VES-3-16-RR:IT:EC 114487 LLB
Mr. Richard C. Celotto
Designers and Planners, Inc.
2120 Washington Blvd., Suite 200
Arlington, Virginia 22204
RE: Coastwise trade; Pipelaying; Outer Continental Shelf;
Foreign-flag vessels; 46 U.S.C. App. 292 and 883
Dear Mr. Celotto:
Reference is made to your letter of September 23, 1998, in
which you request that this office rule upon the proposed use of
non-coastwise-qualified vessels in the laying of subsea
pipelines. Our ruling follows.
FACTS:
A British-registered company, European Marine Contractors
Limited (EMC), owns and operates five vessels which are
registered in the Bahama Islands. Two of the vessels are
semisubmersible pipelay barges, two are flat-bottomed trench
barges, and one is a diving support vessel. It is stated that
the company has been operating the vessels in other countries in
support of offshore drilling operations but now seeks to operate
in United States territorial waters as well as those overlying
the Outer Continental Shelf of this country. The company would
seek to become involved in providing pipelines connecting
offshore drilling units with one another as well as connections
involving oil loading facilities and domestic land-based
facilities.
It is proposed that the vessels would arrive from foreign
locations and moor in offshore locations. Pipe sections would be
transported to the EMC vessels by United States-flag vessels,
with the EMC vessels only entering American ports when standing
by between contract obligations or when embarking or disembarking
crewmembers. Actual operations would involve starting at a
terminal point, such as at an oil rig, and placing pipeline
sections in the water. The sections would be welded together as
the vessel deployed them. One of the trenching barges would then
follow with a tow sled which would straddle the pipe and dig a
trench with water jets. The pipe would then fall into the trench
and , depending upon the particular contract specifications,
would either be covered or left uncovered. Any necessary diving
services would be supplied by the diving support vessel.
ISSUE:
Whether any of the laws enforced by the Customs Service are
implicated in the circumstances outlined in the Facts portion of
this ruling.
LAW AND ANALYSIS:
Generally, the coastwise laws prohibit the transportation of
passengers or merchandise between points in the United States
embraced within the coastwise laws in any vessel other than a
vessel built in, documented under the laws of, and owned by
citizens of the United States.
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.
Title 46, United States Code Appendix, section 883, the
coastwise merchandise statute often called the "Jones Act",
provides in part that no merchandise shall 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 vessel other than a vessel built in,
documented under the laws of, and owned by citizens of the United
States.
Not included within the general meaning of merchandise is
the equipment of a vessel which will be used by that vessel.
Such materials have 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."
(Treasury Decision 49815(4), March 13, 1939). Customs has
specifically ruled that, "Vessel equipment placed aboard a vessel
at one United States port may be removed from the vessel at
another United States port at a later date without violation of
the coastwise laws." (Customs Ruling Letter 102945, November 8,
1978). Decisions as to whether a given article comes within the
definition of "vessel equipment" are made on a case by case
basis.
Section 4(a) of the Outer Continental Shelf Lands Act of
1953, as amended (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, or producing resources therefrom...to the same
extent as if the outer Continental Shelf were an area of
exclusive Federal jurisdiction within a state."
Title 46, United States Code App., section 292, provides
that with one exception not applicable in the present case,
vessels may not dredge in the navigable waters of the United
States unless they meet the requirements of 46 U.S.C. App. 883.
The Customs Service has previously ruled that the laying
of pipe is not considered coastwise trade. When pipe is laid, it
is paid out in a continual operation while the vessel proceeds.
Customs distinguishes between such an operation and the act of
unlading merchandise since there is no single identifiable
coastwise point involved in the laying of pipe (C.S.D. 79-321).
Since the activity involved is not coastwise trade, foreign-flag
vessels may be employed.
With respect to the potential dutiability of the pipe,
Customs has had occasion to rule on similar matters. In
Headquarters Letter 106454, dated November 16, 1983, the issue of
the dutiability of certain flexible pipeline laid on the seabed
between two fixed platforms considered to be located within the
United States was considered. Customs determined in those
circumstances that duty liability is limited to that portion of
the pipeline which rises along the structure of a production
platform, beginning with its first point of attachment to the
structure.
The operations surrounding the trench barges lead us to a
different result. In a published precedential case (Customs
Service Decision 79-331, December 28, 1978), Customs had occasion
to rule upon the use of a towed plow which created a furrow for a
pipeline in conjunction with a pipelaying operation. That ruling
found that the use of the device was an engagement in dredging
when it was used in United States territorial waters. We find no
meaningful distinction between the device considered in that case
and the sled presently under consideration. Use of the device
within the three mile territorial waters of the United States
would be prohibited.
We find no such prohibition with respect to the use of the
diving support vessel. There would be no transportation of
passengers or merchandise between coastwise points provided by
the vessel. As such, its use is not restricted by the coastwise
laws enforced by Customs.
HOLDING:
Following thorough consideration of the facts and analysis
of the law and applicable precedents, we have determined that
with the exception of the use of the trenching barges within
territorial waters, the matters as stated in the Facts portion of
this ruling may be accomplished with the use of foreign-flag
vessels.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers Branch