VES-3-RR:IT:EC 114298 LLB
Mr. Kenneth G. Weigel
Kirkland and Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
RE: Vessel entry and clearance; Vessel supplies and equipment;
Satellite launch from vessel; Foreign-flag vessels; American
home port operations; Temporary unlading; Passengers; Entry
for consumption; 19 U.S.C. 1433, 1434; 46 U.S.C. App. 91,
289, 883
Dear Mr. Weigel:
Reference is made to your letter of March 17, 1998, which
you supplemented with a letter dated May 15, 1998, and another of
June 15, 1998. You request a ruling on numerous issues
concerning an up-coming long-term project which will seek to
launch commercial satellites from the deck of a vessel which will
be located outside of the territorial waters of the United States
at the times of launch. You have requested that certain
information contained in your submissions, which you have
identified by enclosure within brackets, be accorded confidential
treatment under section 177.2(b)(7), Customs Regulations (19 CFR
177.2(b)(7)). Our ruling follows.
FACTS:
A foreign corporation, Sea Launch Company, LDC, a consortium
of aerospace companies which is headquartered in the Cayman
Islands, proposes to utilize two foreign-documented vessels to
support and effectuate the launch of a series of rockets bearing
commercial satellite payloads. The launches would take place
over an extended period of time, and would take place in the
Pacific Ocean, most probably in waters identified as being within
the 200 mile exclusive economic zone of a foreign nation.
One of the two vessels would be dedicated as the launch
platform (LP) and is in fact a converted oil platform. The
second vessel would act in the role of a support, assembly and
command ship (CS) and would transport persons and equipment
necessary for launch activities. Both vessels are self-propelled.
Prior to launch activities ensuing, a home port facility for
the two vessels would be established in the United States at Long
Beach, California. Initially (for the first two launches), the
two vessels themselves would be used to bring rocket stages,
fuel, parts, and necessary equipment and paraphernalia from their
foreign ports of origin to the home port site. For subsequent
launch programs, the necessary elements would be brought into the
United States and landed at the home port by other vessels.
Actual assembly operations would take place aboard the CS, with
only minimal materials being landed in the home port during
initial stages of the project. For later launches, necessary
elements would be landed, and then placed aboard the two vessels
as needed. At certain times, equipment may be placed aboard the
vessels and then removed. The encapsulation of satellites
within fairings would take place on shore in the home port, and
the payloads would then be placed aboard the CS for integration
with their rockets.
Once assembly operations are completed in the home port, the
CS would move around the common finger-pier where each of the two
vessels would occupy its own side-by-side berth separated by the
pier, and would proceed to the side of the pier occupied by the
LP vessel. Here, the CS would be joined to the LP by a
gangplank, with the two vessels being in a stern-to-stern
configuration. This maneuver would be performed for the purpose
of transferring the assembled rocket from the CS assembly vessel
to the LP for transportation and launch purposes. The vessels
would thereafter proceed to the launch site located beyond the
territorial waters of the United States.
At the launch site, the vessels would again be connected by
gangplank in order that crewmembers, supplies, and equipment
might be moved between the two. Prior to launch, all personnel
and equipment would be returned to the CS which would move
several miles distant from the LP for safety reasons. Actual
launch would be commanded from the CS by remote control.
While at sea and at the launch site, it might be necessary
from time to time to order and receive additional parts. In
addition, persons referred to as VIPs may join the CS by
helicopter or vessel in order to observe launches, or may
observe from vessels upon which they would travel to the launch
site. Those persons would not return to the home port aboard
either the CS or the LP vessel, and any parts separately
transported would be incorporated in launch vehicles. Any waste
or debris generated as a result of crewmembers living aboard the
vessels or resulting from assembly and launch activities would be
brought back to the home port for disposal.
ISSUE:
May the personnel, merchandise, and vessels involved in the
proposed program as outlined in the Facts portion of this ruling
be utilized in the described fashion without consequence under
United States law.
LAW AND ANALYSIS:
Entry of Vessels for Consumption
The initial concern expressed in the request for a ruling is
whether the two vessels, the CS and the LP as described above,
might themselves be subject to duty under the Harmonized Tariff
Schedule of the United States. The special status accorded
vessels, their tackle, apparel, equipment, and appurtenances has
long been recognized, with vessels being considered sui generis
and totally distinct from merchandise. (See The Conqueror, 166
U.S. 110, 17 S. Ct. 510, 41 L. Ed. 937 (1896); United States v.
William Herman Wepner, 32 CCPA 30, C.A.D. 282 (1944)). The
requirements for the entry of merchandise are provided in section
1484 of title 19, United States Code. Those requirements have no
applicability to commercial vessels, of which the vessels under
consideration are examples. Accordingly, there would be no
Customs duty requirements when such vessels are brought to the
United States.
Coastwise Merchandise Transportation Statute
Inquiry is next made as to whether any of the proposed
activities might be proscribed by the provisions of the so-called
Jones Act. The coastwise law pertaining to the transportation of
merchandise, 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 transporting 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...
Customs has consistently interpreted this prohibition to apply to
all vessels except United States-built, owned, and properly
documented vessels (see 46 U.S.C. 12106, 12110, 46 U.S.C. App.
883, and 19 C.F.R. 4.80).
The coastwise laws generally apply to points in the
territorial sea, defined as the belt, three nautical miles wide,
seaward of the territorial sea baseline, and to points located in
the internal waters, landward of the territorial sea baseline, in
cases where the baseline and the coastline differ. These laws
have also been interpreted to apply to transportation between
points within a single harbor. Merchandise, as used in section
883, includes any article, including even materials of no value
(Act of June 7, 1988, Pub. L. 100-329; 102 Stat. 588).
In this case, we are informed that the CS will move from one
mooring site to another in order to transfer assembled launch
vehicles with payloads to the LP vessel. The merchandise
transferred will, in all cases, include some items which were
loaded on to the CS while it is in the home port. An example of
this is found in the receipt in the home port by the CS of
encapsulated satellites. Having received any "merchandise" in
such a manner, as well as any other which may be received in
port, the vessel could not transship it to a second vessel within
the territorial waters of the United States, even if a transfer
takes place within the same harbor in which the merchandise was
received.
The argument is made by the requestor that the articles in
question are vessel equipment rather than merchandise. For
Customs to adopt this position, it would be necessary to
determine that the articles sought to be identified as equipment
functionally remain the equipment of the CS vessel, or indeed of
both vessels, following placement on the LP vessel. The
coastwise transportation statute makes it clear that the
definition of merchandise is all inclusive for purposes of
section 883 issues, even to the point of including materials of
no value whatsoever. In addition, by separate statute
administered by Customs (19 U.S.C. 1401), merchandise is defined
to include wares and chattels of every description. Therefore,
the proscriptions set forth in section 883 would be invoked by
the transshipment of merchandise in such circumstances as are
outlined above. The result would be different, however, if the
articles transferred were found to constitute and to remain
identified as vessel equipment of the CS vessel rather than as
merchandise.
We find the circumstances flowing from the facts in this
case to be unique in our experience. Here we are presented with
two specialty vessels, neither of which could fulfill its project
mission without the other. There have been occasions when we
have been asked to rule upon the legality of proposed projects
involving the use of two vessels which would work in tandem. In
such cases, one vessel could not realize its purpose in
completing the project without the presence of a second vessel of
the type proposed to be used. In the present circumstance,
however, the specific vessels under consideration have been
configured especially for the proposed project, and with the
physical arrangement and limitations of the home port facilities
taken fully into account. There is no other vessel of the same
type that can be substituted for either ship. They are, in a
sense, halves of the same whole.
In this case, complete rockets will be placed aboard the LP
vessel by the CS vessel. The rockets will have been assembled
from separate stages and joined to payloads by specialists aboard
the CS vessel. The LP vessel, which is designed as a high seas
launch pad, will transport the rockets from the home port to the
launch site, and will provide the stable platform from which the
rockets will be fired. While the rockets will actually lift off
from the LP, all command and control functions related to launch
are the exclusive province of the CS vessel, and will be
accomplished by remote control.
We find in this case that the two vessels are co-dependent
and inexorably tied for purposes of realizing the aims of the
mission. For this reason, we find that the articles which will
be transshipped from one vessel to the other within the confines
of the home port are considered to be equipment of both vessels,
equipment which will not contribute to the successful operation
of either vessel without active utilization by both vessels.
Coastwise Passenger Transportation Statute
The requestor next seeks confirmation that none of the
personnel to be transported on either vessel would be considered
to be passengers under the laws enforced by Customs. The Act of
June 19, 1886, as amended (24 Stat. 81; 46 U.S.C. App. 289,
sometimes called the coastwise passenger law), provides that:
No foreign vessel shall transport passengers
between ports or places in the United States
either directly or by way of a foreign port,
under a penalty of $200 for each passenger so
transported and landed.
We are not made aware in the facts as presented, of anyone
connected with the vessels who might be considered a passenger.
Further, none of the proposed uses of the vessels, with the
exception of the proposed movements within the harbor of the home
port by the CS for transshipment purposes, appear to involve two
United States points. If activities involve the loading of
personnel and crew at the home port, sailing to the launch area,
and returning to home port again, there is a single United States
point involved and no coastwise implications are suggested. As
concerns the matter of VIPs visiting the CS at the launch site as
previously outlined, there are no coastwise issues involved since
the site is at a foreign location.
Vessel Report of Arrival, Entry and Clearance Requirements
The next issue posed for our consideration concerns
requirements for vessel report of arrival, entry, and clearance.
The pertinent portion of the report of arrival statute, 19 U.S.C.
1433, as amended, presently provides as follows:
Immediately upon the arrival at any port or
place within the United States or the Virgin
Islands of -
(A) any vessel from a foreign port or place;
(B) any foreign vessel from a domestic port;
(C) any vessel of the United States carrying
bonded merchandise or foreign
merchandise for which entry has not been
made; or
(D) any vessel which has visited a hovering
vessel or received
merchandise while outside the territorial
sea;
the master of the vessel shall report arrival
at the nearest customs facility or other such
place as the Secretary may prescribe by
regulations.
The pertinent portion of the vessel entry statute, 19 U.S.C.
1434, as amended, presently provides as follows:
Within 24 hours...after the arrival at any
port or place in the United States of -
(1) any vessel from a foreign port or place;
(2) any
foreign vessel from a domestic port;
(3) any vessel of
the United States having on board bonded
merchandise or foreign
merchandise for which entry has not
been made; or
(4) any vessel which has visited a hovering
vessel or delivered or received
merchandise while outside the territorial
sea;
the master of the vessel shall, unless
otherwise provided by law, make formal entry
at the nearest customs facility or other such
place as the Secretary may prescribe by
regulation.
The pertinent portion of the vessel clearance statute, 46 U.S.C.
App. 91, as amended, presently provides as follows:
(b) When required; other [than American]
vessels
Except as otherwise provided by law, any
vessel that is not a vessel of the United
States shall obtain clearance from the
Customs Service before proceeding from a port
or place in the United States-
(1) for a foreign port or place;
(2) for another port or place in the United
States; or
(3) outside the territorial sea to visit a
hovering vessel or to
receive or deliver merchandise while outside
the territorial sea.
The central issue with regard to possible vessel report of
arrival, entry, and clearance in this case concerns whether there
has been a receipt and/or delivery of merchandise while outside
of the territorial sea of the United States (beyond three miles).
Not included within the general meaning of merchandise is the
equipment of a vessel which will be used by that vessel. Such
materials have been defined as 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), March 13, 1939).
As previously discussed, the vessels under consideration
will be working in tandem in order to successfully launch
missiles. The vessels are individually documented, operated,
and crewed and are considered by Customs to be separate vessels,
but the issue remains whether there has been any receipt or
delivery of "merchandise" while on the high seas. As detailed
previously with regard to the issue of coastwise merchandise
transportation, we have determined that the articles under
consideration are interchangeable equipment of both vessels and
not merchandise. In the present case, this means that neither
vessel must report its arrival under section 1433 upon return to
the United States, and neither vessel must comply with entry and
clearance requirements under sections 1434 and 91, respectively.
Temporary Removal of Articles from the Vessels in the Home Port
As stated in the Facts portion of this ruling, there will be
occasion to temporarily land and then relade certain equipment on
to the two vessels. We understand that the articles herein being
considered are related to the assembly and launching of the
rockets. The requestor seeks permission to accomplish such
unlading and lading operations without the need to make an entry
for consumption. Alternative treatments are suggested in this
regard, the first being under the provisions of 19 CFR 4.39,
which is promulgated pursuant to section 446, Tariff Act of 1930,
as amended (19 U.S.C. 1446).
Title 19, United States Code, section 1446 is not operative
in the circumstances under consideration since it merely permits
the retention of equipment aboard vessels without duty
consequences, and treats any such equipment which is landed as
imported merchandise. The statute does permit transshipment to
another vessel owned by the same entity, but only where there is
an engagement in foreign trade, and only in the case in which the
vessel transferring the equipment is doing so because it is being
delayed in port for some reason. In this case, nothing is being
taken to a foreign port, and the two vessels would be traveling
together without any delay.
The second alternative offered involves temporary placement
of the articles in a bonded warehouse or foreign trade zone. It
is urged that placement aboard the vessels after initial landing
would be sufficient to meet exportation requirements for these
types of entries. Our response in this case is dependant upon
the ultimate disposition of the articles reladen. Mere placement
aboard the vessels with subsequent return to the home port or
retention aboard would not constitute an exportation as defined
in the Customs Regulations (19 CFR 101.1), that being a severance
from the things of this country and a joining with the things of
some foreign country. Withdrawal from a warehouse for
exportation is covered in 19 CFR 144.37, but that provision is
merely procedural and accomplishment of "exportation" is still
governed by the language of section 101.1 of the Customs
Regulations.
On the other hand, Customs has ruled that the launching into
space of articles which had been withdrawn from a foreign trade
zone would be tantamount to an exportation for satisfaction of
necessary conditions, and the same result appertains in the case
of required exportation in terms of withdrawal from a bonded
warehouse. Therefore, if the particular articles in question are
actually part of a launch vehicle or payload, their having been
launched would constitute an exportation following withdrawal
from foreign trade zone or warehouse status.
We also note that the Harmonized Tariff Schedule of the
United States does include provisions for communications
satellites as well as for spacecraft launch vehicles and other
types of satellites which may be entered for consumption. These
are provided for in items 8802.60.30 and 8802.60.90 of the
tariff, respectively. Communications satellites carry a free
rate of duty, and the remainder of the named items carry a duty
rate of 0.7 per cent ad valorem.
In summary, the only articles which if entered under a bond
or in foreign trade zone status will be considered to have been
properly exported from the United States are those which are
actually part of the launch vehicle. Articles other than those
which are to be launched must, if landed in the United States, be
entered for consumption with appropriate duty paid. If
satellites or launch vehicles are entered for consumption rather
than in a bonded status, the applicable item numbers and duty
rates are as previously detailed.
HOLDING:
Following thorough consideration of the facts as well as
analysis of the law and applicable regulations, we have
determined that the project which is the subject of this ruling
will, for purposes of the laws enforced by Customs, be governed
by the findings set forth in the Law and Analysis portion of this
ruling. We wish to emphasize that the findings set forth in
this ruling are limited to the specific facts of this case, and
that these findings should not be relied upon by any other
persons. Further determinations in this regard will be made on a
case by case basis only.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch