us-cbp-cross-rulings-hq-109303•HQ 109303: Applicability of the coastwise laws to ballast movement of a vessel and related issues (see also Customs Service Decision (C.S.D. 87-16)
HQ 109303: Applicability of the coastwise laws to ballast movement of a vessel and related issues (see also Customs Service Decision (C.S.D. 87-16)
us-cbp-cross-rulings-hq-109303HQ 109303: Applicability of the coastwise laws to ballast movement of a vessel and related issues (see also Customs Service Decision (C.S.D. 87-16)Guidance
Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.
HQ 109303
March 21, 1988
VES-3/VES-5-29/VES-11-05 CO:R:P:C 109303 PH
CATEGORY: Carriers
Paul G. Kirchner, Esq.
Kurrus & Kirchner
1055 Thomas Jefferson Street, NW.
Washington, D.C. 20007
RE: Applicability of the coastwise laws to ballast movement of a
vessel and related issues (see also Customs Service Decision
(C.S.D. 87-16)
Dear Mr. Kirchner:
This in response to your letter of January 13, 1988, in which
you request a ruling on certain aspects of a ruling dated May 22,
1987 (File: VES-11-05/VES-5-29/VES-3 CO:R:CD:C 108700 PH), which
was published as C.S.D. 87-16. Under procedures which we
established, we also received a letter dated February 4, 1988,
from Russell W. MacKechnie, Jr., Esq., of Donohue and Donohue
commenting on your letter, a letter dated February 19, 1988, from
you commenting on Mr. MacKechnie's February 4 submission, and a
letter dated March 4, 1988, from Mr. MacKechnie commenting on
your February 19 submission. We received several other letters
from both you and Mr. MacKechnie commenting on the procedural
handling of this case.
With regard to your comments on the procedures we developed
for handling this matter (see your letters of January 28,
February 19, and February 26, 1988), we note that this is an
administrative, not a judicial matter. The procedures we
developed were intended to bring forth all factual and legal
aspects of this case, as expeditiously as possible, in view of
the apparent adversarial nature of the case. We have tried to
treat both you and Mr. MacKechnie as professionally and fairly as
possible.
We are providing Mr. MacKechnie with a copy of this ruling.
Although we see no need to modify C.S.D. 87-16 with regard to the
questions you raise, we do plan to review the aspects of the
C.S.D. concerning the applicability of tonnage tax to the vessels
under consideration. When we do so, we may consider clarifying
certain aspects of the C.S.D. relating to issues you raise.
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For your information, the reason that this ruling is in a
different format from that of the ruling published as C.S.D. 87-
16 is that the ruling format has been changed.
FACTS:
The facts, as described in C.S.D. 87-16, are as follows:
The inquirer represents the operator [Exxon] of a
number of coastwise-qualified vessels which are used to
transport Alaska North Slope oil from Valdez, Alaska,
to United States Gulf and East Coast ports. The
vessels are documented with registry and coastwise
license endorsements. In Valdez, the vessels load the
oil and obtain clearance to the Panamanian port of
Puerto Armuelles on the Pacific Ocean. There the
vessels discharge the oil and obtain Panamanian
clearance to Long Beach, California. At Long Beach, or
occasionally at the port of San Francisco, California,
the vessels make formal entry and pay tonnage duties.
The vessels are replenished with bunkers and stores and
change crews. They then proceed to Valdez for the next
load of oil.
The oil is transferred by an 80 mile pipeline from
Puerto Armuelles to the port of Chiriqui Grande,
Panama, on the Caribbean Sea. There, vessels of the
company represented by the inquirer load the oil and
transport it to United States Gulf or East Coast ports.
These vessels arrive in Chiriqui Grande in ballast from
United States ports and make entry with Panamanian
officials. They discharge dirty ballast at a terminal
in Panama for treatment before loading the oil which
came through the pipeline. After loading, the vessels
obtain Panamanian clearance to a United States Gulf or
East Coast port. Upon arrival at the latter port, the
vessels make entry with United States Customs and pay
tonnage duties.
The company represented by the inquirer plans to
surrender to the United States Coast Guard the
Certificates of Documentation for the vessels employed
in the above-described transactions and to have the
registry endorsements on the Certificates deleted,
leaving only the coastwise endorsements ....
In addition to the above facts, the inquirer in C.S.D. 87-16
stated that the Exxon vessels arriving in ballast (at Chiriqui
Grande) from United States ports on the Gulf or East Coast
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discharge dirty ballast to the terminal where it is subsequently
treated and the recovered crude is returned to the shore storage
system. In his February 4, 1988, letter Mr. MacKechnie, on
behalf of Exxon, states that only one voyage by Exxon Alaska
North Slope (ANS) vessels to Chiriqui Grande to load ANS oil in
1987 was not carrying merchandise or passengers (defined by Mr.
MacKechnie as being "free of dirty water ballast or residual
domestic cargo of any kind"). Mr. MacKechnie states that the
remaining such voyages involved the transportation of dirty water
ballast for discharge, processing, and reentry into the ANS
storage system at Chiriqui Grande or residual ANS cargos, heavy
fuel oil cargoes, and Florida crude oil cargoes which were "top-
loaded" with ANS crude at Chiriqui Grande for subsequent
discharge at Gulf or East Coast ports. Mr. MacKechnie states
that residual cargoes on such voyages averaged approximately 100
barrels of product per vessel.
Mr. MacKechnie states, in his February 4 letter, that the
same analysis applies to every return voyage made by Exxon's ANS
vessels on the Pacific Coast side of the transaction. Dirty
water ballast is discharged, processed, and returned to the ANS
storage system at Valdez. Mr. MacKechnie states that if "clean"
ballast vessels are used in the future on the Puerto Armuelles to
Valdez leg of the transportation, those vessels will carry, on
average, 100 barrels of residual ANS cargo to be "top-loaded" at
Valdez for the return run to Puerto Armuelles.
In his March 4 letter Mr. MacKechnie further describes the
Exxon ANS vessels moving to Chiriqui Grande to load ANS oil for
transportation to United States Gulf and East Coast ports. He
states:
Although Exxon's vessels are equipped with crude oil
washing systems, those systems are not used after every
discharge of cargo. Exxon's dirty water ballast ANS
vessels1 have, on average, 19 cargo tanks, all
equipped with crude oil washing systems. On the
outbound leg to Chiriqui Grande, two of the tanks
contain dirty water ballast; five of the tanks contain
residual cargoes after crude oil washing and discharge;
the remaining 12 tanks contain residual cargoes after
discharge only. These 12 tanks are not crude oil
washed. Exxon rotates the 5 tanks to be crude oil
washed at each discharge. Thus, while Exxon does not
dispute the presence of some "sludge or muck" in the
tanks, its average retained on board (ROB) cargo of 100
barrels refers solely to pumpable, liquid, non-sludge
cargo which Exxon has not pumped out in its entirety at
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discharge. ... It is subsequently unladen at a Gulf
Coast or East Coast port, and its transportation aboard
Exxon's ANS vessels during the outbound leg to Chiriqui
Grande constitutes a part of that cargo's
transportation between coastwise points. We emphasize
that the 100 barrels of ROB cargo are in addition to
the average 300 barrels per vessel of ANS crude
recovered from the dirty water ballast discharged at
Chiriqui.
Mr. MacKechnie also describes, in his March 4 letter, the
process by which the oil is recovered from the dirty ballast in
Chiriqui Grande. He states:
Ballast oil and water is discharged into shore ballast
tanks equipped with gravity skimmers. The crude oil
floats to the surface and is discharged by gravity to
separators where a similar gravity/separation process
takes place. The essence of the operation is merely
allowing the crude to float to the surface of the
water, skimming, and returning the crude oil to the
shore storage tanks.
It is requested that we rule on the following issues:
ISSUES:
1. Would ballast voyages, (a) between United States Gulf and
East Coast ports and Panama, (b) between Panama and United States
West Coast ports, and/or (c) between United States West Coast
ports and Alaska in connection with the trade described in C.S.D.
87-16 and in the FACTS portion of this ruling be considered
coastwise trade?
2. Is the statement in C.S.D. 87-16 that "[t]he vessels used
for each part of the transportation are required to be documented
for the coastwise trade" based upon any statutory or legal
authority or requirements under the jurisdiction of, or required
to be administered by, the United States Customs Service and, if
not, does this statement represent an official ruling of Customs
with respect to this issue?
3. Does the statement in C.S.D. 87-16 that a vessel need not
have a registry endorsement on its Certificate of Documentation
in order to clear Customs (thus implying that a vessel with only
a coastwise endorsement may clear Customs) mean that a vessel on
a non-coastwise voyage between a United States port and a foreign
port need not have a registry endorsement for any other purposes,
including 46 U.S.C. 12110?
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4. What is the effect of C.S.D. 87-16 on the laws,
regulations, or policies governing pilotage and what is the
position of Customs as to the possible relevance of coastwise or
non-coastwise trade determinations by Customs for purposes of 46
U.S.C. App. 883 to the application of 46 U.S.C. 8502(a)?
LAW AND ANALYSIS:
ISSUE 1.
There is no statutory or regulatory definition of coastwise
trade. Customs enforces various navigation laws, some of which
concern vessel movements which are generally considered coastwise
in nature. The law concerning the transportation of merchandise
between points in the United States embraced within the coastwise
laws, often called the Jones Act or the coastwise merchandise
law, is section 27 of the Act of June 5, 1920, as amended (41
Stat. 999; 46 U.S.C. App. 883). This law provides, in pertinent
part, that:
No merchandise shall be transported by water, or by
land and water, on penalty of forfeiture of the mer-
chandise (or a monetary amount up to the value thereof
as determined by the Secretary of the Treasury 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 transport-
ed), 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 ....
In C.S.D. 87-16 we held, with regard to the applicability of
section 883 to the transportation considered in that C.S.D.,
that:
The use of vessels to transport Alaska North Slope
oil from Alaska to the Pacific coast of Panama from
which the oil is discharged and pumped through a
pipeline to the Caribbean coast of Panama where the oil
is loaded onto other vessels and transported to United
States Gulf or East Coast ports is coastwise trade.
The vessels used for each part of the transportation
are required to be documented for the coastwise trade.
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Merchandise, within section 883, is considered to be material
with any apparent value or which will be used commercially or in
trade (see C.S.D. 87-15). Vessels not transporting merchandise
would not be considered to be engaged in coastwise transportation
governed by section 883.
As you noted in your January 13 letter, we have held that
"[a] cargo or passenger vessel which proceeds between U.S. ports
or places in ballast is not considered in coastwise trade." As
Mr. MacKechnie states, we have ruled that oily water, recovered
in the cleanup and containment operations following an oil spill,
would be considered merchandise within section 883 if it is
treated to recover the oil. We have ruled that transportation of
such oily water between coastwise points by a non-coastwise-
qualified vessel is prohibited by section 883. We have so held
regardless of the fact that the cost of treating the oily water
may far exceed the value of the oil recovered from the oily water
(see ruling letters VES-10-03-R:CD:C 102240 BH, November 4, 1976,
and VES-10-03R:CD:C 102240 CWH, March 2, 1977; ruling memorandum
VES-3-12-CO:R:CD:C 104918 PH, March 5, 1981; and ruling letter
VES-3-12-CO:R:CD:C 105504 PH).
In none of these oil recovery operation cases have we held
that oily water ballast, transported from a coastwise point in an
oil tanker which has discharged its cargo of oil, is considered
merchandise transported between coastwise points within section
883, even if the oily ballast is unloaded at a second coastwise
point and there treated to recover the oil. Such a movement
would not be coastwise transportation of merchandise within
section 883. Even though the oily water ballast would be
considered merchandise within section 883, the transporting
vessel would have discharged its oil cargo, except for a
remainder or residual that was impossible or impractical to
remove from the vessel, and would be proceeding in ballast (i.e.
without cargo).
The fallaciousness of the position that the vessels under
consideration are transporting merchandise between coastwise
points, or performing part of such transportation, on their
return movement to Chiriqui Grande with oily water ballast is
illustrated by examining the consequences of adopting that
position. If we did so, a foreign or United States registry
documented (i.e., non-coastwise-qualified) vessel which loaded
oil at one United States port and transported it to a foreign
port where the oil was unloaded and the vessel took on water as
ballast before proceeding to another United States port where the
vessel discharged its oily water ballast would be subject to the
penalties of section 883 for both legs of what is clearly a
foreign movement.
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Consistent with our treatment of oily water ballast carried
in the vessels under consideration on their return movement to
Chiriqui Grande, transportation of the residual which was left
over, in the normal course of business, after discharge of the
ANS oil at United States Gulf and East Coast ports would also not
be considered to be transportation of merchandise between
coastwise points within section 883. Only if a measurable
quantity of the ANS oil loaded in Chiriqui Grande in excess of
the residual which remains, in the normal course of business,
after discharge of the oil is transported back to Chiriqui Grande
before being transported onward to a United States port would the
transporting vessel be considered to be transporting merchandise
between coastwise points (i.e., Valdez to Puerto Armuelles to
Chiriqui Grande to Gulf or East Coast port to Chiriqui Grande to
Gulf or East Coast port) within section 883.
With regard to the Pacific Coast voyages, the same analysis
would apply except that if a measurable quantity of the ANS oil
loaded in Valdez in excess of the residual which remains, in the
normal course of business, after discharge of the oil at Puerto
Armuelles was returned to the same point in Valdez where it was
loaded, such a movement would not be considered to be
transportation of merchandise between coastwise points within
section 883 (i.e., it would be transportation from Valdez to
Valdez via Puerto Armuelles).
ISSUE 2.
The Customs Service is responsible for the enforcement of
46 U.S.C. App. 883 (see section 102, 1946 Reorganization Plan No.
3, set out in a Historical Note following 46 U.S.C. App. 1).
That law limits the coastwise transportation of merchandise to
vessels "built in and documented under the laws of the United
States and owned by persons who are citizens of the United
States." We interpret "documented under the laws of the United
States" in this provision to mean properly so documented. Since,
under 46 U.S.C. 12106(b), only a vessel for which a coastwise
license or an appropriately endorsed registry is issued may be
employed in the coastwise trade, subject to the laws regulating
the coastwise trade, it is our position that vessels which are
engaged in the transportation of merchandise between coastwise
points within section 883 are required to be documented for the
coastwise trade.
In addition, with regard to this issue, the Act of June 19,
1886, chapter 421, section 7, 24 Stat. 81, as amended (46 U.S.C.
App. 319), provides that:
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Whenever a vessel, entitled to be documented and
not so documented, is employed in a trade for which
certificates of documentation are issued under the
vessel documentation laws, other than a trade covered
by registry, the vessel is liable to a civil penalty of
$500 for each port at which it arrives without the
proper certificate of documentation ....
The Customs Service is partially responsible for the
enforcement of this law (see notice published in the Federal
Register on May 18, 1967 (32 FR 7408), and Customs Circular
VES-1-R:CD:C ENF-4, July 26, 1973). This law also is statutory
authority under the jurisdiction of Customs for the holding in
C.S.D. 87-16 that "[t]he vessels used for each part of the
transportation [considered in that C.S.D.] are required to be
documented for the coastwise trade."
ISSUE 3.
In C.S.D. 87-16 we stated that:
... there is no authority for denying clearance to a
vessel which is engaged or will engage in the coastwise
trade and which is documented with a Certificate of
Documentation with a coastwise endorsement only, when
that vessel is bound to a foreign port or place ....
Accordingly, we ruled in the C.S.D. that a vessel with only a
coastwise endorsement may clear Customs (see Holding 3). On the
basis of the same rationale discussed in the C.S.D., a vessel on
a non-coastwise voyage between a United States port and a foreign
port could clear Customs without a registry endorsement. We take
no position with regard to the question of whether such a vessel
would be required, for other purposes, to have a registry
endorsement. We note that the United States Coast Guard is
responsible for the enforcement of 46 U.S.C. 12110, to which you
refer in this regard.
ISSUE 4.
With regard to this issue, we stated in C.S.D. 87-16 that the
ruling published as that C.S.D. "[was] not intended to have any
effect on the laws, regulations, or policies governing pilotage,
which are outside the purview of the Customs Service." That
continues to be our position. C.S.D. 87-16 was not intended to
have any effect on the laws, including 46 U.S.C. 8502(a),
regulations, or policies governing pilotage. We take no position
on the possible relevance of determinations by Customs for
purposes of 46 U.S.C. App. 883 to the application of 46 U.S.C.
8502(a).
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HOLDINGS:
1. Ballast voyages, (a) between United States Gulf and East
Coast ports and Panama, (b) between Panama and United States West
Coast ports, and/or (c) between United States West Coast ports
and Alaska, in connection with the trade described in C.S.D. 87-
16 and in the FACTS portion of this ruling would not be
considered coastwise transportation within 46 U.S.C. App. 883
when:
(a) Oily water ballast is carried by the vessels even
if the oily water ballast is treated after the ballast voyage
and the oil recovered from the oily water ballast is
transported onward to a coastwise point; or
(b) A residual or remainder of oil which is left over,
in the normal course of business, after discharge of the ANS
oil is carried by the vessels even if the residual or
remainder is transported with other oil to a coastwise point
or is removed from the vessel after the ballast voyage and
transported onward to a coastwise point.
Voyages in which a measurable quantity of the ANS oil in
excess of the residual which remains, in the normal course of
business, after discharge of the oil at the United States Gulf or
East Coast ports or Puerto Armuelles would be considered to be
coastwise transportation of merchandise within section 883 except
that, with regard to the Pacific Coast voyages, if that
measurable quantity of ANS oil was unloaded at the same point in
Valdez where it was loaded, it would not be considered to be such
coastwise transportation.
2. The statement in C.S.D. 87-16 that "[t]he vessels used
for each part of the transportation are required to be documented
for the coastwise trade" is based upon the authority of 46 U.S.C.
App. 883 (see also, 46 U.S.C. App. 319) which is under the
jurisdiction of the Customs Service. This statement does
represent an official ruling of Customs with respect to this
issue.
3. A vessel on a non-coastwise voyage between a United
States port and a foreign port could clear Customs without a
registry endorsement. We take no position with regard to the
question of whether such a vessel would be required, for other
purposes, to have a registry endorsement.
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4. Customs Service Decision 87-16 was not intended to have
any effect on the laws, including 46 U.S.C. 8502(a), regulations,
or policies governing pilotage and we take no position on the
possible relevance of determinations by Customs for purposes of
46 U.S.C. App. 883 to the application of 46 U.S.C. 8502(a).
Sincerely,
Edward T. Rosse
Acting Director, Regulatory
Procedures and Penalties Division
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