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HQ 115938

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April, 1, 2003

VES-3-06-RR:IT:EC 115938 LLO

CATEGORY: CARRIER

J. Kelly Duncan, Esq.

Jones Walker
201 St. Charles Ave.
New Orleans, Louisiana 70170-5100

RE: Coastwise Trade, Outer Continental Shelf; 43 U.S.C. §1333(a); 46 U.S.C. App. §§289, 883

Dear Mr. Duncan:

This is in response to your letter dated March 6, 2003, on behalf of your client, [ ], requesting a ruling on the use of non-coastwise qualified liftboats for various activities within United States waters and waters overlaying the Outer Continental Shelf (OCS). You have requested that we expedite our consideration of your request, and that we accord confidential treatment to this matter. Our ruling on the matter follows.

FACTS:

[ ] liftboats are U.S. documented self-propelled, self- elevating work platforms with legs, cranes and living accommodations. When furnishing well services, the liftboats serve as work platforms, equipment staging areas and crew quarters for liftboat personnel engaged in oil and gas well drilling, completion, intervention, construction, maintenance and repair services. The liftboats perform work for and alongside offshore oil or gas platforms. The liftboats also provide services necessary to produce and maintain offshore wells as well as plug and abandonment services at the end of their life cycle. The larger, multipurpose liftboats also are used in well-intervention and perform heavy lifts, support pipeline tie-ins and other construction related projects. [ ]. Services furnished by the liftboats include the installation of compressors, generators, pumps and other oilfield equipment, decks, heliports, well-jackets, stairways, grating, handrails, boat landings and similar equipment and pre-fabricated structural components by the personnel and technicians aboard the liftboats as part of the construction and maintenance operations performed by the liftboats. Other services furnished from the liftboats include fishing for tools, thru-tubing services, logging, multilaterals, milling and cutting, cementing operations, casing patch, wellhead services, completions, coiled tubing, pumping and stimulation, blowout control, snubbing, recompletion, pipeline services (including cleaning, commissioning, testing, flooding and dewatering), well workover, nitrogen jetting, welding, offshore construction, engineering and well and reservoir evaluation services.

These services are furnished in connection with oil and natural gas wells, and platforms on the OCS and shallow waters of the Gulf of Mexico and, from time to time, in internal waters and bays of the United States. The personnel transported on board these liftboats would be involved in the furnishing of these services and would be crew employed by [ ].

With respect to the liftboats equipped with cranes, such cranes are used for lifting and moving equipment to and from a customer’s platform or wellhead in connection with construction, maintenance and other services furnished by the liftboats. You indicate that the liftboats are stationary, with their legs imbedded in the seabed, during any lifting or setting operation. Accordingly, any movement of cargo lifted by a liftboat crane is effected exclusively by the operation of the crane and not by movement of the liftboat. You note that the only persons and goods transported on the liftboats would be personnel, third party technicians and equipment and materials utilized in the furnishing of the services of the liftboats.

You further state that at no time would such personnel, technicians or equipments or materials be moved from one coastwise point to another where they would be discharged except for such personnel, third party technicians and equipment and materials utilized in performing the services from which the liftboat has been engaged. You indicate that the only time that any persons might permanently disembark from a liftboat that is servicing an offshore platform and board the platform is in the event of safety considerations, such as work schedules requiring crew changes, personal health reasons or significant inclement weather, i.e. a hurricane that threatens the seaworthiness of the liftboat and well-being of those aboard. You go on to note that in such an event, such persons will return to a U.S. port by means of coastwise - qualified vessels or helicopters. Thus, there would be no carriage or discharge of any goods, equipment or personnel, other than such as are necessary to the mission, operation and/or navigation of the liftboats.

You further indicate that the subject liftboats will sometimes be time -chartered to customers but will always be operated and crewed by [ ]’s personnel. You state that the liftboats may leave from a U.S. port and travel to one or more coastwise points, carrying its equipment, personnel, third party technicians and one or more representatives from the customer for whom [ ] is performing services and, upon completion of the services, the liftboat will return with its equipment, personnel, technicians and the customer’s representatives to a U.S port. You indicate that on other occasions, the liftboat may travel to another platform to perform services for the same or another customer, but that in no event would any person permanently disembark from the vessel at the offshore site except for safety and health reasons as discussed above.

ISSUE:

Whether the proposed activities may be accomplished by non-coastwise-qualified liftboats as described above in compliance with the coastwise laws.

LAW AND ANALYSIS:

Generally, the coastwise laws prohibit the transportation of passengers or merchandise between points in the U.S. embraced within the coastwise laws in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the U.S. Title 46, United States Code Appendix, §289 (46 U.S.C. App. §289), prohibits foreign vessels from transporting passengers between ports or places in the U.S. either directly or by way of a foreign port, under penalty of $200 for each passenger so transported and landed. Title 46, United States Code Appendix, §883 (46 U.S.C. App. §883), the coastwise merchandise statute often called the “Jones Act,” provides in part that no merchandise shall be transported between points in the U.S. embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the U.S.

The coastwise laws generally apply to points in the territorial sea, which is defined as the belt 3 nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters landward of the territorial sea baseline.

The Customs Bulletin and Decisions Vol. 36, No. 23, dated June 5, 2002, outlined Customs’ position regarding which persons transported on a vessel are considered “passengers” as that term is defined in §4.50(b), Customs Regulations (19 C.F.R. §4.50(b)). Under this interpretation, persons transported on a vessel will be considered passengers unless they are directly and substantially connected with the operation, navigation, ownership, or business of that vessel. Additionally, persons transported free of charge as an inducement for future patronage or good will are considered passengers. Finally, persons transported on a vessel for reasons connected to business interests not directly related to the business of the vessel itself would be considered passengers.

Section 4(a) of the Outer Continental Shelf (OCS) Lands Act of 1953 (43 U.S.C. §1333(a) (OSCLA), provides in part that the laws of the U.S. are extended to:
the subsoil and seabed of the OCS 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 therefromto the same extent as if the OCS were an area of exclusive Federal jurisdiction within a state.

Under the foregoing provision, we have ruled that the coastwise laws and other Customs navigation laws are extended to mobile oil drilling rigs during the period they are secured to or submerged onto the seabed of the OCS. We have applied that principle to drilling platforms, artificial islands, and similar structures, as well as to devices attached to the seabed of the OCS for the purpose of resource exploration operations.

As noted in the facts, several different scenarios are put forth by the inquirer for consideration. With respect to the applicability of 46 U.S.C. App. §883 to the proposed activities, we note as follows

In Ruling Letter 112218 dated July 22, 1992, which involved non-coastwise qualified barges used as oil and gas well drilling, workover, and service vessels, certain of the facts were described as follows:

”workover” and “service” barges are used as platforms or transport vessels for work to be performed at a well. Such work may consist of removing broken tools from a well shaft, repairing tools aboard a barge and placing them in a well shaft, well cleaning and well stimulation (the injection of chemicals into a well in order to stimulate the production of oil and gas). Transportation services may include the carriage of cement, chemicals, and other materials for use in drilling, as well as crew stores. Ruling 112218 went on to hold that: In view of the fact that the vessels in question will have aboard only necessary equipment and crew members during their movements, we have determined that no coastwise laws will be violated in the course of the proposed vessel voyages. (See also, Ruling Letter 113137)

Additionally, in Ruling Letter 108223, dated March 13, 1986, which involved the provision of stimulation services to OCS wells, Customs stated as follows:
we have held that the use of a vessel to blend, mix and place cement in oil wells is not a use of the vessel in coastwise trade. On the basis of this ruling, we have ruled that the use of a non-coastwise qualified vessel in oil well stimulation, described as the blending of specific mixtures of water, hydrochloric acid and other agents and then pumping the blended mixture into an oil field, is not coastwise trade. We have ruled that the transportation of the cement used in the oil wells and that of the chemicals, etc. used in the oil well stimulation is not coastwise trade subject to 46 U.S.C. App. 883 because such transportation is only of supplies incidental to the vessel’s service which are consumed in that service. (See also Ruling Letter 113137)

Furthermore, it should be noted that Customs has held that the equipment of a vessel which will be used by that vessel, is not included in the general meaning of “merchandise” for purposes of 46 U.S.C. App. §883. Such articles include that which is “necessary and appropriate for the navigation, operation or maintenance of the vessel and for the comfort and safety of the persons on board.” (Treasury Decision 49815(a), dated March 13, 1939). Customs has specifically ruled that, “Vessel equipment placed aboard a vessel at one U.S. port may be removed from the vessel at another U.S. port at a later date without violation of the coastwise laws.” (Ruling Letter 102945) Decisions as to whether a given article comes within the definition of “vessel equipment” are made on a case - by - case basis. The articles necessary to carry out the vessel functions described above, constitute equipment that is fundamental to the vessel’s operation and is not “merchandise” for purposes of 46 U.S.C. App. §883. Any additional cargo that does not constitute equipment, and is transported coastwise in the non-qualified liftboats would be transported in violation of coastwise laws.

With respect to the liftboats equipped with cranes, such cranes are used for lifting and moving equipment to and from a customer’s platform or wellhead in connection with construction, maintenance and other services furnished by the liftboats. The liftboats are stationary, with their legs embedded in the seabed, during any lifting or setting operation.

Customs has held that the use of a non-coastwise qualified crane vessel to load and unload cargo is not coastwise trade and does not violate 46 U.S.C. App. §883, provided that any transportation of the cargo is effected exclusively by the operation of the crane and not by movement of the vessel except for necessary movement which is incidental to a lifting operation while it is taking place (see Ruling Letter 111446). In the present matter it is stated that the crane vessel will remain stationary during actual lifting and setting operations. In light of these facts we find that the proposed lifting and setting operations are permissible under 46 U.S.C. App. §883.

In regard to the applicability of 46 U.S.C. App. §289, the inquirer states that the only persons transported on the liftboats would be crew and such personnel utilized in the furnishing of the services by the liftboats. At no time would such personnel be transported from one coastwise point to another except for safety considerations, crew changes, health reasons, or inclement weather. As such, these personnel would not be “passengers” within the meaning of 19 C.F.R. §4.50(b). Consequently, their proposed transportation would not violate 46 U.S.C. App. §289.

In view of the fact that the vessels in question will have aboard only necessary equipment and personnel during the activities in question, we have determined that no coastwise laws will be violated in the course of their proposed usage.

HOLDING:

As detailed in the Law and Analysis portion of this ruling, the proposed activities as described above do not constitute coastwise trade therefore those activities may be accomplished by the subject non-coastwise qualified liftboats.

Sincerely,

Glen E. Vereb
Chief

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