Applicability of U.S. Coastwise Laws to a Floating Drydock; 1 U.S.C. § 3; 46 U.S.C. § 55102

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H323996 May 22, 2022 VES-3-18 OT-RR:BSTC:CCR H323996 SMS CATEGORY: Carriers Johnathan K. Waldron Blank Rome, LLP 1825 Eye Street N.W. Washington, D.C. 20006-5403 RE: Applicability of U.S. Coastwise Laws to a Floating Drydock; 1 U.S.C. § 3; 46 U.S.C. § 55102 Dear Mr. Waldron: This is in response to your March 18, 2022, letter in which you request a ruling on behalf of [ ] (“the Company”) determining if the proposed drydock operations violate 46 U.S.C. § 55102. Counsel has requested confidential treatment be accorded to certain information submitted in connection with this ruling request. In consideration of the request and sufficient justification presented pursuant to 19 C.F.R. § 177.2(b)(7), this office will not identify the parties having any connection to the transactions under review nor any of the business confidential information provided to U.S. Customs and Border Protection (“CBP”). Our decision follows. FACTS: The Company offers products and services to commercial businesses and vessels and to the U.S. Departments of Defense and Homeland Security. The drydock was constructed overseas and is currently owned by a company under your control. You intend to tow the drydock from overseas to your facility in the United States, for rental use. Once in the United States, the drydock “will be permanently moored to two mooring dolphins.” You explain that, in this position, the drydock operation will consist of submerging and deballasting, moving up and down in a vertical direction only. Specifically, the ruling request elaborates that the drydock will be submerged to the required depth for each vessel’s draft and safety allowance, then tugs and line handlers will be used to guide vessels in need of repair and maintenance into the drydock. The drydock will be raised vertically, lifting the vessel in need of repair out of the water, and it will remain stationary at the pier while work is performed on the lifted vessel. Once the work on the vessel is completed, the drydock will be re-submerged, and the repaired vessel will be floated off. At times, a vessel may be moved from the drydock to a location ashore for additional repairs and then returned to the drydock, to complete more work. You lastly, explain that it will not be possible for the drydock to move in any direction other than vertically, as it will be permanently affixed to the two mooring dolphins. Thus, you request based on the above facts, whether the drydock would violate coastwise laws. ISSUE: Whether the subject drydock operations, will be subject to the Jones Act. LAW AND ANALYSIS: Pursuant to 46 U.S.C. § 55102 (“the Jones Act”), “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 was built in the United States, documented under the laws of the United States, and owned by United States citizens. Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise qualified.” Here, the only issue in contention is whether the subject drydock is a “vessel” for purposes of the Jones Act. Although the Jones Act does not define the term “vessel,” the Rules of Construction Act provides a definition of “vessel” for all federal laws. See 1 U.S.C. § 3; Stewart v. Dutra Constr., 543 U.S. 481, 490 (2005). Under 1 U.S.C. § 3, “[t]he word ‘vessel’ includes every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water.” The subject drydock will thus be considered a “vessel” for purposes of the Jones Act if it is either “actually used” or “capable of being used” as a means of transportation over water. The Supreme Court has clarified that a watercraft need not be primarily used for maritime transportation in order to qualify as a vessel under 1 U.S.C. § 3. To the contrary, the statutory phrase “capable of being used . . . as a means of transportation over water” merely requires a “practical,” rather than “theoretical,” capability of maritime transport. For example, in Stewart v. Dutra Constr., the Court held that a dredge that was capable of limited self-propulsion through manipulation of its anchors and cables was a “vessel.” Although the primary purpose of the dredge was to dig a trench underneath Boston Harbor for the Ted Williams tunnel, it moved itself and the workers aboard it every two hours by manipulating its anchors and cables. The dredge also had “a captain and crew, navigational lights, ballast tanks, and a crew dining area.” Stewart, 543 U.S. at 484. The dredge was thus “not only ‘capable of being used’ to transport equipment and workers over water—it was used to transport those things.” Id. at 495. The Court distinguished the dredge in Stewart from watercraft that had been permanently moored or that were “otherwise rendered practically incapable of maritime transport.” Id. at 494. For example, in Cope v. Valette Drydock Co., 119 U.S. 625 (1887), the Court held that a floating dry-dock that had been moored in the same place for 20 years was not a “vessel.” The floating dry-dock was instead a “‘fixed structure’ that had been ‘permanently moored,’ rather than a vessel that had been temporarily anchored.” Cope, 119 U.S. at 627. Similarly, in Evansville & Bowling Green Packet Co. v. Chero Cola Bottling Co., 271 U.S. (1926), the Court held that a “wharfboat” that was used as an office, warehouse, and wharf was not a “vessel.” The wharfboat’s connection to the shore “evidence[d] a permanent location” through four or five cables securing it in place and connections with the city’s water, electric light, and telephone systems. Evansville, 271 U.S. at 22. Unlike the dredge in Stewart, the watercraft in both Cope and Evansville were not practically capable of transporting people, freight or cargo from place to place. Neither the drydock in Cope nor the wharfboat in Evansville moved “from place to place” or was “used to carry freight from one place to another.” Evansville, 271 U.S. at 22. “Simply put, a watercraft is not ‘capable of being used’ for maritime transport in any meaningful sense if it has been permanently moored or otherwise rendered practically incapable of transportation or movement.” Stewart, 543 U.S. at 495. The Court in Lozman v. City of Riviera Beach, 133 S. Ct. 735 (2013), further explained that the “basic difference” between the dredge in Stewart, which was found to be a vessel, and the wharfboat in Evansville, which was not a vessel, “is that the dredge was regularly, but not primarily used (and designed in part to be used) to transport workers and equipment over water while the wharfboat was not designed (to any practical degree) to serve a transportation function and did not do so.” Id. at 743. Additionally, federal district courts have applied Lozman in finding that a drydock is not a vessel. In Fireman’s Fund Ins. Co. v. Great Am. Ins. Co. of N.Y., 2013 U.S. Dist. LEXIS 11114 (S.D.N.Y. 2012), the court reasoned that a regular observer would not consider the subject drydock designed or regularly used to transport persons or things over water because, in relevant part, the drydock lacked the ability to propel itself; possessed no steering mechanism; lacked navigational lights, life boats, a wheelhouse or “other equipment that would allow it to be used for the transportation of passengers,” and had been “more or less” permanently moored for several years. Similarly, in Catlin v. San Juan Towing & Marine Servs., 2013 LEXIS 52307 (D.P.R. 2013) (vacated on other grounds), the court found that a floating drydock was not a vessel because the subject drydock lacked the capacity to propel itself over water without being towed, possessed no steering system, and lacked navigation lights or other equipment allowing it to be used for transporting passengers or cargo, was unable to generate electricity without a connection to land, and was not “regularly or actually used to transport persons or goods over water.” Furthermore, CBP has also ruled in similar scenarios that use of a non-coastwise-qualified vessel as a moored drydock facility does not violate the coastwise laws, provided that the vessel remains stationary. Specifically, we have routinely held that the use of a moored drydock in hauling 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 Headquarters Rulings (“HQ”) H070662 (Aug 28, 2009); H041428 (Oct. 22, 2008); 116312 (Sep. 21, 2004); HQ 114439 (Aug. 21, 1998); HQ 110283 (Nov. 17, 1989); and HQ 113208 (Sep. 19, 1984). Therefore, we have consistently found that such activity is not prohibited by 46 U.S.C. § 55102. In the present matter, you state that the drydock will be permanently moored, would not participate in the transportation of merchandise, but will only move vertically to facilitate the repair of vessels. Thus, contrary to the dredge used in Stewart and discussed in Lozman, the subject drydock would not be used to transport merchandise over water. This matter is more akin to the findings in both Fireman’s Fund Ins. Co. and Catlin, in which Courts determined that floating drydocks were not vessels where those drydocks were not actually used to transport merchandise or passengers. In Fireman’s Fund Ins. Co., for instance, the court noted that the drydock was “never used to transport cargo or people,” and had been permanently moored in one place for several years. See Fireman’s Fund Ins. Co., 14-15. Here, as held in Stewart, Fireman, Catlin, and HQ H070662 etc., as the dry-dock is not “capable of being used’ for maritime transport in any meaningful sense” as “it has been permanently moored or otherwise rendered practically incapable of transportation or movement” there is no Jones Act violation. Stewart, 543 U.S. at 495. In this case, we find that, provided there is no other movement of the drydock during the proposed activity, aside from its vertical movements, such activity is not as a “vessel” as defined under 1 U.S.C. § 3 and thus is not violative of the 46 U.S.C. § 55102. HOLDING: The proposed use of the subject floating drydock would not violate the Jones Act, 46 U.S.C. § 55102. Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruing letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” If the terms of the actual transaction and/or contract vary from the facts stipulated to herein, this decision shall not be binding on CBP as provided for in 19 C.F.R. § 177(b)(1), (2) and (4), and § 177.9(b)(1) and (2). Sincerely, W. Richmond Beevers Chief, Cargo Security, Carriers and Restricted Merchandise Branch Office of International Trade, Regulations and Rulings U.S. Customs and Border Protection