For offshore developers and Engineering, Procurement, and Construction (EPC) companies, understanding U.S. Customs and Border Protection (CBP) rulings is critical for ensuring compliance and avoiding costly violations in Outer Continental Shelf (OCS) operations. These rulings clarify the applicability of the Jones Act (46 U.S.C. § 55102), the Dredging Statute (46 U.S.C. § 55109), and dutiability for various activities and materials.
Here are the key considerations for offshore developers and EPCs, based on recent CBP rulings:
Jones Act and Coastwise Trade (46 U.S.C. § 55102)
The Jones Act prohibits the transportation of merchandise or passengers between points in the United States embraced within the coastwise laws by any vessel not built in, documented under the laws of, and owned by U.S. citizens.
“Coastwise Points” on the OCS:
- U.S. laws extend to the subsoil and seabed of the OCS, and to artificial islands, installations, and other devices permanently or temporarily attached to the seabed for exploring, developing, producing, transporting, or transmitting resources (including non-mineral energy resources like offshore wind platforms).
- The pristine seabed of the OCS is generally not considered a coastwise point until an installation or device is attached to it for OCSLA purposes.
- Once a monopile is installed, that location on the seabed becomes a coastwise point.
- Electric transmission cables placed on the OCS for transmitting power are considered coastwise points under the OCSLA, as amended in 2021.
Cable Laying Operations (“Paid Out, Not Unladen”):
- The sole use of a vessel in laying pipe or cable between two coastwise points is generally NOT considered coastwise trade if the material is “paid out” and not “unladen” as cargo. This means a non-coastwise-qualified vessel may carry and lay such cable.
- This principle applies to the installation of flexible flowlines, umbilical lines, and risers, provided the installation is performed on or from the vessel.
- Cable repair, replacement, or installation of a section of cable, including pull-in operations, are also considered part of cable laying operations and typically do not violate the Jones Act if the cable is “paid out”.
Transportation of Monopiles and Transition Pieces:
- Transportation of monopiles from a U.S. port (a coastwise point) to a pristine seabed site on the OCS by a non-coastwise-qualified, dynamically positioned (DP) installation vessel is permissible, as long as the vessel is not anchored or attached to the seabed at the installation site.
- However, if a non-coastwise-qualified jack-up vessel is used and attaches itself to the seabed (jacks up) for monopile installation, it establishes a second coastwise point. In this scenario, transporting monopiles from a U.S. port to the jacked-up vessel would violate the Jones Act. To avoid violation, a coastwise-qualified vessel must transport the monopiles to the jacked-up vessel.
- Once a monopile is installed, it becomes a coastwise point. Therefore, thetransportation of transition pieces (TPs) from a U.S. port to previously installed monopiles by a non-coastwise-qualified vessel would violate the Jones Act. A foreign-flagged vessel can install the TPs if it remains stationary during the lifting operation, but transportation between coastwise points must be by a coastwise-qualified vessel.
“Merchandise” vs. “Vessel Equipment”:
- Merchandise includes “goods, wares, and chattels of every description” and “valueless material”.
- Vessel equipment consists of “portable articles necessary and appropriate for the navigation, operation or maintenance of the vessel and for the comfort and safety of the persons on board”. Items are only vessel equipment if they are integral to the vessel’s function and are returned to the vessel. The “mission of the vessel” rationale for classifying items as vessel equipment has been revoked and is no longer valid.
- Examples:
- Vessel Equipment: Remote Operated Vehicles (ROVs) if returned to the vessel, jointing habitats (remain on vessel), empty reels/carousels (returned to vessel). Cable pullheads and cable protection system pullheads are also considered vessel equipment if returned to the vessel.
- Merchandise: Concrete mats or rock bags placed over laid cable (as they are left on seabed and don’t aid vessel operation). Spare cable jointing bodies and accessories, or spare cable protection systems, if transported between different U.S. ports by a non-coastwise-qualified vessel, are considered merchandise. Boulders picked up by a grab and relocated are also considered merchandise.
- Transportation of empty containers for cable protection materials between U.S. ports by a foreign vessel is permissible, as they are considered vessel equipment.
Excess Cable:
- Returning unused excess cable (5% or less of total laden amount) to the same U.S. port and berth where it was originally laden does not violate the Jones Act.
- Transporting unused excess cable (5% or less) to a different U.S. port by a non-coastwise-qualified vessel is permissible.
- Unlading excess cable originally laden in a foreign port at a U.S. port also does not violate coastwise laws.
Dutiability of Merchandise
- Foreign-manufactured cable or flowlines that are unladen at a U.S. port (even temporarily onto a dock or barge for immediate loading onto an installation vessel) are considered dutiable foreign merchandise in their entirety.
- The portion of an umbilical or cable that rises along an OCS platform’s structures (e.g., through an I-tube) from its attachment point to the platform is dutiable.
- Cable laid on the seabed of the OCS between structures (e.g., platforms and termination bases) is not dutiable, unless that specific part of the cable is unloaded in a U.S. port or onto one of the platforms before being laid on the seabed.
Dredging Statute (46 U.S.C. § 55109)
The Dredging Statute requires coastwise-qualified vessels for dredging in U.S. navigable waters.
- Definition of “Dredging”: “the use of a vessel equipped with excavating machinery in digging up or otherwise removing submarine material”.
- Activities NOT considered “Dredging”:
- Water jetting/fluidization: The use of water jetting tools that fluidize the seabed to create a narrow slice for cable burial, or for “remedial post-burial work,” is considered “temporary manipulation of the seabed” and not dredging. This applies to pure chain cutting, hybrid water jet/chain cutter, or pure water jet devices for cable burial.
- Grapnel operations: The retrieval of out-of-service cable or debris with a grapnel is not considered dredging, as grapnels are not excavation equipment.
- Mechanical cutters: Using a mechanical cutter to create a narrow trench for cable burial is also generally not considered dredging if it’s a temporary manipulation of the seabed.
- Boulder relocation: Picking up boulders with a “grab” device without using suction or other excavating machinery is not considered dredging.
- Survey operations using sonar-based tools that do not physically contact the seabed do not violate coastwise laws.
- Activities considered “Dredging”: Pulling a plow to create a trench for pipe laying is considered dredging.
- OCS Applicability: Dredging on the OCS is covered by the statute only if it is done in connection with OCSLA purposes (exploring, developing, producing, transporting, or transmitting resources).
Passenger Transportation (46 U.S.C. § 55103)
The Passenger Vessel Services Act (PVSA) prohibits the transportation of passengers between points in the United States by non-coastwise-qualified vessels.
- A “passenger” is defined as “any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business”.
- Project management and field engineer personnel, or construction/supervisory crew who are directly and substantially related to the vessel’s operations or mission, are NOT considered passengers. Their transportation on a foreign-flagged vessel between U.S. points does not violate the PVSA if their duties are directly related to the vessel’s business or operation.
Conclusion
For offshore developers and EPCs, meticulous planning that incorporates these nuances from CBP rulings is essential for navigating the complex regulatory landscape of OCS projects.
