VES-3-16-RR:IT:EC 114833 GEV
Jeff R. Rytlewski, Esq.
Preis, Kraft & Roy
Post Office Drawer 94-C
Versailles Centre
Suite 400
102 Versailles Boulevard
Lafayette, Louisiana 70509
RE: Coastwise Trade; Pipe-Laying; Exclusive Economic Zone;
46 U.S.C. App. §§ 289, 883
Dear Mr. Rytlewski:
This is in response to your letter dated April 14, 2000, on behalf of your client, requesting expedited consideration pursuant to 19 CFR
§ 177.2(d) with respect to a ruling regarding the use of foreign-flagged vessels in a pipe-laying operation in the Gulf of Mexico. The ruling you seek is set forth below.
FACTS:
Your client, a large engineering concern, is preparing to bid for a pipeline construction contract in the Gulf of Mexico. The pipeline construction will include work both in the territorial waters of the United States and the Exclusive Economic Zone (EEZ).
With respect to this construction, you inquire as to the applicability of the coastwise laws to the use of foreign-flagged vessels under the following scenarios.
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Use of a Panamanian-flagged, Panamanian-owned, free floating pipe-laying barge within U.S. territorial waters (within 3 nautical miles).
Use of a Panamanian-flagged, Panamanian-owned free floating pipe-laying barge within the EEZ.
Use of foreign-flagged offshore supply vessels (OSV) to transport personnel, equipment and pipe sections from any U.S. port to a free floating, Panamanian-flagged pipe-laying
barge within U.S. territorial waters, then proceeding to a second U.S. port (for example: loading the OSV at the port of Mobile, transporting to barge, and then proceeding to port of Tampa).
Use of foreign-flagged OSV to transport personnel, equipment and pipe sections from any U.S. port to a free floating, Panamanian-flagged pipe-laying barge within U.S. territorial waters, then returning to the port of origin (for example: loading the OSV at the port of Mobile, transporting to the barge, and then proceeding back to the port of Mobile).
Use of foreign-flagged OSV to transport personnel, equipment and pipe sections from any U.S. port to a free floating, Panamanian-flagged pipe-laying barge in the EEZ, then proceeding to a second U.S. port (for example: loading the OSV at the port of Tampa, transporting to the barge, and then proceeding to the port of Mobile).
Use of foreign-flagged OSV to transport personnel, equipment and pipe sections from any U.S. port to a free floating, Panamanian-flagged pipe-laying barge in the EEZ, then returning to the port of origin (for example: loading the OSV at the port of Tampa, transporting to the barge, and then proceeding back to the port of Tampa).
Use of a Panamanian-flagged, Panamanian-owned, free floating pipe-laying barge, where the lay barge is laden at any U.S. port with all pipe necessary to complete a project and that pipe and that barge accomplish the pipe-laying within U.S. territorial waters.
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Use of a Panamanian-flagged, Panamanian-owned, free floating pipe-laying barge, where the lay barge is laden at any U.S. port with all pipe necessary to complete a project and that pipe and that barge accomplish the pipe-laying in both territorial waters and the EEZ.
ISSUE:
Whether the use of foreign-flagged vessels as described in any of the above-enumerated scenarios constitutes a violation of 46 U.S.C. App. §§ 289 and/or 883.
LAW AND ANALYSIS:
The coastwise law pertaining to the transportation of merchandise,
§ 27 of the Act of June 5, 1920, as amended (41 Stat. 999; 46 U.S.C. App. § 883, often called the “Jones Act”), provides, in pertinent part, that:
No merchandise,... shall be transported by water, or by land and water, on penalty of forfeiture of the merchandise (or a monetary amount up to the value thereof as determined by the Secretary of the Treasury, or the actual cost of the transpor- tation, whichever is greater, to be recovered from an consignor, seller, owner, importer, consignee, agent, or other person or persons so transporting or causing said merchandise to 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 other vessel 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...
The term “merchandise” as used in § 883 includes valueless material (see amendment to § 883 by the Act of June 7, 1988, Pub.L. 100-329; 102 Stat. 588). Furthermore, the statute provides that the prohibitions set forth therein apply to the transportation of “valueless material or any dredged material regardless of whether it has commercial value, from a point or place in the United States or a point or place on the high seas within the Exclusive Economic Zone (EEZ) as defined in the Presidential Proclamation of March 10, 1983, to another point or place in the United States or a point or place on the high seas within that
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EEZ.” Id. The March 10, 1983, Presidential Proclamation defined the EEZ as a zone contiguous to the territorial sea extending to a distance 200 nautical miles from the territorial sea baseline.
Further in regard to the term "merchandise" as used in § 883, it should be noted that Customs has long-held the equipment of a vessel to be considered as other than merchandise. To that end, vessel equip-ment has been defined as articles, "...necessary and appropriate for the navigation, operation, or maintenance of the vessel and for the comfort and safety of the persons on board." (T.D. 49815(4), dated March 13, 1939)
The Act of June 19, 1886, as amended (24 Stat. 81; 46 U.S.C. App.
§ 289, sometimes called the coastwise passenger law), provides that:
No foreign vessel shall transport passengers between ports or
places in the United States either directly or by way of a foreign port, under a penalty of $200 for each passenger so transported and landed.
Customs has consistently interpreted the above prohibition to apply to all vessels except United States-built, owned, and properly documented vessels (see 46 U.S.C. § 12106, 12110; 46 U.S.C. App. § 883; 19 CFR § 4.80). Furthermore, for purposes of the above statute a “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))
The coastwise laws generally apply to points in 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 the coastline differ.
Furthermore, § 4(a) of the Outer Continental Shelf Lands Act of 1953, as amended (67 Stat. 462; 43 U.S.C. § 1333(a)) (OCSLA), 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,
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or producing resources therefrom ... to 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 (Pub. L. 95-372, Title II, § 203, 92 Stat. 635), to add, among other things the language concerning temporary attachment to the seabed. The legislative history associated with this amendment is telling, wherein it is stated that:
...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 drillstring, pipes, or other appurte-
nances, on the OCS for exploration, development, or production purposes. [House Report 95-590 on the OCSLA Amendment of 1978, page 128, reproduced at 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 are extended to mobile oil drilling rigs during the period they are secured to or submerged onto the seabed of the OCS (T.D. 54281(1)). We have applied the same principles to drilling platforms, artificial islands, and similar structures, as well as devices attached to the seabed of the OCS for the purpose of resource exploration operations. (Customs Service Decisions (C.S.D.s) 81-214 and 83-52)
In regard to the vessel uses in the pipeline construction under consideration, we note that Customs has long-held that the sole use of a vessel laying pipe is not considered a use in the coastwise trade of the United States, even when the pipe is laid between two points in the United States embraced within the coastwise laws. The fact that the pipe is not landed as cargo but is only paid out in the course of the laying operation makes such operation permissible. Further, since the use of a vessel in pipe-laying is not a use in the coastwise trade, a foreign-flag vessel may carry pipe which it is to lay between such points. However, the transportation of pipe by any vessel other than a pipe-laying vessel to a pipe-laying location at a point within U.S. territorial waters would be considered coastwise trade and would
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therefore have to be accomplished by a vessel meeting the statutory requirements entitling it to engage in such trade. (See Customs Service Decision (C.S.D.) 79-321)
Legitimate equipment and stores of the vessel for its use, including pipe laden on board to be paid out in the course of operations, are not considered merchandise within the purview of § 883. However, articles transported on the vessel between points embraced within the coastwise laws which are not legitimate stores and equipment of the vessel are subject to § 883. Id.
Crewmembers, including technicians necessary to assist the vessel’s pipe-laying operation, are not considered passengers under § 289, nor are construction company personnel and employees of the various subcontractors who are on the vessel in connection with its business. Id.
Accordingly, in view of the above, our determinations with respect to the eight scenarios you pose are as follows. Nos. three and four would be the only scenarios that would constitute violations of the coastwise laws (both 46 U.S.C. App. §§ 289 and 883) inasmuch as both would involve the transportation of passengers and merchandise on foreign-flagged vessels solely between points within U.S. territorial waters (i.e., coastwise points).
HOLDING:
The use of foreign-flagged vessels as described in scenarios three and four constitute violations of 46 U.S.C. App. §§ 289 and 883.
Sincerely,
Acting Chief
Entry Procedures and Carriers Branch