VES-3-24-OT:RR:BSTC:CCI H152956 WRB
Brian T. McCarthy, Esq.
Chalos, O'Connor & Duffy
366 Main Street
Port Washington, NY 11050-3120
RE: Coastwise Transportation; lightering; 46 U.S.C. § 55102
Dear Mr. McCarthy:
This letter is in response to your correspondence dated March 1, 2011, on behalf of your client, Kinder Morgan Bulk Terminals L.L.C. (hereinafter “KMBT”), in which you inquire about whether non-coastwise-qualified bulk carriers or barges may engage in lightering operations whereby cargo is transported from a U.S. port to ocean-going vessels anchored outside U.S. territorial waters for carriage to foreign ports without violating 46 U.S.C. § 55102. Our ruling on your request follows.
FACTS
Kinder Morgan Bulk Terminals provides terminal services for bulk cargoes to foreign-flagged ocean-going vessels that call at U.S. ports located along the Gulf of Mexico. Some of the larger foreign-flagged ocean-going bulk carrier vessels that call KMBT terminals cannot be fully loaded at these facilities due to draft restrictions. Specifically, if these larger, foreign-flagged, ocean-going bulk carriers were loaded to their maximum capacity at KMBT facilities, the vessels’ drafts would exceed the maximum draft of the berths and the ship channels in the relevant ports.
To ensure these ocean-going bulk carrier vessels can safely transit from KMBT’s terminals to foreign ports, the vessels are only partially loaded. To maximize the amount of cargo to be loaded on these vessels, KMBT desires to transport cargoes loaded at U.S. ports to a point outside the territorial waters of the United States in the Gulf of Mexico in order to “top-off” those larger foreign-flagged ocean-going bulk carriers that are unable to be fully loaded at KMBT's terminals in U.S. Gulf ports.
The planned “topping-off” operations would use foreign-flagged bulk carriers and/or barges to transport cargo from one or more U.S. ports to a point outside the territorial waters of the United States in the Gulf of Mexico. These vessels would then discharge their cargoes to the larger foreign-flagged, ocean-going bulk carriers at anchor to ensure these vessels are loaded to their maximum capacity. It is anticipated that the vessels will conduct these “topping-off” operations in the presently-delineated lightering areas currently utilized to lighter large, foreign-flagged tanker vessels. As there are no draft restrictions within these lightering zones, the ocean-going, foreign-flagged bulk carrier vessels can be loaded to their maximum capacity prior to departing for foreign ports.
It is anticipated that a foreign-flagged transshipment vessel anchored in the offshore transshipment area may also be utilized to assist in these operations. If a transshipment vessel is utilized, it would be a foreign-flagged vessel or barge that would receive cargo from the vessels transferring the cargo from the port to the lightering area at a point outside the territorial waters of the United States in the Gulf of Mexico. The foreign-flagged, ocean-going bulk carrier vessel would then receive the “top-off” cargo from the transshipment vessel, rather than directly from the transferring vessels. Once the larger, foreign-flagged, ocean-going bulk carrier vessels are fully loaded, these vessels will directly proceed with all their laded cargo to foreign ports.
Regarding the possibility that KMBT may utilize a tug and barge operation in place of the self-propelled bulk carriers as transfer vessels, KMBT states that if a tug and barge are utilized, any such operation would be conducted by coastwise-qualified tugs and barges only. There does not appear to be any intention to utilize integrated tugs and barges in this operation. However, if such vessels would be utilized (i.e., ITBs), they would also be coastwise-qualified.
You postulate two different potential scenarios for the proposed “topping-off” operations, outlined below:
SCENARIO #1: 2 Vessels – Transfer Vessel & Bulk Carrier:
The first scenario relates to cargo operations between a transfer vessel and a foreign-flagged, ocean-going bulk carrier vessel. In this scenario, a foreign-flagged ocean-going bulk carrier vessel, which is partially loaded with cargo at one or more U.S. ports, would rendezvous with the transfer vessel at a predetermined location outside the territorial waters of the United States. The shuttle vessel would transport cargo loaded from one or more U.S. ports. After rendezvousing with the anchored foreign-flagged, ocean-going bulk carrier, the transfer vessel would transfer the U.S.-laden bulk cargoes to that vessel. Once the foreign-flagged, ocean-going bulk carrier vessel is fully loaded (i.e. “topped-off”), it would proceed directly onward to its foreign destination.
In this scenario, there may be occasions where the foreign-flagged transfer vessels will be unable to discharge their entire U.S.-origin cargo into the foreign-flagged, ocean-going bulk carriers. In such instances, the foreign-flagged transfer vessel would return and discharge the remaining cargo at the same point where the cargo had originally been loaded.
SCENARIO #2: 3 Vessels – Transfer Vessel, Transshipment Vessel & & Bulk Carrier:
The second scenario involves the use of a transfer vessel and a transshipment vessel. In this scenario, the transfer vessel would load bulk cargo at one or more U.S. points and proceed to the “topping-off” site outside the territorial waters of the United States to rendezvous with the anchored transshipment vessel. The transfer vessel would then discharge its cargo into the transshipment vessel at a point outside U.S. territorial waters. A foreign-flagged, ocean-going bulk carrier vessel, which would have already partially loaded cargo from one or more U.S. ports, would rendezvous with the transshipment vessel at the “topping-off' site. The transshipment vessel would then transfer the U.S.-loaded bulk cargo it received from the transfer vessel(s) to the foreign-flagged, ocean-going bulk carrier vessel. When fully loaded, the foreign-flagged, ocean-going bulk carrier vessel would proceed directly to its foreign destination with all laded cargo.
There may be instances where the transshipment vessel is loaded with more cargo than a single foreign-flagged, ocean-going bulk carrier can load. In such instances, the transshipment vessel would either:
(1) remain at anchor outside the territorial waters of the United States to top off other foreign-flagged, ocean-going bulk carrier vessels with this residual cargo; or,
(2) discharge the residual cargo at the same point in the same U.S. port where the cargo had been originally loaded by the transfer vessel.
ISSUE
Whether the proposed operations constitute engagement in coastwise trade for purposes of 46 U.S.C. § 55102?
LAW AND ANALYSIS
The Jones Act, former 46 U.S.C. App. § 883 recodified as 46 U.S.C. § 55102, pursuant to P.L. 109-304 (October 6, 2006), states that “a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port” unless the vessel was built in and documented under the laws of the United States and owned by persons who are citizens of the United States. (See also 19 C.F.R. §§ 4.80, 4.80b). Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise qualified.” 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.
For purposes of the Jones Act, merchandise includes “valueless material.” See 46 U.S.C. § 55102(a)(2). U.S. Customs and Border Protection (“CBP”) Regulations promulgated under the authority of 46 U.S.C. § 55102 provide that a coastwise transportation of merchandise takes place when merchandise laden at a coastwise point is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a).
SCENARIO #1: 2 Vessels – Transfer Vessel & Bulk Cargo Vessel:
Regarding the movement of cargo discussed in Scenario 1 above, CBP has previously determined that such movement by vessel does not constitute a violation of 46 U.S.C. § 55102. In Headquarters Ruling Letter H015481, dated October 12, 2007, pertained to similar facts as presented in the current matter. In that matter, foreign-built lighter vessels were used to transport cargo from Kivilina, Alaska, to a foreign-flagged bulk carrier anchored beyond the three-mile U.S. territorial sea. The lightering vessel then discharged all of the cargo laden in Kivilina onto the foreign-flagged bulk carrier, which then transported the cargo to its final destination in various places in Canada and Asia. This movement was not in violation of 46 U.S.C. § 55102 since the merchandise was not unladen at a U.S. coastwise point. Should the transfer vessel return to a coastwise point to discharge residual cargo, it must do so at the same coastwise point where the cargo was originally loaded in order to avoid a violation of 46 U.S.C. § 55102.
SCENARIO #2: 3 Vessels – Transfer Vessel, Transshipment Vessel & Bulk Carrier:
Regarding the movement of cargo discussed in Scenario 2 above, CBP has previously examined similar facts and determined that it does not constitute a violation of 46 U.S.C. § 55102. In Headquarters Ruling Letter 115217, dated December 7, 2000, we determined that the use of a foreign-built, foreign-flagged vessel serving as a Floating Offshore Service Facility (FOSF), anchored to the Outer Continental Shelf (OCS) for the purpose of providing logistics support and other services for the exploration, development or production of OCS resources, did not violate the coastwise laws. In that matter, the FOSF vessel received merchandise and passengers for further delivery to OCS platforms and other units through vessel deliveries from U.S. ports, vessel deliveries from foreign ports, and during visits by the FOSF vessel itself to foreign ports. The merchandise and passengers would be retained onboard the FOSF, then delivered to OCS platforms and other units. We also ruled that the foreign-flagged, foreign-built FOSF vessel would not violate the coastwise laws if it departed from and subsequently returned to its same OCS anchorage without lading or unlading merchandise or passengers at another coastwise point during such transit. The same determination is in effect here. Should the transshipment vessel return to a coastwise point to discharge residual cargo, it must do so at the same coastwise point where the cargo was originally loaded in order to avoid a violation of 46 U.S.C. § 55102.
HOLDING
The proposed operations as described above do not constitute engagement in the coastwise trade for purposes of 46 U.S.C. § 55102.
Sincerely,
George Frederick McCray
Supervisory Attorney-Advisor/Chief
Cargo Security, Carriers and Immigration Branch
Office of International Trade, Regulations & Rulings
U.S. Customs and Border Protection