VES-3-01-OT:RR:BSTC:CCI H059376 JLB
Captain Matthew J. Valcourt
Fowler White Burnett P.A.
Espirito Santo Plaza
Fourteenth Floor
1395 Brickell Avenue
Miami, Florida 33131
RE: Coastwise Transportation; Reef Construction; 46 U.S.C. § 55102
Dear Capt. Valcourt:
This letter is in response to your correspondence dated April 17, 2009, on behalf of your client, American Marine & Construction Inc. (“American Marine”), in which you inquire about whether a non-coastwise-qualified construction barge may be used to engage in construction of a reef without violating 46 U.S.C. § 55102. Our ruling on your request follows.
FACTS
American Marine is an American owned and operated construction company. They have recently entered into a subcontract with M&J Construction Company, the main contractor with Palm Beach County, to complete several inland marine and beach re-nourishment projects. A portion of the project involves removing worthless rip rap (limestone rocks) from unusable farmland at Dubois Farms in Palm Beach County. Trucks will be utilized to transport the rip rap from Dubois Farm to the port of Palm Beach, where the construction barge will be waiting. American Marine does not pay Dubois Farm for the rock and does not charge Palm Beach County for the rock transportation or removal from the farm, just for the construction of the reef.
The U.S.-built construction barge, which currently does not hold a coastwise endorsement due to a title dispute, is a work platform that will be utilized to transport the rock to the site. The rock is placed on the barge along with other construction equipment and moved via tug a very short distance to the beach re-nourishment site. The entire site is within Florida’s territorial waters, in fact, the subsea property is leased by the State of Florida to Palm Beach County so the project is entirely within one county. The total distance between where the construction materials, including the rock and other equipment, are placed onboard and the re-nourishment site is two miles.
ISSUE
Whether the proposed operation constitutes an engagement in coastwise trade for purposes of 46 U.S.C. § 55102?
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.
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). 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.”
You note that American Marine does not charge a freight rate for placing the rock on the construction barge or for its transportation to the site. Additionally, you contend that the rock is like dredge spoil, in that it is worthless, and that CBP has previously allowed the dumping of various materials such as rocks and dredge spoils offshore. However, you provide no citation to any prior CBP rulings as evidence and explicitly state that such precedence was “not binding.” In fact, for purposes of the Jones Act, merchandise also includes “valueless material.” See 46 U.S.C. § 55102(a)(2); Headquarters Ruling Letter H021555, dated January 16, 2008 (dredge spoils constitute “merchandise” within the meaning of 19 U.S.C. § 1401(c)). Thus, the transportation of such valueless material, regardless of whether it has a commercial value, between two coastwise points would be prohibited under 46 U.S.C. § 55102.
You assert, however, that engaging in reef construction is not coastwise trade. You state that in Headquarters Ruling Letter 113812, dated January 10, 1997, CBP ruled that reef construction does not constitute coastwise trade since a foreign-flagged vessel was permitted to engage in reef building when materials were loaded in a U.S. port. While that case did involve a non-coastwise-qualified vessel transporting concrete structures used in artificial reef construction from a coastwise point to the site, the movement was held not to be in violation of 46 U.S.C. § 55102 since it involved the unlading of such structures at points outside the territorial sea. Therefore, this case does not hold that engaging in reef construction is never coastwise trade. Furthermore, it is inapplicable to the facts currently under consideration.
Finally, you contend that the entire project takes place within a very small distance with the total distance between the point of lading and the re-nourishment site being 2 miles. However, as stated above, the 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). These regulations further clarify the term coastwise points as “including points within a harbor.” See 19 C.F.R. § 4.80(a). In addition, CBP has narrowly construed what constitutes the same coastwise point. See Headquarters Ruling Letter W115601, dated February 28, 2002 (where CBP determined that merchandise unladen even a vessel width from the dock where it is laden (with no contact with the dock at any point) is in violation of 46 U.S.C. § 55102); see Headquarters Ruling Letter H028458, dated June 19, 2008 (merchandise transported from one coastwise point, namely, Dock #2 of a U.S. facility, on a non-coastwise-qualified vessel to Dock #1 of the same U.S. facility, another coastwise point, via a foreign port was a violation of 46 U.S.C. § 55102). Accordingly, the coastwise transportation of merchandise from the point of lading, at the port of Palm Beach, to the re-nourishment site, is a violation of 46 U.S.C. § 55102.
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), provides that except when towing a vessel in distress, only a coastwise-qualified vessel may do any part of any towing between coastwise points. Thus, it is important to note that the tug used to tow the barge must be coastwise-qualified since it will be operating between two coastwise points.
As noted above, the navigation laws (including the Jones Act) can only be waived under the authority provided by 46 U.S.C. § 501. This statute provides, in pertinent part, that:
[w]hen the head of an agency responsible for the administration of the navigation or vessel-inspection laws considers it necessary in the interest of national defense, the individual may waive compliance with those laws to the extent, in the manner, and on the terms the individual prescribes. [Emphasis added]
As it is readily apparent that the case in question is not related to national defense, a waiver is unavailable. Consequently, the coastwise transportation under consideration is in violation of 46 U.S.C. § 55102.
HOLDING
The proposed operation described above constitutes an engagement in the coastwise trade in violation of 46 U.S.C. § 55102.
Sincerely,
Glen E. Vereb, Chief
Cargo Security, Carriers and Immigration Branch