VES-3-02 CO:R:P:C 110967 LLB
Mr. Robert W. McCormick
Operations Manager
Western Alaska Contractors, J.V.
6120 A Street
Anchorage, Alaska 99518-1817
RE: Applicability of the coastwise laws to the transportation of
certain persons and equipment via hovercraft between
coastwise points
Dear Mr. McCormick:
Reference is made to your letter of April 4, 1990, in which
you request that we provide a ruling on the possible applica-
bility of the coastwise transportation of persons and equipment
within Prince William Sound, Alaska.
FACTS:
It is proposed that workmen and their equipment be trans-
ported between coastwise points within the confines of Prince
William Sound aboard a foreign-built hovercraft of less than 5
net tons. The workmen transported would all be employees of the
owner and/or operator of the hovercraft, and it would be
operated under one of two circumstances:
1. A U.S. citizen would own and operate a
foreign-built hovercraft, and would transport
his own employees and their equipment to and
from coastwise worksites ashore.
2. A U.S. citizen would bareboat charter and
operate a foreign-owned and foreign-built
hovercraft. Persons transported to shore-
side worksites would be employees of the
bareboat charter party operating the
hovercraft, and would be accompanied by
their work equipment.
ISSUE:
Whether the transportation of workmen and their equipment
between coastwise points on a non-coastwise qualified hovercraft
of less than 5 net tons, either owned by or bareboat chartered to
a U.S. citizen, is prohibited under the coastwise laws.
LAW AND ANALYSIS:
The Customs Service has held that hovercraft are considered
"vessels" for purposes of the navigation laws, of which the
coastwise passenger statute is one (see T.D. 56390(1), April 8,
1965). This Treasury Decision remains a viable statement of
agency policy, having been consistently cited since its issuance
(Ruling Letter 104772, dated October 12, 1980). It is settled,
therefore, that hovercraft are "vessels."
Generally, the laws referred to as 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 by
any vessel other than a vessel built in, properly documented
under the laws of, and owned by citizens of the United States
(i.e., a coastwise-qualified vessel). Points embraced within the
coastwise laws include all points within the territorial and
navigable waters of the United States. The United States
territorial waters consist of the territorial sea, defined as the
belt, 3 nautical miles wide, adjacent to the coast of the United
States and seaward of the territorial sea baseline.
Pursuant to section 67.11-1, Coast Guard Regulations (46 CFR
67.11-1) vessels which are of less than 5 net tons cannot be
documented under the United States flag by the Coast Guard.
However, 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.
Section 4.80(a), Customs Regulations (19 CFR 4.80(a)), lists the
requirements for vessels which are qualified to engage in the
coastwise trade. Subparagraph (2) of this section (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.
Section 27 of the Act of June 5, 1920, as amended (41 Stat.
999; 46 U.S.C. App. 883, often called the Jones Act), provides,
in pertinent part, that:
No merchandise shall be transported by water, or by
land and water, on penalty of forfeiture of the
merchandise (or a monetary amount up to the value
thereof as determined by the Secretary of the Treasury,
or the actual cost of the transportation, whichever is
greater, to be recovered from any consignor, seller,
owner, importer, consignee, agent, or other person or
persons so transporting or causing said merchandise to
be transported), between points in the United States
* * * 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 * * *.
The passenger coastwise law, 46 U.S.C. App. 289, provides
that:
No foreign vessel shall transport passengers
between ports or places in the United States,
either directly or by way of a foreign port,
under a penalty of $200 for each passenger so
transported and landed.
Pursuant to 46 U.S.C. 12106 and 12110 and their predecessors
(46 U.S.C. 65i and 65m and, before them, 46 U.S.C. 11) and
consistent with 46 U.S.C. App. 883, the coastwise merchandise
law, the Customs Service has consistently held that the
prohibition in 46 U.S.C. App. 289 applies to all non-coastwise-
qualified vessels.
Under a bareboat or demise charter, the owner relinquishes
complete control and management to the charterers for the charter
period. If the owner retains any degree of management or
control, however slight, the charter is a time or voyage charter.
The decisive factor is whether complete control and management
has been surrendered by the owner to the charterers so that for
the charter period the charterers are in effect the owners pro
hac vice (i.e., for this turn; for this one particular occasion).
Certain facts are clear in this matter:
1. It is intended that the hovercraft will engage in
travel between points embraced within the coastwise
laws.
2. The hovercraft in question may not qualify to transport
passengers or merchandise in the coastwise trade by
virtue of being constructed abroad.
3. If operated under a true bareboat charter, the American
vessel operator would be considered the owner for
purposes of the coastwise transportation statutes.
In light of these findings, it remains to be determined whether
either "merchandise" or "passengers" would be transported
between coastwise points.
The term "merchandise," as used in 46 U.S.C. App. 883, is
not defined for purposes of that provision. We have used the
definition of "merchandise" found in section 401(c), Tariff Act
of 1930, as amended (19 U.S.C. 1401(c)) in our administration of
section 883. "Merchandise" is defined in section 1401(c) as
meaning "goods, wares, and chattels of every description, and
[including] merchandise the importation of which is prohibited
..." More specifically, in Headquarters Decision 105061, dated
May 7, 1987, we held that construction equipment and materials
constituted merchandise and could not be transported in a
foreign-built, foreign-flag barge under section 883. Finally, we
have held that it is immaterial that cargo transported may be
owned by the vessel owner for purposes of section 883.
Headquarters Decision 109649, 08-1-88.
Under section 4.50(b), Customs Regulations (19 CFR 4.50(b)),
a passenger within the meaning of the coastwise laws is defined
as "any person carried on a vessel who is not connected with the
operation of such vessel, her navigation, ownership or business."
As can be seen, there is no requirement that persons
transported be charged either directly or indirectly for passage.
Persons on commercial (non-pleasure) vessels are considered
passengers unless they enjoy some status which ties them
intimately to the operation, navigation, ownership, or business
of the vessel. This means that it is not sufficient that they
might have some direct link to a business which may, as part of
its enterprise, find it necessary to operate a vessel. For
example, the employees of a construction firm whose owner happens
to utilize a vessel in the course of business, would be
considered passengers when transported point to point. This is
so because, although they have a direct relationship with the
company, they have no such connection with the vessel.
HOLDING:
A non-coastwise-qualified hoverbarge of less than 5 net
tons, either owned and operated by or bareboat chartered and
operated by a U.S. citizen, may not be operated in the coastwise
transportation of employees of the company operating the vessel.
Neither may the employees' work equipment be so transported.
Such proposed transportation of passengers and merchandise is
prohibited under 46 U.S.C. App. 289 and 883, respectively.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch