HQ 0112049 - Coastwise Trade; Passengers; Voyage to Nowhere; 46 U.S.C. App. 289 - United States International Trade Commision Rulings

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HQ 112049

February 10, 1992

VES-3-CO:R:IT:C 112049 GEV

CATEGORY: CARRIER

Bruce N. Durham
Lieutenant Commander
Senior Investigating Officer
United States Coast Guard
433 Ala Moana Boulevard
Honolulu, Hawaii 96813-4909

RE: Coastwise Trade; Passengers; Voyage to Nowhere; 46 U.S.C. App. 289

Dear Lieutenant Commander Durham:

This is in response to your letter dated December 16, 1991, enclosing files on two vessels regarding their use, or proposed use, by foreign interests in Hawaiian waters. Our ruling on this matter is set forth below.

FACTS:

The MASA is a U.S.-built vessel used to transport passengers on cruises in waters off the coast of the island of Oahu, Hawaii. Specifically, the passengers embark at Keehi Lagoon for scenic cruises to Diamond Head. The passengers usually stay on the vessel for the duration of the round trip cruise and disembark at Keehi Lagoon, the point of embarkation. However, this same vessel may transport passengers from Keehi Lagoon to either Ala Wai Harbor or Honolulu Harbor where they disembark.

In regard to the above vessel, the following documentation has been submitted: (1) a copy of the vessel's Certificate of Documentation issued by the U.S. Coast Guard (USCG) endorsed with a registry endorsement and indicating U.S. corporate ownership; (2) a copy of navigation chart no. 19357 marking both the 3-mile U.S. territorial sea for the area in which the vessel operates and the actual course of the vessel as observed by the USCG; (3) a copy of a letter from the law firm retained to represent the alleged owner of the subject vessel, dated July 17, 1990, to the State of Hawaii Department of Transportation/Harbors Division
indicating that the vessel is owned by a Japanese citizen who is leasing the vessel to the U.S. corporation designated the sole owner of the vessel on the USCG certificate of documentation; (4) a copy of USCG form 1258 ("Application for Documentation or for Surrender, Replacement, or Redocumentation") indicating the registry endorsement and U.S. corporate ownership; and (5) a copy of the State of Hawaii "Application for Vessel Registration and Certificate of Number" indicating the vessel is owned by a Japanese alien and that its principal use is for pleasure.

The KAHUWAI MISTRESS is registered for pleasure with the State of Hawaii but not yet documented by the USCG. The vessel is used for daily charters by hotel guests.

In regard to this second vessel, the following documentation was submitted: (1) a copy of the State of Hawaii "Application for Vessel Registration and Certificate of Number" indicating the vessel is owned by a U.S. corporation and that its principal use is for pleasure; (2) a copy of the articles of incorporation for Kahuwai Bay Charter, Inc., of Honolulu, Hawaii, the U.S. corporate owner denoted as such on the aforementioned state registration; (3) a letter from the State of Hawaii Department of Transportation/Harbors Division, to the USCG, Honolulu, dated October 29, 1991, stating that although the vessel is state- registered for pleasure it is used to carry guests of a Japanese- owned hotel who charter the vessel on a daily basis; (4) a letter from the State of Hawaii Department of Transportation/Harbors Division, dated September 30, 1991, to the hotel's general manager discussing the use of vessels by the hotel's guests; and (5) a copy of a facsimile transmission from the State of Hawaii Department of Transportation/Harbor Division, dated December 6, 1991, to the USCG, Honolulu, transmitting various communications regarding this matter.

ISSUES:

1. Whether the transportation of passengers between U.S. points constitutes coastwise trade within the purview of 46 U.S.C. App. 289.

2. Whether the transportation of passengers solely within the 3-mile U.S. territorial sea, even though the passengers disembark at their point of embarkation without going ashore at any other coastwise point, constitutes a "voyage to nowhere" thereby obviating the applicability of 46 U.S.C. App. 289.

3. Whether the use of a vessel for charter party fishing constitutes coastwise trade within the purview of 46 U.S.C. App. 289.

LAW AND ANALYSIS:

Title 46, United States Code Appendix, section 289 (46 U.S.C. App. 289, the passenger coastwise law) as interpreted by the Customs Service, prohibits the transportation of passengers between points in the United States embraced within the coastwise laws, either directly or by way of a foreign port, in a non- coastwise-qualified vessel (i.e., any vessel that is not 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 section 289, "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 4.50(b)) Section 4.80a, Customs Regulations (19 CFR 4.80a) is interpretive of section 289.

In its administration of 46 U.S.C. App. 289, the Customs Service has ruled that the carriage of passengers entirely within territorial waters, even though the passengers disembark at their point of embarkation and the vessel touches no other coastwise point, is considered coastwise trade subject to coastwise laws. However, the transportation of passengers to the high seas (i.e., beyond U.S. territorial waters) and back to the point of embarkation, assuming the passengers do not go ashore, even temporarily, at another United States point, often called a "voyage to nowhere", is not considered coastwise trade (29 O.A.G. 318 (1912)). It should be noted that the carriage of fishing parties for hire, even if the vessel proceeds beyond territorial waters and returns to the point of the passengers' embarkation, is considered coastwise trade (T.D. 55193(2)).

In interpreting the coastwise laws, Customs has ruled that a point in United States territorial waters is a point in the United States embraced within the coastwise laws. The territorial waters of the United States consist of the territorial sea, defined as the belt, 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 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 the purposes of the coastwise laws, the charterer is not proscribed by the coastwise laws from using the vessel during the charter for pleasure purposes only. A vessel chartered under a charter arrangement other than a bareboat charter (e.g., a time or voyage charter) and used in coastwise transportation (see discussion above on the carriage of passengers entirely in territorial waters or to the high seas or foreign waters) would be subject to penalties under the coastwise
laws. 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).

In our review of charter arrangements to determine whether or not they are bareboat charters we have generally held that:

The nature of a particular charter arrangement is a question of fact to be determined from the circum- stances of each case. Under a bareboat charter or demise charter the owner relinquishes complete man- agement 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 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.

Notwithstanding the contradictory evidence regarding the ownership of the two vessels in question (a matter totally within the jurisdiction of the USCG to which Customs will defer), we note that in neither case does there appear to be an issue pertaining to a bareboat charter. Therefore, assuming, arguendo, that neither vessel meets the necessary U.S. ownership requirements for a coastwise endorsement pursuant to 46 U.S.C 12106, we hold as follows.

In regard to the first vessel in question (MASA), its use to transport passengers from Keehi Lagoon to Ala Harbor or Honolulu Harbor constitutes coastwise trade pursuant to 46 U.S.C. App. 289. Accordingly, the vessel must be coastwise-qualified as required by that statute (i.e., U.S.-built, owned and documented).

As for the alleged use of the MASA on a "voyage to nowhere" which would render inapplicable the requirements of 46 U.S.C. App. 289, the USCG observations of the actual course of the vessel as delineated on navigation chart 19357 show that the
vessel is operating well within U.S. territorial waters and is not proceeding to the high seas as is required (see discussion above). Accordingly, the vessel is not transporting passengers on a valid "voyage to nowhere" and therefore is in violation of 46 U.S.C. App. 289.

The analysis set forth above also applies to the second vessel in question (KAHUWAI MISTRESS). The use of the vessel to transport hotel guests between points within U.S. territorial waters is coastwise trade and therefore it must be coastwise- qualified. If it is used on a "voyage to nowhere" (which is not apparent from the evidence submitted) it must meet the requirements discussed above.

Finally, we note that the hiring of either vessel in question for charter party fishing is coastwise trade regardless of whether the vessel proceeds beyond U.S. territorial waters and returns to the passengers' point of embarkation. Accordingly, a vessel with only a registry endorsement would be prohibited from engaging in such activity.

HOLDINGS:

1. The transportation of passengers between U.S. points constitutes coastwise trade within the purview of 46 U.S.C. App. 289.

2. The transportation of passengers solely within the 3- mile U.S. territorial sea, even though the passengers disembark at their point of embarkation without going ashore at any other coastwise point, does not constitute a "voyage to nowhere" thereby obviating the applicability of 46 U.S.C. App. 289.

3. The use of a vessel for charter party fishing, regardless of whether the vessel proceeds beyond the 3-mile U.S. territorial sea and returns to the passengers' point of embarkation, constitutes coastwise trade within the purview of 46 U.S.C. App. 289.

Sincerely,

B. James Fritz

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