VES-03-01-CO:R:IT:C: 111591 BEW
Ronald M. Hershkowitz, Esquire
American Telephone and Telegraph Company
295 North Maple Avenue
Basking Ridge, New Jersey 07920
RE: Applicability of coastwise merchandise law, 46 U.S.C. App.
883, to proposed carriage of cable by a foreign-built vessel
Dear Mr. Hershkowitz:
This is in reference to your request for a ruling on behalf
of Transoceanic Cableship Company (TCSC), a wholly owned
subsidiary of the American Telephone and Telegraph Company
(AT&T) regarding the proposed use of a U.S. registered foreign-
built vessel for cable laying operations.
FACTS:
You state that a U.S. registered foreign-built vessel will
be used to transport equipment that will either (1) form a part
of a submarine telecommunications cable system (cable system)
that is to be laid in international waters or (2) that is
equipment used to lay or repair a cable system. You state that
AT&T provides international services principally through two
types of facilities: (1) leased international satellite circuits,
and (2) territorial circuits in cable systems jointly owned by
AT&T and other United States and foreign telecommunications
carriers, such as British Telecom, France Telecom and Koku.
You state that various parts of a cable system are
manufactured in several locations in the United States. The
principal cable manufacturing facility in the United States is
owned by Simplex Wire and Cable Company and is located in
Newington, New Hampshire. You state that the repeaters are made
by AT&T in its Clark, New Jersey, plant, and optical fiber is
manufactured by AT&T at its plant in Atlanta, Georgia. You state
that fiber and the repeaters are shipped to Simplex by land
carriers where they are processed into submarine cable. The
cable and repeaters are assembled and loaded directly into the
cable ship's special tanks. The vessel then lays the cable
system along its prescribed route in the United States,
international and foreign territorial waters. You state that
while the cable laying is being done, the cable is continuously
tested by technicians on the cable laying vessel and in the cable
station ashore.
You state that C.S. LONG LINES and the C.S. CHARLES L. BROWN
are used by TCSC in performing both cable laying and repair
services. You state that the C.S. LONG LINES has laid or
participated in the laying of all of the major cable systems in
which AT&T has an ownership interest. You state that while the
cable systems have a good record for continuous operation, they
are subject to the possibility of outages due to such causes as
trawling activities and underwater landslides. In addition,
you state that it is possible that the underwater repeaters and
related equipment will develop trouble and have to be replaced.
You state that an arrangement has been worked out with Cable
Systems, AT&T, foreign governments, and telecommunication
entities which own cable systems and cable ships for the
efficient and orderly use of the available ships to safeguard the
vast cable network. Under the said arrangement, the subject
ships are stationed at strategic points in the Atlantic and
Pacific Basins in order to give the best overall coverage of the
large ocean area involved. Each ship is responsible for the
maintenance and repair of the cables in its general area. The
C.S. LONG LINES and the C.S. CHARLIE BROWN are the only U.S.
flag vessels that participate in these maintenance programs.
When a cable breaks or fault occurs, a repair ship is
dispatched to the area of the trouble indicated by testing
techniques ashore. Upon arrival at the site, the vessel lowers a
grappling hook and proceeds slowly to drag the bottom on courses
perpendicular to the known route of the cable. The cable is
raised to the surface and taken aboard ship. The damaged cable
is cut out and replaced by splicing new cable to the old cable.
The repaired cable is lowered to the bottom. To facilitate the
prompt dispatch of the vessels to the repair areas, the cable
ships are maintained in a state of readiness to depart on very
short notice. You state in order to minimize delay in
proceeding to the cable area, the ships generally carry a limited
amount of cable and a few spare repeaters and related apparatus
on board at all times for repair work. You state that the spare
cable, repeaters and apparatus are an integral and highly
essential part of the vessel's repair equipment.
You state that AT&T has established depots where inventories
of the different types of cables and repeaters are stored. AT&T
presently operates cable depots in Baltimore, Maryland, and
Honolulu, Hawaii. You state that a study is being made of the
feasibility of establishing a cable depot in the Puget Sound
area of Washington state.
In general, the cable ships are maintained on a standby
basis at the depot, subject to immediate activation in response
to a cable failure. You state that on occasion, it has been
necessary for the cable ships to proceed to other locations to
load spare cable which is not in inventory at the depot.
You state that if TCSC is not permitted to pick up submarine
cable in Newington, New Hampshire, and store it in its depots in
Baltimore, Honolulu, or potentially, the Puget Sound area, its
ability to compete for cable contracts will be undermined. In
addition, you will not be able to make efficient use of the
proposed depot and the existing depot in Baltimore with respect
to the construction of cable systems connected to the Pacific and
Atlantic Coasts of the United States, respectively.
You state that the Department of the Treasury has ruled that
a small amount of unused cable -- 5% or less -- may be off-
loaded at a U.S. port other then that of original loading without
violating the Jones Act. You state the 5% limitation was
arbitrarily set and unrelated to the reasoning behind the
ruling. You indicate that the 5% limitation is extremely
restrictive. You state that cable laying projects require
substantially more than 5% additional cable to satisfy reasonable
margins for error, particularly when, as is often the case, the
cable system's repeaters are tested on board the cable ship
while the cable is being laid. You cite the following examples:
1. A two part cable system is to be laid in the Pacific,
part 1 is to be laid between California and Hawaii, and at a
later date, part 2 is to be laid between Hawaii and Guam.
Part 1 of the system is loaded aboard a cable ship in
Newington, New Hampshire, and laid as planned. Surplus
cable and spare repeaters are off loaded at the Honolulu
depot for use as repair stock. Subsequently, the system
experiences several outages, the repair of which depletes
the depot stock inventory. Several months later, while in
Newington loading Part 2 of the system, the vessel loads
several sections of cable in excess of the cable system's
requirements . The vessel transits to Hawaii where prior to
commencement of part 2, it off loads the additional spare
cable sections at Honolulu depot, replenishing the repair
cable inventory.
2. AT&T purchases cable F.O.B. Newington, New Hampshire,
for a transatlantic cable with a planned construction start
date of January 1. The start project is delayed. The cable
factory, having manufactured the cable, requires AT&T to
take delivery of the cable as they are unable to store it at
their facility. The cable is loaded aboard a TCSC cable
ship at Newington and transported to the AT&T depot,
Baltimore, for storage. On July 1, AT&T commences
construction, TCSC reloads the cable on the same or a
different cable ship and proceeds to lay the cable.
3. A decision is made to establish the Puget Sound Depot.
The initial stock of spare cable inventory, spare repeaters,
and associated equipment are transported from the Baltimore
and Honolulu depots, and the cable factory in Newington.
You state that the coastwise law does not apply to the
transportation of equipment carried aboard a foreign built cable
laying and repair vessel so long as that equipment is either a
part of the cable system or is equipment used to lay and repair a
cable system.
ISSUE:
Whether the carriage of cable by a foreign-built cable
laying and repair vessel from its point of lading in the
United States to a second point in the United States where
it will be either temporarily unladed into an onshore
storage depot or unladed directly onto another foreign-built
cable-laying and repair vessel located within U.S.
territorial waters which will subsequently install the
cable, constitutes a violation of 46 U.S.C. App 883.
LAW AND ANALYSIS:
Generally, the coastwise laws (e.g., 46 U.S.C. App. 289 and
883, and 46 U.S.C. 12106 and 12110) prohibit the transportation
of merchandise or passengers between points in the United States
embraced within the coastwise laws in any vessel other 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 coastwise law pertaining to the transportation of
merchandise, section 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 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 transportation, whichever
is greater, to be recovered from any
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 ....
For purposes of the coastwise laws, a point in United States
territorial waters is considered a point embraced within the
coastwise laws. The coastwise laws generally apply to points in
the territorial sea, defined as the belt, three (3) 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.
Transportation of the cable being paid out by the cable
laying vessel from a coastwise point to a second coastwise
point, other than in very narrow circumstances not applicable in
this case, is not considered coastwise trade. We have stated
that it is the fact that the cable is not landed but is merely
paid out in the cable laying operation which makes this operation
permissible. To avoid the coastwise prohibition, the cable must
be paid out by the transporting vessel during the voyage
immediately following the lading of the cable. A lading at the
beginning of the voyage followed by an unlading at its
termination will result in a coastwise violation.
If a non-coastwise-qualified vessel lades cable as cargo for
the purposes not of using it before arrival at a second U.S.
point, but merely to transport it to that second such point, the
vessel will be considered to have transported merchandise in the
coastwise trade in violation of section 883. The operations you
outlined would not be prohibited under the provisions of 46
U.S.C. App. 883, provided that the subject cable system and
repeaters are transported as a part of the cable-laying
operation.
The circumstance outlined in example 1, would not violate
the coastwise statute provided the cable is laid on the voyage
between California and Hawaii, and the off-laded cable laying
equipment was laden to be consumed on the same voyage. If the
cable and repeaters are carried as repair stock, that equipment
is cargo.
Under the circumstances outlined in example 2, the
transportation from New Hampshire to Maryland would be a
coastwise transportation and would be prohibited under the
coastwise statute (46 U.S.C. App.883).
With regard to example 3, the transportation of the cable
for the purposes of initial stock of spare cable inventory, spare
repeaters, and associated equipment, from the Baltimore depot,
the Honolulu depot, or the cable factory, to establish the Puget
Sound depot is coastwise trade and would be prohibited under
section 883.
With regard to ruling 105644 (C.S.D. 82-136) which stated
that no coastwise violation exists when a ship pays out 1,100
nautical miles of cable and unlades a small amount of left over
cable at a second coastwise point, it is not analogous to the
case at hand. We cannot as you suggest, hypothesize as to how we
might rule if at some future time either more or less cable was
so left over and unladen.
HOLDING:
The carriage of cable by a foreign-built cable-laying and
repair vessel from its point of lading in the United States to a
second point in the United States where it will be temporarily
unladed into an onshore storage depot for future use or unladed
directly onto another foreign-built cable laying and repair
vessel located within U.S. territorial waters which will
subsequently install the cable, constitutes a violation of 46
U.S.C. App. 883.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch