HQ 116599 - 46 U.S.C. App. §883; Coastwise Transportation of Merchandise; Cement Unloader Barge - United States International Trade Commision Rulings

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HQ 116599

February 27, 2006

VES-3-RR:BSTC:CCI 116599 CK

CATEGORY: CARRIER

Timothy W. Strickland, Esq.
Fowler Rodriguez & Chalos
4 Houston Center, Suite 1560
1331 Lamar
Houston, Texas 77010

RE: 46 U.S.C. App. §883; Coastwise Transportation of Merchandise; Cement Unloader Barge

Dear Mr. Strickland:

This letter is in reply to your ruling request dated February 6, 2006, on behalf of your client, Global Cement. Your correspondence and the exhibits attached thereto, supplement Global Cement’s initial ruling request dated January 11, 2006. Our reply follows.

FACTS:

Global Cement (“Global”), a Texas wholesaler of cement sells cement to small and medium size companies in Houston and the surrounding areas. At this time Global purchases the cement from another U.S. supplier. The supplier’s barges are loaded with cement in New Orleans and are transported to the Port of Houston where they are unloaded at Global’s dock. Recently, Global has been exploring other options to obtain a higher grade of cement while at the same time reducing costs and complying with all applicable laws and regulations.

You state that Global decided it should purchase a barge in which cement would be stored at Global’s dock at the Port of Houston. You began seeking barges with capacities of 10,000-40,000 metric tons that are self-unloading and double hulled. You found a Russian company that can manufacture such barges. You state that Global would like to purchase one of the Russian cargo ocean barges and use the barge as a floating cement silo permanently moored to Global’s dock facility. The barge would be U.S.-flagged.

The barge would be kept in Houston and would be loaded with cement approximately every four to six (4-6) weeks. An ocean carrier with pneumatic discharging equipment will bring in the foreign cement. The carrier will discharge the cement onto the barge or bulk carriers using Global’s proposed pneumatic equipment. In the interim, the barge would serve as a floating silo storing the cement at the Global dock at the Port of Houston. Cement would then be pneumatically pumped to Global’s loading silos and ultimately into customer’s tanker trucks.

In addition to the submission you made in this case, Global made an initial written submission dated January 11, 2006, which is supplemented by your correspondence. In that submission Global states it wishes to get approval to purchase three foreign-made ocean barges for storage of cement. The cement will be unloaded with self-unloading vessels to these storage barges as close to the Global facility as possible. The filled barges will then be rotated in position for unloading. Photos were included to illustrate the proposal.

ISSUE:

Whether the proposed activity is permitted or prohibited pursuant to the coastwise merchandise statute, 46 U.S.C. App. § 883.

LAW AND ANALYSIS:

Title 46, United States Code Appendix, section 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 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 a vessel built in, documented under the laws of, and owned by citizens of the United States (i.e., a coastwise-qualified vessel).

The coastwise laws generally apply to points in the territorial sea, which is 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.

U.S. Customs and Border Protection (“CBP”) has long held that the use of a stationary, non-coastwise-qualified crane vessel to load and unload cargo or construct or dismantle a marine structure is not coastwise trade and does not violate the coastwise laws provided that any movement of merchandise 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. However, the movement of merchandise while it is suspended from the crane, even between two points in a harbor, which is effected by a movement of the vessel which is neither necessary nor incidental to a lifting operation by the crane would constitute the coastwise transportation of merchandise within the purview of 46 U.S.C. App. § 883. See, for example, HQ 106351 dated November 1, 1983 and HQ 113858 dated April 4, 1997. See also § 4.80(a), CBP Regulations (19 CFR § 4.80(a)).

In HQ 115630, dated March 25, 2002, we held that where lateral movement of the entire floating crane/barge was required to lift and place its load, such activity constituted the coastwise transportation of merchandise because it exceeded movement necessary and incidental to a lifting operation.

In HQ 115940, dated April 17, 2003, we were asked whether the use of a crane barge and deck barge in unloading boulders for placement on the ocean floor was coastwise activity. The barges were to be brought alongside of the crane barge and the crane (which was affixed to its barge in one position) was to offload these boulders one by one and place them on the ocean floor. We held that since the only movement of the crane barge was to reposition itself for proper unloading, and the crane barge would not be used to transport any material utilized on the project, then this was not a coastwise activity requiring a coastwise-qualified vessel.

In HQ 110823, dated February 1, 1990, a non-self-propelled barge was fitted with a Siwertell ship unloader and used to unload cargo ships. The barge was moved along the vessel, but when the barge was moved or repositioned to unload it did not carry any merchandise whatsoever. We found that the use of that non-coastwise-qualified barge for unloading operations from a fixed position would be permissible as long as no merchandise was onboard the barge during its repositioning for further unloading.

The same analysis would apply to the proposal you present. You state that from a stationary position the non-coastwise-qualified barge unloader would pump out the cement from a cargo vessel using pneumatic equipment onto the floating barge for storage, the cement would then be pumped into Global’s loading silos on land for delivery into customer’s tanker trucks. Based on the facts you present the barge would not be engaged in prohibited coastwise activities and would not be in violation of 46 U.S.C. App. §883. However, the same cannot be said about the use of three rotating storage barges discussed in Global’s initial submission of January 11, 2006.

In Global’s submission it states that three barges will be used in rotation. The enclosed photos illustrate that the cement storage barges will be rotated through a staging area to load, unload, and store cement. This would mean that the foreign-built barges will move through the rotation while carrying merchandise, i.e., cement, that is loaded at one U.S.-point and unloaded at a different U.S.-point. This would be a clear violation of 46 U.S.C. App. §883. (See 19 CFR §4.80(a) which provides that non-coastwise-qualified vessels may not transport passengers or merchandise between U.S. points, including points within a harbor.)

HOLDING:

The proposed activity of the non-coastwise-qualified barge to act as a stationary floating storage silo is permitted pursuant to the coastwise merchandise statute, 46 U.S.C. App. § 883. However, it would be a violation of 46 U.S.C. App. § 883 for multiple barges to transport cement between locations within U.S. territorial waters.

Sincerely,

Glen E. Vereb

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