HQ 0112021 - Coastwise; Passengers; Floating Hotel; Bareboat Charter; Pleasure Use; 46 U.S.C. App. 289; 19 C.F.R. 4.80. - United States International Trade Commision Rulings

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HQ 112021

April 1, 1992

VES-3-02/3-04 CO:R:IT:C 112021 JBW

CATEGORY: CARRIER

Barbara Ehrich Locke, Esquire
Holland & Knight
1200 Brickell Avenue
P. O. Box 015441
Miami, Florida 33101

RE: Coastwise; Passengers; Floating Hotel; Bareboat Charter; Pleasure Use; 46 U.S.C. App. 289; 19 C.F.R. 4.80.

Dear Ms. Locke:

This letter is in response to your request that we rule on the application of the coastwise laws to the use of a foreign - built vessel as a "floating hotel."

FACTS:

Your clients operate a local fishing charter service that takes customers fishing in the back waters of the Florida Everglades. Because of the inaccessibility of the fishing sites, your clients wish to use a Canadian-built houseboat to provide overnight lodging for their customers. The houseboat will also serve as a stationary site from which day fishing trips will be conducted. You state that the houseboat will remain anchored while the customers are on board. The customers will not be transported by the houseboat. You state that all other transportation of the customers will be on coastwise-qualified vessels.

ISSUES:

(1) Whether the use of an anchored, foreign-built houseboat for overnight lodging of guests is prohibited by 46 U.S.C. App. 289.

(2) Whether a foreign-built houseboat may be chartered or leased to third persons for their pleasure use.

LAW AND ANALYSIS:

The coastwise passenger law 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 a penalty of $200 for each passenger so transported.

46 U.S.C. App. 289. The Customs Service has consistently interpreted this proscription to apply to any vessel except a United States built, owned, and properly documented vessel. See 46 U.S.C.A. 12106 & 12110 (West Supp. 1991), 46 U.S.C. App. 289, and 19 C.F.R. 4.80(a) (1991). The territorial waters of the United States are defined to include the belt, three 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. Headquarters Ruling Letter 111275, dated November 13, 1990.

The Customs Service has determined that a vessel not qualified for the coastwise trade may be used as a hotel without violating the coastwise statute provided the vessel remains stationary by mooring or anchoring while the passengers are on board. Headquarters Ruling Letter 111423, dated January 9, 1991; Headquarters Ruling Letter 110542, dated November 21, 1989. Any movement by the vessel from its stationary location with passengers on board would constitute a violation of 46 U.S.C. App. 289. From these rules, we determine that the proposed use of the subject vessel would not constitute a violation of the coastwise laws provided that it remains anchored while the customers are on board.

You raise two collateral issues regarding the intended use of the foreign-built vessel. First, you ask whether the vessel must be under United States documentation, in addition to Florida documentation, to be used as a floating hotel. The enforcement jurisdiction of the Customs Service extends to the use of the vessel in the coastwise trade. We determined in the previous paragraph that the intended use of the houseboat would not constitute an engagement in the coastwise trade. Therefore, the nature of the vessel's document would not be of concern to the Customs Service. This ruling does not address issues within the purview of other governmental agencies, e.g., the United States Coast Guard for issues relating to vessel documentation, safety, and inspection requirements. If you wish to contact the Coast Guard about these matters, you may communicate with your local Coast Guard office or Coast Guard Headquarters at the following address:

Thomas Willis
Chief, Vessel Documentation
U.S. Coast Guard (GMVI-6/13)
2100 Second Street, S.W. (Room 1312)
Washington, D.C. 20593-001

Second, you ask whether we know of any prohibition on the use of the houseboat in a brochure advertising the package charter. The advertisement of this proposed service would not affect our conclusion regarding the legality of the use of the houseboat as a stationary hotel. See C.S.D. 84-53, 18 Cust. B. & Dec. 969, 972 (1984).

Finally, you ask whether the foreign-built houseboat may be chartered or leased to third persons for their pleasure use. The Customs Service has consistently held that when a vessel is chartered under a bona fide bareboat charter, the bareboat charterer is treated as the owner of the vessel for the period of the charter, and, because the owners are not considered "passengers" for purposes of the coastwise laws, 19 C.F.R. 4.50(b) (1991), the charterer is not proscribed by the coastwise laws from using the vessel during the charter for pleasure purposes only. Headquarters Ruling Letter 109638, dated July 22, 1988. A vessel chartered under a charter arrangement other than a bareboat charter (e.g., a time or voyage charter) and used in coastwise transportation would be subject to penalties under the coastwise laws. Id. A vessel chartered under a bareboat charter would also be subject to penalties if the bareboat charterer used it in the coastwise trade (e.g., to transport passengers other than bona fide guests between coastwise points or entirely within territorial waters). Id.

The United States Supreme Court stated:

To create a demise [or bareboat charter] the owner of the vessel must completely and exclusively relinquish "possession, command, and navigation" thereof to the demisee.... It is therefore tantamount to, though just short of, an outright transfer of ownership. However, anything short of such a transfer is a time or voyage charter party or not a charter party at all.

Guzman v. Pichirilo, 369 U.S. 698, 699-670 (1962); see also, Leary v. United States, 81 U.S. 607, 611 (1871), 2B Benedict on Admiralty 52 (6th ed. 1990).

In our review of charter arrangements to determine whether they are bareboat charters for Customs purposes, we have held, in addition to the above-described principles, that:

The nature of a particular charter arrangement is a question of fact to be determined from the circumstances of each case. Under a bareboat charter or demise charter the owner relinquishes complete management and control of the vessel to the charterer. On the other hand, if the owner retains a degree of management and control, however slight, the charter is a time or voyage charter, and the vessel is deemed to be engaged in trade. The crux of the matter is whether the complete management and control have been wholly surrendered by the owner to the charterer so that for the period of the charter the charterer is in effect the owner. Although a charter agreement on its face may appear to be a bareboat or demise charter, the manner in which its covenants are carried out and the intention of the respective parties to relinquish or to assume complete management and control are also factors to be considered.

Headquarters Ruling Letter 109638 (emphasis added). In that regard, it is well established that a vessel may be demised complete with captain if he is subjected to the orders of the demisee during the period of the demise. Guzman, 369 U.S. at 701. Furthermore, the Customs Service has held that the mere fact that the crew is furnished to the charterer would not render the agreement a time charter provided the charterer had full authority to hire, discharge, or replace the crew. See Headquarters Ruling Letter 108278, dated April 2, 1988.

A bareboat charter agreement conforming to these guidelines will permit a non-coastwise qualified vessel to be chartered for pleasure purposes. We note, however, that this ruling is advisory and suggest that your client submit a copy of the bareboat charter agreement when one is available.

Finally, the current status and use of the houseboat were not identified in your letter. You should be aware, however, that a yacht purchased abroad and brought into the United States by a United States resident is presumed, in the absence of evidence to the contrary, to be brought into the United States for use here "permanently" so that it would be classifiable as imported merchandise and thus subject to duty. The Astral, 72 Cust. Ct. at 253-54, 375 F. Supp. at 1366; Estate of Lev H. Pritchard v. United States, 43 C.C.P.A. 85, 88 , C.A.D. 612 (1956). The houseboat may be subject to duty upon entry into the United States.

HOLDINGS:

(1) The Customs Service has determined that a vessel not qualified for the coastwise trade, which is moored or anchored, may be used as a hotel without violating the coastwise statute, provided the vessel is not moved from its moored or anchored position with passengers aboard.

(2) The coastwise laws do not prohibit a charterer from chartering a foreign-registered vessel under a bona fide bareboat charter provided that the vessel is used for pleasure purposes only.

Sincerely,

B. James Fritz
Chief

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