U.S. Department o~. Director 792 T J Jackson Drive Homeland Security •.~J. National Vessel Documentation Center Falling Waters, 'IN 25419

Staff Symbol NVDC United States Phone: (304) 271-2506

Fax: (304) 271-2442 Coast Guard Email: Timothy.v.Skuby@uscg.mil

16713/5/2 November 29, 2012

Mr. Chad Verret Sr. Vice President Deepwater Operations Harvey Gulf International Marine, LLC 701 Poydras Street, Suite 3700 New Orleans, LA 70139

Dear Mr. Verret:

We refer to your letter of October 4,2012, with its enclosures, wherein you reported that Harvey Gulf International Marine, LLC ("Harvey Gulf') is currently constructing four dual fuel offshore support vessels at Trinity Shipyard in Gulfport, Mississippi, which, upon completion, are intended to be Jones Act-compliant and eligible to engage in the coastwise trades of the United States. In that regard, you have sought confirmation of the following:

"[Harvey Gulf] is seeking confirmation that LNG fuel tanks fabricated outside of the U.S., for which (sic) are assembled into the vessel within the U.S., will permit the offshore support vessel to retain its eligibility for coastwise endorsement. Currently, the LNG tanks are being constructed within the U.S.; however the LNG tank fabricator is considering the use of its international facilities to expedite the schedule."

The question as to which you have sought confirmation has presupposed not only that "the LNG fuel tanks are assembled into the vessel in the United States" but also that "the vessel's construction in all other respects satisfies the test of having been built in the U.S." In that respect, the confirmation you have sought is confined to the issue of the foreign fabrication of the LNG fuel tanks.

Your letter correctly reflects that, in order to be documented in the United states with a coastwise endorsement entitling it to be operated in the coastwise trades of the United States, the vessels must be determined to have been built in the United States. Moreover, in order for that to be the case, its construction must satisfy both of the requirements of 46 C.F.R. § 67.97; namely:

"To be considered built in the United States a vessel must meet both of the following criteria:

(a) All major components of its hull and superstructure are fabricated in the United States; and

(b) The vessel is assembled entirely in the United States."

For the purposes of our determination in this case the definition of the term "hull" at 46 C.F.R. § 67.3 must also be considered, in pertinent part, as follows:

"Hull means the shell, or outer casing, and integral structure below the main deck which provide both the flotation envelope and structural integrity of the vessel in its normal operations ... "

Your letter was also provided to the Coast Guard's Naval Architecture Division ("NAD") which, at our request, has reviewed your plans with regard to the LNG fuel tanks. A copy of the NAD report, dated November 16,2012, has been attached hereto as Exhibit A in support of this determination.

The question addressed to the NAD for technical review by the facts presented in this case is straightforward. Would the LNG fuel tanks, as described, form part of the "hull", as defined above, of the vessels? If so, because of their size (your letter estimated the steelweight of the vessels as 1,815 LT and the LNG fuel tank as 105 LT), it is clear that they would constitute "major components" of the hull (the standard for which has consistently been set at 1.5% of a vessel's lightship steelweight) and, as such, would need to be fabricated in the United States in order for the vessels to be considered built in the United States. If not, on the other hand, then, notwithstanding their size, the fact that they might be fabricated outside of the United States would not negatively implicate the first criterion set forth above.

After review, the NAD offered the following findings at paragraphs 5, 6, and 7 of its report, in pertinent part:

"5 ....With respect to the fuel tank installation, and consistent with our previous reviews of this nature:

'Independent' tanks (as opposed to 'integral' tanks) are structurally separate from the hull. This means that primary hull stresses are not transmitted to the tank structure, and the tank structure is designed only to meet the liquid loads (i.e., hydrostatic and hydrodynamic (sloshing)) and does not contribute to the overall strength of the hull.

"6. Based on the description of the fuel tank installation... , the saddle foundations are specifically intended to structurally isolate the hull and the LNG tank from each other. This is necessary not only to isolate the tank from any bending stresses of the hull in a seaway, but also to isolate the hull from any stresses due to thermal expansion and contraction of the LNG tank.

"7. Therefore, we conclude that the LNG tank is not part of the hull ... "

Consequently, based upon these findings and conclusions, the LNG fuel tanks described would not comprise part of the hull of the vessels and, as such, are not precluded from being fabricated outside of the United States.

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The second criterion of 46 C.F.R. § 67.97, set forth above, requires that the vessel be assembled entirely in the United States. In this case you have indicated that the LNG fuel tanks will, in fact, be assembled into the vessels in the United States at Trinity Shipyard.

The Coast Guard has long held that items not integral to the hull or superstructure of a vessel may be foreign built without compromising its coastwise eligibility. However, if attached or joined to the vessel in a foreign shipyard, the second criterion of the test, the "assembled entirely in the United States" criterion, would be impacted. Because the LNG fuel tanks in this case will be assembled into the vessels in the United States, that is not the case here.

Moreover, the Coast Guard's interpretation that the second criterion of the test refers to the assembly of the vessel itself, and does not require assembly in the United States of every component part of the vessel, has also been upheld. Philadylphia Metal Trades Council, MTD, AFL-CIO v. Allen, 2008 WL 4003380, E.D. Pa., 2008.

For all of the above reasons, we confirm that foreign fabrication of the LNG fuel tanks will not jeopardize the coastwise eligibility of the vessels provided that those tanks are assembled into the vessels in the United States, as has been represented.

Sincerely,

G Retired

~, ...... Enclosure

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EXHIBIT A

U.S. Department 00. Commandant (CG·ENG-2) 2100 Second Street, S.w. Stop 7126 Homeland Security United States Coast Guard Washington, DC 20593·7126

Staff Symbol: CG-ENG-2· United States Phone: (202) 372·1366 Coast Guard Fax: (202) 372-19:~5

16713 November 16, 2012

MEMORANDUM

From: Jaideep SfR~~~-:> ...1v-J:2,oVl.." Reply to CG-ENG-2* Chief, Naval ~ecture DivisIOn (CG-ENG-2*) Attn of: (202) 372-1366

To: National Vessel Documentation Center

Subj: Harvey Gulf LNG Offshore Supply Vessels - Preliminary U.S. Build Determination

Refs: (a) D. Cameron (NVDC) e-mail of7 Oct 2012, to J. Sirkar (CG-ENG-2)

(b) Harvey Gulf letter (w/Gen'l Arrangement & LNG tank drawings) of 4 Oct 2012, to NVDC

1. Reference (a) requests our review and comments regarding a dual-fuel offshore support vessel (OSV), as described per reference (b). Four of these OSVs are currently under construction at Trinity Shipyard for Harvey Gulf International Marine (HGIM).

2. These OSVs will be fitted with independent LNG fuel tanks, which are currently being fabricated in the United States. However, to expedite the fabrication schedule, the tank vendor is contemplating fabrication in additional foreign facilities, to be shipped back to the U.S. shipyard for assembly into the hull. HGIM is requesting confirmation that foreign fabrication of the LNG tank system will not invalidate the coastwise eligibility of the vessels.

Description of vessel and foreign-source components

3. As described in reference (b), these will be 302 ft x 64 ft X 24Y2 ft OSVs, dual-fueled by LNG and diesel. The LNG fuel system ("LNGPac") is being fabricated by WartsiliL It will c:omprise of an insulated LNG tank (4.5 m diameter x 26.6 m long, 284 m3 capacity), with an attached "tank room" at one end. The tank room will be outfitted with various auxiliary systems for handling the LNG fuel. The total length of the fuel tank/tank room unit will be approximately 30.1 m.

4. The LNG tank will be mounted on two saddle foundations on the vessel's inner bottom; this will allow for thermal expansion/contraction of the tank. The estimated steel weight of the vessel is given as 1,815 Ltons, and the estimated weight of the LNG fuel tank is 105 Ltons.

Basis of our review per 46 CFR 67.3

5. The only issue submitted for our consideration here is whether or not the LNG fuel tank is part of the hull, and should therefore be included in the vessel's discounted steel weight. With respect to the fuel tank installation, and consistent with our previous reviews of this nature:

"Independent" tanks (as opposed to "integral" tanks) are structurally separate from the hull. This means that primary hull stresses are not transmitted to the tank structure, and the tank structure is designed only to meet the liquid loads (Le., hydrostatic and hydrodynamic (sloshing») and does not contribute to the overall strength of the hull.

Review comments

6. Based on the description of the LNG fuel tank installation in reference (b) and the General Arrangement drawing, the saddle foundations are specifically intended to structurally isolate the hull and the LNG tank from each other. This is necessary not only to isolate the tank from any bending stresses of

*fonnerly CG-5212

Subj: Preliminary U.S. Build Determination for Harvey Gulf 16713 LNG Offshore Support Vessels November 16,2012

the hull in a seaway, but also to isolate the hull from any stresses due to thennal l~xpansion and contraction of the LNG tank.

7. Therefore, we conclude that the LNG tank is not part of the hull, and that its weight should not included in the discounted steel weight of the vessel.

8. If you have any questions, please contact me or Mr. Thomas JORDAl'l" at the above.

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