VES-3-02-OT:RR:BSTC:CCR H329275 HKC
Peter F. Black, Esq.
Mills Black LLP
1215 19th Street, NW
Washington, DC 20036
RE: Coastwise Transportation; Outer Continental Shelf; Wind Turbine Generators; 46 U.S.C. § 55102; 19 CFR § 4.80; 43 U.S.C. § 1333.
Dear Mr. Black,
This letter is in response to your January 4, 2023, ruling request on behalf of your client regarding whether the transportation of wind turbine generator (“WTG”) transition piece covers (“TP covers”) by a non-coastwise-qualified vessel in the waters over 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 January 4, 2023, ruling request and subsequent correspondence. Your client proposes to install wind turbine generator (“WTG”) units at various installation sites located within a project lease area on the OCS. All WTG installation sites are located outside United States territorial waters on the OCS. The installation will be conducted by [ ], a foreign-flagged, non-coastwise-qualified jack-up WTG installation vessel (“the Jack-up Vessel”).
Prior to the Jack-up Vessel’s arrival at each WTG installation site, an unrelated vessel will install a monopile foundation and transition piece at each site. This first vessel will leave a TP cover atop each transition piece before departing the site for the next site. The TP cover is a canvas cover designed to protect the transition piece. The Jack-up Vessel will then proceed from a foreign port to the first WTG installation site, attach itself to the seabed, and jack up to the required installation height. A separate coastwise-qualified tug and barge will arrive from [
] laden with WTG tower, nacelle, and blade components.
At the WTG installation site, the Jack-up vessel will remove the TP cover sitting upon the transition piece and place it upon the deck of the Jack-up Vessel. The Jack-up Vessel will then install the WTG tower, nacelle and blades by lifting them directly from the coastwise-qualified barge to the installation site. Upon completion of the installation at the first WTG site, the Jack-up Vessel will lower itself into the water, disconnect from the seabed, and proceed to the next WTG installation site.
You assert that the TP covers should be considered vessel equipment, because they provide protection for the WTG tower segments during the installation process and are necessary for performing the Jack-up Vessel’s function of constructing WTGs. You note that the TP covers will be disassembled and/or damaged by ripping during removal and may attract mold and salt damage during use. You further advise that the TP covers will either be recycled to manufacture new TP covers or disposed of.
Your client proposes the following six scenarios regarding the transportation of the TP cover:
Scenario One: The Jack-up Vessel offloads the TP cover onto a coastwise-qualified supply vessel prior to lowering itself into the water, detaching from the seabed, and departing the first WTG installation site. The supply vessel transports the TP cover to a U.S. port which would be a coastwise point.
Scenario Two: The Jack-up Vessel offloads the TP cover onto a coastwise-qualified supply vessel while it is underway between the first WTG installation site and the second WTG installation site, and not affixed to the seabed. The supply vessel then transports the TP cover to a U.S. port which would be a coastwise point.
Scenario Three: While travelling between the first WTG installation site and the second WTG installation site, the Jack-up Vessel attaches itself to a point on the seabed and offloads the TP cover to a coastwise-qualified supply vessel. The Jack-up Vessel then detaches from the seabed and departs for the second WTG installation site. The supply vessel transports the TP cover to a U.S. port which would be a coastwise point.
Scenario Four: The Jack-up Vessel travels from the first WTG installation site to the second WTG installation site and affixes itself to the seabed at the second WTG installation site. The Jack-up Vessel then offloads the TP cover onto a coastwise-qualified supply vessel. The supply vessel transports the TP cover to a U.S. port.
Scenario Five: TP covers remain on board the Jack-up Vessel as it travels between WTG installation sites, affixing itself to the seabed at each site. The accumulated TP covers are not recycled, but rather disposed of along with operational waste, garbage, and refuse at a U.S. port by the Jack-up Vessel once it completes installation.
Scenario Six: The TP covers remain on board the Jack-up Vessel as it travels between WTG installation sites, affixing itself to the seabed at each site. The accumulated TP covers are unloaded only when the Jack-up Vessel returns to a foreign port following the completion of its WTG installation project.
ISSUE
Whether the proposed transportation of TP covers by a non-coastwise-qualified Jack-up Vessel on the U.S OCS 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.
(Emphasis added).
Notably, the Jones Act prohibits a non-coastwise-qualified vessel from performing “any part” of the transportation of merchandise between two U.S. points to which the coastwise laws apply, meaning a violation would occur even if the merchandise is transferred to a coastwise-qualified vessel before reaching its destination. Additionally, a Jones Act violation occurs even if the merchandise is carried to a non-coastwise point by a non-coastwise-qualified vessel, prior to being carried to its coastwise destination by a coastwise-qualified vessel.
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.
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.” Pursuant to 19 U.S.C. § 1401(c), the word “merchandise” is defined as “goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31.” For purposes of the Jones Act, merchandise also includes “valueless material.” Accordingly, the WTG components, including the TP covers, being transported 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.”
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. It has been CBP’s longstanding position that vessel equipment and supplies of the transporting vessel, however, do not constitute “merchandise” for the purposes of the Jones Act. “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.
Here, the subject TP covers must be considered merchandise rather than vessel equipment. In prior rulings, CBP has held devices used to protect WTG components while being transported offshore by a vessel to be vessel equipment. The facts in the present matter are easily distinguished from these scenarios. Here, the TP covers play no role in protecting the WTG components while they are being transported offshore; rather, the TP covers serve to protect the previously-installed WTG monopile and are already physically located offshore at the time the Jack-up Vessel and supply vessel arrive at the WTG installation site. Therefore, the TP covers cannot be considered “necessary and appropriate” for the function of either the Jack-up Vessel or the supply vessel.
Additionally, the facts indicate each WTG installation site will consist of a monopile, transition piece, and TP cover installed at the site prior to the arrival of the Jack-up Vessel. CBP has previously ruled that a coastwise point is created when a monopile is installed in the seafloor. Therefore, each WTG installation site will be considered a coastwise point.
Scenario One, as outlined in your request, involves the lading of a TP cover by crane onto the coastwise-qualified supply vessel while the Jack-up Vessel remains affixed to the seabed at the first WTG installation site. Because the lifting operation is not coastwise trade, no coastwise transportation of merchandise by the Jack-up Vessel would occur. The subsequent coastwise transportation of the cover from the WTG installation site to a U.S. port would be conducted by the coastwise-qualified supply vessel. Therefore, this scenario would not be in violation of the Jones Act.
Scenario Two, as outlined in your request, involves the TP cover remaining on the Jack-up Vessel as it detaches from the seabed and departs the first WTG installation site. The Jack-up vessel then unloads the TP cover onto a coastwise-qualified supply vessel while underway for the second WTG installation site. The coastwise qualified supply vessel would transport the TP cover to a U.S. port. The Jack-up Vessel would not be considered a coastwise point at the time of unlading since it is not attached in any way to the OCS seabed. However, 46 U.S.C. § 55102 prohibits a non-coastwise-qualified vessel from performing “any part of the transportation of merchandise … between points in the United States to which the coastwise laws apply”. Here, the TP covers would be transported between two coastwise points (the first WTG installation site and a U.S. port). The Jack-up Vessel would be performing part of this transportation – the leg from the first WTG installation site to the point where the TP cover would be transferred onto the supply vessel. Therefore, this scenario would be in violation of the Jones Act.
Scenario Three, as outlined in your request, involves the TP cover remaining on the Jack-up Vessel as it detaches from the seabed and departs the first WTG installation site. The Jack-up Vessel would then depart for the second WTG installation site. At a location between the two sites, the Jack-up Vessel would affix itself to the OCS seabed and unload the TP cover onto a coastwise-qualified supply vessel. The coastwise-qualified supply vessel would subsequently convey the TP cover to a U.S. port. Similar to the scenario above, under these facts the Jack-up-up Vessel would be performing “any part of the transportation of merchandise … between points in the United States to which the coastwise laws apply”. The fact that the two vessels transfer the TP cover at a third location between the first WTG installation site and the U.S. port does not negate the fact that the TP cover is travelling between these two coastwise points. Therefore, this scenario would be in violation of the Jones Act.
Scenario Four, as outlined in your request, involves the Jack-up Vessel traveling from the first WTG installation site to the second WTG installation site with the TP cover on board. The Jack-up Vessel would then affix itself to the seabed at the second WTG installation site, before unloading the TP cover onto a coastwise-qualified supply vessel. The coastwise-qualified supply vessel would subsequently convey the TP cover to a U.S. port. Similar to Scenarios Two and Three above, here the Jack-up-up Vessel would be performing “any part of the transportation of merchandise … between points in the United States to which the coastwise laws apply”. Here, the TP cover is travelling from the first WTG installation site and a U.S. port, both of which are coastwise points. The Jack-up vessel is performing part of this transportation, from the first WTG installation site to the point where the TP cover is offloaded onto the supply vessel. Accordingly, this scenario would be in violation of the Jones Act.
Scenario Five, as outlined in your request, would involve the Jack-up Vessel travelling between multiple WTG installation sites, affixing itself to the seabed to perform WTG installation at each site. At each site, the Jack-up Vessel would place an additional TP cover on its deck. Once all installations are complete the Jack-up Vessel would enter a U.S. port and dispose of the accumulated TP covers as garbage/operational waste. CBP has in the past treated waste containers as vessel equipment when for hygienic reasons they are “necessary and appropriate for the navigation, operation or maintenance of the vessel and for the comfort and safety of the persons on board.” In the present matter, the TP covers could not be considered necessary for “the comfort and safety” of the crew,” because they serve no hygienic function. The decision to ultimately dispose of the TP covers, rather than recycle them, in this scenario has no bearing on their status as merchandise. Accordingly, transportation of the TP covers between WTG sites and the U.S. port by the Jack-up Vessel would be in violation of the Jones Act.
Scenario Six, as outlined in your request, would involve the Jack-up Vessel travelling between multiple WTG installation sites, affixing itself to the seabed to perform WTG installations at each site. At each site, the Jack-up Vessel would place an additional TP cover on its deck. Once all installations are complete, the Jack-up Vessel would depart for a foreign port and unload the TP covers there. Here, the TP covers would remain on board the Jack-up Vessel when it stops at each subsequent WTG installation site. Because each of the TP covers in this scenario are being transported between a WTG installation site (coastwise point) and a foreign port (non-coastwise point), the Jack-up Vessel would not be transporting merchandise between two coastwise points. Therefore, this scenario would not be in violation of the Jones Act.
HOLDING
Inasmuch as all transportation between coastwise points contemplated in scenario one would take place aboard a coastwise-qualified supply vessel, the proposed handling of TP covers by the non-coastwise-qualified Jack-up Vessel in scenario one would not be in violation of 46 U.S.C. § 55102, because no coastwise transportation of merchandise by the Jack-up Vessel would occur.
The proposed transportation of TP covers on the non-coastwise-qualified Jack-up Vessel in scenario six would not be in violation of 46 U.S.C. § 55102 because the transportation would not occur between two coastwise points.
The proposed transportation of TP covers on the non-coastwise-qualified Jack-up Vessel in scenarios two, three, four, and five would be in violation of 46 U.S.C. § 55102 because the Jack-up Vessel would be transporting merchandise, in whole or in part, between two coastwise points.
Sincerely,
W. Richmond Beevers
Chief
Cargo Security, Carriers and Restricted Merchandise Branch
Office of Trade, Regulations and Rulings
U.S. Customs and Border Protection