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HQ 111212


November 15, 1990

VES-3-02 CO:R:P:C 111212 JBW

CATEGORY: CARRIER

Mr. N. Dale Dunham
Emergency Planning Coordinator
San Francisco International Airport
San Francisco, California 94128

RE: Coastwise; Passenger; Hovercraft; Rescue; Classification; 46 U.S.C. App. 289; 46 U.S.C. App. 883; subheading 8901.10.00, HTSUS.

Dear Mr. Dunham:

This letter is in response to your letter of July 25, 1990, regarding the use of foreign-built hovercraft to perform air crash rescue in San Francisco Bay.

FACTS:

San Francisco International Airport is examining the use of hovercraft for air crash rescue, recovery and associated operations and training on the waters of San Francisco Bay. You state that hovercraft are almost exclusively manufactured abroad. We assume for purposes of this analysis that the hovercraft at issue is designed for use principally over water.

ISSUES:

(1) Whether the coastwise laws prohibit the use of a foreign-built hovercraft for air crash rescue operations and training.

(2) What is the classification under United States law of a hovercraft designed principally for use over water.

(3) Whether a foreign-built hovercraft imported into the United States is subject to entry and assessment of duty under United States law.

LAW AND ANALYSIS:

I. Eligibility for Use of a Hovercraft as a Rescue Vessel under the Coastwise Laws of the United States.

The passenger coastwise law, 46 U.S.C. App. 289 (Supp. III 1985), provides that:

No foreign vessel shall transport passengers between ports or places in the United States, either directly or by way of a foreign port, under a penalty of $200 for each passenger so transported and landed.

Pursuant to 46 U.S.C.A. 12106 and 12110 (West Supp. 1990) and consistent with 46 U.S.C.A. App. 883 (1975 & West Supp. 1990) (the coastwise merchandise law), the Customs Service has consistently held that the prohibition in 46 U.S.C. App. 289 applies to all non-coastwise-qualified vessels. Non-coastwise- qualified vessels include, with certain exceptions, any vessel other than a vessel built in, properly documented under the laws of, and owned by citizens of the United States. 46 U.S.C.

The Customs Service has held that hovercraft, when used as in this case on or in proximity to water, are considered "vessels" for purposes of the navigation laws, of which the coastwise passenger statute is one. See T.D. 56390(1), 100 Treas. Dec. 168 (1965).

The Customs Regulations define "passenger" for purposes of section 289 as "any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business." 19 C.F.R. 4.50(b) (1990). Whereas the use of hovercraft is otherwise within the ambit of the coastwise laws, the Customs Service has held that the use of a vessel for rescue work is not considered to be transportation of passengers or merchandise as defined in the regulations. Consequently, the utilization of the vessel for rescue work is not considered to be an engagement in the coastwise trade. T.D. 78-438, 12 Cust. B. & Dec. 953 (1978); Headquarters Letter Ruling 109373, dated March 28, 1988.

Furthermore, the Customs Service has held that a person being trained or receiving instruction in the handling or navigation of a vessel, and whose presence on board the vessel is required in order to receive such training or instruction, is not a "passenger" within the coastwise laws. Accordingly, while the vessel is used for such training, it need not be documented to engage in the coastwise trade. See Headquarters Ruling Letter 104973, dated January 12, 1981; see also Headquarters Ruling Letter 109850, dated December 27, 1988, and Headquarters Ruling Letter 109287, dated February 24, 1988. We conclude that the coastwise laws do not prohibit the use of a foreign-built hovercraft for air crash rescue and training operations.

II. Classification and Entry of Hovercraft under United States Law.

United States law requires that all goods imported into the customs territory of the United States be subject to or exempt from duty as provided for in the Harmonized Tariff Schedules of the United States (HTSUS). The General Rules of Interpretation (GRI's) set forth the legal framework in which merchandise is to be classified under the HTSUS. GRI 1 requires that classification be determined first according to the terms of the headings of the tariff and any relative section or chapter notes and, unless otherwise required, according to the remaining GRI's.

Classified under Heading 8901, HTSUS, are cruise ships, excursion boats, ferry boats, cargo ships, barges and similar vessels for the transportation of persons or goods. The Explanatory Notes, which provide the official interpretation of the tariff at the international level, include within Heading 8901 "[v]essels of the hydroglider type, hydrofoils and hovercraft." Hovercraft, being principally designed and used to transport people over water, are classified in subheading 8901.10.00, HTSUS, under the provision for "cruise ships, excursion boats and similar vessels principally designed for the transportation of persons...." The hovercraft under consideration, assuming it is designed for use principally over water, would be classified under this provision.

United States Note 1 to Chapter 89, HTSUS, exempts from formal customs consumption entry and the payment of duty vessels if in use in international trade or commerce. You state that the hovercraft will be used exclusively in the San Francisco Bay area. From this description, we assume that it is unlikely that the hovercraft will be used beyond the internal or territorial waters of the United States; consequently, the vessel will not be used in international trade or commerce. The vessel therefore does not benefit from this exemption. However, vessels not classified in Headings 8903 and 8907, subheadings 8905.90.10 and 8906.00.10, or Chapter 98, HTSUS, are excepted from entry. 55 Fed. Reg. 40162, 40166 (October 2, 1990)(to be codified at 19 C.F.R. 141.4(b)).

HOLDINGS:

The coastwise laws of the United States do not prohibit the use of a foreign-built hovercraft for air crash rescue and training operations.

Hovercraft, being principally designed and used to transport people over water, are classified under subheading 8901.10.00, HTSUS. Vessels not classified in Headings 8903 and 8907, subheadings 8905.90.10 and 8906.00.10, or Chapter 98, HTSUS, are excepted from entry.

We note, however, your statement with respect to the prospective use of the hovercraft in "associated operations." As we do not know what such activity entails, we cannot comment as to the coastwise, entry, duty, or any other implication of this additional activity.

Sincerely,

B. James Fritz
Chief

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