Dredging; 46 U.S.C. § 55109

HQ H056696 April 17, 2009 VES-10-02-OT:RR:BSTC:CCI H056696 JLB CATEGORY: Carriers Mr. Jeffrey F. Lawrence Ms. Heather M. Spring Sher & Blackwell LLP 1850 M St., N.W., Suite 900 Washington, DC 20036 RE: Dredging; 46 U.S.C. § 55109 Dear Mr. Lawrence and Ms. Spring: This letter is in response to your correspondence dated April 6, 2009, on behalf of your client, Stuyvesant Environmental Contracting, Inc., in which you inquire about whether a violation of the coastwise dredging statute, 46 U.S.C. § 55109 occurs if your client enters into contracts containing a dredging element and the dredging work is performed by a subcontractor or joint venture partner. Our ruling on your request follows. FACTS Stuyvesant Environmental Contracting, Inc. (“SECI”) provides environmental remediation and soils processing services in the United States. It employs the expertise and technologies of an overseas affiliate, Boskalis Dolman. SECI is a company incorporated in Delaware but is not a U.S. citizen for purposes of the coastwise laws, thus, it does not engage itself in the dredging business. Its processing facilities are operated entirely on land and no U.S. cabotage laws are implicated. However, its soil processing service contains a dredging element. Depending on the project, SECI intends to either (1) subcontract the dredging work to a qualified dredging company, or (2) submit a joint bid with a qualified dredging company under a joint venture agreement or teaming agreement. Under the first scenario, subcontracting the dredging work, SECI will be responsible for overall project management and coordination. The company will perform, or subcontract, all of the on-land processing and disposal activities. It will subcontract all dredging work to a company authorized to own or charter qualified vessels and engage in dredging activities in U.S. navigable waters pursuant to the coastwise dredging statute. The dredging subcontractor will have full responsibility for performing the dredging work in accordance with the contract specifications. SECI does not intend to place a supervisor or surveyor onboard any dredge and will not direct the day-to-day operations of the dredging subcontractor. Under the second scenario, SECI will be part of a teaming arrangement or joint venture with a dredging company, whereby SECI and a dredging company jointly submit a proposal under which each party supplies its particular experience, expertise, and equipment. Accordingly, SECI will be responsible for all on-land processing activities, and a qualified dredging company will be responsible for all the dredging activities. Overall project management will be coordinated by both parties on terms to which they agreed. Once again, SECI would not place personnel onboard the dredges or direct day-to-day dredging vessel operations. ISSUE Whether a corporation that is not a U.S. citizen for purposes of engaging in the coastwise trade may enter into contracts that have a dredging element under the abovementioned scenarios without violating 46 U.S.C. § 55109? LAW AND ANALYSIS Title 46, United States Code, section 55109(a) (46 U.S.C. § 55109(a)) provides, with certain exceptions, that a vessel may engage in dredging in the navigable waters of the United States only if: (1) the vessel is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; (2) the charterer, if any, is a citizen of the United States for purposes of engaging in the coastwise trade; and (3) the vessel has been issued a certificate of documentation with a coastwise endorsement under chapter 121 of this title or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement. Thus, SECI may not engage in dredging itself since it is not a U.S. citizen for purposes of engaging in the coastwise trade. However, the corporation is in the business of providing soil processing services in the United States and this type of work does have a dredging component. Therefore, SECI proposes to either (1) subcontract the dredging work to a qualified dredging company, or (2) submit a joint bid with a dredging company under a joint venture agreement or teaming agreement. SECI declares that the qualified dredging company they choose will meet the requirements of being a citizen of the United States for purposes of engaging in coastwise trade and will only utilize dredges that are coastwise-qualified. Accordingly, it is only necessary to determine if SECI will be deemed a charterer for purposes of the aforementioned statute. A charter party may consist of either a bareboat, time or voyage charter. See Headquarters Ruling Letter 109638, dated July 22, 1988; Headquarters Ruling Letter 114314, dated May 7, 1998; Headquarters Ruling Letter 116491, dated July 26, 2005. The term “charterer” in 46 U.S.C. § 55109(a)(2) refers to charterers with any of these three charter agreements. We note the well-established plain language principle which mandates that in determining legislative intent, the language of the statute must first be examined. See Phone Mate, Inc. v. United States, 12 CIT 575, 690 F.Supp. 1048 (1988), aff"d, 867 F.2d 1404 (1989). Where the content of the statute is in "reasonably plain terms, that language must ordinarily be regarded as conclusive." See Negonsott v. Samuels, 507 U.S. 99, 113 S.Ct. 1119, 1122-23, 122 L.Ed.2d 457 (1993) quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 570, 102 S.Ct. 3245, 3249, 73 L.Ed.2d 973 (1982). Furthermore, in the absence of ambiguity, the plain meaning of that statute must prevail. See United States v. RMS Electronics, Inc., 67 CCPA 79, C.A.D. 1249, 642 F.2d 1081 (1980); see also Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). Consequently, as 46 U.S.C. § 55109 does not expressly define, or limit, the term "charterer," the term as used in the statute, would thus, on its plain face, encompass any form of charter party. This position is conclusively confirmed in the legislative history of 46 U.S.C. § 55109, former 46 U.S.C. App. § 292, as amended by section 5501(a)(1), Public Law 102-587 (November 4, 1992), where the Congressional author of the amended provision declared that "if the dredge is chartered under a time voyage or demise [bareboat] charter, the charterer of the vessel also must meet the citizenship requirements under...46 App. U.S.C. 802...The purpose of this restriction is to ensure that these vessels are always under the control of U.S. citizens" (emphasis added) (138 Cong. Rec. 5006, at 5018 (Mr. Tauzin)). You claim that entering into a subcontract for the performance of dredging services with a dredging company under the circumstances you describe will not convert SECI into a “charterer” for purposes of 46 U.S.C. § 55109. While a charter agreement would consist of SECI entering into a contract with the dredging company, such a contract would have as its focus the specific vessel itself, whereas a subcontract for the performance of dredging services would be formed with the focus of the contract being the hiring of a company with particular expertise and experience in performing such services, not the leasing of a specifically designed vessel. The crux of a charter is the hiring or leasing of a vessel. U.S. Customs and Border Protection (“CBP”) is guided by the judicially recognized definition of a charter as “a contractual arrangement where one person (the charterer) becomes entitled to the use of the whole of a vessel belonging to another (the owner).” See Trico Marine Operators, Inc. v. Falcon Drilling Co., 116 F.3d 159, 161 (Trico) (5th Cir. 1997). A charter has been similarly defined as the document in which the arrangements and contractual engagements entered into when one person (the charterer) takes over the use of the whole of a ship belonging to another (the owner). See Grant Gilmore and Charles L. Black, The Law of Admiralty § 4-1 (2d ed. 1975); see also Thomas J. Schoenbaum, Admiralty & Maritime Law § 11-1 at 169 (2d ed. 1994) (defining a charter party as a specialized form of contract for the hire of an entire ship; the party that obtains the use and service of the ship is called the charterer). A charter party is legally defined as “a contract by which a ship, or a principal part of it, is leased by the owner, esp. to a merchant for the conveyance of goods on a predetermined voyage to one or more places; a special contract between the shipowner and charterer, esp. for the carriage of goods at sea.” Black’s Law Dictionary 95 (2d Pocket ed. 2001). As described in the proposed two scenarios, it is readily apparent that SECI does not meet the definition of a “charterer” as contemplated by these authorities. In Headquarters Ruling Letter (“HRL”) 116012, dated July 24, 2003, it was determined that the prime contractor in a dredging operation would clearly be a charterer for purposes of 46 U.S.C. § 55109, regardless of the fact that the contract stated that it was a “subcontract.” In that case we noted that although the subcontracting dredging company’s employees were the only ones actually operating the vessels and machinery, the contract involved the “rental” of dredges, and the prime contractor placed a project superintendent and surveyor directly onboard the subcontractor’s vessels to ensure that the dredging was performed in accordance with the contract specifications. See also Trico Marine Operators, Inc., 116 F.3d 159 (where a company that contracted with the operator of a drilling vessel for use of the vessel and its crew in prospecting for oil constituted a charterer since the company’s personnel were on the vessel providing general supervision of the crew and directing the crew where to prospect for oil); Lewis v. Keyes 303, Inc., 834 F. Supp. 191(S.D. Tex. 1993) (a company that gained the exclusive use of a drilling rig to build wells and ultimately controlled the direction and control of the operation of the vessel was a charterer). However, such a ruling does not preclude the possibility that a foreign citizen could, under certain circumstances, subcontract dredging work in accordance with 46 U.S.C. § 55109. As noted above, one of the purposes of the aforementioned statute was to ensure that vessels engaging in dredging activities in U.S. navigable waterways are under the control of U.S. citizens, not to prohibit foreign persons from engaging qualified dredging companies in performing such services. The facts considered in HRL 116012 are clearly distinguishable from those now under consideration. Under the first scenario, while SECI is responsible for the overall project management and coordination, the dredging subcontractor will have full responsibility for performing the dredging work in accordance with contract specifications. SECI will not have a supervisor or surveyor onboard the dredge nor will they direct any of the day-to-day dredging operations. Additionally, SECI will not rent the dredges, but rather will be hiring the services of the dredging company which will retain control of the dredging operations by selecting the appropriate vessels and equipment for the work that is required. Under the second scenario, SECI would enter into a joint venture or teaming arrangement with a qualified dredging company with each company contributing its own expertise and equipment to the project, and sharing project management responsibilities. The dredging company would select and provide the appropriate equipment and dredges for the actual dredging work and would have sole responsibility and control over the dredging activities with only its personnel onboard the dredges. SECI would therefore have even less general oversight responsibilities for the dredging aspects of the project than it would as a prime contractor under the first scenario. Accordingly, under the facts presented, SECI is not considered a charterer for purposes of 46 U.S.C. § 55109. Thus, SECI may either enter into subcontracts with qualified dredging companies for dredging services, or enter into joint ventures or teaming arrangements with dredging companies for purposes of submitting a joint proposal for remediation/dredging services, without violating 46 U.S.C. § 55109. HOLDING Under the facts presented, the corporation, which is not a U.S. citizen for purposes of engaging in the coastwise trade, may enter into contracts that have a dredging element under the abovementioned scenarios without violating 46 U.S.C. § 55109. Sincerely, Glen E. Vereb, Chief Cargo Security, Carriers and Immigration Branch