ENT-1-RR:IT:EC 115134 GEV
John J. Jaskot, Esq.
Jones, Walker, Waechter, Poitevent
Carrère & Denègre, L.L.P.
499 South Capitol St., S.W.
Suite 600
Washington, D.C. 20003
RE: Floating Offshore Service Facility; Outer Continental Shelf Lands
Act; Coastwise Trade; Vessel Entry and Clearance; Merchandise
Duty and Tariff Requirements; 43 U.S.C. § 1333(a); 19 U.S.C.
§§ 1202, 1433, 1434; 46 U.S.C. App. §§ 91, 289, 883
Dear Mr. Jaskot:
This is in response to your letter dated August 11, 2000, requesting a ruling concerning your client’s proposed operation of a Floating Offshore Service Facility (FOSF). The ruling you seek is set forth below.
FACTS:
You are currently engaged in discussions with various oil exploration and production companies to enhance the logistics support system for deepwater drilling and other operations on the Outer Continental Shelf (OCS) of the United States. To that end it is proposed that a foreign-built, foreign-flagged vessel of approximately 150,000 deadweight tons could be located approximately 100 miles or more beyond the 12-mile territorial sea of the United States to serve as a FOSF for nearby deepwater drilling and production activities.
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The FOSF vessel would remain in the vicinity of its designated position through the means of a sophisticated anchoring system or its onboard vessel propulsion system. The FOSF vessel would be large enough to carry onboard diesel fuel, aviation fuel, potable water, food supplies, drill pipe, drilling mud and cement, and other necessary consumables and supplies to support deepwater operations. The FOSF vessel itself would obtain such consumables and supplies, for further delivery to OCS platforms and other units, (1) through offshore supply vessel (OSV) deliveries from U.S. ports, (2) through supply vessel deliveries from foreign ports, and on rare occasions, (3) during visits by the FOSF vessel itself to foreign ports. Additionally, the FOSF vessel would provide offshore warehouse space, heliport services, berthing accommodations, hospital and emergency room facilities, and other onboard logistics services to support OCS operations.
ISSUES:
Whether the FOSF vessel would be subject to Customs report of arrival, entry and clearance requirements if it proceeds between a foreign port and a location on the OCS beyond the territorial sea of the United States.
Whether, under the circumstances described in Issue 1, the onboard merchandise of the FOSF vessel is subject to Customs duties assessed pursuant to the Harmonized Tariff Schedule of the United States.
Whether OSVs, regardless of flag, transporting passengers or
merchandise between the FOSF vessel at its OCS location
and foreign ports or offshore OCS platforms located beyond
the territorial sea of the United States, are subject to Customs
report of arrival, entry and clearance requirements.
4. Whether OSVs, regardless of flag, transporting passengers or
merchandise between the FOSF vessel at its OCS location and
ports within the territorial sea of the United States, are subject to
Customs report of arrival, entry and clearance requirements.
LAW AND ANALYSIS:
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 part, that the laws of the United States are extended to:
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... 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.
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 appurtenances, 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 Customs and navigation laws, including the coastwise laws, the laws on entrance and clearance of vessels, and the provisions for dutiability of merchandise, are extended to mobile oil drilling rigs during the period they are secured to or submerged onto the seabed of the OCS (Treasury Decision (T.D.) 54281(1)). The vessel report of arrival, entry and clearance requirements administered by Customs (see 19 U.S.C. §§ 1433, 1434 and 46 U.S.C. App. § 91, respectively) do not apply to a vessel when it initially attaches to a point on the OCS at which there is no existing structure that constitutes a coastwise point for purposes of the OCSLA. (Customs ruling letter 112611, dated June 23, 1993) 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, including warehouse vessels anchored over the OCS when used to supply drilling rigs on the OCS. (see Customs Service Decisions (C.S.D.s) 81-214 and 83-52, and Customs Ruling Letter 107579, dated May 9, 1985)
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Title 46, United States Code Appendix, § 883 (46 U.S.C. App. § 883, the merchandise coastwise law 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 one that is coastwise-qualified (i.e., U.S.-built, owned and documented).
Title 46, United States Code Appendix, § 289 (46 U.S.C. App. § 289, the passenger coastwise law), prohibits the transportation of passengers between coastwise points, either directly or by way of a foreign port, in any vessel other than one that is coastwise-qualified.
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.
We note your reference to a 12-mile territorial sea. Presidential Proclamation 5928 of December 27, 1988, extended the territorial sea of the United States to 12 nautical miles in order to “...advance the national security and other significant interests of the United States.” It further provides that, “Nothing in this Proclamation: (a) extends or otherwise alters existing Federal or State law or any jurisdiction, rights, legal interests, or obligations derived therefrom;...” (Emphasis added) Consequently, it is our position that the 3-mile territorial sea Customs recognizes for purposes of the administration of the navigation laws was not affected and so stated in subsequent rulings. (See Customs ruling letters 111365, 112392, 112436, 113124, 113812, and 114715) To date, this position remains in effect.
With respect to proposed operation of the FOSF vessel, upon reviewing the OCSLA and its legislative history discussed above, it is readily apparent that attachment to the OCS for exploration, development, or production purposes is the critical element in determining the applicability of the Customs and navigation laws. In this regard we note your statement that the subject FOSF vessel would remain at its location on the OCS either by “…a sophisticated anchoring system or its onboard vessel propulsion system.” While the former is indicative of the requisite attachment for purposes of applying the aforementioned laws pursuant to the OCSLA (see
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Customs Ruling Letter 107579, supra), the latter is not. Consequently, the mere floating action of the vessel and/or the
maintaining of its position by use of its “onboard vessel propulsion system” renders inapplicable the Customs and navigation laws at issue with one exception. That exception pertains to the OSVs in question, regardless of flag, which have delivered or received merchandise to or from the FOSF vessel while it is outside the 3-mile territorial sea. OSVs engaged in such activities are required to report arrival, enter and clear. (See 19 U.S.C. §§ 1433(a)(1)(D), 1434(a)(4) and 46 U.S.C. App. § 91(a)(3) and (b)(3), respectively).
In the event the FOSF vessel’s “sophisticated anchoring system” (i.e., attachment to the OCS) is implemented during the course of the vessel operations under consideration thereby resulting in the applicability of the aforementioned laws pursuant to the OCSLA, our position is as follows.
If, at the time the FOSF vessel proceeds from a foreign port to a location on the OCS beyond the territorial sea that is an existing structure constituting a coastwise point within the meaning of the OCSLA (i.e., an installation or other device or artificial island permanently or temporarily attached to the seabed of the OCS for purposes of exploring for, developing or producing resources therefrom), the statutory vessel report of arrival and entry require-ments would apply. Furthermore, all onboard merchandise (excluding ship stores and equipment) would be subject to any duties assessed pursuant to the Harmonized Tariff Schedule of the United States if on the date of the FOSF vessel’s arrival at that location there is an “intent then and there to unlade such merchandise.” (19 CFR § 101.1) In addition, Customs clearance must also be obtained prior to the departure of the FOSF vessel from that location.
With respect to the OSVs under consideration, in addition to the scenario discussed above, we note the following. Those vessels, regardless of flag, transporting passengers or merchandise between the FOSF vessel at its OCS location (i.e., a coastwise point pursuant to the OCSLA) and foreign ports must report their arrival, enter and clear. The same requirements would also apply with respect to such transportation by foreign-flag OSVs between the FOSF vessel at its OCS location and any other offshore OCS platform located beyond the territorial sea of the United States that is a coastwise point pursuant to the OCSLA. In addition, U.S.-flag OSVs having on board bonded merchandise or foreign merchandise for which entry has not been made would be subject to Customs report of arrival, entry and
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clearance requirements when proceeding between coastwise points. (See 19 U.S.C. §§ 1433(a)(1)(C), 1434(a)(3) and 46 U.S.C. App.
§ 91(a)(2))
Additionally, it should be noted that those OSVs transporting passengers or merchandise between the FOSF vessel at its OCS location and ports within the territorial sea of the United States must be coastwise-qualified (see discussion above on 46 U.S.C. App.
§§ 289, 883).
HOLDINGS:
The FOSF vessel would be subject to Customs report of arrival, entry and clearance requirements if it proceeds between a foreign port and a location on the OCS beyond the territorial sea of the United States that is a coastwise point pursuant to the OCSLA.
Under the circumstances described in Issue 1, the onboard merchandise of the FOSF vessel (excluding ship stores and equipment) is subject to Customs duties assessed pursuant to the Harmonized Tariff Schedule of the United States if, on the date of the FOSF vessel’s arrival at the location that is a coastwise point pursuant to the OCSLA, there is an intent then and there to unlade such merchandise.
3. OSVs, regardless of flag, transporting passengers or merchandise
between the FOSF vessel at its OCS location and foreign ports or
offshore OCS platforms located beyond the territorial sea of the
United States, are subject to Customs report of arrival, entry and
clearance requirements if such OCS locations are coastwise points
pursuant to the OCSLA.
Foreign-flag OSVs, transporting passengers or merchandise
between the FOSF vessel at its OCS location and ports within the
territorial sea of the United States, are subject to Customs report of
arrival, entry and clearance requirements if the OCS location is a
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coastwise point pursuant to the OCSLA. Under this scenario,
OSVs that are U.S.-flagged and have on board bonded
merchandise or foreign merchandise for which entry has not been
made are also subject to these requirements.
Sincerely,
Larry L. Burton
Chief
Entry Procedures and Carriers Branch