VES 3-15 CO:R:P:C 100808 BEW
Mr. Wes Downey
Operations Coordinator
MICOPERI U.S.A. CORPORATION
525 North Belt East, Suite 600
Houston, Texas 77060
RE: Applicability of coastwise laws to the transportation and
installation of a platform floating topsides
(superstructure), and the dutiability of subject
superstructure.
Dear Mr. Downey:
This is in reference to your request for a ruling on the
dutiability of a superstructure being imported as a hull and
deck to be mated at an approximate location of Longitude 89
West, Latitude 29 North, which location appears to be in the
territorial waters of the United States.
FACTS:
You state that the installation proposal would consist of
towing a platform floating topside (superstructure) from European
fabrication yard to the Gulf of Mexico. You state that the
superstructure comprising of the mated hull and deck would
subsequently be towed to approximate location Longitude 92 West,
Latitude 26 North, which is a location on the Outer Continental
Shelf (OCS). You state that these operations are very complex
and weather sensitive. Therefore, it is likely that at some
stage of the operation, the superstructure or components would be
required to standby in a U.S. harbor either seeking shelter or
due to project delay.
Your inquiry concerns the application of Customs duties to
the hull and deck. You ask whether the hull and deck are
considered to be an importation. Your letter requests the rate
of duty if the hull and deck are imported.
Lastly, you ask whether entrance into the United States
harbor for standby have different consequences versus not doing
so.
ISSUE:
Whether a superstructure consisting of a hull and deck which
will be mated after its arrival into the U.S. and subsequently
installed on the outer Continental Shelf is a "vessel".
Whether a superstructure consisting of a hull and deck which
will be mated after its arrival into the U.S. and subsequently
installed on the outer Continental Shelf is subject to Customs
duty.
LAW AND ANALYSIS:
Section 27 of the Act of June 5, 1920, as amended (41 Stat.
999; 46 U.S.C. App. 883, often called the Jones Act), provides,
in pertinent part, that:
No merchandise shall be transported by water, or by
land and water, on penalty of forfeiture of the
merchandise (or a monetary amount up to the value
thereof as determined by the Secretary of the
Treasury, or the actual cost of the transportation,
whichever is greater, to be recovered from any
consignor, seller, owner, importer, consignee, agent,
or other person or persons so trans- porting or
causing said merchandise to be transported), between
points in the United States ... embraced within the
coastwise laws, either directly or via a foreign port,
or for any part of the transportation, in any other
vessel than a vessel built in and documented under the
laws of the United States and owned by persons who are
citizens of the United States ....
For purposes of the coastwise laws, a point in United States
territorial waters is considered a point embraced within the
coastwise laws. The territorial waters of the United States
consist of the territorial sea, defined as the belt, 3 nautical
miles wide, adjacent to the coast of the United States and
seaward of the territorial sea baseline.
Section 4(a) of the Outer Continental Shelf Lands Act of
1953, as amended (67 Stat. 462; 43 U.S.C. 1333(a)) (OCSLA),
provides, in pertinent part, that the laws of the United States
are extended to:
... the subsoil and seabed of the outer Continental
Shelf and to all artificial islands, and all
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 there- from ... to
the same extent as if the outer Continental Shelf were
an area of exclusive Federal jurisdiction located
within a State."
Under this provision, Customs has ruled that the coastwise
laws and other Customs and navigation laws are extended to mobile
oil drilling rigs during the period they are secured to or
submerged onto the seabed of the United States OCS. The same
principles have been applied to drilling platforms, artificial
islands, and similar structures 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.
The question of whether an article is a "vessel" has usually
come before Customs in the context of the question of dutiability
of the article. Under Chapter 89, Harmonized Tariff Schedule of
the United States Annotated (HTSUSA), vessels other than yachts
and pleasure vessels (see Heading 8903, HTSUSA), floating docks
(see Subheading 8905.20.00, HTSUSA), and vessels and other
floating structures for breaking up (scrapping) (see Heading
8908, HTSUSA), are not subject to Customs duties. This has long
been so (see General headnote 5(g), Tariff Schedules of the
United States (TSUS) (19 U.S.C. 1202), and sub- part D, part 6,
schedule 6, TSUS). Of course, the determination of whether an
article is a vessel also affects other issues, including, for
example, the applicability of vessel entry and clearance
requirements (see 19 CFR Part 4), Coast Guard administered
safety and inspection requirements, and seamen's compensation for
personal injury or death under 46 U.S.C. App. 688.
Section 401(a), Tariff Act of 1930, as amended (19 U.S.C.
1401(a)), defines the term "vessel" to include "... every
description of water craft or other contrivance used, or capable
of being used, as a means of transportation in water" (see also,
1 U.S.C. 3).
The Courts have provided considerable guidance with regard
to the determination of whether an article is a vessel for
purposes of dutiability. In The Conqueror, 166 U.S. 110 (1897),
the Supreme Court, stating that "[v]essels certainly have not
been treated as dutiable articles, but rather as the vehicles of
such articles, and ... are never charged duties when entering our
ports ..." (166 U.S. at 115), held that vessels are not articles
subject to Customs duties.
The Court of Customs Appeals, in Thayer v. United States, 2
Ct. Cust. App. 526, T.D. 32252 (1912), held that racing shells
are not vessels for purposes of dutiability. In so holding, the
Court stated:
... we think it is obvious that Congress could not have
meant by section 3 [i.e., section 3, Revised Statutes
(1 U.S.C. 3), defining "vessel" in the same manner,
substantively, as does 19 U.S.C. 1401(a)] that every
artificial thing that floats on water and [is] of
sufficient buoyancy to be used as a means of
transporting anything, however small, is a vessel in
the eyes of the law, but must have meant that to be a
vessel it must be capable of some substantial use for a
means of transportation on water. A temporary,
fugitive, impractical, although possible, use of
transportation of articles or things of trifling weight
in smooth water only and for short distances we do not
think could possibly answer the call of the statute.
[T.D. 32252, at page 248.]
The same Court, in Hitner Sons Co. v. United States, 13 Ct.
Cust. App. 216, T.D. 41175 (1922), held that the hull of a vessel
towed into the United States for scrap or junk was not a vessel
for purposes of dutiability. The Court stated:
[f]rom these authorities [previous court cases
considering what are vessels] some general conclusions
may be deduced. In order to come within the definition
of a "vessel" as fixed by section 3, Revised Statutes,
the service upon which the thing in question can engage
must be a maritime service. It must have some relation
to commerce or navigation, or at least some connection
with a vessel employed in trade. It must be engaged
in, or in some sense related to commerce and
navigation. The fact that the structure has the shape
of a vessel, or has been once used as one, or could by
proper appliances be again used as such, can not affect
the question. The test is the actual status of the
structure as being fairly engaged in or suitable for,
commerce or navigation and as a means of transportation
on water. [T.D. 41175, at 334.]
The Customs Court, in Tregoning Boat Co. v. United States,
15 Cust. Ct. 197, C.D. 971 (1945), held that a wooden boat hull
for a lifeboat was a vessel for purposes of dutiability. The
Court stated that:
[u]nder the definition of "vessel" contained in 1
U.S.C. section 3, as construed by the courts, present
and continuous use as a means of transportation on
waters is not required, capability of practical and
substantial use is sufficient. [15 Cust. Ct. at 199.]
More recently, in United States v. Seagull Marine, 67 CCPA
89, C.A.D. 1251, 627 F.2d 1083 (1980), the Court of Customs and
Patent Appeals reversed a decision by the Customs Court (83 Cust.
Ct. 10, C.D. 4814, 475 F. Supp. 158 (1979)), in holding that
inflatable rubber life rafts are not vessels, for purposes of
dutiability, and are subject to duty. The Court recognized that
the definition of the term "vessel" is quite broad. The Court
went on to state that:
... judicial precedent has limited the definition of
vessel for tariff purposes and has established that not
every watercraft meeting the bare terms of the
definition is entitled to entry into the United States
duty free. In particular, the scope of the term
"vessel" has been narrowed to limit duty-free treatment
to watercraft that are instrumentalities of commerce as
opposed to articles of commerce. See The Conqueror
..., United States v. Bethlehem Steel Co. ..., Hitner
Sons Co. v. United States ..., and Thayer v. United
States .... [67 CCPA at 93.]
See also United States v. Moran Towing and Transportation
Co., 235 F. Supp. 569 (D.C. Md. 1964); reversed, 374 F.2d 656
(4th Cir. 1967); vacated and remanded, 389 U.S. 575 (1968);
vacated and remanded to Dist. Ct., 409 F.2d 961 (4th Cir. 1969);
302 F. Supp. 600 (D.C. Md. 1969), and particularly the first
Court of Appeals decision in Moran, in which the Court stated
that something properly may be considered a vessel under some
acts of Congress but not a vessel "within the meaning of the
traditional exemption from the customs acts" (374 F.2d at 664).
Section 203 of the OCSLA Amendments of 1978 (92 Stat. 629,
635) (1978 Amendments), amended section 4(a) of the OCSLA by
substituting "... and all installations and other devices
permanently or temporarily attached to the seabed ..." for "...
and fixed structures ...." The purpose of this change was
stated in the legislative history to be to make it clear "...
that Federal law is to be applicable to all activities on all
devices in contact with the seabed for exploration, develop-
ment, and production." Thus, Federal law was intended "... to
be applicable to activities on drilling ships, semisubmersible
drilling rigs, and other watercraft, when they are connected to
the seabed by drillstring, pipes, or other appurtenances, on
the OCS for exploration, development, or production purposes."
(reproduced at 1978 U.S.C.C.A.N. 1450, 1534.)
In discussing this amendment, among others, the House and
Senate conferees stated their understanding that the Customs
Service had interpreted existing section 1333(a)(1) of the act to
mean that foreign-built drilling and production platforms are not
subject to duty when brought to the waters of the outer
Continental Shelf and attached to the seabed because such
platforms are not considered imported until placed on the shelf.
The conferees rejected this interpretation as contrary to the
intent of Congress in enacting the Outer Continental Shelf Lands
Act in 1953. The conferees stated that one of the purposes of
the amendment to section 1333(a)(1) was to make it clear that
Customs duties are to apply to foreign-built drilling and
production platforms brought in to the waters of the Outer
Continental Shelf for placement so as to be used to develop and
produce its minerals. (See S. Rept. No 95-1091, 95th Cong., 2d
sess., 80-81 (1978)).
Customs has generally held that mobile drilling rigs,
registered as vessels and capable of transporting merchandise or
passengers on water, are "vessels" for dutiability purposes (see,
e.g., rulings dated December 12, 1983 (File No. 106450), and May
15, 1984 (File No. 106587)). Drilling rigs and production
platforms which are attached to the seabed of the OCS for the
requisite purposes (see 43 U.S.C. 1333(a)) and which are not
practically capable of being moved to another site on the OCS
have been held not to be "vessels" (see C.S.D. 79-1 and 110228
PH).
On the basis of the preceding authority and legislative
history the Customs Service is of the opinion that foreign-built
drilling and production platforms which are not vessels, if
permanently or temporarily attached to the seabed of the Outer
Continental Shelf, would be considered imported into the Customs
territory of the United States and subject to the laws and
Customs Regulations resulting from such importation (see C.S.D.
79-1).
Based on the foregoing, we conclude that the floating hull
and deck under consideration is not a vessel for purposes of
dutiability, and is subject to duty under the HTSUSA.
Classification of goods in the tariff schedule shall be
governed by the General Rules of Interpretation of the HTSUSA.
Under General Rule 2 an incomplete or unfinished article has to
have the essential character of the complete or finished
article. Under subheading 8905.20.0000 floating or submersible
drilling or productions platforms are not subject to duty. In
order to be classified under this subheading such platforms 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. Enclosed is a copy of the
explanatory notes relating to three (3) main groups of
platforms. The floating hull and deck under consideration does
not have the essential character of the complete or finished
floating platforms stated above. Accordingly, the subject hull
and deck are classifiable as other floating structures in
subheading 8907.90.0090 HTSUSA and are dutiable at a rate of 3.8
percent (see enclosed copy of HTSUSA).
Accordingly, we find that the subject hull and deck are not
"vessels" and as such are dutiable upon their attachment, whether
temporary or permanent, to the seabed of the outer Continental
Shelf.
HOLDING:
1. All installations and other devices permanently or
temporarily attached to the seabed of the OCS, and which are not
practically capable of being moved to another site on the OCS are
not vessels. Such installations and other devices are considered
imported into the Customs territory upon attachment to the
seabed.
2. A floating superstructure consisting of a hull and deck
which will be mated after its arrival into the U.S. and
subsequently installed on the outer Continental Shelf is not a
vessel and as such is subject to Customs duty upon importation
into the United States.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch
Enclosures