HQ 0111437 - The applicability of the coastwise laws to the proposed use of a foreign-flag tug and two foreign-flag barges in a dredging project and the movement of dredge sand on the Sacramento River, its adjacent sloughs and the San Francisco Bay. - United States International Trade Commision Rulings

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HQ 111437

September 4, 1991

VES-10-02-CO:R:P:C 111437 BEW

CATEGORY: CARRIER

Stanley X. Cook, Esquire
Attorneys at Law
2156 The Alameda
San Jose, California 95126

RE: The applicability of the coastwise laws to the proposed use of a foreign-flag tug and two foreign-flag barges in a dredging project and the movement of dredge sand on the Sacramento River, its adjacent sloughs and the San Francisco Bay.

Dear Mr. Cook:

This is in reference to your letters of December 6, 1990, and April 17, 1991, requesting a ruling concerning a dredging contract from the U.S. Army Corps of Engineers in the Sacramento River.

FACTS:

You state that a California corporation intends to enter into a joint venture with a California subsidiary corporation of a major Korean corporation. In this venture, the Korean parent or subsidiary corporation would furnish a tug and two barges of current Korean registry, manned by U.S. seaman who would be employees of the joint venture.

You state that the vessels would not transport merchandise between U.S. ports, but that the operations would be confined solely to the movement of the dredged sand on the Sacramento River, its adjacent sloughs and the San Francisco Bay. You state that none of the vessels would leave the bay during the operations of the venture. At the conclusion of the dredging and fill operations, the tug and barges would return to their home port. You ask the following questions:

(1) What, if any, restrictions, taxes or requirements are imposed by the U.S. Customs Service concerning the use of such vessels in the manner specified above?

(2) Does it make a difference whether such vessels are owned by the Korean parent corporation/U.S. subsidiary, or leased to the U.S. domestic corporation of my clients?

(3) What separate requirements, taxes, or restrictions, if any, are imposed with regard to any collateral equipment for sand dredging and movement, such as dredging equipment, conveyors and tractors.

Your request goes only to the transportation and towing aspects of the dredging project.

ISSUES:

1. Whether the transportation of dredge sand on a non- coastwise-qualified vessel from a dredge site in the Sacramento River and the San Francisco Bay Area to the shore or other points in the same waters is a violation of 46 U.S.C. App. 883.

2. Whether the use of a foreign-flag vessel to tow barges used to haul dredge sand between coastwise points is prohibited under the provisions of 46 U.S.C. App. 316(a).

LAW AND ANALYSIS:

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 ....

"Merchandise" is defined in section 1401(c) of title 19, United States Code, to include goods, wares, and chattels of every description, and includes fish, fish products, and fish packaging materials that are assembled into packages containing fish. Section 883 specifically provides that, for purposes of its provisions, "merchandise" includes valueless material (Pub.L. 100-329; 102 Stat. 588). The transportation of valueless material, whether or not it has commercial value, from a point or place in the United States or point or place on the high seas within the Exclusive Economic Zone (EEZ) as defined in the Presidential Proclamation of March 10, 1983, to another point or place in the United States or a point or place on the high seas within that EEZ would also be prohibited under the provisions of section 883.

In interpreting the coastwise laws, Customs has ruled that 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.

The transportation of dredged material on a foreign-flag barge from a dredge site, located in the territorial waters of the United States, to another point within the territorial waters of the U.S. would be prohibited under the provisions of 46 U.S.C. App. 883. Accordingly, the proposed use of the Korean-flag barges in question would be prohibited.

Section 316(a), as amended by the Act of May 19, 1986 (Pub. L. 99-307 (46 U.S.C. App. 316(a)), prohibits the towing between coastwise points of any vessel except a vessel in distress, by any vessel other than a vessel of the United States issued a certificate of documentation with a coastwise or Great Lakes endorsement (see 46 U.S.C. App. 12106, 12107). This restriction extends to certain territories and possessions of the United States, to towing between points within the same harbor, and to direct, indirect, or partial towing operations.

In summary, the prohibitions imposed by the coastwise laws extend to all vessels regardless of their size, and to the internal waters of the United States as well as to the coastal waters. Their applicability is not affected by the fact that a body of water may be wholly within the jurisdiction of a single state, or whether its course or boundaries intrude on the territory of two or more states. Likewise, it is not a consideration whether a body of water is tidal or non-tidal, is accessible to the sea, is easily reached, or is man-made.

HOLDING:

1. The transportation of dredge sand on a non-coastwise- qualified vessel from a dredge site in the Sacramento River and the San Francisco Bay Area to the shore or other points in the same waters is a violation of 46 U.S.C. App. 883.

2. The towing between coastwise points of any vessel, except a vessel in distress, by any foreign-flag vessel, is prohibited under the provisions of 46 U.S.C. App. 316(a).

Sincerely,

B. James Fritz
Chief

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