HQ 0111627 - Coastwise Trade; passengers; non-coastwise-qualified vessel; medical/dental hospital ship; 46 U.S.C. App. 289; 46 U.S.C. App. 883 - United States International Trade Commision Rulings

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HQ 111627

May 23, 1991

VES-3-02/07-CO:R:IT:C 111627 BEW

CATEGORY: CARRIER

Mr. Ronald A. Danforth
Danforth Marine Consultants
100 Uranus Court
Indialantic, Florida 32903

RE: Coastwise Trade; passengers; non-coastwise-qualified vessel; medical/dental hospital ship; 46 U.S.C. App. 289; 46 U.S.C. App. 883

Dear Mr. Danforth:

This is in response to your letter dated November 12, 1990, requesting a ruling on the legality of the proposed operation of a foreign built (Germany 1955) ship that is presently documented by the U.S. Coast Guard for recreation (yacht).

FACTS:

Your letter states that the vessel is presently owned by a non-profit corporation, Project Hospital Ship Oceanic, Inc., which proposes to use the vessel as a hospital ship to provide medical care to undeveloped countries.

You state that the owner has been unsuccessful in raising money to upgrade the vessel into an operating condition. You state that your company proposes to set up a limited partnership, Oceanic Shipholding Partnership (Oceanic Shipholding) to purchase the vessel and upgrade it to its operating condition. Subsequent to the upgrading, Oceanic Shipholding will bareboat charter the vessel to the International School of Continuing Medical Education, Inc., relinquishing complete management and control of the vessel. You state that the school will donate the use of the vessel, fully operational including crew and with all expenses paid, to Project Hospital Ship Oceanic, Inc., for their use as a hospital ship. You state that the vessel will not carry passengers for hire or engage in coastwise trade. You inquire as to whether there a violation of the coastwise laws will occur when the vessel is used as outlined above.

ISSUE:

Are medical and dental personnel aboard a non-coastwise qualified vessel which is used as an ocean-going hospital ship, and other persons employed on the vessel in a non-traditional capacity, considered to be "passengers" for purposes of the coastwise passenger law, 46 U.S.C. App. 289.

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 ....

The passenger coastwise law, 46 U.S.C. App. 289, provides that:

No foreign vessel shall transport passengers between ports or places in the United States either directly or by way of a foreign port, under penalty of $200 for each passenger so transported and landed.

"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.

For purposes of the coastwise laws, a vessel "passenger" is defined as "... any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business" (19 CFR 4.509b). Section 4.80a of the Customs Regulations (19 CFR 4.80a) is interpretive of section 289.

Given the foregoing definition of "passenger", the Customs Service has ruled that medical, dental, and missionary personnel of a vessel used in such activities and other persons employed on the vessel in a non-traditional capacity are not considered "passengers" for purposes of the coastwise laws, provided that they are actually connected with the operation, navigation, ownership, or business of the vessel (see 110541 PH).

Customs has also ruled that non-coastwise-qualified vessels used as medical or dental clinics in ports of the United States would not be engaged in the coastwise trade when they carry supplies, equipment for their navigation, and personnel necessary for the vessels' operation as clinics. Thus, the supplies and equipment and the personnel necessary for the vessels' operation as clinics and their navigation were not considered to be merchandise or passengers, respectively, for purposes of the coastwise laws, nor were such personnel considered "passengers" as that term is defined in section 4.50(b), Customs Regulations. We have ruled that such a vessel would have to be documented otherwise than for pleasure (see 107024 PH).

We have consistently held that vessel equipment and stores are not considered "merchandise" for purposes of section 883 when transported in the vessel by which they are used (see Customs letter rulings 106910, dated July 9, 1984, and 108223, dated March 13, 1986).

The sole use of a non-coastwise-qualified vessel as a bona fide ocean going hospital ship does not constitute coastwise trade within the meaning of 46 U.S.C. App. 289.

Accordingly, if the subject vessel is used only for such medical and dental care and to transport either salaried or volunteer medical or dental personnel who render medical and dental services aboard the vessel, it would not be engaged in the coastwise trade, however, it must be documented with the Coast Guard.

However, all persons being carried in the vessel must be involved with the operation, navigation, or business of the vessel. A person who is carried on board a vessel for recreational purposes and who pays a fee for such carriage would be considered a "passenger" and his carriage between places in the United States or entirely within U.S. waters would be in violation of the coastwise laws. Merely designating persons as support personnel for the ship's business will not necessarily exempt the vessel from the application of the coastwise laws, e.g. in the past, Customs has held that the transportation of persons who leave the ship at U.S. ports to solicit or to obtain good will, or to move property from one U.S. point to another; or to observe the ship's operation, are engagements in the coastwise trade.

Legitimate equipment and stores of the hospital ship for its use, are not considered merchandise covered by section 883. However, articles transported on the vessel between points embraced within the coastwise laws which are not legitimate stores and equipment of the vessel are subject to section 883.

HOLDING:

The sole use of a non-coastwise-qualified vessel as a bona fide hospital ship does not constitute coastwise trade within the meaning of 46 U.S.C. App. 289.

Medical and dental personnel of a vessel used as an ocean- going hospital ship, and other persons employed on the hospital vessel in a non-traditional capacity are not considered "passengers" for purposes of the coastwise laws, provided that they are actually connected with the operation, navigation, ownership, or business of the vessel as discussed above. Mere employment by the vessel operator will not remove individuals from the status of passengers, even if their duties are conducted aboard the ship, unless the described nexus with the vessel's operation or business is clearly delineated.

Legitimate equipment and ship stores for use of the vessel and crew and said personnel may be transported from a coastwise port to other coastwise points without violating the coastwise laws.

Sincerely,

B. James Fritz

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