HQ 0111736 - Applicability of the coastwise trade laws to the transportation of passengers between United States ports or places on a non-coastwise qualified U.S. vessel. Motor yacht documented with registry endorsement; "voyage to nowhere"; entry procedures for a "voyage to nowhere" - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1992 HQ Rulings > HQ 0111694 - HQ 0111792 > HQ 0111736

HQ 111736

December 17, 1991

VES 3-02 CO:R:IT:C 111736 BEW

CATEGORY: CARRIER

Mr. Charles Peterson
D-2 Box 34
Chula Vista, California 91910

RE: Applicability of the coastwise trade laws to the transportation of passengers between United States ports or places on a non-coastwise qualified U.S. vessel. Motor yacht documented with registry endorsement; "voyage to nowhere"; entry procedures for a "voyage to nowhere"

Dear Mr. Peterson:

This is in reference to your letters of June 6, June 16, and October 8, 1991, concerning the transportation of passengers for hire on the "IT's-DA-VA" a non-coastwise-qualified motor yacht.

FACTS:

You state that the subject vessel is presently documented for "recreation" and that the U.S. Coast Guard had informed you that the documentation must be changed to "registry" in order to meet the requirements necessary to use the vessel for a "6-pack charter." You state that all charters will be aimed at those customers who desire to go from San Diego aboard a "First Class", meticulously maintained and elegantly appointed vessel, fully catered and staffed, to watch the "America's Cup" and pre-trial races. The passengers would board the vessel in San Diego, go out beyond the 3-mile limit, watch the races, and return to the same point of embarkation, where the passengers would disembarked from the vessel. In addition, you state that you intend to work with the Concierges of the Marriot and Hotel Del Coronado hotels in San Diego to use your vessel to service guests of these hotels for "voyages to nowhere", embarking and disembarking at the dock facilities of the said hotels. You request a ruling that would exempt your vessel from U.S. Customs entry and clearance procedures during the aforementioned charters in San Diego, California.

ISSUE:

Are there any restrictions imposed by U.S. law on the operation of a United States vessel documented with a registry endorsement, in the carriage of passengers for hire between coastwise points in the United States?

Whether U.S. vessels on "voyages to nowhere" are exempt from U.S. entry and clearance requirements.

LAW AND ANALYSIS:

Generally, the coastwise laws 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, documented under the laws of, and owned by 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.

Pursuant to 46 U.S.C. 12106 and 12110 and their predecessors (46 U.S.C. 65i and 65m 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. Non-coastwise-qualified vessels include any vessel other than a vessel built in, properly documented under the laws of, owned by citizens of the United States, and never sold foreign with certain exceptions (46 U.S.C. 12106(a)(2)(B) a 19 CFR 4.80(a)(2) and (3)).

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." (Section 4.50(b), Customs Regulations.)

In interpreting the coastwise laws as applied to the transportation of passengers, we have ruled that the carriage of passengers entirely within territorial waters, even though they disembark at their point of embarkation and the vessel touches no other point, is considered coastwise trade subject to the coastwise laws. The transportation of passengers to the high seas or foreign waters and back to the point of embarkation, often called a "voyage to nowhere," is not considered coastwise trade, assuming the passengers do not go ashore, even temporarily, at another coastwise point. We have 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.

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.

A United States documented vessel with a registry endorsement such as yours, would be precluded from engaging in the coastwise trade. The subject vessel could be used to transport passengers from a point in the United States, to the high seas beyond territorial waters and back to the same point, assuming that the vessel touched at no other coastwise point during the transportation. However, the vessel would be prohibited from carrying passengers on such a voyage if the passengers disembarked from the vessel at another coastwise point.

The carriage of paying passengers within the territorial waters of the United States on the subject vessel, a non- coastwise-qualified vessel, would be a violation of the coastwise laws.

In regard to the question of vessel entry, the Omnibus Budget Reconciliation Act of 1990, effective November 5, 1990, amended 46 U.S.C. App. 121 to increase the amount of tonnage taxes assessed "Upon vessels which shall be entered in the United States from any foreign port or place..." (emphasis added) Furthermore, this new legislation provides that vessels departing a U.S. port and returning to the same port, without going to another port or place, except vessels of the U.S., recreational vessels, and barges, as those terms are defined in 46 U.S.C. 2101, will pay tonnage tax at the rate of 9 cents per ton, not to exceed in the aggregate of 45 cents per ton per year for the next five fiscal years. Therefore, although foreign vessels on "voyages to nowhere" were previously not liable for the payment of tonnage tax, as of November 5, 1990, such liability now exists. Under this new law foreign vessels on "voyages to nowhere" are now required to enter and pay tonnage taxes. This legislation is not applicable to U.S. vessels on such cruises.

Title 19, United States Code, section 1434, requires U.S. vessels arriving from a foreign port or place to make entry. When a U.S. vessel arrives in the United States from the high seas, no entry is required. In C.S.D. 80-26 Customs held that a U.S. vessel arriving in the United States from the high seas is not required to make entry in accordance with section 1434 of title 19, because the vessel has not visited a foreign port or place within the meaning of section 1434. A "foreign port" is defined as "a port of place exclusively within the sovereignty of a foreign nation" (see The Winnie, 65 F. 2d 706, 707 3rd Cir. 1933). Since your vessel, a U.S. flag vessel, would be arriving from the high seas when it returns from a "voyage to where" no entry is required. (See also 19 CFR 4.81).

Under 46 U.S.C. App. 91, any vessel bound to a foreign port is required to obtain clearance from Customs (see 19 CFR 4.60- 4.75). However, under the provisions of section 4.60(e) no vessel shall be cleared for the high seas except, a vessel bound to another vessel on the high seas to-

(1) transship export merchandise which it has transported from the U.S. to the vessel on the high seas; or

(2) Receive import merchandise from the vessel on the high seas and transport the merchandise to the U.S.

Under the provisions of section 91, vessels that are being used solely for "voyages to nowhere" are not required to clear when departing from the port of embarkation.

In conclusion, your vessel would not have to enter or clear when it departs the United States for a "voyage to nowhere", but you will have to report your arrival when you return to the port of embarkation.

HOLDING:

Under the provisions of 19 U.S.C. 1434 a U.S. vessel arriving in the United States from a "voyage to where" on the high seas is not required to make entry, nor is it required to clear under the provisions of 46 U.S.C. App. 91 for the high seas when it departs from the United States.

Sincerely,

B. James Fritz

Previous Ruling Next Ruling