portion of the cargo to Boston, then proceed to New York to deliver the remainder of the Canadian-laden cargo.

HOLDINGS:

A vessel which loads cargo at foreign ports, buoys or offshore production platforms located in foreign or international waters for delivery to the United States is not required to be coastwise-qualified pursuant to 46 U.S.C. App. § 883, provided such buoys or offshore platforms are not coastwise points pursuant to the OCSLA.

A vessel operating in the manner described above which makes deliveries of cargo into multiple United States ports without returning to its international port of supply is not required to be coastwise-qualified pursuant to 46 U.S.C. App. § 883.

Sincerely,

Larry L. Burton

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