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HQ 110767


February 21, 1990

VES-3-06/07-CO:R:P:C 110767 GV

CATEGORY: CARRIER

Mr. Ralph Edwards
U.S. Department of Transportation
Maritime Administration
400 Seventh Street, S.W.
Washington, D.C. 20590

RE: U.S. shipping practices

Dear Mr. Edwards:

This is in response to your facsimile transmission dated January 8, 1990, regarding an inquiry you received from the U.S. Embassy in Tokyo pertaining to certain U.S. shipping practices.

FACTS:

A U.S. shipping firm has informed the U.S. Embassy in Tokyo that it is fairly common practice for a foreign vessel to carry foreign-bound cargo from one U.S. location to another (e.g., New York to Long Beach) and then transfer the cargo to a different foreign vessel of the same line which would actually transport the cargo to its final foreign destination. It is stated that none of the cargo would actually be left at Long Beach but would continue to its foreign destination.

In addition, a U.S. shipping firm plans to load foreign- bound cargo at Yokohama, Japan, transport it to Kobe, Japan, and then transfer the cargo to another vessel of the same company that would take the cargo to its final non-Japanese destination. It is stated that none of the cargo would actually be left at Kobe. Furthermore, the U.S. firm in question noted that after the transfer of the cargo to the second vessel, the vessel upon which the subject cargo was originally laden would then go into drydock in Kobe. This operation purportedly takes place in Japan approximately once a year.

ISSUES:

1. Whether the carriage of foreign-bound cargo by a non- coastwise-qualified vessel from its U.S. point of lading to a second U.S. point where it is transshipped to a different vessel of the same line for transport to its foreign destination constitutes a violation of 46 U.S.C. App. 883.

2. Whether the carriage of cargo by a U.S.-owned vessel from one Japanese point to a second Japanese point where it is transshipped to a different vessel of the same line for transport to its final non-Japanese destination constitutes a violation of 46 U.S.C. App. 883.

LAW AND ANALYSIS:

The Customs Service enforces various navigation laws, some of which deal with the coastwise trade. Title 46, United States Code Appendix, section 883 (46 U.S.C. App. 883), the merchandise coastwise law, often called the Jones Act, provides, in part, that no merchandise shall 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 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). See also sections 4.80 and 4.80b, Customs Regulations (19 CFR 4.80, 4.80b).

For purposes of section 883, a point in the United States territorial waters is considered a point embraced within the coastwise laws. The territorial waters of the United States 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.

In regard to the first scenario described above, the carriage of cargo by a non-coastwise-qualified vessel from its U.S. point of lading to another U.S. point for transshipment constitutes a violation of 46 U.S.C. App. section 883 notwithstanding the fact that the cargo is destined foreign.

In regard to the second scenario, 46 U.S.C. App. 883 is inapplicable in view of the fact that the proposed transportation of cargo does not involve two U.S. points. Such a transportation is outside the jurisdiction of the Customs Service for purposes of cabotage. We note, however, that title 19, United States Code, section 1466 (19 U.S.C. 1466), provides in pertinent part for payment of duty in the amount of 50 percent ad valorem on the cost of foreign repairs to vessels documented under the laws of the United States to engage in the foreign or coastwise trade, or vessels intended to engage in such trade. Section 4.14(b)(1), Customs Regulations (19 CFR 4.14(b)(1)), promulgated pursuant to 19 U.S.C. 1466, provides in part that upon first arrival of a U.S.-flagged vessel in the U.S. the owner or master shall declare on Customs Form (CF) 226 all equipment, parts, or materials purchased, and all repairs made, outside the U.S. regardless of the dutiable value of such items or expenses. In addition, pursuant section 4.14(b)(2), Customs Regulations (19 CFR 4.14(b)(2)) such items or expenses shall be entered on CF 226 by
the master or owner. The entry shall be filed with the appropriate Customs officer at the port of first arrival within five working days after arrival. Accordingly, the U.S.-flagged vessel undergoing drydocking operations in Kobe must declare such expenses upon its first arrival in the U.S. subsequent to undergoing such operations and file an entry covering such expenses within five working days after arrival. The entry will then be forwarded to the appropriate vessel repair liquidation unit for determining the amount of duties due.

HOLDINGS:

1. The carriage of foreign-bound cargo by a non-coastwise- qualified vessel from its U.S. point of lading to a second U.S. point where it is transshipped to a different vessel of the same line for transport to its foreign destination constitutes a violation of 46 U.S.C. App. 883.

2. Title 46, United States Code Appendix, section 883 is inapplicable to the carriage of cargo by a U.S.-owned vessel from one Japanese point to a second Japanese point where it is transshipped to a different vessel of the same line for transport to its final non-Japanese destination.

Sincerely,

B. James Fritz

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