VES-3-02-OT:RR:BSTC:CCR H327590 DMK
Mr. Constantine G. Papavizas, Esq.
Winston & Strawn, LLP
1901 L Street, NW
Washington DC 20036
RE: Coastwise Transportation; Outer Continental Shelf; Wind Turbines; Vessel Crew; Project Installation Crew; 46 U.S.C. § 55102; 46 U.S.C. § 55103; 19 CFR §§ 4.50(b), 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 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 [] offshore wind turbine generators (“WTG”) off the coast of [] pursuant to a project permitted under the U.S. Bureau of Ocean Energy Management. The project will be outside U.S. territorial waters, but on the U.S. outer continental shelf pursuant to federal leases issued by the Bureau of Ocean Energy Management. The lease is subdivision number [].
You state that the WTG units will be installed by a non-coastwise-qualified offshore installation vessel [] (“OIV”). 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 feeder vessels. Specifically, the OIV will arrive at the first WTG site and jack up to the proper installation height, at which time a coastwise-qualified tug and barge will bring WTG components to 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 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, backloading skip, bolts, nuts, spare parts, rigging, and provisions. In the process of installing the WTG, these listed components are removed from the WTG and transported to the next WTG site to be loaded on the next barge. That barge will then return the components to shore to be used on a future WTG.
After installation of the 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 with their shipping frames and devices. The OIV will also offload the empty shipping frames and containers laded at the previous WTG site back onto the coastwise-qualified feeder vessels, 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 remaining containers which had been placed on board the OIV containing tools, rigging, and spare parts also will be returned to the original U.S. port of lading by a coastwise-qualified vessel.
The OIG vessel crew will consist of approximately [] officers and personnel whose job functions will be to operate the vessel and its machinery. The OIG will arrive in U.S. waters with an incomplete crew and the remaining crew will embark the OIV at a U.S. port or will arrive shore side or airside via coastwise-qualified transfer vessels and/or FAA registered helicopters. Any crew disembarking at the end of their rotation will leave the OIV in a similar manner.
The project installation crew will consist of approximately [] project installation crew members who will perform installation functions on board the coastwise-qualified feeder vessels, and OIV as well as on the WTGs. All project installation crew members will perform some functions on the OIV. During the WTG installation process, some of the project installation crew will disembark from the stationary OIV onto the feeder vessels and WTGs to conduct activities such as: mooring and unmooring the feeder barge, releasing, or performing sea fastenings, lifting assistance, bolting, painting touch-up works, and similar activities. After these activities are complete the project installation crew will return to the OIV. The OIV will transport the project installation crew between WTG sites. Project installation crewmembers will disembark from the OIV by coastwise-qualified vessels and/or FAA registered helicopters to a U.S. port or airport.
ISSUES
Whether the transportation of the WTG components by a coastwise-qualified tugboat and barge from a U.S. port to an anchored, non-coastwise-qualified OIV 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 OIV 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 OIV violates the Jones Act, 46 U.S.C. § 55102?
Whether transportation of the OIV vessel crew and project installation crew by a non-coastwise qualified OIV violates the Passenger Vessel Services Act, 46 U.S.C. § 55013?
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 anchored, 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 U.S. and the OIVs on the OCS by Jones Act 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 on OIVs, which will be jacked up at the WTG installation site on 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 previously ruled that vessels jacked up at WTG installation sites on the OCS become coastwise points. HQ H320052 (May 11, 2022); HQ H316313 (Feb. 4, 2021). 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 OIVs 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. We have previously found that in similar transactions, using jacked up vessels for construction would not violate the Jones act, provided that the jacked up vessel’s function does not include transportation. HQ H320052 (May 11, 2022); HQ H316313 (Feb. 4, 2021).
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 vessels secured to the seabed of the OCS), the scenario presented would not be in violation of the Jones Act because the 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 OIVs 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 H320052 (May 11, 2022) (ruling that no transportation occurs where a jacked-up OIV’s crane picks up WTG frames and components from a coastwise-qualified supply barge and places them on the OIV’s deck); 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 feeder vessel 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 H320052 (May 11, 2022) and HQ H326313 (Feb. 4, 2021), in which CBP considered the proposed use of a non-coastwise qualified jack-up vessel to install WTG components onto the OCS. In those matters, 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, tools, rigging equipment, spare parts, and refuse as described in the FACTS above between coastwise points by the foreign-flag 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 in this case would transport two categories of items. The first category relates to the shipping frames and the associated devices used to hold the WTG components as well as the shipping containers holding items to be utilized in the WTG installation. These containers and their contents will be lifted from a coastwise-qualified barge at the installation site of the first WTG 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 shipping containers placed onboard for the duration of the U.S. installation, which will contain tools, rigging equipment, and spare parts. Once the installation operations conclude, these containers and their contents will be returned to a U.S. port by a coastwise-qualified vessel. 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 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 coastwise-qualified vessels, such items to be utilized repeatedly. You also state that the situation is no different for the containers or other items 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.
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 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 feeder vessel 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 shipping containers and their contents, including 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. 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.
Issue Four: Whether transportation of the OIG vessel crew and project installation crew by a non-coastwise qualified OIV violates the Passenger Vessel Services Act, 46 U.S.C. § 55013?
Finally, we determine whether transporting the OIV crew and project installation crew aboard the non-coastwise qualified OIV would be in violation of the Passenger Vessel Services Act, 46 U.S.C. § 55103. Pursuant to 46 U.S.C. § 55103 only coastwise-qualified vessels may transport passengers in the navigable waters in the United States, provided, in pertinent part:
[…] a vessel may not transport passengers between ports or places 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 applicable regulation at 19 CFR § 4.50(b) defines a passenger as “any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business.”
In accordance with previous CBP rulings, individuals transported between coastwise points are not classified as “passengers” within the meaning of 46 U.S.C. § 55103 and 19 CFR § 4.50(b) if they are required to be onboard to contribute to the accomplishment of the operation or navigation of the vessel during the voyage or are onboard because of a necessary vessel ownership or business interest during the voyage. See, e.g., HQ H316313 (Feb. 4, 2021); HQ H311603 (Aug. 31, 2020); HQ H183157 (Sept. 2, 2011); HQ H168214 (May 26, 2011); HQ H036016 (Aug. 29, 2008). We have previously ruled that the installation crew for WTG installations are not classified as “passengers” under the PVSA provided they perform some function on board the OIV. HQ H300962 (Apr. 14, 2022).
In the present case, you state that the OIV vessel crew will be on board for the purpose of operating the OIV and its machinery. You have provided a list of OIV vessel crew and their responsibilities. We find that the proposed activities described in your request would be directly and substantially connected with the operation of the vessel and the installation crew will be onboard because of a necessary business interest. We therefore determine that the subject OIV vessel crew are not “passengers” within the meaning of 46 U.S.C. § 55103 and 19 CFR § 4.50(b).
As regards the project installation crew, you state that they will be on board for the purposes of installing the WTGs and supporting activities related thereto. You have provided a list of installation crew and their responsibilities. The installation crew will also perform other tasks related to the installation of WTGs while on board the OIV. We find that the proposed activities described in your request would be directly and substantially connected with the operation of the vessel and the installation crew will be onboard because of a necessary business interest. We therefore determine that the subject installation crew are not “passengers” within the meaning of 46 U.S.C. § 55103 and 19 CFR § 4.50(b).
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 a coastwise trade and the foreign-flagged 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 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.”
The transportation of the OIV vessel crew and project installation crew would not be in violation of 46 U.S.C. § 55103 because such individuals, in this context, are not “passengers.”
Sincerely,
W. Richmond Beevers
Chief, Cargo Security, Carriers and Restricted Merchandise Branch
Office of Trade; Regulations and Rulings
U.S. Customs and Border Protection