VES-3-15/VES-5/VES-13:CO:R:IT:C 112611 BEW
John W. McConnell, Jr., Esq.
Haight, Gardner, Poor & Havens
1300 I Street, N.W.
Washington, D.C. 20005
RE: Entry and Clearance Requirements; non-self-propelled drilling
rig arriving from the North Sea to point on the OCS; drilling
exploratory wells on the OCS.
Dear Mr. McConnell:
This is in reference to your letter of March 3, 1993, in which
you request a ruling as to whether Customs report of arrival, entry
and clearance procedures are applicable to a non-self-propelled
semi-submersible drilling rig when it is brought into the United
States from a location on the North Sea to a point on the Outer
Continental Shelf (OCS) for purposes of drilling exploratory wells
on the OCS.
FACTS:
You state that the vessel, which is documented under the laws
of the United States, is presently being towed from the North Sea
in Europe to a point on the OCS, located at 89~ 50' 25.3" west
longitude and 28~ 34' 20.9" north latitude, which is outside the
territorial waters of the United States, and approximately 40 plus
miles from the nearest shore on the coast of the State of
Louisiana.
It is planned that the vessel will attach to the seabed of
the OCS at the point described above for the purpose of drilling
an exploratory well. There will be at that time no installation
or other devices or artificial islands permanently or temporarily
attached to the seabed of the OCS for purposes of exploring for,
developing or producing resources therefrom. The vessel will not
call at any port of the United States or place within the
jurisdiction of the customs laws of the United States.
After completion of one exploratory well, the vessel may move
to another point or points on the OCS for the purpose of drilling
other exploratory wells, at which points there will be
no installation or other devices or artificial islands permanently
or temporarily attached to the seabed of the OCS for purposes of
exploring for, developing or producing resources therefrom.
In addition, you state that the vessel, when it arrives at
the initial point on the OCS, will be transporting only members of
its regular complement, those personnel necessary for the routine
functioning of the unit, including crew, industrial personnel and
general maintenance and support personnel, and only legitimate
equipments, stores and supplies for use in its nautical and
drilling operations. It will not be transporting any passengers
or any other equipment and materials as merchandise. The same will
apply to the vessel when it moves from point to point on the OCS.
You state that since the vessel's last departure from a port
of the United States, certain foreign repairs, alterations, and
additions were made to, and certain equipment was purchased for
the vessel, which may be subject to duty under the provisions of
19 U.S.C. 1466(a).
ISSUES:
1. Whether the subject vessel is required to report its arrival
pursuant to 19 U.S.C. 1433 when it arrives at a point on the OCS
where there is no installation or other devices or artificial
islands permanently or temporarily attached to the seabed of the
OCS for purposes of exploring for, developing or producing
resources therefrom.
2. Whether under the circumstances set forth above, the subject
vessel is required to enter and clear under the provisions of 19
U.S.C. 1434 and 46 U.S.C. App. 91, respectively.
3. Whether the vessel is subject to duties for foreign equipment
purchases and repairs performed on the vessel subsequent to the
vessel's departure from the United States pursuant to 19 U.S.C.
1466(a), when it arrives at a point on the Outer Continental Shelf
for the purpose of drilling exploratory wells.
4. Whether the proposed movement of the vessel as stated above
constitutes coastwise trade thereby necessitating compliance with
the provisions of 46 U.S.C. App. 289, 883 and/or 316(a).
LAW AND ANALYSIS:
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, in
pertinent part, that:
No merchandise, including merchandise owned by
the United States Government, a State (as
defined in section 2101 of the1 Title 46) or
1So in original a subdivision of a State, 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, including
Districts, Territories, and possessions thereof
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 territorial waters of the United States
consist of the territorial sea, defined as the belt, 3 nautical
miles wide, adjacent to the coast of the United States and seaward
of the territorial sea baseline.
Section 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
pertinent 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, or
producing resources therefrom ... to the same
extent as if the outer Continental Shelf were
an area of exclusive Federal jurisdiction
located within a State.
Section 203 of the OCSLA Amendments of 1978 (92 Stat. 629, 635)
(1978 Amendments), amended section 4(a) of the OCSLA by
substituting "... and all installations and other devices
permanently or temporarily attached to the seabed ..." for "...
and fixed structures ...." The purpose of this change was
stated in the legislative history to make it clear "... that
Federal law is to be applicable to all activities on all devices
in contact with the seabed for exploration, development, and
production." Thus, Federal law was intended "... to
be applicable to activities on drilling ships, semi-submersible
drilling rigs, and other watercraft, when they are connected to
the seabed by drillstring, pipes, or other appurtenances, on
the OCS for exploration, development, or production purposes."
(reproduced at 1978 U.S.C.C.A.N. 1450, 1534.).
Under these provisions, Customs has 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 United States OCS. The same
principles have been applied to drilling platforms, artificial
islands, and similar structures 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.
Before the 1978 amendments, the corresponding part of section
4(a) provided 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 fixed structures which may be erected
thereon for the purpose of exploring for, developing, removing, and
transporting resources therefrom, to the same extent as if the
outer Continental Shelf were an area of exclusive Federal
jurisdiction located within a State."
The intent of this change was stated to be "technical and
perfecting and ... meant to restate and clarify and not change
existing laws." (House Conf. Report No. 95-1474, p. 80 (1978
U.S.C.C.A.N. 1679)). It was also stated in this Report about
this change that the conferees were informed--
... Under section 4(a)(1) of the conference
report, Federal laws and "civil and political
jurisdiction of the United States" are
applicable to the subsoil and seabed of the
OCS, to all artificial islands and "all
installations and other devices permanently or
temporarily attached to the seabed, which may
be erected thereon" to explore, develop,
produce or transport OCS mineral resources.
Thus customs laws apply - as within the
"political and civil jurisdiction" of the
United States - to platforms constructed
outside the United States and brought into OCS
waters - as being "installations and other
devices * * * which may be erected thereon". In response to the foregoing legislative history, the Customs
Service issued Customs Service Decision (C.S.D.) 79-1. This deci-
sion held that foreign-built drilling and production platforms
which are not vessels are dutiable upon their attachment, whether
temporary or permanent, to the seabed of the OCS. The C.S.D.
emphasized that only drilling platforms which are not vessels are
dutiable upon attachment to the OCS. It did not make vessels,
whether drilling vessels or otherwise, subject to duty (vessels
other than yachts and pleasure vessels are not subject to duty un-
der the Harmonized Tariff Schedules of the United States), nor did
it make them subject to vessel entrance and clearance requirements
upon initial attachment to the OCS at a point at which there is no
existing artificial island or installation or other device attached
to the seabed for the purpose of exploring for, developing, or
producing resources therefrom.
It was the position of the Customs Service before the 1978
Amendments and remains the position of the Customs Service that
drilling vessels are not subject to the vessel entrance and
clearance requirements at the time they "attach" to the OCS at a
point at which there is no existing artificial island or
installation or other device attached to the seabed for the purpose
of exploring for, developing, or producing resources therefrom.
Under 19 U.S.C. 1466, equipment purchased in a foreign country
for, and repairs made in a foreign country to a vessel documented
under the laws of the United States to engage in the foreign or
coasting trade or intended to be employed in such trade are
dutiable "on the first arrival of such vessel in any port of the
United States." In view of the specific language in section 1466
attaching duties on the first arrival in any port of the United
States, we conclude that drilling vessels are not subject to vessel
repair duties on their attachment to the OCS at a point at which
there is no existing artificial island or installation or other
device attached to the seabed for the purpose of exploring for,
developing, or producing resources therefrom.
Under the foregoing, the subject drilling rig is not required
to report its arrival pursuant to 19 U.S.C. 1433, or make entry
pursuant to 19 U.S.C. 1434, when it arrives at a point on the OCS
at which there is no existing artificial island or installation or
other device attached to the seabed for the purpose of exploring
for, developing, or producing resources therefrom. Furthermore,
the subject drilling rig is not required to clear pursuant to 46
U.S.C. App. 91. In addition, the payment of duties under 1466(a) for the cost of foreign repairs or
equipment purchases made to the vessel shall not accrue at the time
that the vessel attaches to the seabed for the purpose of drilling
exploratory wells where there is no existing artificial island or
installation or other device attached to the seabed for the purpose
of exploring for, developing, or producing resources therefrom.
In the case under consideration, you indicate that the
drilling rig is non-self-propelled. In this regard you should know
that section 316(a) of title 46, United States Code Appendix, as
amended by the Act of May 19, 1986 (Pub. L. 99-307 (46 U.S.C. App.
316(a)), prohibits the towing between coastwise points of any
vessel except a vessel in distress, by any vessel other than a
vessel of the United States issued a certificate of documentation
with a coastwise or Great Lakes endorsement (see 46 U.S.C. 12106,
12107). This restriction extends to certain territories and
possessions of the United States, to towing between points within
the same harbor, and to direct, indirect, or partial towing
operations.
HOLDINGS:
1. The subject vessel is not required to report its arrival
pursuant to 19 U.S.C. 1433 when it arrives at a point on the
OCS where there is no installation or other devices or
artificial islands permanently or temporarily attached to the
seabed of the OCS for purposes of exploring for, developing
or producing resources therefrom.
2. Under the circumstances set forth above, the subject
vessel is not required to enter and clear under the provisions
of 19 U.S.C. 1434 and 46 U.S.C. App. 91, respectively.
3. Ad valorem duties for foreign equipment purchases and
repairs performed on the subject vessel subsequent to its
departure from the United States do not accrue under the
provisions of 19 U.S.C. 1466(a), when the vessel arrives at
a point on the Outer Continental Shelf for the purpose of
drilling exploratory wells under the circumstances set forth
above.
4. The proposed movement of the vessel as stated above does
not constitute coastwise trade thereby necessitating
compliance with the provisions of 46 U.S.C. App. 289 and/or
883. In addition, the proposed movement of the vessel does not constitute a violation of the towing statute, 46 U.S.C.
App. 316(a), provided that any towing of the drilling vessel
between coastwise points (including points atttached to the
OCS as discussed above) is done by a U.S. vessel which has
been issued a certificate of documentation with a coastwise
or Great Lakes endorsement (see 46 U.S.C. 12106, 12107).
Sincerely,
Acting Chief
Carrier Rulings Branch