VES-3-02-OT:RR:BSTC:CCR H314401 MNM
Ms. Barbara L. Holland
General Counsel
Everett Ship Repair, LLC
2730 Federal Avenue Everett, WA 98201
RE: 46 U.S.C. §§ 55102, 55103, and 55111; Coastwise Transportation; Towing; drydock.
Dear Ms. Holland:
This letter is in response to your correspondence dated October 12, 2020, on behalf of Everett Ship Repair, LLC (“ESR”), in which you inquire about whether your ESR’s proposed use of a foreign-built floating drydock to transport vessels within U.S. territorial waters constitutes a violation of the coastwise laws. Our decision follows.
FACTS
The following facts are from your ruling request and email to this office, dated October 29, 2020. ESR owns and operates a ship repair facility with a foreign-built, registry-endorsed, floating drydock, the FAITHFUL SERVANT barge (“drydock”), which is moored to a permanent pier at the Port of Everett in Washington State. ESR anticipates that it will need to move the drydock on occasion from its fixed position in the Port of Everett (“Pier 3”); these movements are described in further detail in the Law and Analysis section below. The proposed operation is anticipated to commence on [ ] (raising the customer’s vessel out of the water for repairs), and [ ] (refloating the customer’s vessel after completion of repairs). The drydock will be towed to and from another location at the Port of Everett (“deepwater docking location”), where the water depth is sufficient to load and unload these deep draft vessels, on those dates.
ISSUES
Whether the proposed transportation of merchandise by a non-coastwise-qualified vessel would constitute a violation of 46 U.S.C. § 55102?
Whether the proposed operation would constitute towing in violation of 46 U.S.C. § 55111?
Whether the proposed transportation of individuals would constitute a violation of 46 U.S.C. § 55103, and 19 CFR § 4.50(b)?
LAW AND ANALYSIS
Pursuant to 46 U.S.C. § 55102, which 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.
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.
Pursuant to 46 U.S.C. § 55102(a), “merchandise, 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 its value or ownership, would be considered merchandise for the purpose of 46 U.S.C. § 55102. The regulations promulgated under the authority of 46 U.S.C. § 55102(a), 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).
Similarly, the coastwise law applicable to the carriage of passengers is found in 46 U.S.C. § 55103 which provides:
(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 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 CBP regulations, promulgated under the authority of 46 U.S.C. § 55103, provide, “[a] passenger within the meaning of this part is any person carried on a vessel who is not connected with the operation of the vessel, her navigation, ownership, or business.”
Issue 1: Transportation of Merchandise under 46 U.S.C. § 55102
You state that ESR is seeking this ruling to confirm that ESR’s use of the drydock for deep-water dockings, “using very similar procedures to those approved in a previous CBP Ruling Letter provided to the drydock’s prior owner in 2009,” will not constitute coastwise trade. You identified the ruling letter issued to the subject drydock’s prior owner is HQ H070662 (Aug. 28, 2009). You also state in your initial ruling request that the drydock holds a registry endorsement, but it is foreign-built, and as such does not qualify for a coastwise endorsement.
Pursuant to § 55102, supra, the coastwise laws prohibit a non-coastwise-qualified vessel from transporting merchandise between points in the United States to which the coastwise laws apply, either directly or via a foreign port. A vessel transported on another vessel is merchandise for purposes of 46 U.S.C. § 55102. “When a vessel is carried aboard another vessel, it assumes the character of merchandise whose carriage is governed by the same requirements applicable to any other category of goods.” HQ 113176 (Sept. 6, 1994). The subject drydock will be moored at a fixed location at ESR’s shipyard (Pier 3). The drydock is partially submerged by flooding its ballast tanks, then the vessel in need of repair is floated over the drydock and the drydock’s ballast tanks are pumped out, raising the drydock and thus, lifting the vessel in need of repair out of the water. The drydock remains stationary at Pier 3 in Everett while work is performed on the lifted vessel. Once the work on the vessel is completed, the drydock is re-submerged and the repaired vessel is floated off the drydock. The drydock remains stationary and moored to the same pier at all times during the operation. We have previously held that the use of a moored drydock in raising vessels out of the water for repairs and subsequently replacing the vessels back in the water at the same point from which they were elevated is not considered the transportation of merchandise between two coastwise points. See HQ H298029 (Sept. 10, 2018); HQ 116312 (Sept. 21, 2004), HQ 114439 (Aug. 21, 1998), HQ 113208 (Sept. 19, 1994), and HQ 110283 (Nov. 17, 1989). Therefore, the proposed transportation contemplated is not a violation of 46 U.S.C. § 55102.
ESR anticipates needing to move the drydock from another location, while it has vessels on board, to Pier 3 to perform repairs and maintenance on vessels that are unable to safely navigate alongside the drydock’s moored location (primarily due to lack of water depth at the drydock’s berth), occurring approximately four times per year. Any foreign vessel (e.g. a foreign-built floating drydock) that transports another vessel aboard it between coastwise points is in violation of 46 U.S.C. § 55102, whether it moves on its own power or is towed by a coastwise-qualified vessel. If, instead, the foreign vessel is towed and returns to the same location where the vessel was laden, there is no violation of 46 U.S.C. § 55102. See HQ H273946 (Apr. 13, 2016); and HQ H269478 (Jan. 11, 2016). In order to safely perform these jobs, ESR proposes to tow the drydock, using a coastwise-qualified tug, to another location at the Port of Everett (“deepwater docking location”) where the water depth is sufficient to load and unload these deep draft vessels. Upon arrival at the deepwater docking location, ESR will anchor the drydock using a three-point anchoring system. Specifically, one anchor line will be led from the bow and one each from the port stern and starboard stern of the drydock and secured by way of anchors positioned to assure that the drydock remains in position.
Once the drydock is positioned, employees of ESR aboard the drydock will document the exact position of the drydock by entering the position in a log and by taking a digital photograph of the drydock’s Global Positioning System (“GPS”) screen. The vessel to be repaired (“customer’s vessel”) will then be laden aboard the drydock at this location. The drydock will then be towed, with the customer’s vessel laden aboard, to its original location at Pier 3 where work will be performed on the customer’s vessel. While the work is being performed, the drydock will be secured to the pier, and the customer’s vessel will remain onboard at all times. When the work is completed, the drydock will be towed back to the same deepwater docking location where the customer’s vessel was laden on board. The drydock will be secured at the deepwater docking location using the same three-point anchoring system. ESR employees aboard the drydock will document its location by again entering the position in a log and by taking a digital photograph of the drydock’s GPS screen. The customer’s vessel will then be unladen from the drydock at the same location where it was laden. The drydock will remain stationary during the entire unloading process. The drydock will then be towed back to its original location at Pier 3.
In this case, the vessels laden aboard the drydock are merchandise within the meaning of 46 U.S.C. § 55102. The drydock will lade and unlade the vessels at the same coastwise point (deepwater docking location) in the territorial waters of the United States located in the Port of Everett. CBP has previously held that no coastwise transportation occurs when merchandise (vessel) is laden at one coastwise point, transported to another coastwise point where it remains aboard the vessel (drydock), and is subsequently unladen at the same point of lading. See HQ H303322 (May 10, 2019); and HQ H084098 (Nov. 20, 2009).
In addition, the deep-water docking procedure proposed by ESR is similar to the facts in HQ H070662. In this ruling, Puglia, the prior owner of the subject drydock at issue in the present ruling request, asserted that they documented the exact position of the point of lading the vessel in need of repair onto the drydock “by entering their position in its log as well as taking a Polaroid or digital picture of the FAITHFUL SERVANT’s GPS screen.” CBP held that so long as the merchandise (the repaired vessel) were to be laden and unladen at the same coastwise point in the Puget Sound, as supported by photographic evidence of the drydock’s exact location, no violation of 46 U.S.C. § 55102 would arise. As noted above in regard to the present ruling request, ESR will similarly document the exact position of the point of lading the customer’s vessel on the drydock by entering the position in a log and by taking a digital photograph of the drydock’s GPS screen. The customer’s vessel will remain aboard the drydock during the entire repair process, and then be returned to and unladen from the drydock at the same coastwise point where it was laden. You assert that ESR’s process is even more certain than Puglia’s as described in HQ H070662 to ensure that the drydock remains stationary throughout the loading and unloading process due to the three-point anchoring system it will utilize at the deepwater docking location. Because the lading and unlading of the vessels will occur at the same coastwise point at the home position, the proposed use of the drydock does not constitute a transportation of merchandise between coastwise points. Therefore, the proposed transportation is not a violation of 46 U.S.C. § 55102.
Issue 2: Towing under 46 U.S.C. § 55111
The coastwise towing statute, 46 U.S.C. § 55111, provides that except when towing a vessel in distress, only a coastwise-qualified vessel may do any part of any towing between coastwise points. ESR states that all towing of the drydock will be completed with the aid of coastwise-qualified tugboats. Specifically, the drydock may also be towed between Pier 3 and the deepwater docking location, without a laden vessel aboard, for drydocking for approximately four contracts per year. Any towing of the drydock for this purpose will carry the same drydock personnel referenced above, which include a dockmaster, assistant dockmaster, electrician, mechanic, and line handlers on board to monitor the drydock’s movements, handle lines and assist with the three-point anchoring system upon arrival and departure from the deepwater docking location. ESR states that all towing of the drydock between coastwise points will be performed by coastwise-qualified tugboats. Accordingly, there will be no violation of 46 U.S.C. § 55111.
Issue 3: Transportation of Passengers under 46 U.S.C. § 55103, and 19 CFR § 4.50(b)
The coastwise laws prohibit a non-coastwise-qualified vessel from transporting passengers between ports or places in the United States. Pursuant to CBP regulations, “[a] passenger…is any person carried on a vessel who is not connected with the operation, navigation, ownership, or business of the vessel.” 19 C.F.R. § 4.50(b). In accordance with previous Headquarters rulings, workmen, technicians, or observers transported by vessel between ports of the United States are not classified as “passengers,” within the meaning of 46 U.S.C. § 55103 and 19 C.F.R. § 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. HQ 101699 (Nov. 5, 1975); see HQ 116721 (Sept. 25, 2006) (quoting HQ 101699). Furthermore, the shipboard activities engaged in by such aforementioned individuals while traveling on a non-coastwise-qualified vessel between coastwise ports must be “directly and substantially” related to the operation, navigation, ownership, or business of the vessel itself in order for such individuals to not be considered as passengers under these provisions of law (see HQ 116721, supra; and HQ 116659 (May 19, 2006), referencing the “direct and substantial” test).
ESR states that when the subject drydock is towed by tugboats, it will carry drydock personnel between coastwise points: Pier 3 and the deepwater docking location. The drydock personnel transported will be a dockmaster, an assistant dockmaster, an electrician, a mechanic, and line handlers. These individuals are needed to monitor the drydock’s movements, handle lines and assist with the three-point anchoring system upon arrival and departure from the deepwater docking location. ESR asserts that all of these individuals are connected with the operation and navigation of the drydock, similarly to the individuals transported between coastwise points on the Austal drydock described in HQ H303322 (“Insofar as the subject individuals are providing the skills necessary for the successful operation and navigation of the vessel, they are not passengers for purposes of 46 U.S.C. § 55103.” (May 10, 2019)). As such, these individuals do not constitute “passengers,” and the transportation of such individuals between coastwise points would not constitute a violation of 46 U.S.C. § 55103.
Insofar as the subject individuals are providing the skills necessary for the operation, navigation, ownership, or business of the vessel, they are not passengers for purposes of 46 U.S.C. § 55103. Insofar as the subject individuals are not passengers, the transportation of the subject individuals is not in violation of 46 U.S.C. § 55103.
HOLDING
The proposed operation described in the FACTS section above would not constitute a violation of 46 U.S.C. §§ 55102, 55103, and/or 55111.
Sincerely,
Lisa L. Burley
Chief/Supervisory Attorney-Advisor
Cargo Security, Carriers and Restricted Merchandise Branch
Office of Trade, Regulations and Rulings
U.S. Customs and Border Protection