VES-3-24 OT:RR:BSTC:CCR H269478 WRB
Richard A. Stanford, Esq.
Stanford Law Firm
P.O. Box 42430
Houston, TX 77242-2430
RE: 46 U.S.C. § 55102; Coastwise Trade; Floating Drydock
Dear Mr. Stanford:
This letter is in response to your September 21, 2015, ruling request on behalf of your client, [ ] (hereinafter “the requestor”), and November 30, 2015, supplement thereto. In your letter, you request a ruling regarding the use of a floating drydock to provide flotation for certain deep draft drilling rigs. Our decision follows.
FACTS
The requestor proposes to construct a floating drydock [ ] at a foreign location
[ ]. Upon delivery, the drydock will be owned by, or leased to and operated by [ ], which is not a citizen of the United States. The drydock will be flagged at delivery under Panamanian flag or other flag of convenience, and will be foreign-built, foreign-owned and operated. The drydock will be towed to a shipyard (hereinafter the “shipyard”) in the territorial waters of the United States located on the [ ] (hereinafter the “ship channel”) in [ ], which is owned and operated by [ ]. The function of the drydock is to raise vessels out of the water to facilitate repair and refurbishment of the portion of the vessel that is normally underwater and then to re-launch the vessel by lowering it back into the water upon completion of the work.
The requestor contemplates the use of the drydock to provide flotation for certain deep-draft drilling rigs being repaired and refurbished at the shipyard. To provide this flotation, requestor proposes to disconnect the drydock from its location at the shipyard and tow it to an offshore location near the mouth of the ship channel beyond the territorial waters of the United States [ ]. Once there, the drydock would be submerged, the drilling rigs floated over the submerged drydock floor by tugs, and then the drydock de-ballasted, raising the drilling rigs from the water. Mooring appliances may be installed, either temporarily or permanently, on the sea bottom at this location to facilitate holding the drydock in place during the lading and unlading process. The drydock with drilling rigs laden aboard would then be towed into the ship channel and up to the shipyard for repair and refurbishment.
Upon completion of repair and refurbishment operations, the drydock with drilling rigs aboard would be towed back to the same location where the drilling rigs were laded, the drydock would be submerged, and the drilling rigs unladen by refloating and then moved away by tugs. At that point, the drydock would be de-ballasted and moved back to the shipyard. All movements of the drydock and the drilling rigs would be conducted by coastwise-qualified tugs.
Your client contemplates three alternative scenarios:
1. The drydock would submerge and load a drilling rig at the described offshore location, and then be towed into the shipyard. The drilling rig would remain laden on the drydock and repair and refurbishment work would be conducted. Following the repair and refurbishment work, the drydock with drilling rig remaining onboard would be towed back to the same offshore location for unlading.
2. The drydock would submerge and load a drilling rig at the offshore location, beyond territorial waters and then be towed to a second location at the shipyard where the water would be deep enough to submerge the drydock. The drydock would then be submerged and the drilling rig floated off. The drilling rig would undergo repair and refurbishment operations, including inclining experiments, and then be moved back to the deep location near the shipyard where it had been unladed from the drydock. The drydock would then be submerged and reload the drilling rig at the same exact location where it submerged for unloading. The drydock with drilling rig onboard would then be towed back to the offshore location for unlading.
3. The drydock would submerge and load a drilling rig at the offshore location, and then be towed to a second location at the shipyard where the water would be deep enough to submerge the drydock. The drydock would then be submerged and the drilling rig floated off the drilling rig and then moved to a quay at the shipyard for the repair and refurbishment work afloat. The drilling rig would undergo repair and refurbishment operations, and then be moved back to the deep location near the shipyard where it had been unladed from the drydock. The drydock would then be submerged and reload the drilling at the same exact location where it submerged for unloading. The drydock with drilling rig onboard would then be towed back to the offshore location for unlading.
ISSUE
Whether the proposed activities described in the FACTS section above violate 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. A vessel that is built in, documented under the laws of, and owned by citizens of the United States, and which obtains a coastwise endorsement from the U.S. Coast Guard, is referred to as “coastwise-qualified.” Title 46, United States Code, § 55102 (46 U.S.C. § 55102), provides, in pertinent part:
Except as otherwise provided in this chapter or chapter 121 of this title, 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 foreign port, unless the vessel—
(1) is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and
(2) has been issued a certificate of documentation with a coastwise endorsement under chapter 121 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.
(emphasis added).
The regulations promulgated under the authority of 46 U.S.C. § 55102, provide in pertinent part:
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 C.F.R. § 4.80b(a).
These regulations further clarify the term coastwise points as “including points within a harbor.” See 19 C.F.R. § 4.80(a).
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 the purposes of this ruling, the term “territorial waters” includes both the internal waters and the navigable waters of the United States. Title 46, United States Code, § 55102(a)(2) provides that “the term ‘merchandise’ includes valueless material.”
CBP has consistently held that no coastwise transportation occurs in violation of 46 U.S.C. § 55102 when merchandise is laden at one coastwise point, transported to another coastwise point where it remains aboard the vessel, and is subsequently unladen at the same point of lading. See e.g., HQ H084098 (Nov. 20, 2009); HQ H047936 (Dec. 30, 2008); HQ H054167 (Mar. 17, 2009); and HQ 110127 (Apr. 5, 1989). In addition, CBP has narrowly construed what constitutes the same coastwise point. In HQ W115601 Feb. 28, 2002), CBP found merchandise can be laden and unladen at the same location without violating 46 U.S.C. § 55102 but if the merchandise was unladen even a vessel width from the dock where it is laden, with no contact with the dock at any point, then a violation of 46 U.S.C. § 55102 occurred. In HQ H028458 (June 19, 2008), CBP held that merchandise transported on a non-coastwise-qualified vessel from Dock #2 of a U.S. facility to Dock #1 of the same facility, via a foreign port, was a violation of 46 U.S.C. § 55102.
With regard to Scenario 1, the drilling rigs are proposed to be laden and unladen at the same offshore location beyond the territorial waters of the United States. The drilling rigs are merchandise within the meaning of 46 U.S.C. § 55102 once placed aboard the drydock. The drilling rigs would not be transported between coastwise points as they will only be laden and unladen at the same location beyond the territorial waters of the United States. Consequently, the proposed use of the drydock would not constitute a transportation of merchandise between coastwise points. Therefore, such activity by a non-coastwise-qualified vessel would not be violative of 46 U.S.C. § 55102.
With regard to Scenario 2, on the voyage to the shipyard, the drilling rigs are proposed to be laden at a non-coastwise point beyond the territorial waters of the United States and unladen at a point within the territorial waters of the United States. On the departure voyage, the drilling rigs are proposed to be laden at a point within the territorial waters of the United States and unladen at a non-coastwise point beyond the territorial waters of the United States. Accordingly, the drilling rigs would not be transported between coastwise points, and the proposed use of the drydock would not constitute a transportation of merchandise between coastwise points. Therefore, such activity by a non-coastwise-qualified vessel would not be violative of 46 U.S.C. § 55102.
With respect to Scenario 3, we are of the opinion that the same result obtains as in Scenario 2, above. The only difference between Scenario 2 and Scenario 3 is the activities of the drilling rigs after unlading at a point within the territorial waters of the United States. In Scenario 3, the drilling rigs would be moved to quayside after unlading. Provided all towing of vessels within territorial waters is performed by coastwise-qualified tugs, there would be no violation of 46 U.S.C. § 55102, or the coastwise towing statute, 46 U.S.C. § 55111.
HOLDING
The proposed activities, as described above, would not be violative of 46 U.S.C. § 55102.
Sincerely,
Lisa L. Burley
Chief/Supervisory Attorney-Advisor
Cargo Security, Carriers and Restricted Merchandise Branch
Office of International Trade, Regulations and Rulings
U.S. Customs and Border Protection