VES 3-02 CO:R:P:C 110196 BEW
Mr. Kenneth Herrick
Post Office Box 646
Petersburg, Arkansas 99833
RE: Transportation of passengers between United States ports or
places and the high seas on a foreign-built vessel
Dear Mr. Herrick:
This is in reference to your letter of April 19, 1989,
concerning the transportation of passengers between ports or
places in the United States territorial waters and the high seas
on your foreign-built vessel.
FACTS:
You state that you purchased an Ablin 25 Deluxe, vessel Hull
No. AMN 02071 0375, made in Sweden from the original owner in
November 1979. You state that the vessel is a configuration
Motorsailer with aft cabin, and weighs less than 5 net tons. You
state that the vessel has been extensively remodeled from the
"wheele-house" roof to the main engine replacement. You state
that the value of the vessel has doubled from its original
purchase price. You state that you wish to list your business as
a "Charter for State Licensing purposes," and ask to what extent
can you transport passengers in conjunction with your photography
and video business.
ISSUE:
Whether the transportation of passengers on a foreign-built
vessel between a port or place in the United States and the high
seas, and return to the point of original embarkation is a
violation of the coastwise laws.
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LAW AND ANALYSIS:
Generally, the coastwise laws (e.g., 46 U.S.C. App. 289 and
883, and 46 U.S.C. 12106 and 12110) prohibit the transportation
of merchandise or passengers between points in the United States
embraced within the coastwise laws in any vessel other 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.
Under the provisions of 46 U.S.C. App. 289, no foreign
vessel shall transport passengers between ports or places in the
United States, either directly or by way of a foreign port. The
penalty for violating this section of the law is $200 for each
passenger so transported and landed.
In the process of documenting a vessel, and issuing a
coastwise license, the United States Coast Guard makes the
determination whether a vessel of at least 5 net tons is a vessel
built in the United States. Coast Guard determines whether the
vessel was U. S. built for its documentation purposes. Customs
honors the Coast Guard's determination. As this vessel is under
five net tons and not eligible for such Coast Guard determination
Customs must make the determination for purposes of the coastwise
laws. Coast Guard's determination normally would be followed by
Customs for the purposes of the requirement that vessels engaging
in the coastwise trade be built in the U.S.
Of course, qualified vessels of less than 5 net tons are not
precluded from engaging in the coastwise trade simply because
they cannot be documented under the laws of the United States,
however. Section 4.80(a), Customs Regulations (19 CFR 4.80(a)),
enumerates the vessels which may engage in the coastwise trade.
Subparagraph (a)(2) of this section (i.e., 19 CFR 4.80(a)(2))
provides that no vessel exempt from documentation (e.g., of less
than 5 net tons) shall transport any passengers or merchandise
between United States coastwise points unless the vessel is owned
by a citizen of the United States and is entitled to or, except
for its tonnage, would be entitled to be documented with a
coastwise license. As stated above, to be entitled to be
documented with a coastwise license a vessel must, among other
things, be built in the United States (46 U.S.C. 12106(a)(2)),
with an exception inapplicable in this case.
The Customs Service has adopted the provisions in section
67.09-3, Coast Guard Regulations (46 C.F.R. 67.09-3), as - 3 -
guidelines for its determination of whether a vessel that is
exempt from documentation because it is less than 5 net tons,
such as you vessel, may be considered built in the United States
and, therefore, may be used in the coastwise trade. Section
67.09-3 states that:
A vessel is considered built in the United States if:
(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.
Under section 67.09-5, Coast Guard Regulations, a vessel is
considered foreign built if it does not meet the requirements of
section 67.09-3.
Customs considers the alterations and modifications done to
the hull and fittings and superstructure of the vessel in the
United States the crucial factor in making its determination as
to whether an imported vessel was rebuilt in the United States.
See Customs Ruling Letter 109050 BEW (11/4/87). Customs also
takes into account the value added to the vessel in the United
States. See Customs Ruling Letter 108906 BEW (6/15/87).
You state that your vessel has doubled in value from its
original purchase price. With your request you did not submit
documentation or sufficient evidence to sustain a finding that
hull and fittings and superstructure of your vessel has been
sufficiently substantially modified to be considered rebuilt in
the United States. In order for us to determine whether your
vessel is considered re-built in the United States, you must
submit evidence and documentation showing that substantial
alterations and modifications to the hull and fitting and
superstructure have been made to the vessel.
In interpreting the coastwise laws as applied to the
transportation of passengers, we have ruled that the carriage of
passengers entirely within territorial waters, even though they
disembark at their point of embarkation and the vessel touches no
other point, is considered coastwise trade subject to the
coastwise laws. The transportation of passengers to the high
seas or foreign waters and back to the point of embarkation,
often called a "voyage to nowhere," is not considered coastwise
trade, assuming the passengers do not go ashore, even
temporarily, at another coastwise point. We have ruled that the
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carriage of fishing parties for hire, even if the vessel proceeds
beyond territorial waters and returns to the point of the
passengers' original embarkation, is considered coastwise trade
subject to the coastwise laws.
A point in United States territorial waters is considered a
point in the United States embraced within the coastwise laws but
a point beyond those waters, even if it is within the United
States Exclusive Economic Zone (EEZ), is not considered to be
such a point, with certain exceptions inapplicable in this
context (see, e.g., the Outer Continental Shelf Lands Act of
1958, as amended; 43 U.S.C. 1333, and the amendments to 46 U.S.C.
App. 883 regarding the transportation of valueless or dredged
material effected by Public Law 100-329).
The territorial waters of the United States consist of the
belt, 3 nautical miles wide, adjacent to the coast of the United
States and seaward of the territorial sea baseline. The recent
Presidential Proclamation (dated December 27, 1988) proclaiming a
12 nautical mile territorial sea extended the jurisdiction of the
United States only for international purposes and did not extend
or change existing federal and state laws. The territorial
waters of the United States continue to be 3 nautical miles wide,
for purposes of the applicability of the coastwise laws. The
vessel under consideration, as a foreign-built vessel, would be
precluded from engaging in the coastwise trade. The vessel could
be used to transport passengers from a point in the United States
to the high seas beyond territorial waters and back to the same
point, assuming that the vessel touched at no other coastwise
point during the transportation and was not engaged in charter
party fishing. However, the vessel would be prohibited from
carrying passengers on such a voyage if the passengers
disembarked the vessel at a coastwise port subject to the
coastwise laws of the United States. This is so because on such
a voyage the passengers would be transported between ports or
places in the United States (see 46 U.S.C.289).
HOLDING:
The transportation by a non-coastwise-qualified vessel, such
as your foreign-built vessel, of passengers to the high seas or
foreign waters and back to the point of embarkation, often called
a "voyage to nowhere" is not considered coastwise trade.
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The transportation of passengers or merchandise by a non-
coastwise-qualified vessel, such as your foreign-built vessel,
from one point or port to another point or port within the
territorial waters of the U.S. is a violation of the coastwise
laws.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch