VES-3-02-OT:RR:BSTC:CCR H337433 HKC
Constantine G. Papavizas, Esq.
Winston & Strawn LLP
1901 L. Street, N.W.
Washington, DC 20036
RE: MODIFICATION OF H335695 (Jan. 5, 2024); Coastwise Transportation; Outer Continental Shelf; Wind Turbines; 46 U.S.C. 55102 and 55103; 19 CFR 4.80a and 4.80b; 43 U.S.C. 1333.
Dear Mr. Papavizas:
This letter is in further response to your October 25, 2023 ruling request on behalf of your client [ ] regarding whether the installation of wind turbine generators and associated operations on the U.S. outer continental shelf ("OCS"), as described below, would violate the coastwise laws.[1] Our decision follows.
FACTS
The following facts are from your October 25, 2023 ruling request and subsequent correspondence.[2] Your client proposes to install approximately [ ] wind turbine generator ("WTG") units for a project organized by [ ]. The project is located in federal waters on the OCS located [
]. WTG installation will commence in [ ].
The proposed transportation of the WTG units from a U.S. port located on the eastern seaboard, to installation sites on the U.S. Outer Continental Shelf ("OCS") will be conducted by a coastwise-qualified tug and a coastwise-qualified barge (the "Tug and Barge"). At the installation sites, the WTGs will be installed by a foreign-flagged jack-up vessel ("Jack Up Vessel"), the [ ], which was constructed in [ ] and registered in [ ]. Monopile foundations and transition pieces will already be installed when the jack-up vessel commences WTG installation.
Prior to installation, the Jack Up Vessel will travel to the first WTG installation site on the U.S. OCS under its own power, secure its retractable legs to the seabed, and jack up to installation height. After the Jack Up Vessel establishes itself at the installation site, the coastwise-qualified Tug and Barge will moor alongside the Jack Up Vessel, which will remain grounded on the OCS. The components for a single WTG, contained in shipping frames will be lifted onto the deck of the Jack Up Vessel using the Jack Up Vessel's crane. Additionally, one or more shipping containers containing WTG bolts and nuts, spare parts for the Jack Up Vessel, and provisions will be laded on the Jack Up Vessel from the coastwise-qualified Tug and Barge. Finally, a second set of shipping containers, consisting of office spaces, tools, rigging equipment, and spare parts for the Jack Up Vessel will be laded onto the Jack Up Vessel from the coastwise-qualified Tug and Barge.
After receiving WTG components from the Tug and Barge, crewmembers onboard the Jack Up Vessel will install the WTG units onto the pre-constructed monopile foundations. The Jack Up Vessel will remain stationary on the seabed via retractable legs throughout this process. Once installation is complete, the Jack Up vessel will then proceed to the next WTG installation site under its own power, while transporting the empty shipping frames and the containers described above. At the next installation site, the empty shipping frames, and shipping containers filled with waste, dirty rags, etc. will be offloaded onto the coastwise-qualified Tug and Barge, and a new set of WTG components and containers will be laded aboard the Jack Up Vessel. All WTG bolts and nuts will be consumed in the WTG construction process before the Jack Up Vessel departs the initial installation site. Accordingly, the Jack Up Vessel will not transport any WTG components between WTG sites. The Tug and Barge will then return to a U.S. port located on the eastern seaboard. The second set of shipping containers, consisting of office spaces and tools etc., will remain on the Jack Up Vessel until all WTGs have been installed.
This process will be repeated at each installation site. Marine crew responsible for operating the Jack Up Vessel and project crew responsible for WTG installation and project oversight will remain aboard the Jack Up Vessel throughout. Once installation is complete at the final installation site, the containers containing office spaces and tools etc. will be unladed onto the coastwise-qualified Tug and Barge and returned to a U.S. port located on the eastern seaboard.
ISSUES
1. Whether the transportation of the WTG components by a coastwise-qualified tug and barge from a U.S. port located on the eastern seaboard, to an anchored, non-coastwise-qualified Jack Up Vessel located on the U.S OCS violates the Jones Act, 46 U.S.C. 55102?
2. Whether the installation of the subject wind turbine generators by the non-coastwise-qualified Jack Up Vessel on the OCS violates the Jones Act, 46 U.S.C. 55102?
3. Whether transportation of certain empty shipping frames, containers, tools, and materials as described above between coastwise points by the non-coastwise-qualified Jack Up Vessel violates the Jones Act, 46 U.S.C. 55102?
4. Whether the transportation of the marine crew and project crew between coastwise points by the non-coastwise-qualified Jack Up Vessel violates the Passenger Vessel Services Act, 46 U.S.C. 55103?
LAW AND ANALYSIS
The coastwise law applicable to the transportation of merchandise, known as the Jones Act, is found at 46 U.S.C. 55102,[3] and 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 a 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.
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. 33 CFR 2.22(a)(2). In addition, Section 4(a)(1) of the Outer Continental Shelf Lands Act of 1953 ("OCSLA"), as amended, provides that the Constitution and laws and civil and political jurisdiction of the United States are extended to:
i) the subsoil and seabed of the outer Continental Shelf;
ii) all artificial islands on the outer Continental Shelf;
iii) 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, including non-mineral energy resources; or
iv) any such installation or other device (other than a ship or vessel) for the purpose of transporting or transmitting such resources.[4]
(Emphasis added).
Accordingly, the OCSLA, as amended in 2021, extends U.S. jurisdiction to devices attached to the seabed of the OCS for the purpose of producing non-mineral energy such as wind energy.
Issue One: Whether the Transportation of the WTG Components between points in the U.S. and the Jack Up Vessel on the OCS on the coastwise-qualified Tug and Barge Violates 46 U.S.C. 55102
The Jones Act specifically prohibits the coastwise transportation of "merchandise" between coastwise points by non-coastwise qualified vessels. Pursuant to 19 U.S.C. 1401(c), the word "merchandise" is defined as "goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31." Further, 46 U.S.C. 55102(a) also provides: "[m]erchandise includes (1) merchandise owned by the United States Government, a State, or a subdivision of a State; and (2) valueless material." For purposes of the Jones Act, merchandise also includes "valueless material."[5] Accordingly, the WTG components being transported offshore would constitute merchandise.
To determine if the proposed transportation occurs between coastwise points, we must examine the points at which the subject merchandise will be laden and unladen. The Jones Act extends to points on 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.[6] OCSLA Section 4, as amended by the 2021 NDAA, extends U.S. law to "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, including non-mineral energy resources."[7]
As outlined in the request, a coastwise-qualified Tug and Barge will lade the WTG components at a U.S. port located on the eastern seaboard and they will be unladed onto the Jack Up Vessel, which will be attached to the seabed of the OCS. Prior CBP rulings interpreted OCSLA Section 4 (which previously did not include a reference to "non-mineral energy resources") to include "devices attached to the seabed of the OCS for the purpose of resource exploration operations, including warehouse vessels anchored over the OCS when used to supply drilling rigs on the OCS."[8] CBP has specifically found Jack Up Vessels to be coastwise points when secured to the seabed of the OCS for a purpose elaborated in the OCSLA.[9] Similarly, in the present matter, we find that the subject Jack Up Vessel would become a coastwise point when attached to the seabed of the OCS for the purpose of installing or constructing a structure to be used for the production of wind energy.
Based on the foregoing, this portion of the transaction involves the transportation of merchandise between one coastwise point (a U.S. port) and a second (the Jack Up Vessel secured to the seabed of the OCS). Nevertheless, the scenario presented would not be in violation of the Jones Act because the Tug and Barge will be coastwise-qualified vessels.
Issue Two: Whether the Installation of the Wind Turbines Generators by the non-coastwise-qualified Jack Up Vessel Violates 46 U.S.C. 55102
CBP has previously held that the use of a non-coastwise-qualified crane vessel to lade and unlade cargo or to construct or dismantle a marine structure is not coastwise trade and does not violate the coastwise laws, provided any movement of merchandise is effected exclusively by the crane and not by any movement of the vessel, except for necessary movement which is incidental to a lifting operation while it is taking place.[10]
In the present matter, we find that the proposed installation of the subject WTGs, as outlined above, would not violate the Jones Act. In the facts you present, the components for each WTG will be laden onboard a coastwise-qualified barge and transported to the Jack Up Vessel, which will be affixed to the seafloor via its legs. The WTG components will then be raised from the barge to the deck of the Jack Up Vessel using its crane. The Jack Up Vessel will then mount the WTG onto the pre-installed foundation. The Jack Up Vessel will remain stationary for the duration of this process.
This scenario appears directly analogous to those considered in H328865 (Feb. 14, 2023), H320052 (May 11, 2022) and H316313 (Feb. 4, 2021), in which CBP considered the proposed use of non-coastwise-qualified jack-up vessels to install WTG components onto the U.S. OCS. In these scenarios, a jack-up vessel similarly secured itself to the seabed before raising WTG components from a coastwise-qualified feeder vessel. CBP determined that the movement of material by the jack-up vessel's crane would not constitute transportation as contemplated by the coastwise laws. As such, provided that the Jack Up Vessel remains stationary or only makes incidental movements subordinate to and a direct consequence of any lifting operations, for the duration of the installation process, the movement of the crane and Jack Up Vessel as contemplated by the facts would not constitute transportation of merchandise and therefore, would not be considered to be coastwise trade within the meaning of 46 U.S.C. 55102 and 19 CFR 4.80b(a).
Issue Three: Whether Transportation of Containers, Installation Tools, and Materials Violates 46 U.S.C. 55102
Your client contemplates transporting containers and empty shipping frames between WTG installation sites aboard the non-coastwise-qualified Jack Up Vessel. The shipping frames and first set of containers containing WTG bolts and nuts, as well as spare parts and provisions for the Jack Up Vessel will be laded aboard the Jack Up Vessel while it is affixed to the seabed at one WTG installation site. All WTG bolts and nuts will be consumed in the WTG construction process before the Jack Up Vessel departs the initial installation site. At no point will the Jack Up Vessel transport WTG components, to include nuts and bolts, between different WTG installation sites. The empty shipping frames and containers will be unladed from the Jack Up Vessel while it is affixed to the seabed at a second WTG site, except that the shipping containers will also contain waste generated aboard the vessel in lieu of parts/provisions consumed in the installation. The spare parts and provisions will remain on the Jack Up Vessel.
A second set of shipping containers, consisting of offices spaces, tools, rigging equipment, and spare parts for the Jack Up Vessel will be laded onto the Jack -Up Vessel while it is affixed to the seabed at one WTG site, and unladed from the Jack Up Vessel while it is affixed to the seabed at the final WTG site onto the coastwise qualified Tug and Barge. In the scenarios above, the Jack Up vessel is performing coastwise transportation as it is lading containers and/or shipping frames on board at one coastwise point and unlading them at another coastwise point.
We note that the Jones Act prohibits the coastwise transportation of "merchandise" by non-coastwise-qualified vessels. Pursuant to 46 U.S.C. 55102: "[m]erchandise includes (1) merchandise owned by the United States Government, a State, or a subdivision of a State; and (2) valueless material." As such, any cargo, regardless of value, is generally considered merchandise for the purpose of the Jones Act.
However, CBP has also held that "vessel equipment" is not included within the general meaning of merchandise. "Vessel equipment" has been defined as portable articles, "necessary and appropriate for the navigation, operation or maintenance of the vessel and for the comfort and safety of the persons on board."[11] CBP clarified its consideration of vessel equipment in 2019, indicating that vessel equipment includes "all articles or physical resources serving to equip the vessel, including the implements used in the vessel's operation or activity."[12] CBP elaborated that items considered "necessary and appropriate for the operation of the vessel" are those items that are integral to the function of the vessel and are carried by the vessel. This may include those items that aid in the installation and construction of offshore infrastructure.[13] Whether such articles constitute vessel equipment is a fact-specific, case-by-case determination.[14]
CBP has previously held that "the ... devices used to transport the WTG components as well as the shipping containers used to transport materials to be incorporated into the WTG ... or provisions to be consumed by the Offshore Installation Vessel's crew... are integral to the installation activity of the vessel."[15] Similarly, CBP has found "tools ... used by the installation crew in physically installing and commissioning the subject WTG units... are integral to the function of the vessel, which is to install and commission the subject WTG units."[16] In the same ruling CBP also held that items such as "containers and bags, personal protection equipment, food and drink, and hand washing materials are necessary for the 'comfort and safety' of the crewmembers performing the WTG installation."[17] CBP has similarly ruled containers, a waste skip, tools and spare parts, and crew consumables to be vessel equipment because they were integral to a Jack Up Vessel's function of installing WTG units.[18]
In the present matter, we similarly find the empty shipping frames, shipping containers, vessel waste, spare parts and provisions for the Jack Up Vessel, tools, rigging equipment etc. to be vessel equipment because they are integral to the function of the vessel. The shipping containers to be used as office space are similarly integral to the function of the vessel because project crew will be working in these areas. Accordingly, the items above being transported between coastwise points on board the Jack Up Vessel are vessel equipment and not "merchandise" under the Jones Act. No violation of 46 U.S.C. 55102 exists if the subject materials as described herein are transported between, and used at, multiple installation sites.
Conversely the nuts and bolts, as well as any other components to be integrated into the WTG during the construction process, are merchandise.[19] Transportation of these items between coastwise points on board the non-coastwise qualified Jack Up Vessel would be violative of the Jones Act.
Issue Four: Whether Transportation of the Installation Crew Violates 46 U.S.C. 55103
The Passenger Vessel Services Act ("PVSA"), 46 U.S.C. 55103, provides, in relevant part:
(a) In General. Except as otherwise provided in this chapter or chapter 121 of this title, a vessel may not transport passengers between ports or places in the United States to which the coastwise laws apply, either directly or via a 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.[20]
The applicable regulation at 19 CFR 4.50(b) defines a passenger as "any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business."
In accordance with previous CBP rulings, individuals transported between coastwise points are not classified as "passengers" within the meaning of 46 U.S.C. 55103 and 19 CFR 4.50(b) if they are required to be onboard to contribute to the accomplishment of the operation or navigation of the vessel during the voyage or are onboard because of a necessary vessel ownership or business interest during the voyage.[21] We have previously determined that Cable Lay Vessel ("CLV") crew members directly and substantially connected with the laying of submarine electric transmission cables are not considered "passengers" within the meaning of 46 U.S.C. 55103 and 19 CFR 4.50(b).[22]
In the present case, marine crew and project crew will be transported between coastwise points by the non-coastwise qualified Jack Up Vessel. The ruling request states these personnel will complete functions related to the operation of the Jack Up Vessel, installation of WTG components, or project oversight and inspection of WTG installation. To the extent that these individuals will be engaged in any shipboard activities while traveling on the Jack Up Vessel between or at WTG sites that would be "directly and substantially" related to the operation, navigation, or business of the vessel itself, as would be the case under the facts herein submitted, such individuals would not be considered to be passengers. Accordingly, we find that the proposed activities in this case are directly and substantially connected with the operation and business of the vessel, which is the installation of the subject WTGs. We therefore determine that the subject individuals are not "passengers" within the meaning of 46 U.S.C. 55103 and 19 CFR 4.50(b).
HOLDING
1. The transportation of the subject WTG components aboard the coastwise-qualified Tug and Barge from a U.S. port located on the eastern seaboard to the Jack Up Vessel attached to the seabed of the OCS would not be in violation of 46 U.S.C. 55102 because the transportation between coastwise points would be effected by coastwise-qualified vessels.
2. The installation of the WTG units by the Jack Up Vessel attached to the seabed of the OCS would not be in violation of 46 U.S.C. 55102 because the foreign-flagged Jack Up vessel would remain completely stationary during the installation process.
3. The transportation of the subject shipping frames, shipping containers, and associated vessel equipment between WTG sites onboard the Jack Up Vessel would not be in violation of 46 U.S.C. 55102 because such items, in this context, are not "merchandise." The transportation of WTG components between WTG sites onboard the Jack Up Vessel would be violative of 46 U.S.C. 55102 because such components are merchandise.
4. The transportation of the marine crew and project crew onboard the Jack Up Vessel between or at WTG installation sites attached to the seabed of the OCS would not be in violation of 46 U.S.C. 55103 because they are directly and substantially related to the operation of the vessel.
Accordingly, H335695 (Jan. 5, 2024) is hereby MODIFIED, as discussed above.
Sincerely,
W. Richmond Beevers
Chief
Cargo Security, Carriers and Restricted Merchandise Branch
Office of Trade, Regulations and Rulings
U.S. Customs and Border Protection
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[1] You have asked this office for confidential treatment of bracketed information. CBP Regulations at 19 C.F.R. 177.2(b)(7) provide that the requester of a ruling from our office may ask that privileged or confidential commercial or financial information supplied for purposes of preparing the requested ruling not be disclosed. Such requests will be considered if the information is clearly identified and the reasons for requesting that information not be disclosed are provided. If this office receives a Freedom of Information Act request for your submission, Regulations at 6 C.F.R. 5.12, et seq. regarding the disclosure of business information provide that the submitter of business information will be advised of receipt of a request for such information whenever the business submitter has in good faith designated the information as commercially or financially sensitive information. We accept your request for confidential treatment as a good faith request.
[2] Request for Ruling Regarding Interpretation of the Jones Act and Related Laws, dated (Oct. 25, 2023); Email, RE: [ ] Ruling Request, dated (Dec. 13, 2023).
[3] Formerly 46 U.S.C. App. 883. See Pub. L. 109-304 (Oct. 6, 2006).
[4] 43 U.S.C. 1333(a)(1).
[5] See 46 U.S.C. 55102(a)(2).
[6] 33 CFR 2.22(a)(2)
[7] 43 U.S.C. 1333(a)(1)(A)(iii).
[8] See Customs Service Decisions 81-214 and 83-52.
[9] H328865 (Feb. 14, 2023); H320052 (May 11, 2022); H316363 (Feb. 4, 2021).
[10] See, e.g., HQ 116111 (Jan. 30, 2004) (ruling no transportation occurs where a stationary crane barge moored in place by four anchors picks up boulders from a coastwise-qualified supply barge and places them on the seabed to create a breakwater); HQ 115940 (Apr. 17, 2003) (ruling that a Panamanian-flag crane barge would not violate the Jones Act in using its crane to lift erosion-protection boulders from one barge and place them onto the ocean floor).
[11] Treasury Decision 49815(4) (Mar. 13, 1939).
[12] Customs Bulletin & Decisions Vol. 53, No. 45, p. 88 (Dec. 18, 2019).
[13] See, e.g., H328865 (Feb. 14, 2023); H316313 (Feb. 4, 2021).
[14] Id. at pp. 88-89.
[15] H320052 (May 11, 2022).
[16] H316313 (Feb. 4, 2021).
[17] Id.
[18] H328865 (Feb. 14, 2023).
[19] Id.
[20] See 85 Fed. Reg. 36469 at 36471 (June 17, 2020) (updating penalties for 2020).
[21] See, e.g., HQ H316313 (Feb. 4, 2021); HQ H311603 (Aug. 31, 2020); HQ H183157 (Sept. 2, 2011); HQ H168214 (May 26, 2011); HQ H036016 (Aug. 29, 2008).
[22] See HQ H330764 (Apr. 12, 2023).
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