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HQ 111259


September 7, 1990

VES-3-02-CO:R:P:C 111259 GEV

CATEGORY: CARRIER

Gerald O. Rennerts
President
American Hydrolines, Inc.
7308 - 187th Street
Flushing, New York 11366

RE: Coastwise Trade; Passengers; 46 U.S.C. App. 289, 883; Dutiability

Dear Mr. Rennerts:

Thank you for your letter of August 8, 1990, regarding your proposed use of a hydrofoil in the coastwise trade. Our ruling on this matter is set forth below.

FACTS:

In the process of developing new, high speed ship configurations in the United States, Hydro-Lance Engineering, Inc. of Canoga Park, California, has recently tested a prototype consisting of two long, narrow, cylindrical floating structures (hydrofoils) with a cargo or passenger deck suspended approx- imately 30 ft. above on a separate structure. Consequently, the vessel will be inherently stable in rough seas and waves will break below the main deck.

In an effort to develop the above prototype, American Hydrolines, Inc. proposes to use the hull of the Russian-built hydrofoil KOMETA. This hull (essentially the passenger section of the vessel) would be stripped of its hydrofoils and engines, and appended to the much larger Hydro-Lance structures described above.

ISSUES:

1. Whether the use in the coastwise trade of a hydrofoil consisting of a Russian-built hull is prohibited by 46 U.S.C. App. 289 and 883.

2. Whether the hull of a Russian-built hydrofoil is subject to duty upon importation into the United States pursuant to the Harmonized Tariff Schedule of the United States Annotated.

LAW AND ANALYSIS:

Title 46, United States Code Appendix, section 883 (46 U.S.C. App. 883, the coastwise merchandise statute 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 of 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).

Title 46, United States Code Appendix, section 289 (46 U.S.C. App. 289, the passenger coastwise statute), prohibits the transportation of passengers between points embraced within the coastwise laws of the United States, either directly or by way of a foreign port, in a non-coastwise-qualified vessel. Pursuant to section 4.50(b), Customs Regulations (19 CFR 4.50(b)) a "passenger" for purposes of section 289 is defined as "any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership or business."

Points embraced within the coastwise laws include all points within the territorial waters of the United States, including points within a harbor. 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 issue under consideration, whether the incorporation of a Russian-built hull in the subject hydrofoil would render it non-coastwise-qualified is a determination of the U.S. Coast Guard (USCG). This determination, made by the USCG for vessels 5 net tons or greater, is dependent upon whether that agency considers the vessel to be "built in the United States" as that term is defined in section 67.09-3, Coast Guard Regulations (46 CFR 67.09-3). We suggest you contact the USCG regarding this matter.

As to the question of dutiability contained in the second issue under consideration, subheading 8901.10.00, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), provides for "...Cruise ships, excursion boats and similar vessels principally designed for the transport of persons; ferry boats of all kinds..." This subheading designates a free rate of duty.

It is our position that the hull stripped of its hydrofoils and engines will be classified under this provision. General Rule of Interpretation (GRI) 2.(a) of the HTSUSA provides that any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that as entered, the incomplete or unfinished article
has the essential character of the complete or finished article. In this case the hull without the hydrofoils and engines has the essential character of the vessels described in subheading 8901.10.00, HTSUSA.

HOLDINGS:

1. Whether the use in the coastwise trade of a hydrofoil consisting of a Russian-built hull is prohibited by 46 U.S.C. App. 289 and 883 is determined by whether the U.S. Coast Guard considers the vessel to be "built in the United States" as that term is defined in section 67.09-3, Coast Guard Regulations (46 CFR 67.09-3).

2. The hull of a Russian-built hydrofoil is considered a vessel upon importation into the United States subject to duty- free treatment pursuant to Subheading 8901.10.00, HTSUSA.

Sincerely,

Stuart P. Seidel

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