VES-5-CO:R:IT:C 112612 GEV
Marc J. Fink, Esq.
Sher & Blackwell
1255 Twenty-Third Street, N.W.
Washington, D.C. 20037-1194
RE: Harbor Maintenance Fee; Drilling Rig; Vessel;
Commercial Cargo; Public Law 99-662
Dear Mr. Fink:
This is in response to your letter dated March 3, 1993, on behalf of your client, Rowan Companies, Inc. ("Rowan"), requesting a ruling with respect to the applicability of the harbor maintenance fee to two self-elevating, mobile, jack-up drilling rigs which were dry-towed into Pascagoula, Mississippi, earlier this year. Our ruling on this matter is set forth below.
Rowan, a company located in Houston, Texas, which engages in offshore drilling activities, is the owner of two self-elevating, mobile, jack-up drilling rigs, the ROWAN-JUNEAU and CHARLES ROWAN. Your letter enclosed copies of the U.S. Coast Guard Certificates of Documentation for both rigs (Exhibits A and C), as well as documentation describing the ROWAN-JUNEAU in detail (Exhibit B). For purposes of this ruling, both rigs are considered identical to each other.
The ROWAN-JUNEAU was in the North Sea for drilling work which was anticipated to be undertaken by Rowan or one of its wholly-owned subsidiary companies. For reasons not herein relevant, the anticipated work was not available for the ROWAN-JUNEAU. The CHARLES ROWAN was engaged in drilling operations in the North Sea for Rowan for a number of years. Subsequent to the completion of this work, both rigs were loaded on board the M/V TRANSHELF, a Russian-flagged, heavy-lift, semi-submersible vessel, at the Port of Rotterdam, The Netherlands, and transported (i.e., "dry-towed") to Pascagoula, Mississippi, arriving on January 6, 1993.
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Upon arrival at the Port of Pascagoula the M/V TRANSHELF made formal vessel entry pursuant to Part 4, Customs Regulations (19 CFR 4.0 et seq.). Pursuant to these vessel entry procedures Rowan's agent, Kerr Steamship, listed the two rigs as cargo on the Cargo Declaration (Customs Form (CF) 1302) included in the inward manifest. Consequently, the Customs officers in Pascagoula (a port listed in 19 CFR 24.24(b)(1) as one of the ports subject to the harbor maintenance fee) proposed to assess a harbor maintenance fee against the shipper, Rowan.
In response to this proposed assessment, Rowan objected and requested cancellation of the entry of the rigs as cargo. It is Rowan's contention that instead of being considered cargo and therefore subject to the harbor maintenance fee, the rigs should be considered vessels subject to the vessel entry procedures set forth in Part 4, Customs Regulations.
In support of its contention Rowan supplied the Customs officers in Pascagoula with a commercial invoice and a bill of lading indicating that the ROWAN-JUNEAU was shipped on June 30, 1992, out of the United States on board the MIGHTY SERVANT I, destined for England. The invoice and bill of lading described the ROWAN JUNEAU as a mobile drilling rig. In addition, Rowan provided Customs with a CF 1378 (Clearance of Vessel to a Foreign Port), dated April 3, 1981, for the CHARLES ROWAN, destined for England, and an invoice indicating that it was a mobile drilling platform. Furthermore, Rowan was advised through verbal discussion with a Customs National Import Specialist in New York that drilling rigs such as those under consideration are classified as vessels pursuant to Chapter 89, subheading 8905.20.00, Harmonized Tariff Schedule of the United States (HTSUS, 19 U.S.C. 1202, as amended). Following this discussion with the NIS and Customs District Office in Mobile, Alabama, Rowan was advised that the harbor maintenance fee would not be assessed on these rigs pending further Customs review of this matter.
Whether an offshore jack-up drilling rig transported aboard a vessel is considered "commercial cargo" as defined in 19 CFR 24.24(b)(2) so that its loading or unloading at a port listed in 19 CFR 24.24(b)(1) subjects it to the assessment of a harbor maintenance fee pursuant to 19 CFR 24.24(a).
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LAW AND ANALYSIS:
Title 19, Code of Federal Regulations, § 24.24(a), provides in pertinent part, as follows:
"Commercial cargo loaded or unloaded from a
commercial vessel is subject to a port use
fee of 0.125 percent (.00125) of its value
if the loading or unloading occurs at a port
within the definition of this section..."
Section 24.24(a) was promulgated pursuant to the Water Resources Development Act of 1986 (Public Law 99-662, 100 Stat. 4082) whose purpose includes the providing of Federal funds for the maintenance of any channel or harbor in the United States which is not an inland waterway and is open to public navigation
(§ 4462(a)(2)(A) of Public Law 99-662, 100 Stat. 4266).
Section 24.24(b)(2), Customs Regulations, defines "commercial cargo" as "...merchandise transported on a commercial vessel and passengers transported for compensation or hire." (emphasis added) A review of Public Law 99-662 and its legislative history yields no further clarification as to what the term "commercial cargo" contemplates. It is noted, however, that both explicitly state that "commercial cargo" does not include bunker fuel, ship's stores, sea stores, or legitimate equipment necessary for the vessel (i.e, equipment used on or in the vessel for its operation), and fish or other aquatic animal life caught (and not previously landed on shore) on the voyage of a U.S. vessel. (see § 4462(a)(3) of Public Law 99-662, 100 Stat. 4267, and U.S. Code Congressional and Administrative News, vol. 6, 99th Congress, Second Session, 1986 at p. 6712) It is important to note that offshore drilling rigs, such as the two under consideration, are not among the items listed in both the statute and legislative history as exempt from the assessment of the harbor maintenance fee.
Notwithstanding the lack of specificity from the authority cited above as to what constitutes "commercial cargo", we nonetheless note that the legislative history of Public Law 99-662 provides, in pertinent part, that:
"...all administrative and enforcement
provisions of customs laws and regulations
are to apply with respect to administration
and enforcement of the port user charge
provisions as if such charges were customs
duties. Similarly,...the port user charges
are to be treated as if they were customs
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(See U.S. Code Congressional and Administrative News, vol. 6, 99th Congress, Second Session, 1986 at p. 6707)
It is therefore apparent that the customs laws are controlling with respect to the administration and enforcement of the harbor maintenance fee. Consequently, since the definition of "commercial cargo" set forth in Public Law 99-662 and reflected in its legislative history includes "merchandise", we note that § 1401(c) of title 19, United States Code (that part of the United States Code entitled, "Customs Duties") defines merchandise, for purposes of the customs laws, as "...goods, wares, and chattels of every description..." It is Customs position that this definition includes a vessel which is carried aboard another vessel. In this regard we note that Customs has long-held that a vessel so transported is considered cargo and as such, is merchandise required to be manifested (see Customs Rulings 102750, dated April 13, 1977; 104086, dated July 23, 1979; 111323, dated October 18, 1990; and 107060, dated November 21, 1984, published as Customs Service Decision (C.S.D.) 85-9).
It is Rowan's position that the ROWAN-JUNEAU and CHARLES ROWAN are not "commercial cargo" for purposes of § 24.24(a), Customs Regulations, but rather are vessels. In support of this position you cite title 1, United States Code, § 3 (1 U.S.C. 3) which defines a "vessel" as "every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water." We note that this definition is also found in title 19, United States Code, § 1401(a) (19 U.S.C. 1401(a)). Furthermore, you cite the following authority for the proposition that offshore drilling rigs have long been recognized as vessels: The Dixie III, 1965 A.M.C. 2629 (D. La.); Offshore Co. v. Robinson, 266 F.2d 769 (5th Cir. 1959); and Senko v. LaCrosse Dredging Corp., 352 U.S. 370 (1957) (we note that the latter addresses dredges, not offshore drilling rigs). In addition, you cite the following authority for the principle that vessels are not subject to customs duties because they are instrumentalities of commerce as opposed to articles of commerce: The Conqueror, 166 U.S. 110 (1897); The United States v. Seagull Marine, 627 F.2d 1083 at 1085 (CCPA 1980).
In regard to the above-cited court decisions, while we do not dispute their applicability to the issues addressed therein (i.e., damages for personal injury to seamen pursuant 46 U.S.C. App. 688, and duty assessment pursuant to the Tariff Schedule of the United States, (the predecessor to the HTSUS)), it is important to note that in none of these cases was the assessment of the harbor maintenance fee an issue presented for adjudication. In fact, each of these cases predates the enactment of the statute which implemented the fee. We do note, however, that the court in United States v. Seagull Marine, stated as follows:
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"As seen in 1 U.S.C. 3, supra, the definition
of the term "vessel" is quite broad. However,
judicial precedent has limited the definition
of vessel for tariff purposes and has established
that not every watercraft meeting the bare terms
of the definition is entitled to entry into the
the United States duty free. In particular, the
scope of the term "vessel" has been narrowed to
limit duty-free treatment to watercraft that are
instrumentalities of commerce as opposed to
articles of commerce."
(United States v. Seagull Marine, supra, at 1084, citing The Conqueror, supra; Hitner Sons Co. v. United States, 13 Ct. Cust. App. 216, T.D. 41175 (1922); and Thayer v. United States, 2 Ct. Cust. App. 526, T.D. 32252 (1912)).
It should be noted that the U.S. Court of International Trade has upheld Customs disparate interpretations of similar language. In Tropicana Products, Inc. v. U.S, 789 F.Supp. 1154 at 1158 (CIT 1992) the court stated, "...the criterion of whether goods have been 'manufactured' serves different purposes under different statutes..." The court in Tropicana Products also cited National Juice Products Association v. U.S., n. 14, 628 F.Supp. 978 (CIT 1986) where, in discussing whether the "substantial transformation" test applied by the courts to country of origin, drawback, and Generalized System of Preferences should be applied in construing the term "manufactured" as it is used in 19 U.S.C. 1562 (i.e., imported merchandise may not be "manufactured" in a bonded warehouse prior to its withdrawal therefrom) the court stated, "...although the language of the tests applied under the three statutes is similar, the results may differ where differences in statutory language and purpose are pertinent."
Accordingly, the above authority supports Customs position that there are instances where an article is considered a "vessel" for purposes of duty consequences under the HTSUS, yet when it is transported on board another vessel it is also considered "commercial cargo" for purposes of assessing the harbor maintenance fee. You concur in this reasoning on pp. 5-6 of your letter where you reference a yacht brought to the United States on board another vessel. Furthermore, the assessment of the harbor maintenance fee is not contingent on whether a vessel is considered to be imported or exported, but rather whether there has been a "...use by a commercial vessel of a harbor or channel ("port") in the United States for the loading or - 6 -
unloading of commercial cargo on or from the vessel." (see U.S. Code Congressional and Administrative News, vol. 6, 99th Congress, Second Session, 1986 at p. 6706) The facts under consideration (i.e., the M/V TRANSHELF unloading the two rigs at Pascagoula) evidence that such port use has occurred thereby warranting the assessment of the harbor maintenance fee.
Accordingly, we disagree with your statement on p. 4 of your letter that, "The fee was intended to be a one time only fee imposed on the export or import of commercial merchandise." The fact that the fee may be imposed without regard to whether merchandise is exported, imported, or is in fact domestic cargo transported solely between two points in the United States is evidenced in the legislative history of Public Law 99-662 which states:
"The port use charge is to be paid by
the importer in the case of cargo entering
the U.S., by the exporter in the case of
cargo to be exported from the U.S., and by
the shipper in the case of any other waterborne
cargo (i.e., cargo loaded or unloaded at U.S.
ports involving shipment between U.S. ports)...
Only one port use fee is to be imposed with
respect to the transportation of the same cargo
on the same vessel. Also, the port use charge
is to be imposed only once where the same cargo is loaded and reloaded at the same port."
(see U.S. Code Congressional and Administrative News, vol. 6, 99th Congress, Second Session, 1986 at 6714) It should be noted that the Customs Regulations provide for the assessment of the harbor maintenance fee for the transportation of cargo between United States ports (19 CFR 24.24(e)).
You note that Customs has not assessed the harbor maintenance fee on LASH barges entering or leaving the United States on board a mother vessel. While it is true that both the drilling rigs under consideration and LASH barges are individually documented vessels, the distinction to be made is that unlike drilling rigs, LASH barges are used to transport both import and export merchandise, akin to containers used as instruments of international traffic which, pursuant to 19 U.S.C. 1322(a), are "...excepted from the application of the customs laws..." Accordingly, it is Customs position that LASH barges, unlike the drilling rigs under consideration, should not be assessed the harbor maintenance fee because they are "...instrumentalities of commerce as opposed to articles of commerce." (see The United States v. Seagull, supra, at 1084)
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Finally, we note your statement on p. 4 of your letter that, "If the harbor maintenance fee is imposed on these multi-million dollar vessels and other similar vessels each time they enter or exit a port, it will significantly increase the cost of their operation and will discourage U.S. companies from operating such vessels." This statement appears to be in direct conflict with the findings of the Senate Committee on Finance with respect to the economic impact of these fees on individuals, consumers, and business. This committee stated that, "This...charge is set at a sufficiently low level...so as not to impair either U.S. ports or U.S. port users." Further in regard to the assessment of these fees and port maintenance charges, the committee stated that, "The increase in costs to port users and to ultimate consumers of commercial cargo is expected to be insignificant in comparison to the overall prices of cargo, and hence is expected to result in little, if any, additional increase in consumer prices." (see U.S. Code Congressional and Administrative News, vol. 6, 99th Congress, Second Session, 1986 at 6721)
A jack-up drilling rig transported aboard a vessel is considered "commercial cargo" as defined in 19 CR 24.24(b)(2) so that its loading or unloading at a port listed in 19 CFR 24.24(b)(1) subjects it to the harbor maintenance fee pursuant to 19 CFR 24.24(a).
Harvey B. Fox
Director, Office of Regulations