HQ 0111134 - Coastwise transportation of goods from New York to Kingston, Jamaica, to Puerto Rico to Trinidad aboard a Zim or other foreign flag vessel. 46 U.S.C. App. 883; 46 U.S.C. 891u - United States International Trade Commision Rulings

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HQ 111134

February 19, 1991

VES-3-VES-10-03 CO:R:IT:C 111134 BEW

CATEGORY: CARRIER

Walter H. Lion, Esquire
Maddy, Dalton & Lion
405 Lexington Avenue
New York, New York 10174-0083

RE: Coastwise transportation of goods from New York to Kingston, Jamaica, to Puerto Rico to Trinidad aboard a Zim or other foreign flag vessel. 46 U.S.C. App. 883; 46 U.S.C. 891u

Dear Mr. Lion:

This is in reference to your letters of June 21, 1990 and January 17, 1991, in which you requested a ruling on the application of the coastwise laws to a proposed transportation of merchandise as follows:

1. Leg 1 - New York to Kingston, Jamaica, aboard a Zim or other foreign vessel;

2. Leg 2 - Kingston, Jamaica, to Puerto Rico aboard a Zim or other foreign vessel;

3. Leg 3 - Puerto Rico to Trinidad, aboard a Zim or other foreign vessel.

FACTS:

You state that Zim and its affiliates operate foreign flag vessels between many United States ports and foreign ports around the world, and that they also operate vessels between foreign ports outside of United States commerce, for instance, Zim operates vessels between various Caribbean ports that are not territories and possessions of the United States. You state the vessels in Zim's Caribbean service also carry cargo between foreign ports in the Caribbean and Puerto Rico. You state that Zim would like to offer service between any of the mainland United States ports it serves and foreign ports in the Caribbean using transshipment via feeder vessel in its Caribbean service. You state that one route under consideration would move cargo, under a through port to port bill of lading from New York to Trinidad. You cite 46 U.S.C. 891u, and state under this statute the proposed transportation is by definition "foreign trade" and not "coastwise trade", even if an intermediate stop is made in a territory or possession such as Puerto Rico, so long as the final destination is a foreign port. You state that the cargo, while in Puerto Rico, would be drayed from one vessel's pier to another in bond.

ISSUE:

Whether the transportation on a foreign flag vessel of in- bond goods being shipped from New York to Trinidad, transhipped both at a port Jamaica and a port in Puerto Rico, is considered coastwise trade and subject to the coastwise laws.

LAW AND ANALYSIS:

Generally, the coastwise laws (e.g., 46 U.S.C. App. 289 and 883, and 46 U.S.C. 12106 and 12110) prohibit the transportation of merchandise or passengers between points in the United States embraced within the coastwise laws 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.

The coastwise law pertaining to the transportation of merchandise, 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 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 ....

For purposes of the coastwise laws, a point in United States territorial waters is considered a point embraced within the coastwise laws. The coastwise laws generally apply to points in the territorial sea, defined as the belt, three (3) nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline, in cases where the baseline and the coastline differ.

"Merchandise," as used in section 883, includes any article, including valueless merchandise pursuant to the recent amendment of section 883 by the Act of June 7, 1988 (Public Law 100-329; 102 Stat. 588).

The Customs Service is, of course, "charged with the administration" of section 883. In determining whether merchandise which is transported from one point in the United States to a point in a foreign country and then to another point in the United States is subject to the prohibition in section 883 by virtue of being transported between coastwise points "via a foreign point," we have relied upon the holding of the Supreme Court in The Bermuda, 70 U.S. 514 (1865). We have issued a number of rulings on the applicability of section 883 to the transportation of merchandise between coastwise points via a foreign port. In these rulings, we have held, as did the Supreme Court in The Bermuda, that an "honest intention to bring the goods [transported] into the common stock of the [intermediate foreign] country" is required to break the continuity of transportation between coastwise points via a foreign point. We have held that an intent to export merchandise after its transportation from the United States to an intermediate foreign port is not, by itself, sufficient to break the continuity of the transportation when the merchandise is transported onward from the intermediate foreign port to a second point in the United States. We have also held that when, at the time of shipment of merchandise from the United States to an intermediate foreign port, there existed the expectation that a substantial portion of the merchandise would not be consumed in the country of the foreign port, entry through the foreign country's customs and payment of duty is not considered to break the continuity of the transportation when any of the merchandise is transported onward to a second point in the United States.

It is in this regard that intent becomes a factor in the interpretation of section 883; i.e., when merchandise is trans ported between coastwise points via an intervening foreign port and there is a question of whether the continuity of the voyage is broken at the intervening foreign port. In International Raw Materials, Ltd., v. Baker, Civil Action No. 87-2005 (E.D. Pa. 1988) (22 Cust. Bull. No. 19), the Court refers to the use of an intent test in the interpretation of section 883. In the International Raw Materials the court held that there is no need to consider the intent of the shipper when the shipment involves direct transportation of merchandise between domestic ports, the violation of the Act is clear at the time the merchandise is unladen at the domestic port. For shipments via foreign ports, the violation is not apparent from the route of the vessel; an intent test allows Customs to consider the substance of the transportation rather then its form and is a reasonable means for deciding whether the Act has been violated. The Court held that coastwise transportation of merchandise takes place, within the meaning of the coastwise laws, when merchandise laden at a point embraced within the coastwise laws ("coastwise point") is unladen at another coastwise point, regardless of the origin or ultimate destination of the merchandise. The intent test should be used in a case where merchandise transported from a coastwise point is processed or manufactured at a non-coastwise point and the resulting product is transported onward to a second coastwise point.

The prohibitions set forth in the coastwise laws are against the use of foreign-flag or non-coastwise-qualified U.S. vessels for the transportation of the goods from port to port or point to point within the territorial waters of the United States.

The transportation of the subject goods from New York to Kingston, Jamaica, to Puerto Rico would be considered coastwise transportation and coastwise-qualified vessels must be used for such transportation.

You allege that under the statutory provisions in 46 U.S.C. 891u, the proposed transportation is by definition "foreign trade". The definitions of "foreign trade" and "coastwise trade" set forth in 46 U.S.C. App. 891u applies only to the Merchant Marine Act of 1928 and are not applicable to the provisions set forth in the Merchant Marine Act of 1920 (the coastwise laws, 46 U.S.C. App. 883).

HOLDING:

The transportation of the subject goods from New York to Kingston, Jamaica, to Puerto Rico would be considered coastwise transportation and such transportation of goods from New York to

Kingston Jamaica, to Puerto Rico to Trinidad using foreign flag vessels would be prohibited under the provisions of the coastwise laws, specifically 46 U.S.C. App. 883.

Sincerely,

B. James Fritz

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