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HQ 109610


July 6, 1988

VES-3-12 CO:R:P:C 109610 PH

CATEGORY: CARRIER

Mr. M. Paul Taylor, P.E.
Vice President, Alaska Operations
White Pass & Yukon Route
Post Office Box 435
Skagway, Alaska 99840

RE: Coastwise Transportation of Waste Oil

Dear Mr. Taylor:

This in response to your letter of June 20, 1988, in which you request a ruling on the applicability of the coastwise laws to the transportation in a foreign-flag vessel of waste oil from Ketchikan to Skagway, Alaska.

FACTS:

You state that your Canadian-flag container vessel, the M/V FRANK H. BROWN, makes regular bi-weekly sailings out of Vancou- ver, British Columbia, to Skagway, Alaska, touching the Alaskan port of Wrangell on the northward movement and the Alaskan ports of Haines and Ketchikan on the southward movement. You state that you have a 6,000 gallon tank on the dock in Ketchikan which you allow Ketchikan area fishing vessels to use as a depository for used crankcase oil. This oil is a waste product, you state, and you do not buy it.

The waste oil deposited in the tank currently is brought to Skagway on an Alaska Marine Lines barge and you use it in a restored steam engine that hauls tourists from one end of Skagway to the other. This steam locomotive operates only in the summer months.

You ask whether, since the oil is a United States waste product which is given to you, you could load the tank of oil on- to the M/V FRANK H. BROWN in Ketchikan, leave it aboard for the Ketchikan-Vancouver-Wrangell-Skagway segment of the voyage, and then land it in Skagway for use in your steam locomotive.

ISSUE:

Does the use of a foreign-flag vessel to transport waste oil, given to and to be used by the owner of the transporting vessel, between the Alaskan ports of Ketchikan and Skagway, via several other ports, including Vancouver, violate the coastwise laws?

LAW AND ANALYSIS:

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 mer- chandise (or a monetary amount up to the value thereof as determined by the Secretary of the Treasury to be recovered from any consignor, seller, owner, importer, consignee, agent, or other person or persons so trans- porting or causing said merchandise to be transport- ed), 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 ....

This law was recently amended by the Act of June 7, 1988 (Public Law 100-329). Under this amendment, the term "merchan- dise" includes valueless material and the prohibition in section 883 applies to the transportation of "valueless material or any dredged material regardless of whether it has commercial value, from a point or place in the United States or a point or place on the high seas within the Exclusive Economic Zone as defined in the Presidential Proclamation of March 10, 1983 [(EEZ), general- ly, the zone 197 miles outward from the outer limit of United States territorial waters], to another point or place in the United States or a point or place on the high seas within that [EEZ]." Public Law 100-329 amended the penalty provision in section 883 so that the penalty now is forfeiture of the merchandise transported or a monetary amount up to the value thereof, "or the actual cost of the transportation, whichever is greater."

The transportation which you describe would consist of the loading of waste oil which is "given" to you from Ketchikan onto a foreign-flag vessel which would proceed, via Vancouver and Wrangell, with the oil to Skagway where the oil would be unloaded and used in a steam locomotive owned by your company. Thus, the waste oil would clearly be transported between "points in the United States ... embraced within the coastwise laws ... via a foreign port." You contend, however, that this is not the haul- ing of "cargo" between two United States ports since you derive no revenue from hauling the tank nor do you pay any money for the waste oil.

Before enactment of Public Law 100-329, we had consistently held that waste material which has no apparent value and is transported solely for disposal is not "merchandise," for purpos- es of the coastwise laws (see, e.g., Customs Service Decision 87- 15, copy enclosed). We held that the transportation of such material between coastwise points by a non-coastwise-qualified vessel is not prohibited by the coastwise laws. The Courts upheld this interpretation of 46 U.S.C. App. 883 (see Great Lakes Dredge & Dock Co. v. Ludwig, 486 F. Supp. 1305 (W.D. New York 1980), and 106 Mile Transport Associates v. Koch, 86 Civ. 7190 (JMW) (S.D. New York March 27, 1987)).

Even under this interpretation, the waste oil under consideration would have been considered to be "merchandise," for purposes of section 883, because it has a commercial use (i.e., it is used for your restored steam engine in Skagway). The enactment of Public Law 100-329, making 46 U.S.C. App. 883 applicable to the transportation of "valueless material," makes it clear that the described transportation would be prohibited by section 883.

HOLDING:

The use of a foreign-flag vessel to transport waste oil, given to and to be used by the owner of the transporting vessel, between the Alaskan ports of Ketchikan and Skagway, via several other ports, including Vancouver, is prohibited by 46 U.S.C. App. 883.

Sincerely,

B. James Fritz
Chief
Carrier Rulings Branch

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