46 U.S.C. §§ 55102, 55103, and 55111; Coastwise Transportation; Towing; drydock.

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H311601 November 13, 2020 VES-3-02-OT:RR:BSTC:CCR H311601 MNM CATEGORY: Carriers Mr. Greg MendenhallG B Mendenhall Pllc 3278 Franklin Avenue, Suite 5 P.O. Box 65 Millbrook, New York 12545 RE: 46 U.S.C. §§ 55102, 55103, and 55111; Coastwise Transportation; Towing; drydock. Dear Mr. Mendenhall: This letter is in response to your correspondence dated June 3, 2020, on behalf of your client [ ], in which you inquire about whether your client’s proposed use of a foreign-built floating drydock to transport vessels within U.S. territorial waters constitutes a violation of the coastwise laws. Our decision follows. FACTS The following facts are from your ruling request and emails to this office, dated September 1, 2020 and September 22, 2020. Your client owns and operates a floating drydock at its shipyard facilities in [ ]. The drydock is approaching the end of its useful life, and your client seeks to purchase a foreign-built floating drydock to moor at a shipyard facility in [ ]. Upon delivery, the new drydock will be flagged under a foreign flag. The drydock will be used exclusively for the purpose of raising vessels from the water for inspection, maintenance, and repairs at the shipyard. The proposed operation is anticipated to commence in 2024.  Your client anticipates that it will need to move the drydock on occasion from its fixed position in the shipyard (the “home position”); these movements are described in further detail in the Law and Analysis section below. ISSUES Whether the proposed transportation of merchandise by a non-coastwise-qualified vessel described in the FACTS section above would constitute a violation of 46 U.S.C. § 55102? Whether the proposed operation described in the FACTS section above would constitute towing in violation of 46 U.S.C. § 55111? Whether the proposed transportation of individuals described in the FACTS section above would constitute a violation of 46 U.S.C. § 55103, and 19 C.F.R. § 4.50(b)? LAW AND ANALYSIS Pursuant to 46 U.S.C. § 55102, which 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 foreign port, unless the vessel— (1) is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and (2) 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. Pursuant to 46 U.S.C. § 55102(a), “merchandise, 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 its value or ownership, would be considered merchandise for the purpose of 46 U.S.C. § 55102. The regulations promulgated under the authority of 46 U.S.C. § 55102(a), provide in pertinent part: A coastwise transportation of merchandise takes place, within the meaning of the coastwise laws, when merchandise laden at a point embraced within the coastwise laws (“coastwise point”) is unladen at another coastwise point, regardless of the origin or ultimate destination of the merchandise. 19 C.F.R. § 4.80b(a). Similarly, the coastwise law applicable to the carriage of passengers is found in 46 U.S.C. § 55103 which provides: (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- (1) is wholly owned by citizens of the United States for purposes of engaging in coastwise trade; and (2) 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 CBP regulations, promulgated under the authority of 46 U.S.C. § 55103, provide, “[a] passenger within the meaning of this part is any person carried on a vessel who is not connected with the operation of the vessel, her navigation, ownership, or business.” Issue 1: Transportation of Merchandise under 46 U.S.C. § 55102 Pursuant to § 55102, supra, the coastwise laws prohibit a non-coastwise-qualified vessel from transporting merchandise between points in the United States to which the coastwise laws apply, either directly or via a foreign port. A vessel transported on another vessel is merchandise for purposes of 46 U.S.C. § 55102. “When a vessel is carried aboard another vessel, it assumes the character of merchandise whose carriage is governed by the same requirements applicable to any other category of goods.” HQ 113176 (Sept. 6, 1994). The subject drydock will be moored at a fixed location at [ ] shipyard (home position), will be non-self-propelled, and will be affixed to permanent concrete mooring dolphins that prevent any movement of the dock, other than to ballast up and down to allow vessels to enter and exit the dock. While the drydock is pinned into its mooring location, the drydock will be able to raise and lower vertically on structural rails constructed onto the drydock. The drydock will be lowered by allowing sea water to enter ballast tanks through sea-chests on the drydock. The drydock will be raised by pumping out sea water contained inside the ballast tanks. The drydock will not move laterally or transit out to deeper waters during its operations at its home position. We have previously held that the use of a moored drydock in raising vessels out of the water for repairs and subsequently replacing the vessels back in the water at the same point from which they were elevated is not considered the transportation of merchandise between two coastwise points. See HQ H298029 (Sept. 10, 2018); HQ 116312 (Sept. 21, 2004), HQ 114439 (Aug. 21, 1998), HQ 113208 (Sept. 19, 1994), and HQ 110283 (Nov. 17, 1989). Therefore, the proposed transportation of the subject drydock would not be a violation of 46 U.S.C. § 55102. With the new drydock and dolphins, [ ] anticipates needing to move the drydock from its home position for each launch and each graving dock float out, occurring 2-3 times per year. Any foreign vessel (e.g. a foreign-built floating drydock) that moves with another vessel aboard between coastwise points is in violation of 46 U.S.C. § 55102, whether it moves on its own power or is towed by a coastwise-qualified vessel. If, instead, the foreign vessel is towed and returns to the same location where the vessel was laden, there is no violation of 46 U.S.C. § 55102. See HQ H273946 (Apr. 13, 2016); and HQ H269478 (Jan. 11, 2016). The subject drydock will be towed by coastwise-qualified tugboats to a new temporary location to be prepared near Lot 20 in [ ]’s shipyard. The drydock could also be towed to another pier within the shipyard or to a third-party location, depending on the work in the shipyard. This towing of the drydock will be for the purpose of allowing [ ]’s shipyard to launch new buildings from its building ways and building dock. When the drydock is towed by tugboats, it could hold a laden vessel under repair, and it will carry drydock personnel between the home position and the temporary position. The primary temporary positions used (Lot 20, Berth 2, and Berth 6) are within [ ]’s shipyard. However, in the unlikely event [ ] is unable to accommodate the drydock at a position within its [ ] shipyard, the drydock may be moved to a Naval or commercial berth outside of [ ]’s [ ] shipyard. In no circumstances will the drydock ever be moved outside of [geographical location where [ ]’s shipyard is located]. [ ] states that whenever [ ] moves the drydock with a laden vessel, the laden vessel will remain in the floating drydock and will not be unladen from the drydock while it is at a temporary location. If a vessel prior to the completion of its repairs is to be moved on the drydock to a temporary location and then returned to the home position, it will be unladen at the same point it was originally laden in the shipyard, i.e. the home position. [ ] states that there will be no transportation on the drydock of a laden vessel between two coastwise points. In this case, the vessels laden aboard the drydock are merchandise within the meaning of 46 U.S.C. § 55102. The drydock will lade and unlade the vessels at the same coastwise point (the drydock’s home position) in the territorial waters of the United States located in [ ]. CBP has previously held that no coastwise transportation occurs when merchandise (vessel) is laden at one coastwise point, transported to another coastwise point where it remains aboard the vessel (drydock), and is subsequently unladen at the same point of lading. See HQ H303322 (May 10, 2019); and HQ H084098 (Nov. 20, 2009). Because the lading and unlading of the vessels will occur at the same coastwise point at the home position, the proposed use of the drydock does not constitute a transportation of merchandise between coastwise points. Therefore, the proposed transportation is not a violation of 46 U.S.C. § 55102. [ ] asserts that weld machines and rolling stock may be laden aboard the drydock and transported with the drydock during a shift from the home position to the temporary location. Insofar as the weld machines and rolling stock would not be unladen at the temporary location but at the point of original lading, there would no coastwise movement. Accordingly, we do not reach whether these articles are merchandise or vessel equipment. Issue 2: Towing under 46 U.S.C. § 55111 The coastwise towing statute, 46 U.S.C. § 55111, provides that except when towing a vessel in distress, only a coastwise-qualified vessel may do any part of any towing between coastwise points. [ ] states that all towing of the drydock will be completed with the aid of coastwise-qualified tugboats. Specifically, the drydock may also be towed to a temporary location or a third-party location, without a laden vessel aboard, for inspection, maintenance, or drydocking. Any towing of the drydock for this purpose will carry the same drydock personnel referenced above and will utilize coastwise-qualified tugboats to assist with towing the drydock from the home position to the temporary position and for its return. [ ] states that all towing of the drydock between coastwise points will be performed by coastwise-qualified tugboats. Accordingly, there will be no violation of 46 U.S.C. § 55111. Issue 3: Transportation of Passengers under 46 U.S.C. § 55103, and 19 C.F.R. § 4.50(b) The coastwise laws prohibit a non-coastwise-qualified vessel from transporting passengers between ports or places in the United States. Pursuant to CBP regulations, “[a] passenger…is any person carried on a vessel who is not connected with the operation, navigation, ownership, or business of the vessel.” 19 C.F.R. § 4.50(b). In accordance with previous Headquarters rulings, workmen, technicians, or observers transported by vessel between ports of the United States are not classified as “passengers,” within the meaning of 46 U.S.C. § 55103 and 19 C.F.R. § 4.50(b), if they are required to be onboard to contribute to the accomplishment of the operation or navigation of the vessel during the voyage or are onboard because of a necessary vessel ownership or business interest during the voyage. HQ 101699 (Nov. 5, 1975); see HQ 116721 (Sept. 25, 2006) (quoting HQ 101699). Furthermore, the shipboard activities engaged in by such aforementioned individuals while traveling on a non-coastwise-qualified vessel between coastwise ports must be “directly and substantially” related to the operation, navigation, ownership, or business of the vessel itself in order for such individuals to not be considered as passengers under these provisions of law (see HQ 116721, supra; and HQ 116659 (May 19, 2006), referencing the “direct and substantial” test). [ ] states that when the subject drydock is towed by tugboats, it could hold a laden vessel under repair, and it will carry drydock personnel between coastwise points: the home position and a temporary position. The drydock personnel transported will be a dockmaster and a [ ] harbor pilot to ensure the safe navigation and transportation of the drydock. In addition, aboard will be a minimal number of technicians and line handlers to monitor the vital drydock systems during its movement, handle lines, and assist in safely mooring the drydock upon arrival at either a temporary mooring location or its home position. The drydock personnel will depart from the drydock while it is located at a temporary location and reboard for moving the drydock back to its home position. The points where the personnel board and disembark the drydock are at two different coastwise points within the shipyard or the third-party pier or dock. As stated above, the primary temporary positions used are within [ ]’s shipyard. However, in the unlikely event [ ] is unable to accommodate the drydock at a position within its [ ] shipyard, the drydock may be moved to a Naval or commercial berth outside of [ ]’s [ ] shipyard. In no circumstances will the drydock ever be moved outside of [ ] (the geographical location where [ ]’s shipyard is located). [ ] asserts that the dockmaster and harbor pilot aboard the vessel will perform the work of navigating the subject vessel. As such, these individuals do not constitute “passengers,” and the transportation of such individuals between coastwise points would not constitute a violation of 46 U.S.C. § 55103. In addition, [ ] asserts that the technicians and line handlers aboard the vessel will perform the work of manning and operating the subject vessel. As such, these individuals also do not constitute “passengers,” and the transportation of such individuals between coastwise points would not constitute a violation of 46 U.S.C. § 55103. Insofar as the subject individuals are providing the skills necessary for the operation, navigation, ownership, or business of the vessel, they are not passengers for purposes of 46 U.S.C. § 55103. Insofar as the subject individuals are not passengers, the transportation of the subject individuals is not in violation of 46 U.S.C. § 55103. HOLDING The proposed operation described in the FACTS section above would not constitute a violation of 46 U.S.C. §§ 55102, 55103, and/or 55111. Sincerely, Lisa L. Burley Chief/Supervisory Attorney-Advisor Cargo Security, Carriers and Restricted Merchandise Branch Office of Trade, Regulations and Rulings U.S. Customs and Border Protection