VES-3-02-OT:RR:BSTC:CCR H328865 HKC
John D. Giffin, Esq.
Keesal, Young & Logan
400 Oceangate
Long Beach, CA 90802
RE: Coastwise Transportation; Outer Continental Shelf; Wind Turbines; 46 U.S.C. §§ 55102 and 55103; 19 CFR §§ 4.80a and 4.80b; 43 U.S.C. § 1333.
Dear Mr. Giffin:
This letter is in response to your June 2, 2022 ruling request on behalf of your client Maersk Supply Services A/S (“Maersk”) regarding whether the installation of wind turbine generators and transportation of wind turbine installation crew 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
The following facts are from your June 2, 2022 ruling request, its supporting materials, and email correspondence. Your client proposes to install wind turbine generator (“WTG”) units for a project organized by Equinor Offshore Wind LLC (“Equinor”). You state that your client will install multiple WTG units at two separate lease areas: Empire Wind I and II and
[ ], both located on the seabed of OCS off the East Coast of the United States. The proposed transportation of the WTG units from U.S. ports to installation sites on the U.S. Outer Continental Shelf (“OCS”) will be conducted by a coastwise-qualified tug and a coastwise-qualified barge (the “Tug and Barge”). At the installation sites, a non-coastwise-qualified, European-flagged jack up vessel (the “Jack Up Vessel”) built in a foreign shipyard in Asia will install the WTG components.
Prior to installation, the non-coastwise-qualified Jack Up Vessel will be transported from Singapore to the United States on a heavy lift vessel. Once in U.S. waters, the Jack Up Vessel will travel to the first WTG installation site on the U.S. OCS under its own power, secure its retractable legs to the seabed, and jack up to installation height. After the Jack Up Vessel establishes itself at the installation site, the coastwise-qualified Tug and Barge will transport WTG components from a port in the United States (likely South Brooklyn Marine Terminal – New York) to the Jack Up Vessel, which will remain grounded on the OCS. The WTG components will be secured for transport on board the Barge in a [ ].
Upon arriving at the Jack Up Vessel, the Tug will push the Barge into a “notch” located on the Jack Up Vessel. [
]. Once the [ ] is placed on the deck of the Jack Up Vessel, the Tug will then pull the Barge clear from the Jack Up Vessel leaving the [ ] on the Jack Up Vessel. The Tug and Barge will then wait offshore at a safe distance from the Jack Up Vessel while WTG components are installed.
After receiving WTG components from the Tug and Barge, crewmembers onboard the Jack Up Vessel will utilize the vessel’s crane to install the WTG units onto pre-constructed turbine foundations. The Jack Up Vessel will remain stationary on the seabed via retractable legs throughout this process. If the weather is favorable once WTG components have been installed, the Tug will push the Barge into the “notch” of the Jack Up Vessel, and [
]. The Jack Up Vessel will then proceed to the next WTG installation site under its own power, while transporting a “waste skip” container, tools, materials, and consumables, and installation crew as discussed below. If the weather is not favorable once WTG components have been installed, the Jack Up Vessel will move to the next WTG installation site under its own power with the [ ] still on board. At the next installation site, once the weather is favorable, the Tug will push the Barge into the “notch” of the Jack Up Vessel and [
].
Upon receiving the empty [ ], the Tug and Barge will return to a U.S. Port where additional WTG components will be placed into the empty [ ] for delivery to the Jack Up Vessel at the next WTG installation site.
Besides the WTG components, the Tug and Barge will transport the following components from a U.S. port (likely South Brooklyn Marine Terminal – New York) to the Jack Up Vessel. These materials include: (1) a waste skip for waste generated by daily vessel operations; (2) a container used to hold all tools, materials, and consumables necessary for the mechanical completion and installation of one WTG. These items, along with the empty
[ ] (if the weather is not favorable for it to be removed immediately following WTG installation) will subsequently be transported by the Jack Up Vessel between installation.
Finally, you have provided a list of approximately 28 installation crewmembers who will be transported to the Jack Up Vessel for the purpose of assembling and installing the WTG units. The installation crew will be transported to the Jack Up vessel from a U.S. port onboard either a coastwise-qualified vessel or a U.S.-registered helicopter. Once on board, the Jack Up Vessel will transport the installation crew between WTG sites. Besides WTG installation, these installation crewmembers will also be responsible for inspection and maintenance of lifting gear on the Jack Up Vessel, as well as ensuring equipment is securely fastened to the vessel.
ISSUES
Whether the transportation of the WTG components by a coastwise-qualified tug 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?
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 containers, tools, and materials between coastwise points by the non-coastwise-qualified Jack Up Vessel violates the Jones Act, 46 U.S.C. § 55102?
Whether the transportation of the installation crew between coastwise points by the non-coastwise-qualified Jack Up Vessel violates the Passenger Vessel Services Act, 46 U.S.C. § 55103?
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 One: Whether the Transportation of the WTG Components between points in the U.S. and the Jack Up Vessel on the OCS on the coastwise-qualified Tug and Barge 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.” Here, the WTG components being transported offshore would constitute merchandise.
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. 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 Jack Up Vessel, 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.” CBP has specifically found Jack Up Vessels to be coastwise points when secured to the seabed of the OCS. Similarly, in the present matter, we find that the subject Jack Up Vessel 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, this portion of the transaction involves the transportation of merchandise between one coastwise point (a U.S. port) and a second (the Jack Up Vessel secured to the seabed of the OCS). Nevertheless, the scenario presented would not be in violation of the Jones Act because the tug and barge will be coastwise-qualified vessels.
Issue Two: Whether the Installation of the Wind Turbines Generators by the non-coastwise-qualified Jack Up Vessel 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.
In the present matter, we find that the proposed installation of the subject WTGs, as outlined above, does not violate the Jones Act. In the facts you present, the components for each WTG will be laden onboard a coastwise-qualified barge and transported to the Jack Up Vessel, which will be affixed to the seafloor via its legs. The WTG components will then be raised to the deck of the Jack Up Vessel using [ ]. Using its crane, the Jack Up Vessel will then unlade the WTG onto the pre-installed foundation. The Jack Up Vessel will remain stationary for the duration of this process.
This scenario appears directly analogous to those considered in HQ H320052 (May 11, 2022) and H316313 (Feb. 4, 2021), in which CBP considered the proposed use of non-coastwise-qualified jack-up vessels to install WTG components onto the U.S. OCS. In these scenarios, a 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 Jack Up Vessel 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 Jack Up Vessel 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 Three: Whether Transportation of Containers, Installation Tools, and Materials Violates 46 U.S.C. § 55102
As to whether the transportation of the waste skip, tools, materials, consumables, bolts, cables, accessories, personal protective equipment and [ ] described in the FACTS above between coastwise points by the non-coastwise-qualified Jack Up Vessel 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.” 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.” 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.
According to your submission, the non-coastwise-qualified Jack Up Vessel would transport three categories of items between offshore installation sites. The first category consists of the [ ], which will only be transported by the Jack Up Vessel if the weather is not favorable for it to be removed immediately following WTG installation. The second category consists of a “waste skip” container, for storing waste generated by vessel operations. The third category consists of a container used to hold parts, materials, and consumables necessary for the installation of one WTG, to include bolts, cables, and accessories. Based upon the description of the operation provided, CBP understands that the items taken on board the Jack Up Vessel 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 each of these items is necessary and appropriate to the function of the Jack Up Vessel because it cannot install offshore WTGs without these items. Accordingly, you suggest that the [ ], “waste skip”, and container with tools, equipment, and consumables should be considered “vessel equipment”, not “merchandise”.
CBP’s longstanding position is 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 the board.” 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.
CBP has previously held that “the … 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 Offshore Installation Vessel’s crew… are integral to the installation activity of the vessel.” Similarly, CBP has found “tools … used by the installation crew in physically installing and commissioning the subject WTG units… are integral to the function of the vessel, which is to install and commission the subject WTG units.” In the same ruling CBP also held that items such as “containers and bags, personal protection equipment, food and drink, and hand washing materials are necessary for the ‘comfort and safety’ of the crewmembers performing the WTG installation.”
In the present matter, the [ ] and containers will be used by the installation crew to physically transfer WTG components from the barge to the Jack Up Vessel, making them integral to the Jack Up Vessel’s function of installing WTG units. The waste skip container, tools and spare parts, and crew consumables, which will remain on the Jack Up Vessel as it travels between installation sites, are similarly integral to the vessel’s function because they will be used by the Jack Up Vessel’s crew in physically installing the WTG units. Accordingly, the empty [ ], containers, waste skip, and associated devices, tools, and consumables to be transported on board the Jack Up Vessel 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 Installation Crew Violates 46 U.S.C. § 55103
The Passenger Vessel Services Act (“PVSA”), 46 U.S.C. § 55103, provides, in relevant part:
(a) In General. Except as otherwise provided in this chapter or chapter 121 of this title, 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.
In the present case, the “installation crew” will be transported from the U.S. shore to the non-coastwise qualified Jack Up Vessel on the OCS aboard either a coastwise-qualified vessel or U.S.-registered helicopter. The installation crew will then travel onboard the Jack Up Vessel to each WTG site, with 4-5 members of the crew disembarking by gangplank to perform installation and commissioning work on each WTG, while the remainder of the crew assists with installation from the Jack Up Vessel. The installation crew will also perform pre-installation tasks onboard the Jack Up Vessel, including regularly inspecting and maintaining the lifting equipment to be used in WTG installation. When not participating in WTG installation, the installation crew will also be responsible for carrying out general maintenance on the Jack Up Vessel, cleaning the Jack Up Vessel, and have assigned muster stations. The ruling request states that the personnel fall into the following categories: supervisors, lifting operations crewmembers, and technical crew (e.g., installation technicians, high voltage technicians). To the extent that the individuals will be engaged in any shipboard activities while traveling on the Jack Up Vessel between WTG sites that would be “directly and substantially” related to the operation, navigation, or business of the vessel itself, as would be the case under the facts herein submitted, such individuals would not be considered to be passengers. Accordingly, we find that the proposed activities in this case are directly and substantially connected with the operation and business of the vessel, which is the installation of the subject WTGs. We therefore determine that the subject individuals 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 aboard the coastwise-qualified tug and barge 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 the foreign-flagged Jack Up vessel would remain completely stationary during the installation process.
The transportation of the subject containers, installation tools, and materials 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 installation crew onboard the Jack Up Vessel between WTG installation sites attached to the seabed of the OCS would not be in violation of 46 U.S.C. § 55103 because they are directly and substantially related to the operation of the vessel.
Sincerely,
W. Richmond Beevers
Chief
Cargo Security, Carriers and Restricted Merchandise Branch
Office of Trade, Regulations and Rulings
U.S. Customs and Border Protection