HQ 0110734 - Carriage of passengers in a raft. - United States International Trade Commision Rulings

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HQ 110734

February 23, 1990

VES-3-03-CO:R:P:C 110734 KVS

CATEGORY: CARRIER

Mr. Randall B. Farish
P.O. Box 390292
Kailua, Kona, HI 96739

RE: Carriage of passengers in a raft.

Dear Mr. Farish:

This is in response to your letter of December 15, 1989, in which you request a ruling allowing the carriage of passengers in the coastwise trade in a foreign-built, Zodiac inflatable craft.

FACTS:

You state that the raft, part of which was imported from France in a bag, is under 5 net tons. The rubber tubes (made of DuPont Hypalon from the U.S.) were purchased from France at a cost of $6,000.00. After importation into the United States, the raft was assembled and reinforced for use in open waters in Oregon, by the Inflatable Boat Center of Portland, Oregon.

You have enclosed invoices detailing the extent and cost of work done by the Inflatable Boat Center:

1) assembly of the floor system, placement of the keel and sponsons, and installed in, or attached to the tubes which were fabricated in France by Zodiac out of DuPont Hyplalon (U.S.);

2) installation of the transom assembly and floor brace to fit 2 40 HP Mercury outboard motors;

3) reinforcement of all seams in and outside of the vessel to bring it up to heavy duty range for commercial use;

4) additional fabric reinforcement on top of tubes for protection of fabric from oils and other agents (ultra violet);

5) addition of beaching strips on bottom of the vessel to reinforce those areas that will come in contact with sand, etc., while beaching;

6) bottom of vessel fabricated with double thick DuPont hypalon for an inner fabric strength of 1880 Denier. This gives the vessel an extra strong bottom for off-shore use and in beaching the vessel;

7) transom cross-angled to add extra strength to counter the cave-in and lay back typical to dual outboard installation. Large ovals of fabric installed to better handle the twin outboards;

8) a marine grade white oak thrustboard installed to better handle the aluminum floorboards, which were installed for commercial use;

9) installation of aluminum console, seatbox, battery box, and gas tank holders (which were purchased in the

10) front bow cover fabricated to protect the front of the vessel and protect the life jacket area from exposure;

11) installation of removable lights for night navigation;

12) special protection material sprayed to coat floors, console, and all other areas exposed to sea and weather.

The cost of the preceding modifications to the hull and fittings completed by the Inflatable Boat Center was $6,078.92.

An invoice from Steven's Marine of Tigard, Oregon is also enclosed, indicating that two forty horsepower engines ($5,290) and instruments, steering, and wiring ($1,988) were supplied and installed at a total cost of $7,278.00.

An invoice from Koffler Boats of Eugene, Oregon, indicates that the console, seat box, driver's seat, transom reinforcement plate, and fuel tank trays were custom built for the vessel and a protective coating for the floor was supplied at a cost of $2,100.00.

An invoice from the Noble Warrant Co. of Aloha, Oregon, indicates that two sets of teak floor stringers were furnished at a cost of $588.00.

An invoice from Howard Upholstery, Inc. of Clackamas, Oregon, indicates that custom upholstery and a resin coating were supplied for a cost of $600.00.

Finally, an invoice from West Marine Products indicates that safety and other miscellaneous equipment (i.e., life vest, fire extinguisher, position fixing equipment, radio, antennae, tarp, etc.) for the vessel was purchased at a cost of $1,385.71. Your letter indicates that West Marine Products is located in Portland, Oregon, and that the equipment was installed by the Inflatable Boat Center of Portland, Oregon.

ISSUE:

Is an inflatable raft of less than 5 net tons, part of which was imported from France in a bag and part added in the United States, considered built in the United States, for purposes of the coastwise laws.

LAW AND ANALYSIS:

Generally, the coastwise laws prohibit the transportation of passengers or merchandise between points in the United States embraced within the coastwise laws in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. The passenger coastwise law, 46 U.S.C. App. 289, provides:

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. 12106 and 12110 and their predecessors (46 U.S.C. 65i and before them, 46 U.S.C. 11), and consistent with 46 U.S.C. App. 883 (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. Such vessels include any vessel other than a vessel built in, properly documented under the laws of, and owned by citizens of the United States, with certain exceptions (see 46 U.S.C.

In its interpretation of the coastwise laws, the Customs Service has ruled that the carriage of passengers entirely within territorial waters, even though the passengers disembark at their point of embarkation and the vessel touches no other coastwise point, is considered coastwise trade subject to the coastwise laws. Transportation of passengers from a point in the United States to the high seas or foreign waters and back to the point of original embarkation, often called a "voyage to nowhere", is not considered coastwise trade. However, the Customs Service has also ruled that the carriage of fishing parties for hire, even if the vessel proceeds beyond territorial waters and returns to the
point of the passengers' original embarkation is considered coastwise trade subject to the coastwise laws.

Normally, the process of documenting a vessel is completed by the United States Coast Guard. For the purpose of documentation and the issuance of a coastwise license, the Coast Guard first makes a determination that a vessel measures at least 5 net tons and has been built in the United States. However, vessels measuring less than 5 net tons cannot be documented under the United States flag by the United States Coast Guard. In the case of such vessels, the United States Customs Service determines questions on certain qualifications which are germane to the vessel's activities. In particular, the Customs Service must determine whether vessels of less than 5 net tons have been built in the United States for purposes of the coastwise laws.

Of course, qualified vessels of less than 5 net tons are not precluded from engaging in the coastwise trade simply because they cannot be documented under the laws of the United States. Section 4.80(a), Customs Regulations (19 CFR 4.80(a)(2)) provides that no vessel exempt from documentation (e.g. of less than 5 net tons) shall transport any passengers or merchandise between United States coastwise points unless the vessel is owned by a citizen of the United States and is entitled to or, except for its tonnage, would be entitled to be documented with a coastwise license. As stated above, to be entitled to be documented with a coastwise license, a vessel must, among other things, be built in the United States (46 U.S.C. 12106(a)(2)), with an exception inapplicable in this case.

Therefore, if the vessel under consideration in this case is considered built in the United States, it may be used in the coastwise trade, but if it is not considered built in the United States, it may not be so used.

The Customs Service has adopted the provisions in section 67.09-3 of the Coast Guard Regulations (46 CFR 67.09.3), as a guideline for its determination of whether a vessel that is exempt from documentation because it is less than 5 net tons, may be considered built in the United States and, therefore, may be used in the coastwise trade. Section 67.09.3 states:

A vessel is considered built in the United States if:

(a) All major components of its hull and superstructure are fabricated in the
United States; and

(b) The vessel is assembled entirely in the United States.

Under section 67.09.5 of the Coast Guard Regulations (46 CFR 67.09-5), a vessel is considered foreign-built if it does not meet the requirements of section 67.09.3, as listed above.

The Customs Service has ruled that a vessel undergoing substantial rebuilding or modification, although originally built abroad, may be considered built in the United States for purposes of the coastwise laws. The Customs Service considers the alterations and modifications done to the hull, fittings, and superstructure of the vessel in the United States the crucial factor in making its determination as to whether an imported vessel was rebuilt in the United States (see Customs Letter 109050 (dated November 4, 1987)). Customs also takes into account the value added to the vessel in the United States (see Customs Letter 108906 (dated June 15, 1987)).

In the case currently under consideration, although the raft was originally imported from France in a bag, the invoices submitted demonstrate that substantial work was carried out in Portland, Oregon. Under the facts given, the cost supplied for the raft as imported is approximately $6,000.00. The cost of the modifications and improvements made in Portland to the hull, fittings, and superstructure total $18,030.63. As a result of the rebuilding, the value of the vessel increased approximately 300 per cent.

HOLDING:

An inflatable raft of less than 5 net tons, part of which was imported from France in a bag with a substantial part added in the United States after extensive work in this country, as described in the FACTS portion of this ruling, is considered built in the United States, for the purposes of the coastwise laws.

Sincerely,

B. James Fritz

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