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HQ 110103

May 3, 1989

VES-3-17-CO:R:P:C 110103 LLB


Mr. R. F. Calnan
Commodity Tax Section
Gulf Canada Resources Limited
Post Office Box 130
Calsary, Alberta, Canada T2P 2H7

RE: Applicability of the third proviso of the coastwise merchandise statute to the movement of merchandise by rail and vessel from Texas, to a point on the outer continental shelf off Alaska.

Dear Mr. Calnan:

Reference is made to your letter of March 6, 1989, in which you relate the proposed movement of U.S. manufactured oilfield casing from a point in the continental United States, via rail (Burlington Northern and Canadian National Railroad trackage) to Canada, and thence via vessel to a wellhead on the outer continental shelf off the coast of Alaska. You seek a ruling on the permissibility of such a movement under the terms of the coastwise merchandise statute.


Approximately two railcars full of 7-inch, U.S.-made oilfield casing is proposed to be shipped from Lone Star, Texas. The railcars will be Canadian National Railroad stock and will proceed to Hay River, Northwest Territories, Canada, in part over Burlington Northern trackage. Routes rate tariffs will be filed with the United States Interstate Commerce Commission by Canadian National Railroad. From Hay River, the casing would be transferred to Canadian-operated barges for transportation via the McKenzie River to Tuktoyaktuk, Northwest Territories. Once there, depending upon weather and ice conditions, the casing would be transported either to Canadian trucks for further transit via ice road, or to Canadian vessels bound for Herschel Island, Yukon Territories. At Herschel Island, the casing would be loaded aboard the Canadian-registered beaudril drillship "Kulduk" for transportation to the Belcher wellsite on the outer continental shelf off the coast of Alaska. 2


Whether, by virtue of the third proviso to the coastwise merchandise statute, oilwell casing materials may be transported between two coastwise points, in part via non-coastwise-qualified vessels.


Title 46, United States Code App., 883, provides, in pertinent part, that:

No merchandise shall be transported by water, or by land and water, on penalty of forfeiture thereof, between points in the United States, including Districts, Territories, and possessions thereof 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...

Section 4(a) of the Outer Continental Shelf Lands Act of 1953, as amended (43 U.S.C. 1333(a)) (OCSLA), provides, in pertinent part, that he laws of the U.S. are:

...extended to the subsoil and seabed of the outer continental shelf and to all artificial islands, and all installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purpose of exploring for, developing, or producing resources therefrom, or any such installation or other device (other than a ship or vessel) for the purpose of transporting such resources, to the same extent as if the outer continental shelf were an area of exclusive Federal jurisdiction located within a State...

Thus, it is the case that both the point of origin of the transportation (Lone Star, Texas), as well as the terminus of the transportation (Belcher wellsite, outer continental shelf) are points within the contemplation of the coastwise merchandise law

The third proviso to 27 of the Merchant Marine Act, 1920, as amended (46 U.S.C. App. 883), provides:

That this section shall not apply to merchandise transported between points within 3
the continental United States, including
Alaska, over through routes heretofore or hereafter recognized by the Interstate
Commerce Commission for which routes rate tariffs have been or shall hereafter be filed with said Commission when such routes are in part over Canadian rail lines and their own or other connecting water facilities...

Simply stated, 883 would not prohibit the transportation of merchandise if all of the conditions of the third proviso are met, that is:
a) through routes are utilized which have hereto or are hereafter recognized by the I.C.C.
b) routes rate tariffs have been or shall hereafter be filed with the I.C.C., and have not subsequently been rejected for filing, have become effective according to their terms, and have not been subsequently suspended, or withdrawn by the Commission.
c) the routes utilized are in part over Canadian rail lines and their own or other connecting water facilities.

We have held that "over Canadian rail lines" means simply over rail trackage in Canada, and that "their own or other connecting water facilities" means water facilities covered by a through route regardless of whether those facilities connect directly with the Canadian rail line covered by that through route. Accordingly, the proposed service will qualify under the third proviso and will not constitute a violation of the coastwise laws of the United States provided the through route is recognized by the Interstate Commerce Commission as set forth in the preceding paragraph.


Under the above-stated facts, the proposed transportation would be permitted under the third proviso to U.S.C. App. 883, so long as the I.C.C. filing requirements set forth above have been satisfied.


B. James Fritz

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