VES-3-17-RR:IT:EC 114407 GEV
William N. Myhre, Esq.
Preston Gates Ellis & Rouvelas Meeds LLP
1735 New York Avenue, N.W.
Suite 500
Washington, D.C. 20006-5209
RE: Coastwise Trade; Third Proviso to 46 U.S.C. App. 883
Dear Mr. Myhre:
This is in response to your letter dated June 30, 1998, on
behalf of Sunmar Shipping, Inc. ("Sunmar"), requesting an
expedited ruling regarding the proposed transportation of frozen
fish between a coastwise point in Alaska and another coastwise
point in the continental United States to be accomplished in part
by non-coastwise-qualified vessels operated by Sunmar and in part
over Canadian rail lines. Our ruling in this matter is set forth
below.
FACTS:
For over 15 years Sunmar has been operating foreign-flag
refrigerated transport vessels carrying frozen and chilled
seafood products from the North Pacific fishing grounds to ports
in Europe, often calling at ports in eastern Canada en route.
Sunmar proposes to expand this service by the addition of a call
at Dutch Harbor, Alaska, to load frozen fish products for
discharge at the Bayside Food Terminal in the St. Stephen area of
New Brunswick, Canada or Shelburne, Nova Scotia. On discharge,
the frozen fish are transferred by pallet to railcars under
control of the New Brunswick Southern Railroad for movement to
St. John, Newfoundland. In St. John, the railcars/product are
transferred to the Canadian Pacific Railroad for further movement
over Canadian rail lines to the U.S./Canadian border crossing at
McAdam Junction, New Brunswick/Calais, Maine. Canadian Pacific
then hauls them across Maine to Montreal, Quebec, and then onward
to Albany, New York. In Albany, the railcars transfer to Conrail
for delivery to New Bedford, Massachusetts. Products landed at
Shelburne, Nova Scotia, will follow the same routing from St.
John's onward. The total journey is estimated to require eight
to ten days.
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ISSUE:
Whether the transportation of frozen fish indirectly between
coastwise points, in part via both foreign-flag vessel and rail
trackage in Canada, as described above, is in accord with the
Third Proviso to 46 U.S.C. App. 883.
LAW AND ANALYSIS:
Title 46, United States Code Appendix, 883 (46 U.S.C.
App. 883, the coastwise merchandise statute, often called the
"Jones Act"), provides in pertinent part that no merchandise
shall be transported between points embraced within the coastwise
laws, either directly or via a foreign port, or for any part of
the transportation, 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 (i.e., a coastwise-qualified vessel).
The Third Proviso to 46 U.S.C. App. 883 provides that:
[T]his section shall not apply to merchandise transported
between points within 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, the prohibition against using a non-coastwise-qualified vessel set forth in
883 would not apply if all of the conditions to the Third
Proviso are met, that is:
a) through routes are utilized which have heretofore or are
hereafter recognized
by the Interstate Commerce Commission ("ICC");
b) routes rate tariffs have been or shall hereafter be
filed with the ICC, 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 ICC; and
c) the routes utilized are in part over Canadian rail lines
and their own or other connecting water facilities.
The Customs Service has held that "over Canadian rail lines"
means 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
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covered by that through route. Customs has issued numerous
rulings over the years interpreting
the Third Proviso as set forth above. (See, e.g., Headquarters
ruling letter 113141, dated June 29, 1994.)
On December 29, 1995, Congress passed the Interstate
Commerce Commission Termination Act ("ICCTA"). This legislation,
which was effective January 1, 1996, abolished the ICC (see 2
and 101, Pub. L. 104-88) and although it did provide conforming
amendments to several sections of the Merchant Marine Act of 1920
(see 321, Pub. L. 104-88), nothing in the remainder of the
statute or its legislative history specifically addresses the
ramifications of the aforementioned abolition on the
administration of the Jones Act ( 27 of the Merchant Marine Act
of 1920, as amended), including the Third Proviso. However, our
review of the legislation in its entirety does yield guidance
with respect to this issue. Specifically, we find the following
sections of the legislation instructive in this matter.
Section 201 of Pub. L. 104-88 amended title 49 of the United
States Code by adding a new Chapter 7 establishing the Surface
Transportation Board (the "Board") within the Department of
Transportation. ( 201(a), Pub. L. 104-88, citing 49 U.S.C.
701) This statutory amendment provides as follows:
Except as otherwise provided in the ICC Termination Act
of 1995,
or the amendments made thereby, the Board shall perform
all functions
that, immediately before the effective date of such
Act, were functions
of the Interstate Commerce Commission or were performed
by any officer
or employee of the Interstate Commerce Commission in
the capacity as
such officer or employee. ( 210(a), Pub. L. 104-88,
citing 49 U.S.C. 702)
Accordingly, there exists unequivocal statutory authority
for the premise that notwithstanding the demise of the ICC, those
matters within its jurisdiction that were not subsequently
eliminated by the ICCTA or the amendments made thereby (e.g.,
Third Proviso-dependent authorization) are now vested in the
Board.
In regard to Third Proviso ruling requests to be considered
by Customs subsequent to the effective date of the ICCTA, we note
that pursuant to 204(a)(2) of the ICCTA, the Board published a
final rule in the Federal Register on June 7, 1996, which removed
from the Code of Federal Regulations obsolete ICC regulations,
including the rail tariff filing requirement. (61 FR
29036) On July 5, 1996, the Board published in the Federal
Register as a final rule its new regulations (49 CFR Part 1300,
effective August 4, 1996), which require rail carriers to merely
disclose their rates and service terms to any person upon formal
request, as well as provide advance notice of increases in such
rates or a change in such service terms. (61 FR 35139)
Notwithstanding the substitution of ICC authorization with the
aforementioned Board oversight, the ICCTA is devoid of any
indicia that this new regulatory authority should be interpreted
other than in pari materia with the Third Proviso.
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It is therefore our position that notwithstanding the
abolition of the ICC and the failure on the part of the ICCTA to
specifically provide for conforming amendments to the Jones Act,
the cumulative effect of the ICCTA nonetheless mandates that the
Third Proviso remains in force albeit subject to compliance with
the requirements of the Board. Further in this regard, however,
we note Customs ruling letter 112085, dated March 10, 1992,
issued prior to the ICCTA, wherein we held that the legality of a
proposed movement of frozen seafood pursuant to the Third Proviso
was not thwarted merely because the language therein provides for
the filing of a rate tariff and such merchandise was a commodity
for which no rate tariff was required under ICC procedures. The
rationale for this position was that, "...although the statute
specifies the filing of rate tariffs with the Interstate Commerce
Commission, mechanistic adherence to that requirement in the
present climate of deregulation would lead to an absurd result
which cannot be justified." Id. We believe the same such result
would occur were we to disallow the proposed movement under
consideration where, as discussed above, the rail tariff filing
requirement has been removed pursuant to the regulations of the
Board promulgated pursuant to the ICCTA.
Accordingly, the indirect transportation between coastwise
points of commodities which are exempt from requirements
regarding rate tariffs, through the utilization of foreign-flag
vessels and Canadian rail trackage, is not prohibited merely
because no tariffs may be filed to cover the movements.
HOLDING:
The transportation of frozen fish indirectly between
coastwise points, in part via both foreign-flag vessel and rail
trackage in Canada, as described above, is in accord with the
Third Proviso to 46 U.S.C. App. 883.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch