HQ H015078 - Coastwise Trade; 46 U.S.C. § 55102; Outer Continental Shelf; 43 U.S.C. § 1333(a) - United States International Trade Commision Rulings

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HQ H015078

November 7, 2007

VES-3-15-OT:RR:BSTC:CCI H015078 GG

CATEGORY: CARRIER

Mr. Arlen Molmen
7801 Miller Road 2
Houston, Texas 77049

RE: Coastwise Trade; 46 U.S.C. § 55102; Outer Continental Shelf; 43 U.S.C. § 1333(a)

Dear Mr. Molmen:

This is in response to your correspondence of July 30, 2007, on behalf of Petrobas America, Inc. (Petrobas), requesting a ruling on the applicability of the coastwise laws to the installation of five buoyancy cans on risers for a drilling platform in the Gulf of Mexico using foreign-flag vessels. Our ruling on this matter is set forth below.

FACTS

Petrobas, an oil company, contemplates a project to install the base for a drilling platform. The floating production storage offloading platform will be installed in the Gulf of Mexico at Walker Ridge, Blocks 206, 249 and 250, 150 miles south of Fourchon, Louisiana and 360 miles east of Corpus Christi, Texas. The project under consideration pertains to the placement of the base for the aforementioned platform and it is expected that the base will be completed in 2008. The base consists of risers, which will be the anchoring point on the ocean floor for the attachment of the drilling platform to be added at a later date. Five risers will be permanently attached to the sea floor, which will permanently anchor the platform to the seabed. A buoyancy can will be attached with a chain to each of the five risers. It is contended that the buoyancy cans will serve as buoy markers so that the risers can be located after they have been installed on the ocean floor when the platform is completed and towed out to the location. Each buoyancy can weighs approximately 300 tons, and will be connected to the flexible riser by chain, in the depth of approximately 100 meters of water. The buoyancy cans are temporary, and will be removed and returned to the point of origin when the platform is attached to the risers on the sea floor. As some of the buoyancy cans may be acquired in Corpus Christi, Texas, they will be returned to Corpus Christi. The work will be done on site with either the M/V JUMBO JAVELIN or the M/V FAIRPLAY. Both vessels are registered in The Netherlands. It is anticipated that the project will be completed in 2009 or 2010.

ISSUE

Whether the use of buoyancy cans as described above is violative of 46 U.S.C. § 55102.

LAW AND ANALYSIS

Generally, the coastwise laws prohibit the transportation of passengers or merchandise between points in the United States 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 United States. Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise qualified.”

Title 46, United States Code, § 55102 (46 U.S.C. § 55102, the merchandise coastwise law commonly referred to as the “Jones Act,” recodified by Pub. L. 109-304, enacted on October 6, 2006), 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 and documented under the laws of the United States and owned by persons who are citizens of the United States (i.e., a coastwise-qualified vessel). A coastwise-qualified vessel is one that is U.S.-built, owned and documented. Pursuant to Title 19, United States Code, section 1401(c) (19 U.S.C. § 1401(c)) the word “merchandise” means goods, wares and chattels of every description and includes merchandise the importation of which is prohibited. Furthermore, pursuant to Title 19, Code of Federal Regulations, section 4.80b, promulgated pursuant to the Jones Act, “[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.” 19 CFR § 4.80b(a) (2007).

Likewise, section 55103 of Title 46 (46 U.S.C. § 55103) prohibits the transportation of passengers between points in the United States embraced within the coastwise laws, either directly or by way of a foreign port, in a non-coastwise-qualified vessel. We note that for purposes of section 55103, "passenger" is defined as " ... any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership or business." See 19 CFR 4.50(b).

In interpreting the coastwise laws (sections 55102 and 55103 as noted above), U.S. Customs and Border Protection (CBP) has consistently ruled that a point in the United States territorial waters is a point in the United States embraced within the coastwise laws. The territorial waters of the United States consist of 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 coastline differ.

Furthermore, section 4(a) of the Outer Continental Shelf Lands Act of 1953, as amended (43 U.S.C. § 1333(a); “OSCLA”), 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 therefromto 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, to add, among other things the language concerning temporary attachment to the seabed. The legislative history associated with this amendment is telling, wherein it provides in pertinent part: “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 drill string, pipes, or other appurtenances, on the OCS for exploration, development, or production purposes.” H. Rep. No. 95-590; 1978 U.S.C.C.A.N. 1450, 1534.

Under the foregoing provision, we have ruled that the coastwise laws and other Customs and navigation laws, including the laws on entrance and clearance of vessels, and the provisions of dutiability of merchandise, are extended to mobile oil drilling rigs during the period they are secured to or submerged onto the seabed of the outer Continental Shelf (OCS). See Treasury Decision (T.D.) 54281(1). We have applied that principle to drilling platforms, artificial islands, and similar structures, as well as to devices attached to the seabed of the outer Continental Shelf 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; see also, HQ 107579 (May 9, 1985). As such, the provisions for dutiability of merchandise, as well as the coastwise and other navigation laws apply to production platforms. See HQ 113412 (June 22, 1995) (citing C.S.D. 83-52).

With regard to the subject buoyancy cans, you state that the purpose of the cans is to act as buoy markers so that the risers can be located after they have been installed on the ocean floor when the platform is completed and towed out to the location. At the outset we note that the actual use of such cans does not in and of itself constitute a violation of the coastwise laws. It should be further noted, however, that these laws can be implicated as a result of such use.

CBP has long held that that marker buoys merely attached to the OCS to mark drilling sites are not considered “installations” or “other devices” within the meaning of the OCSLA and are therefore not coastwise points. See HQ 110959 (August 8, 1990) (installation site on OCS at which the only contact with seabed is temporary wire rope, chain, and anchor mooring system intended to hold hull and superstructure on location during exploration, development and production on OCS, not a coastwise point during installation of marker buoys until time of attachment to drill ship) (citing C.S.D. 81-95, modified by C.S.D. 84-96); see also, HQ H012082 (August 27, 2007).

However, buoys or offshore 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. See HQ 115439 (August 9, 2001). In the instant case, the subject buoyancy cans would be attached to permanently installed risers. This differentiates the subject cans from the aforementioned buoy markers as described above, which are merely attached to the OCS to mark drilling sites. Here, the risers are permanently attached to the seabed of the OCS for the purpose of resource exploration, development or production. Consequently, the risers would be considered coastwise points pursuant to the OCSLA. As a result, the buoyancy cans that would be attached to the risers would also be considered coastwise points to which the coastwise laws apply. See C.S.D. 81-95, modified by C.S.D. 84-96, supra (wellhead casing sunk into OCS seabed for purpose of resource production concluded to be coastwise point); see also, HQ 116350 (January 18, 2005) (citing C.S.D. 89-115 (installation site on OCS where foundation templates, piles, and mooring system for future oil and gas production considered coastwise point)).

Based on the information provided, it appears that some of the buoyancy cans will be transported from a coastwise point (Corpus Christi, Texas) to their riser installation sites described above (i.e., other coastwise points). We have held that the transportation of buoys from a coastwise point to a point within the U.S. territorial waters is a “transportation of merchandise” and must be accomplished by a coastwise-qualified vessel. See HQ 112693 (July 14, 1993). Likewise, the return of such buoys must also be transported via a coastwise-qualified vessel. Id. In the instant case, the risers would indeed constitute coastwise points as noted above. Accordingly, the coastwise laws would apply to the transportation of the buoyancy cans from Corpus Christi to their respective riser installation sites, and their subsequent return to Corpus Christi.

Finally, we note that some of the buoyancy cans may be of foreign origin. Cargo which is loaded at foreign ports 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 a foreign port is not a coastwise point; therefore a vessel which effects such transportation is not required to be coastwise qualified pursuant to 46 U.S.C. § 55102. See HQ 115439, supra. However, it should be noted that issues concerning entry and duty would be implicated with respect to the cargo. (See C.S.D. 83-52, supra).

HOLDING

The use of the subject buoyancy cans is not in and of itself violative of 46 U.S.C. § 55102. However, such usage can implicate the coastwise laws as discussed in the Law and Analysis portion of this ruling.

Sincerely,

Glen E. Vereb
Chief

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