VES-3-01-OT:RR:BSTC:CCI H029417 JLB
Ms. Jeanne M. Grasso
Blank Rome LLP
Watergate
600 New Hampshire Avenue, NW
Washington, DC 20037
RE: Coastwise Transportation; 46 U.S.C. §§ 55102, 55103; Vessel Equipment; Coastwise Towing; 46 U.S.C. § 55111
Dear Ms. Grasso:
This letter is in response to your correspondence dated May 27, 2008, on behalf of your client, Hannah Marine Corporation (the “Company”), in which you inquire about whether your client’s use of a non-coastwise-qualified barge as an exhibit hall constitutes a violation of 46 U.S.C. §§ 55102 and 55103. Our ruling on your request follows.
FACTS
The Company is chartering a coastwise-qualified tug and a non-coastwise-qualified deck barge to a charterer that will use the barge as a floating exhibit hall. In order to facilitate its use as an exhibit hall, the barge will first be modified in the U.S. by adding customized shipping containers that will either be bolted or welded to the deck. Then the floating exhibit hall will be towed by a coastwise-qualified tug to various U.S. and Canadian ports. The barge will be carrying products and equipment used for demonstration/exhibition purposes and will not carry any passengers during its voyages. Any staff of the exhibit hall will travel over land or by air to each port, or aboard the coastwise-qualified tug.
Upon completion of the charter, the exhibit hall structure will be removed from the barge in the U.S. but the removal may occur at a location different from the location where the barge was modified. As for the products and equipment that will be used for demonstration/exhibition purposes, these items will either be unladen at the same coastwise point at which they were laden or, if they will be unladen at a different coastwise point than which they was laden, they will be transported aboard the coastwise-qualified tug during all voyages.
ISSUE
Whether the use of the non-coastwise-qualified barge and coastwise-qualified tug as described above constitute an engagement in coastwise trade pursuant to 46 U.S.C. §§ 55102 and 55103?
Whether the exhibit hall structure described above is merchandise within the meaning of 46 U.S.C. § 55102 and 19 U.S.C. § 1401(c)?
LAW AND ANALYSIS
The Jones Act, former 46 U.S.C. App. § 883 recodified as 46 U.S.C. § 55102, pursuant to P.L. 109-304 (October 6, 2006), states that “a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port” unless the vessel was built in and documented under the laws of the United States and owned by persons who are citizens of the United States. (See also 19 C.F.R. §§ 4.80, 4.80b). Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise qualified.” The coastwise laws generally apply to points in the territorial sea, which is defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline.
Pursuant to 19 U.S.C. § 1401(c), the word "merchandise" is defined as "goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31.” For purposes of the Jones Act, merchandise also includes “valueless material.” See 46 U.S.C. § 55102(a)(2). U.S. Customs and Border Protection (“CBP”) Regulations promulgated under the authority of 46 U.S.C. § 55102 provide that a coastwise transportation of merchandise takes place when merchandise laden at a coastwise point is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a).
In this case, the barge will carry products and equipment to be displayed in the exhibit hall. You present two different scenarios for unlading this merchandise upon conclusion of the exhibit. In the first scenario, the merchandise will be unladen at the same coastwise point at which it was laden. In that instance, the coastwise transportation of the subject merchandise on the non-coastwise-qualified barge does not constitute a violation of 46 U.S.C. § 55102.
In the second scenario, the remaining merchandise will be unladen at a different coastwise point than the point of lading. Accordingly, the vessel transporting such merchandise must be coastwise-qualified. This requirement is satisfied by your assertion that “any exhibit hall materials and personnel that will travel with the vessels during coastwise transits that may be unladen at different coastwise points than at which laden will transit aboard the coastwise-qualified tug.” Since the merchandise, which will ultimately be unladen at another coastwise point, will be transported between coastwise points aboard the coastwise-qualified tug, in lieu of the non-coastwise-qualified barge, no violation of 46 U.S.C. § 55102 exists.
The coastwise passenger statute, former 46 U.S.C. App. § 289 recodified as 46 U.S.C. § 55103, pursuant to P.L. 109-304 (October 6, 2006), states that no foreign vessel shall transport passengers “between ports or places in the United States to which the coastwise laws apply, either directly or by way of a foreign port,” under a penalty of $300 for each passenger so transported and landed. See also 19 C.F.R. § 4.80(b)(2). You state that all the staff of the floating exhibit hall will travel to the different ports by land, air or aboard the coastwise-qualified tug. Accordingly, given that no individuals will be transported aboard the non-coastwise-qualified vessel, no violation of 46 U.S.C. § 55103 exists. Furthermore, as discussed above, transporting the subject individuals aboard a coastwise-qualified vessel, such as the coastwise-qualified tug in question, does not constitute a violation of 46 U.S.C. § 55103.
Pursuant to the coastwise towing statute, former 46 U.S.C. App. § 316(a) recodified as 46 U.S.C. § 55111, pursuant to P.L. 109-304 (October 6, 2006), except when towing a vessel in distress, only a coastwise-qualified vessel may do any part of any towing between coastwise points. Given that a coastwise-qualified tug is utilized, there would be no violation of the coastwise towing statute, 46 U.S.C. § 55111.
Exhibit Hall Structure
For its use as a floating exhibit hall, the barge will be modified to include customized shipping containers either bolted or welded to the deck of the barge. You state that the exhibit hall structure will ultimately be removed in the U.S. upon completion of the charter but the removal may occur at a different coastwise point than the point of modification. In accordance with the Jones Act, 46 U.S.C. § 55102, if the exhibit hall structure constitutes “merchandise” pursuant to 19 U.S.C. § 1401(c), its coastwise transportation aboard the non-coastwise-qualified barge is a violation of 46 U.S.C. § 55102. Thus, you assert that the materials and equipment installed to modify the barge are vessel equipment and accordingly, they may be transported aboard the vessel without violating 46 U.S.C. § 55102.
As stated above, merchandise for purposes of these statutory requirements “means goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31.” 19 U.S.C. § 1401(c). However, merchandise does not include the equipment of a vessel so long as it is used by that vessel. Such articles have been defined as those which are "...necessary and appropriate for the navigation, operation or maintenance of the vessel and for the comfort and safety of the persons on board." See Headquarters Ruling Letter 114298, dated July 7, 1998 quoting Treasury Decision (“T.D.”) 49815(4), March 13, 1939. Whether such articles constitute vessel equipment is a case-by-case determination. See Headquarters Ruling Letter 115938, dated April, 1, 2003; Headquarters Ruling Letter 114487, dated October 19, 1998. CBP has specifically ruled that "vessel equipment placed aboard a vessel at one U.S. port may be removed from the vessel at another U.S. port at a later date without violation of the coastwise laws." See Headquarters Ruling Letter 113137, dated June 27, 1994; Headquarters Ruling Letter 115938, dated April, 1, 2003.
In Headquarters Ruling Letter 115356, dated May 22, 2001, a non-coastwise-qualified power barge was retrofitted with electric generating equipment in Mississippi. When the equipment, which was welded to the deck, was unladen in Oregon, CBP held that since the generating equipment was integral to the operation of the vessel as a power barge and since the equipment was transported aboard the vessel on which it was used, it was vessel equipment that could be unladen and uninstalled from the barge without violating the Jones Act, 46 U.S.C. § 55102.
CBP has consistently held that vessel equipment consists of articles necessary to carry out a vessel’s functions. See Headquarters Ruling Letter 112218, dated July 22, 1992 (equipment transported aboard non-coastwise-qualified oil and gas well drilling, workover and service barges used to remove broken tools from a well shaft, perform well cleaning and other tasks is vessel equipment since it is necessary to the work of the vessel); Headquarters Ruling Letter 103995, dated July 16, 1979 (the carriage of cement on a non-coastwise-qualified barge engaged in oil well stimulation is vessel equipment given that the purpose of the vessel is the blending, mixing, and placing of cement in the wells). In the present case, the subject barge’s function, for the period of the charter, is to operate as an exhibit hall. In order to accomplish this purpose, it is necessary to modify the structure of the barge’s deck. The exhibit hall structure, essentially the bolted or welded customized shipping containers, is integral to the operation of the vessel as an exhibit hall. Consequently, the structure, which is transported aboard the vessel on which it is used, constitutes vessel equipment as defined in T.D. 49815(4), not merchandise as defined in 19 U.S.C. § 1401(c). As a result, no violation of 46 U.S.C. § 55102 exists if the structure is unladen at a different coastwise point than the point of lading.
HOLDING
The proposed use of the non-coastwise-qualified barge and coastwise-qualified tug does not constitute an engagement in coastwise trade for purposes of 46 U.S.C. §§ 55102 and 55103.
The subject exhibit hall structure constitutes vessel equipment, not merchandise. Accordingly, the coastwise transportation of the subject structure does not constitute a violation of 46 U.S.C. § 55102.
Sincerely,
Glen E. Vereb, Chief
Cargo Security, Carriers and Immigration Branch