VES-3-02-OT:RR:BSTC:RRPP H320052 AMW
Mr. Constantine G. Papavizas, Esq.
Winston & Strawn, LLP
1901 L Street, NW
Washington DC 20036
RE: Coastwise Transportation; Outer Continental Shelf; Wind Turbines; 46 U.S.C. § 55102;
19 CFR §§ 4.80a and 4.80b; 43 U.S.C. § 1333.
Dear Mr. Papavizas:
This letter is in response to your August 2, 2021, ruling request and subsequent follow-up information provided on behalf of your client [ ], regarding whether the installation of wind turbine generators by a non-coastwise-qualified vessel on the U.S. outer continental shelf (“OCS”), as described below, would violate the coastwise laws. Our decision follows.
FACTS
Your client proposes to install approximately [ ] offshore wind turbines in a project developed by [ ] off the coast of [ ] pursuant to a lease issued by the U.S. Bureau of Ocean Energy Management. The project will be outside U.S. territorial waters, but on the OCS [ . The project installation will occur from approximately [ ] to [ ].
You state that wind turbine generator (“WTG”) units will be installed by a non-coastwise-qualified jack-up vessel (the “offshore installation vessel” or “OIV”). The identity of the OIV has not been finalized, but you state that it will likely be the [ ].
You state that the OIV will arrive at the first WTG site without cargo and will be provided WTG components from U.S. ports by coastwise-qualified barges towed by coastwise-qualified tugs; at no time will the foreign OIV go into a U.S. port and lade WTG components. Specifically, the OIV will arrive at the first WTG site, attach itself to the seabed, and jack up to the proper installation height. Following this, a coastwise-qualified tug will position a coastwise-qualified barge alongside the stationary OIV. Once the barge is positioned alongside the OIV, the OIV will utilize its crane to raise and place on its deck the components of a single WTG. In addition to the components themselves, the WTG components will be transported and laden onto the OIV with a series of containers and components (the “devices”) intended to facilitate transport, transfer, and installation, including: a tower lifting tool, tower transport frame, nacelle lifting tool, nacelle transport frame, blade spreader bar, blade rack/stacking frame, and backloading skip. In addition, the OIV will raise up to [ ] shipping containers holding items to be utilized in the WTG installation, including bolts, nuts and grout, spare parts, and provisions for the OIV crew. In addition to this, at the first WTG site, the OIV will receive up to [ ] containers that will remain on board for the duration of the U.S. installation, containing office spaces, tools, rigging equipment, and critical spare parts for the OIV.
After the installation of the first WTG, the OIV will jack down and sail to the second WTG installation site. On board will be empty shipping frames and related devices as well as shipping containers that were loaded for the first installation. At the second site, the OIV will again jack up and take on board, utilizing its crane, a second set of WTG components together with their shipping frames/devices and up to [ ] containers. The OIV will also offload the empty shipping frames and containers laded at the previous WTG site back onto the barge, which will transport them back to a U.S. port at which those empty shipping frames and containers will be filled for subsequent installation activities and operation of the OIV. The offloaded containers may also contain refuse and waste related to the operation, including dirty rags, biohazard bags, and wrapping. These operations will be repeated at each of the installation sites. Finally, once all installation operations conclude, the approximately [ ] containers which had been placed on board containing office spaces, tools, rigging, and spare parts also will be returned to a U.S. port either by a coastwise-qualified vessel or the OIV.
ISSUES
Whether the transportation of the WTG components by a coastwise-qualified tugboat and barge from a U.S. port to an affixed, non-coastwise-qualified jack-up vessel located on the U.S OCS violates the Jones Act, 46 U.S.C. § 55102?
Whether the installation of the subject wind turbine generators by the non-coastwise-qualified jack-up vessel on the OCS violates the Jones Act, 46 U.S.C. § 55102?
Whether transportation of certain tools and material between coastwise points by the non-coastwise-qualified jack-up vessel violates the Jones Act, 46 U.S.C. § 55102?
LAW AND ANALYSIS
The coastwise law applicable to the transportation of merchandise, known as the Jones Act, is found at 46 U.S.C. § 55102, and provides in pertinent part:
Except as otherwise provided in this chapter or chapter 121 of this title, a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel—
is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and
has been issued a certificate of documentation with a coastwise endorsement under chapter 121 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.
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. 33 CFR § 2.22(a)(2). In addition, Section 4(a)(1) of the Outer Continental Shelf Lands Act of 1953 (“OCSLA”), as amended by The William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, H.R. 6395, 116th Cong. § 9503 (2021), provides that the Constitution and laws and civil and political jurisdiction of the United States are extended to:
the subsoil and seabed of the outer Continental Shelf;
all artificial islands on the outer Continental Shelf;
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, including non-mineral energy resources; or
any such installation or other device (other than a ship or vessel) for the purpose of transporting or transmitting such resources.
(emphasis added).
Accordingly, the OCSLA, as amended in 2021, extends U.S. jurisdiction to devices attached to the seabed of the OCS for the purpose of producing non-mineral energy such as wind energy.
Issue 1: Whether the transportation of the WTG components by a coastwise-qualified tugboat and barge from a U.S. port to an affixed, non-coastwise-qualified jack-up vessel located on the U.S OCS violates the Jones Act, 46 U.S.C. § 55102?
As to the whether the transportation of the WTG components between points in the United States and an OIV attached to the U.S. OCS by coastwise-qualified barges and tugs violates 46 U.S.C. § 55102, the Jones Act specifically prohibits the coastwise transportation of “merchandise” between coastwise points by non-coastwise qualified vessels. Pursuant to 46 U.S.C. § 55102(a): “[m]erchandise includes (1) merchandise owned by the United States Government, a State, or a subdivision of a State; and (2) valueless material.”
To determine if the proposed transportation occurs between coastwise points, we must examine the points at which the subject merchandise will be laden and unladen. The Jones Act extends to points on 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. 33 CFR § 2.22(a)(2). OCSLA Section 4, as amended by the 2021 NDAA, extends U.S. law to “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, including non-mineral energy resources.”
As outlined in the request, the coastwise-qualified barges and tugs will be used to lade the WTG components at a U.S. port and unlade them onto the OIV, which will be attached to the seabed of the OCS. Prior CBP rulings interpreted OCSLA Section 4 (which previously did not include a reference to “non-mineral energy resources”) to include “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 81-214 and 83-52. We have also found that a “Floating Offshore Service Facility” anchored to the seabed of the OCS to carry “necessary consumables and supplies to support deepwater [drilling] operations” would become a coastwise point when anchored. HQ 115217 (Dec. 7, 2000). Similarly, in the present matter, we find that the subject OIV would become a coastwise point when attached to the seabed of the OCS for the purpose of installing or constructing a structure to be used for the production of wind energy.
Based on the foregoing, although this portion of the transaction involves the transportation of merchandise between one coastwise point (a U.S. port) and a second (the foreign-flag, jack-up OIV secured to the seabed of the OCS), the scenario presented would not be in violation of the Jones Act because the coastwise-qualified tugs and barges transporting said components will be coastwise-qualified vessels.
Issue 2: Whether the installation of the subject wind turbine generators by the non-coastwise-qualified Jack Up Vessel on the OCS violates the Jones Act, 46 U.S.C. § 55102?
As to whether the installation of the WTGs by the non-coastwise-qualified OIV violates 46 U.S.C. § 55102, CBP has previously held that the use of a non-coastwise-qualified crane vessel to lade and unlade cargo or to construct or dismantle a marine structure is not coastwise trade and does not violate the coastwise laws, provided any movement of merchandise is effected exclusively by the crane and not by any movement of the vessel, except for necessary movement which is incidental to a lifting operation while it is taking place. See, e.g., HQ 116111 (Jan. 30, 2004) (ruling no transportation occurs where a stationary crane barge moored in place by four anchors picks up boulders from a coastwise-qualified supply barge and places them on the seabed to create a breakwater); HQ 115940 (Apr. 17, 2003) (ruling that a Panamanian-flag crane barge would not violate the Jones Act in using its crane to lift erosion-protection boulders from one barge and place them onto the ocean floor); see also 53 Customs Bull. & Dec. 45, p. 95 (Dec. 18, 2019) (lateral movement of a vessel or item in the immediate vicinity of the lifting operation is not “transportation” but merely a movement subordinate to and a direct consequence of the lifting operation).
In the facts you present, once a barge [( ] is positioned alongside the jacked-up OIV, the components for a single WTG contained in shipping frames, such as blade cassettes, will be lifted onto the deck of the OIV utilizing the OIV’s crane, lifting tools and rigging equipment. The OIV will then proceed to install all the components of the WTG while remaining jacked up. These operations will be repeated at each of the installation sites. This scenario appears directly analogous to that considered in HQ H316313 (Feb. 4, 2021), in which CBP considered the proposed use of a non-coastwise-qualified jack-up vessel to install WTG components onto the U.S. OCS. In that matter, the jack-up vessel similarly secured itself to the seabed before raising WTG components from a coastwise-qualified feeder vessel. CBP determined that the movement of material by the jack-up vessel’s crane would not constitute transportation as contemplated by the coastwise laws. As such, provided that the OIV will remain stationary or only make incidental movements subordinate to and a direct consequence of any lifting operations, for the duration of the installation process, the movement of the crane and OIV as contemplated by the facts would not constitute transportation of merchandise and therefore, would not be considered to be coastwise trade within the meaning of 46 U.S.C. § 55102 and 19 CFR § 4.80b(a).
Issue 3: Whether transportation of certain tools and material between coastwise points by the non-coastwise-qualified Jack Up Vessel violates the Jones Act, 46 U.S.C. § 55102?
As to whether the transportation of the empty shipping containers, empty shipping frames and devices, office space, tools, rigging equipment, and spare parts described in the FACTS above between coastwise points by the non-coastwise-qualified OIV violates 46 U.S.C. § 55102, we note that the Jones Act prohibits the coastwise transportation of “merchandise” by non-coastwise-qualified vessels. Pursuant to 46 U.S.C. § 55102: “[m]erchandise includes (1) merchandise owned by the United States Government, a State, or a subdivision of a State; and (2) valueless material.” As such, any cargo, regardless of value, is generally considered merchandise for the purpose of the Jones Act.
However, CBP has also held that “vessel equipment” is not included within the general meaning of merchandise. “Vessel equipment” has been defined as portable 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) (Mar. 13, 1939). CBP clarified its consideration of vessel equipment in 2019, indicating that vessel equipment includes “all articles or physical resources serving to equip the vessel, including the implements used in the vessel’s operation or activity.” Customs Bulletin & Decisions Vol. 53, No. 45, p. 88 (Dec. 18, 2019). CBP elaborated that items considered “necessary and appropriate for the operation of the vessel” are those items that are integral to the function of the vessel and are carried by the vessel. This may include those items that aid in the installation and construction of offshore infrastructure. Whether such articles constitute vessel equipment is a fact-specific, case-by-case determination. Id. at pp. 88-89.
According to your submission, the non-coastwise-qualified OIV would transport two categories of items. The first category relates to the shipping frames and the associated “devices” (i.e., tower lifting tool, nacelle lifting tool, blade spreader bar, blade rack, backloading skip) used to hold the WTG components as well as the approximately [ ] shipping containers holding items to be utilized in the WTG installation (such as bolts, nuts, grout, and crew provisions). These containers and their contents will be lifted from a coastwise-qualified barge at the first WTG site at which point we understand the contents will be utilized in the installation of the first WTG. Once the installation is complete, the empty containers will be transported on board the OIV to the second site, and offloaded onto a coastwise-qualified barge and returned to a U.S. port where they will be filled for installation operations at subsequent WTG sites. When offloaded onto the barge, these otherwise-empty containers may be filled with “refuse” from the installation, including bags containing dirty rags or biohazard, wrapping, and other waste. The second category relates to the approximately [ ] shipping containers placed onboard for the duration of the U.S. installation, which will contain office space, tools, rigging equipment, and spare parts. Once installation operations conclude, these containers and their contents will be returned to a U.S. port by either a coastwise-qualified vessel or the OIV. Based upon the description of the operation provided, CBP understands that other items taken on board the OIV and that would be integrated into the WTG tower as part of the installation and construction process, such as nuts, bolts, and grout, are not being transported between the installation sites but rather are being expended at each installation site.
With respect to the items described above, you contend that an OIV cannot function without having mechanisms for transferring on board WTG components such as shipping frames and the associated “devices” (i.e., tower lifting tool, nacelle lifting tool, blade spreader bar, blade rack, backloading skip) or the tools and consumables in the containers. You point out that the shipping frames will not be left behind and will be returned to shore by qualified U.S.-flag vessels, such items to be utilized repeatedly. You also state that the situation is no different for the containers as they will be used to contain and carry items utilized in the OIV’s operations and which items will be utilized for the installation and construction activity. None of the containers will be left behind and all are being used merely as conveyances and implements of the installation process.
You point out that CBP determined in HQ H316313 that similar items were “vessel equipment” and not “merchandise” and therefore any transportation of the items by the foreign OIV would not violate the Jones Act regardless of where they were laden and unladen. With regard to items such as tools, CBP reasoned that such items were “necessary and appropriate for the . . . operation . . . of the vessel” and “are integral to the function of the vessel and are carried by the vessel.” With regard to items such as refuse containers and personal protective equipment, CBP reasoned that such items were necessary for the “comfort and safety” of the crew. These standards are also articulated in 53 Cust. Bull. and Dec. 45, p. 84 (Dec. 18, 2019). CBP further indicated that if an item is not left behind in connection with construction or installation, that “is a factor that weighs in favor of an item being classified as vessel equipment but, is not a determinative factor.” Id.
In the present matter, the explicit function of the OIV is to install the WTG units. The first class of items includes the transport frames and corresponding devices used to transport the WTG components as well as the shipping containers used to transport materials to be incorporated into the WTG (e.g., nuts, bolts, grouting) or provisions to be consumed by the OIV’s crew. These items will be used by the installation crew to physically transfer WTG components from the barge to the OIV and, subsequently, in installing and commissioning the subject WTG units. As such, these items are integral to the installation activity of the vessel. Similarly, the second class of items includes the approximately [ ] shipping containers and their contents, including office space, tools, rigging equipment, and spare parts, which will be laded for the duration of installation operations before being returned to a U.S. port by a coastwise-qualified vessel or by the OIV itself. Once again, these items will be used by the OIV’s crew in physically installing and commissioning the WTG units. Accordingly, the empty containers, shipping frames and associated devices, tools and materials to be transported on board the OIV are vessel equipment and not “merchandise” under the Jones Act. No violation of 46 U.S.C. §
55102 exists if the subject materials as described herein are transported between, and used at, multiple installation sites.
HOLDING
The transportation of the subject WTG components onboard the coastwise-qualified Barge and towed by the coastwise-qualified Tug from a U.S. port to the Jack Up Vessel attached to the seabed of the OCS would not be in violation of 46 U.S.C. § 55102 because the transportation between coastwise points would be effected by coastwise-qualified vessels.
The installation of the WTG units by the Jack Up Vessel attached to the seabed of the OCS would not be in violation of 46 U.S.C. § 55102 because installation activity is not coastwise trade and the non-coastwise-qualified Jack Up vessel would remain completely stationary or only make incidental movements subordinate to and a direct consequence of any lifting operations during the installation process.
The transportation of the subject WTG component containers, installation tools and materials as described herein between WTG sites onboard the Jack Up Vessel would not be in violation of 46 U.S.C. § 55102 because such items, in this context, are not “merchandise.”
Sincerely,
Lisa L. Burley
Chief/Supervisory Attorney-Advisor
Regulatory Reform & Priority Programs Branch
Office of Trade, Regulations and Rulings
U.S. Customs and Border Protection