ENT-1-03-CO:R:C:E 224477 PH
District Director
Houston, Texas 77052
RE: Internal Advice Request; Importation, Time of; Outer
Continental Shelf; Tension Leg Drilling Platform; 19 CFR
101.1(h); C.A.D. 612; C.S.D. 79-1; C.S.D. 80-235; 8905.20.00,
HTSUS; 8907.90.00, HTSUS; Ruling 110808, August 20, 1990,
Modified
Dear Madame:
With your memorandum of February 11, 1993 (File: ENT-1-H:CO
MPL), you forwarded a request for internal advice submitted by
Panalpina, Inc., on behalf of Shell Offshore Inc. with regard to
the entry, classification, and dutiability of the Shell "Auger"
Tension Leg Platform (TLP). Representatives of the private
interests involved met with Headquarters personnel about this
matter on March 25 and April 30, 1993. Two additional briefs
(dated May 7 and 19, 1983) were sent to this office by one of the
representatives of the private interests involved (copies of these
additional briefs are enclosed). This ruling is based on the
material you forwarded to us with the internal advice request,
information provided at the March 25 and April 30 meetings, the May
7 and 19 additional briefs, and the August 20, 1990, ruling (File:
VES 3-15 CO:R:P:C 110808 BEW) issued by the Carrier Rulings Branch
of the Customs Service about this operation. Our ruling follows.
In the brief submitted with the May 7, 1993, letter, it is
stated that it is understood that "[Customs] believes that if the
hull for the [TLP] arrives at Freeport, Texas and only standby
activities are performed prior to sending it out of the Customs
territory for mating with the deck, no importation or other event
requiring entry will occur [and] that after mating the hull and
deck will be classified as a floating production platform under
item 8905.20.00, HTSUS." Although Customs officials may have
orally indicated that this might be Customs positions, oral
opinions or advice are, of course, not binding on the Customs
Service (19 CFR 177.1(b) and 177.4(a)). At the meetings referred
to above, this (i.e., the effect of oral opinions or advice) was
emphasized to the private parties concerned.
FACTS:
You describe the completed TLP as "... a complete floating
drilling and production platform consisting of the equipment
required for drilling and production, such as derricks, cranes,
pumps, cementing units, etc., helicopter landing pads and living
quarters for personnel." The TLP will be attached to the seafloor
for drilling in the seabed by connection with tubular tendons to
a previously installed subsea template.
The support structure or hull of the TLP is being manufactured
in Italy and is being towed from there. The deck of the TLP is
being manufactured domestically. The hull and deck are to be mated
in the Gulf of Mexico outside United States territorial waters.
The hull of the TLP is now being towed from Italy by two tugs.
It is scheduled to arrive in the United States (plans are to berth
it at Freeport, Texas) before the deck is completed. It is
anticipated that the hull will remain in Freeport, in "safe
harbor," for approximately 1 to 3 months. "Some minor activities"
may be performed on the hull while it is in Freeport awaiting
completion of the deck. These activities, described as
facilitating the mating process, were stated at the meetings
referred to above as consisting of the addition of fenders and the
addition of a temporary generator.
Upon completion of the deck, the hull and the deck will be
towed (the deck will be towed on a barge) outside United States
territorial waters over the outer continental shelf (OCS) and will
there be mated. The mating process will take approximately 2
weeks. After mating, the mated TLP will be returned to Freeport
to complete the welding together of the hull and deck and to
"interconnect" piping and electrical components. These operations
will take approximately 2 months.
After completion of these last operations, the TLP will be
towed to the OCS installation site for permanent attachment to the
seabed. After this attachment to the OCS, drilling and production
operations will immediately commence. Upon attachment to the
seabed, it is the intent of the company involved to file
appropriate entry documentation with Customs.
ISSUES:
(1) When is the hull of the TLP or the completed TLP, as
described in the FACTS portion of this ruling, considered to be
imported?
(2) What is the tariff classification and applicable duty
for the hull of the TLP (i.e., if importation is considered to take
place before mating of the hull and deck of the TLP)?
(3) What is the tariff classification and applicable duty
for the TLP after mating of the hull and deck of the TLP?
LAW AND ANALYSIS:
Initially, we note that the Carrier Rulings Branch, in its
August 20, 1990, ruling (referred to above), held that "[the TLP]
is not a vessel and as such is subject to Customs duty upon
importation into the United States." (See General Note 1 of the
Harmonized Tariff Schedule of the United States Annotated (HTSUSA)
(19 U.S.C. 1202), under which "[a]ll goods provided for in [the
HTS] and imported into the customs territory of the United States
from outside thereof are subject to duty or exempt therefrom as
prescribed in general notes 3 and 4.")
The initial issue in this case is, when does importation into
the United States occur? The time of importation for Customs
purposes is defined in 19 CFR 101.1(h) as, "in the case of
merchandise imported otherwise than by vessel, the date on which
the merchandise arrives within the [c]ustoms territory of the
United States [and] [i]n the case of merchandise imported by vessel
... the date on which the vessel arrives within the limits of a
port in the United States with intent then and there to unlade such
merchandise." Although this definition of importation has been
recognized as inapplicable to cases in which the merchandise to be
imported is a vessel (see Pritchard v. United States, 43 CCPA 85,
87, C.A.D. 612 (1956); American Customs Brokerage Co., Inc. [the
"Astral"] v. United States, 72 Cust. Ct. 245, 253, 375 F. Supp.
1360, C.D. 4546 (1974)), the hull of the TLP and the TLP (after
mating of the hull and deck) have been held not to be vessels.
As contended in the May 7, 1993, brief, the hull of the TLP
will be brought to Freeport "by" vessel (if brought to Freeport
otherwise than by vessel, it would be considered imported when it
arrived in the Customs territory). Even though it is towed to
Freeport, and not brought there "in" a vessel, the means or agency
which brings it to Freeport will be vessels (i.e., the towing
vessels) (see definition of "by" in Webster's New World Dictionary,
3rd College Ed., (1988), "4 expressing means or agency through the
means, work, or operations of" (emphasis in original); see also
Treasury Decision (T.D.) 89-13). Therefore, in order to determine
whether the hull of the TLP is imported when it arrives in
Freeport, we must determine whether, when it is towed into the
limits of that port, there is "then and there" an intent to unlade
the hull of the TLP.
We note that Customs has ruled "... that merchandise which
is not intended to be unladen at the port of arrival (the first
port of entry), but which is intended to be unladen at a second
port of entry in the United States, is not considered imported
merchandise when it arrives at the first port because there is no
intent then and there to unlade ..." (Customs Service Decision
(C.S.D.) 80-235). In this ruling, Customs also explained that
C.S.D. 79-1, which is cited by the inquirer in this case as support
for its position, "... was concerned primarily with the usual
situation when merchandise is towed directly from a foreign port
to be affixed to the [OCS] [and] was not intended to preclude an
importer from bringing such merchandise into the port of entry and
entering it there prior to its unlading and attachment to the
[OCS]."
Thus, the issue of whether the hull of the TLP is imported
when it arrives at Freeport is determined by the meaning of the
word "unladen." The Customs Courts have adopted the dictionary
definition for the term "unlade" (American Mail Line v. United
States, 6 Cust. Ct. 90, 93, C.D. 435 (1941); quoted in United
States v. Commodities Export Co., 14 CIT 166, 170-171, 733 F. Supp.
109 (1990)). Webster's Third New International Dictionary (1986),
defines unlade as "1: to take the load from: take out the cargo of
[,] 2: to have removed (as a load or burden): DISCHARGE, UNLOAD
...."
In a case such as this, in which merchandise which is not a
vessel is towed on its own bottom into the United States, it is
clear that "unlade" cannot mean to unload from a vessel.
Otherwise, such merchandise would never be imported. Instead, we
must analogize this situation to that of merchandise which arrives
in a vessel.
It has long been Customs position, as well as that of other
authorities, that an unlading takes place even when merchandise is
transferred from the arriving vessel to another vessel (The Fame,
8 Fed. Cases 982 (1858); T.D. 21324 (1899); 27 Op. Att'y Gen. 446
(1909); see also, United States v. Ultramar Shipping Co., Inc., 685
F. Supp. 887, 695 (S.D.N.Y. 1987), "... unloading into lighters is
considered discharge in most circumstances"). The unloading of
merchandise transported in a vessel is analogous to the termination
of the towing of a vessel or other merchandise towed by a towing
vessel (i.e., when the tow is terminated, the towed vessel or
merchandise is "discharged" from the towing vessel; note the use
of the word "discharge" as a secondary meaning of "unlade" in the
definition quoted above). In this regard, we note that Customs has
taken the position that the change of the towing vessel in a towing
operation terminates the tow (i.e., the tow is not considered to
be continuous) (see T.D. 70-223(19), interpreting the coastwise
towing statute (46 U.S.C. App. 316(a))). This interpretation is
consistent with the above-described general rule (i.e., unlading
of merchandise brought to the United States in a vessel takes place
when the merchandise is discharged from the transporting vessel;
unlading of merchandise brought to the United States by a towing
vessel takes place when the merchandise is discharged (i.e.,
disconnected) from the towing vessel).
In the case under consideration, the hull of the TLP is to
be towed to Freeport and we understand that the hull of the TLP is
to be disconnected from the towing vessels in Freeport (temporary
fenders and/or a temporary generator may be added to the hull of
the TLP while it is in Freeport). In this situation, the hull of
the TLP would be considered imported when it arrives in the limits
of Freeport because "then and there" it would be intended to
discharge the hull of the TLP from the vessels by which it is
brought to the United States. If the hull of the TLP is not
intended to be disconnected in Freeport from the vessels which tow
it into the Customs territory and if it is not actually so
disconnected before leaving the Customs territory (see East Asiatic
Co., Inc. v. United States, 27 CCPA 364, C.A.D. 112 (1940)), it
would not be considered to be imported when it arrives in the
limits of Freeport, regardless of whether the temporary fenders
and/or temporary generator are added to the hull of the TLP while
it is in Freeport.
As for the classification issues, the General Rules of
Interpretation (GRI's) to the HTSUS govern the classification of
goods in the tariff schedule. GRI 1 states in pertinent part that
"for legal purposes, classification shall be determined according
to the terms of the headings and any relative section or chapter
notes . . . ." Heading 8905, HTSUS, provides for floating or
submersible drilling or production platforms.
The Harmonized Commodity Description and Coding System
Explanatory Notes (EN) constitute the Customs Co-operation
Council's official interpretation of the Harmonized System. While
not legally binding, the Ens provide a commentary on the scope of
each heading of the Harmonized System, and are generally indicative
of the proper interpretation of these headings.
EN 89.05, pg. 1452, states that the floating or submersible
drilling or production platforms of heading 8905, HTSUS, "are
generally designed for the discovery or exploitation of off-shore
deposits of oil or natural gas. Apart from the equipment required
for drilling or production, such as derricks, cranes, pumps,
cementing units, silos, etc., these platforms have living quarters
for the personnel." The heading covers self-elevating platforms,
"which, apart from the working platform itself, are fitted with
devices (hulls, caissons, etc.) which enable them to float, and
with retractable legs which are lowered on the work site so that
they are supported on the sea bed and raise the working platform
above the water level [emphasis added]."
The TLP is designed for the discovery or exploitation of off-
shore deposits of oil. The TLP's deck includes derricks, cranes,
pumps, cementing units, helicopter landing pads, living quarters
for personnel and other equipment required for drilling or
production. The working platform, the deck, is fitted with a
device which enables the deck to float, the hull. As such, the
TLP, after the mating of the deck and hull, is described by the
terms of heading 8905, HTSUS. Accordingly, the complete TLP would
be classifiable under subheading 8905.20.00, HTSUS, which provides
for floating or submersible drilling or production platforms.
However, before the mating of the hull and deck of the TLP,
the hull could not be classified under heading 8905, HTSUS, as it
is not covered by the terms of the heading, nor does it have the
essential character of a complete drilling or production platform
described therein. See GRI 2(a). The remaining headings at issue
are as follows:
8906 Other vessels, including warships and
lifeboats other than row boats
* * * * * * * * * * *
8907 Other floating structures (for example,
rafts, tanks, cofferdams, landing-stages,
buoys and beacons)
EN 89.06, pg. 1453, states that heading 8906, HTSUS, "covers
all vessels not included in the more specific headings 89.01 to
89.05 [emphasis added]." In its August 20, 1990, ruling, the
Carrier Rulings Branch determined that the hull in question was not
a vessel. Therefore, the hull is not covered by heading 8906,
HTSUS.
EN 89.07, pg. 1454, states that heading 8907, HTSUS, "covers
certain floating structures not having the character of vessels."
The structures covered by this heading are generally stationary
when in use. The hull in question, which does not have the
character of a vessel, is classifiable under heading 8907, HTSUS,
specifically under subheading 8907.90.00, HTSUS, which provides for
other floating structures.
For your information, the specific arguments made by the
representatives of the private interests in this case are briefly
addressed below. As to the argument that past Customs rulings have
enunciated a special rule under which floating drilling or
production platforms are only imported when attached to the OCS
(see, e.g., C.S.D. 79-1), as stated above, this rule is applicable
only when the platform is towed directly from a foreign port to be
affixed to the OCS (see C.S.D. 80-235). As to the argument that
the August 20, 1990, Carrier Rulings Branch ruling holds that the
time of importation of the TLP is when it is attached to the seabed
of the OCS, although the ruling can be so interpreted, it does not
explicitly so state. To the extent that the instant ruling is
inconsistent with the August 20, 1990, ruling, the latter ruling
is modified. If reliance on the August 20, 1990, ruling is
intended to be established so that the effect of the instant ruling
is delayed, the requirements of 19 CFR 177.9(e) must be met (i.e.,
specific application for delay of the effective date of a modifying
ruling must be made and consistent past treatment, as well as
reasonable reliance by the affected party, must be established to
the satisfaction of Customs).
The lay order and general order provisions (see 19 U.S.C.
1448, 1490, 1491), referred to in the May 7, 1993, brief, are
inappropriate because these provisions are applicable after
importation. Because classification (as opposed to the effective
duty rate) is effective as of the time of importation, these
provisions could not operate to delay the time of classification
of the hull of the TLP until after mating (see, e.g., Roser Customs
Service (Continental Ore Corp.) v. United States, 64 Cust. Ct. 20,
C.D. 3953 (1970)). Nor are the provisions in 19 U.S.C. 1449 and
19 CFR 4.33 (providing for the unlading of mer-chandise at a port
other than the original port of destination) applicable (i.e.,
these provisions contemplate a situation in which the merchandise
has not been unladen at the original port of destination). The
same is true of the provisions cited to enable the date of entry
to be delayed or to permit operations on the merchandise after
importation (i.e., for classification purposes, the date of
importation, not entry, controls, so delay of the date of entry,
or operations performed on the merchandise after the date of
importation, would not affect classification of the hull of the TLP
once it is imported).
Although it is generally true that there must be an element
of intent with regard to unlading (as discussed above, but see East
Asiatic Co., Inc. v. United States, supra), the contention that
intent to import is required is incorrect (see, e.g., American Mail
Line, supra, 6 Cust. Ct. at 93-94, "[t]he fact that the merchandise
in question was not intended to be sold or to be mingled with and
become a part of the commerce of the United States is immaterial").
As for the argument that the definition of importation in this case
should be governed by the Court decisions regarding yachts (see
Pritchard and Astral, supra), we note that the yachts in those
cases were vessels and the hull of the TLP has been ruled not to
be a vessel (as discussed above). In The Conqueror, 166 U.S. 110
(1897), the Supreme Court stated that "from the foundation of the
government, vessels [in that case, a yacht] have been treated as
sui generis, and subject to an entirely different set of laws and
regulations from those applied to imported articles" (166 U.S.
118), in holding that vessels are not dutiable under the tariff
schedules. By legislation, an exception to this general rule was
created for yachts (i.e., they were made dutiable; see paragraph
370, Tariff Act of 1930, items 696.05 and 696.10, TSUS, and heading
8903, HTSUSA). Nevertheless, they remain vessels and, as stated
by the courts in both Pritchard and Astral, the general definition
of importation cannot be applied to them (43 CCPA at 87, 72 Cust.
Ct. at 253). (It is argued in the May 19, 1993, brief that yachts
are not vessels. This is clearly wrong (see 19 U.S.C. 1401(a), 1
U.S.C. 3, 46 U.S.C. 2101(25); see also St. Hilaire Moye v.
Henderson, 496 F. 2d 973, 979 (1974, Ark.), cert. den., 419 U.S.
884 (1974)).) We reiterate that the hull of the TLP has been held
not to be a vessel.
HOLDING:
(1) The time of importation of the hull of the TLP, which
will be towed to the United States, is the time that it arrives in
a port of the United States with the intent that it be disconnected
in that port from the towing vessels or the time that it arrives
in a port of the United States if it is actually disconnected in
that port from the towing vessels (even if such was not the intent
at the time of arrival). That is, if it is intended to disconnect
the hull of the TLP from the towing vessels in Freeport, the hull
of the TLP is considered to be imported when it arrives in the
limits of Freeport. If the hull of the TLP is not intended to be
disconnected in Freeport from the towing vessels and it is not
actually so disconnected before leaving the Customs territory, it
is not considered to be imported when it arrives in the limits of
Freeport, regardless of whether the temporary fenders and/or
temporary generator are added to the hull of the TLP while it is
in Freeport.
(2) The hull of the TLP, if imported separately, is
classifiable under subheading 8907.90.00, HTSUS, which provides
for other floating structures, such as rafts, tanks, cofferdams,
landing-stages, buoys and beacons. The corresponding rate of duty
for articles of this subheading is 3.8% ad valorem.
(3) The complete TLP (after the mating of the deck and hull)
is classifiable under subheading 8905.20.00, HTSUS, which provides
for floating or submersible drilling or production platforms. The
corresponding rate of duty for articles of this subheading is free.
EFFECTS ON OTHER RULINGS:
Ruling 110808, August 20, 1990, is MODIFIED, to the extent
that it is inconsistent with this ruling.
Sincerely,
John Durant, Director
Commercial Rulings Division