46 U.S.C. § 55102; 19 C.F.R. § 4.80b(a)(2008); Outer Continental Shelf Lands Act of 1953; vessel equipment; 19 U.S.C. § 1401(c); HQ 114298 (July 7, 1998); Treas. Dec. 49815(4); HQ 115938 (Apr. 1, 2003); HQ 114487 (Oct. 19, 1998); HQ 112218 (July 22, 1992)

HQ H046137 February 20, 2009 VES-315-OT:RR:BSTC:CCI H046137 LLB Constantine G. Papavizas, Esquire Winston and Strawn, LLP 1700 K Street, N.W. Washington, D.C. 20006-3817 Re: 46 U.S.C. § 55102; 19 C.F.R. § 4.80b(a)(2008); Outer Continental Shelf Lands Act of 1953; vessel equipment; 19 U.S.C. § 1401(c); HQ 114298 (July 7, 1998); Treas. Dec. 49815(4); HQ 115938 (Apr. 1, 2003); HQ 114487 (Oct. 19, 1998); HQ 112218 (July 22, 1992) Dear Mr. Papavizas: This in response to your December 3, 2008, letter in which you request a ruling, on behalf of your client, BP America Production Company (BP), regarding the application of 46 U.S.C. § 55102 to the sub-operations conducted by BP on the Outer Continental Shelf (OCS). Our decision follows. FACTS In the construction phase of wellheads on the OCS seafloor in the Gulf of Mexico ("GOM"), BP proposes to use a foreign-flagged construction vessel ("the vessel"). One of the primary functions of the vessel is to transport and install equipment. To that end, it is proposed that the vessel will transport and install what are known in the oil production industry as "Christmas Trees." A Christmas Tree is an assembly of valves, spools, pressure gauges and chokes fitted to a wellhead to control production of oil and gas. The vessel will load the Christmas Tree at a coastwise point in Louisiana, Alabama, or Texas. The Christmas Tree will be loaded as a fully commissioned and pressure-tested integrated piece capable of being installed on the wellhead with no further assembly. The Christmas Tree will then be transported to the wellhead in the GOM outside the territorial waters of the United States. At the GOM location, the dynamically-positioned vessel will deploy the Christmas Tree overboard using an integrated crane and cable. With the assistance of the vessel's Remotely Operated Vehicle (ROV) or from an ROV of another U.S. or foreign-flagged vessel, the Christmas Tree will be attached to the top of the well head. Once the Christmas Tree has been positioned and locked onto the wellhead, it will undergo extensive commissioning of all valves, electric and hydraulic functions and then be pressure tested to insure that it is functioning properly. During this commissioning and testing, the Christmas Tree remains connected to the ROV which is connected by umbilical cord to the vessel. If such commissioning and testing indicate that the Christmas Tree is not operating properly, the Christmas Tree will be immediately recovered back onto the deck of the vessel. The vessel will then transport the Christmas Tree back to the same coastwise point where it was loaded for repair. Once the Christmas Tree is repaired, it will be returned to the wellhead for installation as described above. Issue Whether the transportation of the "Christmas Trees", as described above, by a foreign-flagged vessel constitutes a violation of 46 U.S.C. § 55102. Law and Analysis 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. See 33 C.F.R. § 2.22(a)(2)(2008). The coastwise law pertaining to the transportation of merchandise, 46 U.S.C. § 55102, also known as the "Jones Act", provides in pertinent part, that the transportation of merchandise 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 vessel other 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, i.e. a coastwise-qualified vessel, is prohibited. The CBP Regulations promulgated under the authority of 46 U.S.C. § 55102 provide that a coastwise transportation of merchandise takes place when merchandise laden at a point embraced within the coastwise laws ("coastwise point") is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a)(2008). Section 4(a) of the Outer Continental Shelf Lands Act of 1953 (OCSLA), provides, in 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 therefrom, or any installation or other device (other than a ship or a vessel) for the purpose of transporting such resources, to the same extent as if the outer Continental Shelf were an area of exclusive Federal jurisdiction within a State. (emphasis added). You assert that the Christmas Tree is not merchandise within the meaning of 46 U.S.C. § 55102, rather, it is vessel equipment. 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.” See 46 U.S.C. § 55102(a)(2). Merchandise does not include the equipment of a vessel so long as it is used by that vessel. Such articles have been defined as those which are "...necessary and appropriate for the navigation, operation or maintenance of the vessel and for the comfort and safety of the persons on board." See HQ 114298 (July 7, 1998) quoting Treas. Dec. 49815(4) (Mar.13, 1939). Whether such articles constitute vessel equipment is a case-by-case determination. See HQ 115938 (Apr. 1, 2003); HQ 114487 (Oct. 19, 1998). CBP has consistently held that vessel equipment consists of articles necessary to carry out a vessel’s functions. See HQ 112218 (July 22, 1992) (holding that equipment transported aboard non-coastwise-qualified oil and gas well drilling, workover and service barges used to remove broken tools from a well shaft, perform well cleaning and other tasks is vessel equipment since it is necessary to the work of the vessel); HQ 103995 (July 16, 1979) (holding that cement on a non-coastwise-qualified barge engaged in oil well stimulation is vessel equipment given that the purpose of the vessel is the blending, mixing, and placing of cement in the wells). CBP has specifically ruled that "vessel equipment placed aboard a vessel at one U.S. port may be removed from the vessel at another U.S. port at a later date without violation of the coastwise laws." See HQ 113137 (June 27, 1994); HQ115938 (Apr. 1, 2003). Here, the construction vessel's function during the subject voyage, is to transport and install equipment to assist in the construction phase of a wellhead on the seafloor. The Christmas Tree is integral to the operation insofar as it will assist with the production of hydrocarbons such as oil as gas from the wellhead. In the instance that the Christmas Tree is not operational, it will be immediately removed and transported to the coastwise point at which it was laden. Consequently, the Christmas Tree, which would be transported aboard the vessel from which would be installed and would be in furtherance of the vessel's functions, constitutes vessel equipment as defined in T.D. 49815(4), not merchandise defined in 19 U.S.C. § 1401(c). Therefore, no violation of 46 U.S.C. § 55102 exists even if the equipment is unladen at a different coastwise point. Holding The transportation of the "Christmas Trees", as described above, by a foreign-flagged vessel does not constitute a violation of 46 U.S.C. § 55102. Sincerely, Glen E. Vereb Chief Cargo Security, Carriers and Immigration Branch