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HQ 110727 LLB


June 7, 1990

VES-3-24-CO:R:P:C 110727 LLB

CATEGORY: CARRIER

Mr. Bruce A. King
Bogle and Gates
Two Union Square
601 Union Street
Seattle, Washington 98101-2322

RE: Use of vessels with restrictive "Coastwise-Bowaters Only" endorsement to assist in a construction project abroad

Dear Mr. King:

Reference is made to your letter of January 15, 1990, in which you request a ruling on whether any regulatory or statutory provision exists which is enforced by Customs, which would in any way impinge upon the use of vessels with a bowaters endorsement in a foreign-based construction project.

FACTS:

A marine construction company which has been issued a certificate under section 883-1 of title 46, United States Code Appendix (46 U.S.C. App. 883-1), proposes to utilize certain of its barges (including crane, pile driving, and flat barge configurations) to assist in a construction project in a foreign country. The crane barges and pile driving barges have their apparatus permanently attached. The flat barges will be used as either stationary work platforms or staging barges for various of the construction activities. Certain of the barges will have mobile equipment placed aboard in the United States, which equipment will remain aboard the barges during the entire overseas project, and which will be unloaded at the same location in the United States at which it was originally laden. It is stated that none of the vessels will be used to transport any passengers or any cargo, whether owned by the section 883-1 citizen or otherwise.

The incoming letter includes a request for a ruling that several marine activities are not considered to be included in the rubric of the coastwise laws. These include dredging, and vessels used as crane hoists, pile drivers, stationary storage facilities, and staging platforms. These matters appear to be hypothetical in nature and not related to the contemplated operation which is to be accomplished at an unspecified foreign location. Section 177.7(a), Customs Regulations (19 CFR 177.7(a), provides, in pertinent part:

...no ruling letter will be issued with regard to transactions or questions which are essentially hypothetical in nature...

Accordingly, we cannot respond to this general request. The ruling request also asks that Customs grant confidential treatment to the ruling request and to any ruling issued in response. The Customs Regulations are specific on this point, providing in section 177.2(b)(7) (19 CFR 177.2 (b)(7)), that:

Information which is claimed to constitute trade secrets or privileged or confidential commercial or financial information regarding the business transactions of private parties the disclosure of which would cause substantial harm to the competitive position of the person making the request (or of another interested party), must be identified clearly and the reasons such information should not be disclosed, including, where applicable, the reasons the disclosure of the information would prejudice the competitive position of the person making the request (or of another interested party) must be set forth.

In the absence of such justification, submitted in writing, we could not comply with the request for confidentiality. In this case the record was supplemented by a letter of May 1, 1990, which properly set forth the necessary elements for a grant of confidentiality.

ISSUE:

Whether any statutes or regulations administered by the Customs Service will impinge upon the operation by a corporation certified pursuant to 46 U.S.C. App. 883-1, involving that company's barges in a foreign-based construction project.

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 merchandise (or a monetary amount up to the value thereof as determined by the Secretary of the Treasury, or the actual cost of the transportation, whichever is greater, to be recovered from any consignor, seller, owner, importer, consignee, agent, or other person or persons so transporting or causing said merchandise to 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 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 ....

We have long held that "points embraced within the coastwise laws" includes points within a harbor. Further, there is no rule applied by Customs which would permit any minimal degree of movement so as to create the fiction of non-transportation. In relating the statute and its interpretation to the circumstances here under consideration, in order to avoid a violation of the statute it will be necessary to unlade the portable construction equipment at the same location in the United States at which it was originally laden prior to departure from this country.

The Act of September 2, 1958 (72 Stat. 1736, often called the Bowaters Act), titled "An Act to amend section 27 of the Merchant Marine Act of 1920," added a new section 27A immediately following section 27. This Act provides, in pertinent part, that:

Notwithstanding any other provision of law, a corporation incorporated under the laws of the United States ... shall be deemed to be a citizen of the United States for the purposes of and within the meaning of that term as used in sections 316, 808, 835 and 883 of this title, and the laws relating to the documentation of vessels, if it is established by a certificate filed with the Secretary of the Treasury [now the Coast Guard] ... that [certain conditions relating to the corporation are satisfied] but no vessel owned by any such corporation shall engage in the fisheries or in the transportation of merchandise or passengers for hire between points in the United States ... embraced within the coastwise laws, except as a service for a parent or subsidiary corporation and except when such vessel is under demise or bareboat charter at prevailing rates for use otherwise than in the domestic noncontiguous trades from any such corporation to a common or contract carrier subject to chapter 12 of Title 49, which otherwise qualifies as a citizen under section 802 of this title, and which is not connected, directly or indirectly, by way of ownership or control of such corporation.

Vessels built in the United States and owned by a corporation meeting the conditions hereof which are non-self-propelled or which, if self- propelled, are of less than five hundred gross tons shall be entitled to documentation under the laws of the United States, and except as restricted by this section, shall be entitled to all the other benefits and privileges and shall be subject to the same requirements, penalties, and forfeitures as may be applicable in the case of vessels built in the United States and otherwise documented or exempt from documentation under the laws of the United States.

... If any vessel shall transport merchandise for hire in violation of this section, such merchandise shall be forfeited to the United States ....

As can be noted, there is nothing within the wording of section 883-1 which would prevent the use of vessels operated by an entity issued a certificate under that section, in a foreign- based project.

Section 101.1(k), Customs Regulations (19 CFR 101.1(k)), provides, in pertinent part:

'Exportation' means a severance of goods from the mass of things belonging to this country with the intention of uniting them to the mass of things belonging to some foreign country.

We understand that the portable construction equipment will be laden in the United States, used abroad without being taken from the carrying barges, and returned to this country to be unladen. We are unable to state whether this proposed use provides an indication that the equipment will be severed from the goods of this country with the intent that it join those of another, because we do not know the particulars of the intended use or the duration of time that the equipment will be used abroad. This is relevant to the matters at hand because if the equipment were considered to be exported during the period of its foreign use, it would be subject to consumption entry and payment of any applicable duties under the Harmonized Tariff Schedule of the United States upon it return to this country.

Section 4.64, Customs Regulations (19 CFR 4.64) provides, in its entirety:

No clearance shall be granted to any documented vessel bound to a foreign port or place unless it has a Certificate of
Documentation with a registry or, if departing for Canada, a Great Lakes license endorsement.

This language was added to the Customs Regulations by Treasury Decision 83-214 (T.D. 83-214), the purpose of which was to conform the Customs Regulations to changes in the law effected by the Vessel Documentation Act of 1980. Treasury Decision 83- 214 amended section 4.64, Customs Regulations, so that clearance is denied to a documented vessel bound to a foreign port or place unless it is documented with a registry or, if departing for Canada via the Great Lakes, a Great Lakes license endorsement, instead of under registry or a frontier enrollment and license as previously provided.

Although this change was consistent with the documentation scheme created by the Vessel Documentation Act of 1980, it failed to recognize the revocation of section 4337 of the revised statutes (46 U.S.C. 278). As a result of the revocation of section 4337, there is no authority for denying clearance to a vessel which is engaged or will engage in the coastwise trade and which is documented with a Certificate of Documentation with a coastwise endorsement only, when that vessel is bound to a foreign port or place, as would be true of the vessels under consideration.

Although vessels with coastwise or limited coastwise endorsements on their certificates of documentation may not be denied clearance for foreign voyages, their actual employment in such trade is thrown into jeopardy by virtue of section 12110 of title 46, United States Code (46 U.S.C. 12110), subsection (c) of which provides:

When a vessel is employed in a trade not covered by the certificate of documentation issued for that vessel ... the vessel and its equipment are liable to seizure by and forfeiture to the United States Government.

Even though there is no impediment to foreign clearance imposed by section 4.64 of the Customs Regulations, actual operation of the vessels in service for which a registry endorsement is utilized could result in their seizure and forfeiture. Problems posed by 46 U.S.C. 12110 may be avoided, however, by obtaining a dual endorsement on each vessel's certificate of documentation, one being the present limited coastwise endorsement, and the other being a registry endorsement.

In summarizing the foregoing provisions of statute and regulation, we find that under the coastwise merchandise statute (section 883), the portable cranes and other equipment loaded aboard the barges in the United States must, if a violation of law is to be avoided, be unladen at precisely the same spot where placed aboard. Given the regulatory definition of the word "exportation" as discussed above, mobile equipment would not be considered exported during the period it is abroad and thus there would not be any duty consequences upon its eventual return to the United States. Finally, even though vessels operated by a section 883-1 certified corporation are not restricted by the terms of the statute from overseas use and may be cleared for foreign voyages by Customs while carrying a restrictive coastwise endorsement, their use abroad while documented solely for that trade may subject the vessels to seizure and forfeiture. Forfeiture liability may be avoided by the simple expedient of obtaining a dual endorsement for registry trade on vessel documentation prior to departure from the United States

HOLDING:

The barges in question may lade and unlade construction equipment at the same point in the U.S., with an intervening use in foreign territorial waters. Depending upon the particulars and duration of its foreign use, the equipment may be subject to import duties upon its return to this country. The operator, utilizing a certificate of compliance under 46 U.S.C. 883-1, may use the vessels abroad, but unless registry endorsements are obtained for all certificates of documentation, the vessels are subject to seizure and forfeiture.

Sincerely,

B. James Fritz

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