HQ 0112132 - Application of the dredging statute (46 U.S.C. app. 292) and the U.S. coastwise trade laws (46 U.S.C. app. 289 and 883) to the former Panama Canal Zone. - 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 0112009 - HQ 0112144 > HQ 0112132

HQ 112132

April 14, 1992

VES-10-02/3-12-CO:R:IT:C 112132 MLR

CATEGORY: CARRIER

Francis X. Nolan, III
Nourse & Bowles
One Exchange Plaza
At 55 Broadway
New York, NY 10006

RE: Application of the dredging statute (46 U.S.C. app. 292) and the U.S. coastwise trade laws (46 U.S.C. app. 289 and 883) to the former Panama Canal Zone.

Dear Mr. Nolan:

This is in reference to your facsimile dated March 10, 1992, concerning the application of title 46, United States Code Appendix, sections 292 and 883 (46 U.S.C. app. 292 and 883) to certain operations contemplated by your client.

FACTS:

Your client proposes to engage in dredging operations in the Panama Canal Zone using a foreign-built dredge.

ISSUE:

I. Whether ports and places in the former Panama Canal Zone are embraced within the coastwise laws of the United States (i.e., 46 U.S.C. app. 289 and 883).

II. Whether the use of a foreign-built dredge in the former Panama Canal Zone constitutes "dredging in the United States," within the purview of 46 U.S.C. app. 292.

LAW AND ANALYSIS:

I. Title 46, United States Code Appendix, section 883 (46 U.S.C. app. 883, the coastwise merchandise statute, often called the "Jones Act") provides, in pertinent part, 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 ....

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 be prohibited under the provisions of section 883.

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.

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 4.50(b) (1991).

Customs has consistently held that ports and places in the Panama Canal Zone are not embraced within the coastwise laws. Accordingly, the transportation of merchandise from the continental United States to the Panama Canal Zone would not be coastwise trade within the prohibition of the Jones Act (46 U.S.C. app. 883), and nothing in that statute would forbid such transportation in foreign-built vessels. Of course, if the merchandise, without having entered into the general stock of goods in the Canal Zone or being manufactured or processed into new and different products there, were subsequently transported to another coastwise point (i.e., merchandise is laden at one coastwise point and eventually unladen at another coastwise point), a coastwise transportation for purposes of the Jones Act would then have been consummated. Customs Rulings 103780, dated December 27, 1978; 103329, dated April 21, 1978; MS 216.131H, dated November 27, 1968; and MA 216.132, dated July 15, 1959. The same rationale applies with regard to 46 U.S.C. app. 289, the passenger coastwise law. Customs Ruling MA 216.132, dated April 4, 1958.

Although there do not appear to be any Customs decisions on the applicability of sections 883 and 289 to the Canal Zone subsequent to the Panama Canal Treaty, its effect was to make the territory encompassing the "Panama Canal Zone" a part of the Republic of Panama; therefore, Customs position that ports and places in the Panama Canal Zone are not embraced within the U.S. coastwise laws, has not changed.

II. Section 1 of the Act of May 28, 1906 (34 Stat. 204; 46 U.S.C. app. 292, commonly known as the Dredging Act), provides that, "a foreign-built dredge shall not, under penalty of forfeiture, engage in dredging in the United States unless documented as a vessel of the United States." It should be noted that 46 U.S.C. app. 292, as well as the other navigation laws administered by the U.S. Customs Service, are applicable only to those vessels engaged in dredging activities in U.S. territorial waters (generally defined as the belt, 3 nautical miles wide, adjacent to the coast of the United States and seaward of the territorial sea baseline), including the inland navigable waters of the United States and its territories and possessions, and in certain dredging activities on the United States Outer Continental Shelf outside territorial waters. C.S.D. 83-106..

The U.S. Coast Guard determines whether a particular body of water is deemed to be navigable waters of the United States in order to ascertain its jurisdiction to enforce the laws it administers. The navigable waters of the United States are generally outlined in subpart 2.05-25 of the Coast Guard Regulations (33 CFR 2.05-25). The U.S. Customs Service, in ascertaining its own jurisdiction to enforce the navigation laws it administers, is strongly disposed to follow determinations of the U.S. Coast Guard in the absence of Federal judicial decisions or explicit Congressional enactment, although it is not required to do so.

The historical background of the Act of May 28, 1906, is relevant in determining whether the Canal Zone is considered to be a part of the "United States," for purposes of 46 U.S.C. app. 292. The provision was enacted as a result of controversy which arose over the use of foreign-built dredges to repair damage done by a hurricane at Galveston, Texas, in 1900. At the time of the enactment of the provision, foreign-built vessels could not be documented in the United States, unless captured in war by citizens of the United States and lawfully condemned as prize or adjudged to be forfeited for a breach of the laws of the United States (section 4132, Revised Statutes). Thus, at the time of enactment, the proviso in section 1 of the Act of May 28, 1906, "unless documented as a vessel of the United States," was by itself, practically meaningless. However, section 2 of the Act of May 28, 1906, provided:

That the Commissioner of Navigation is hereby authorized to document as vessels of the United States the foreign-built dredges Holm, Leviathan, Nereus, and Triton, owned by American citizens and now under construction abroad for use at Galveston, on which an American citizen, the contractor at Galveston, has an option.

Reading both sections together, it is clear that the proviso in section 1, "unless documented as a vessel of the United States," refers to the dredges which were authorized and directed to be documented as vessels of the United States by section 2. The legislative history of the Act confirms this interpretation {see Cong. Rec. 7029 (1906)} and, stated above, the Act has consistently been so interpreted by the agencies responsible for its administration. Even though a foreign-built dredge may now be documented as a vessel of the United States (see 46 U.S.C. 12102, 12105), it would be prohibited by 46 U.S.C. app. 292 from engaging in dredging in the United States.

Thus, in our interpretation of 46 U.S.C. app. 292 we have, as is proper, considered the statute as a whole and in the context of the time that it was enacted. Accordingly, the use of a foreign-built dredge in the United States is prohibited by 46 U.S.C. app. 292 regardless of whether it is documented as a vessel of the United States. This historical background indicates that the statute is designed to protect American shipbuilding industries.

The question remains whether we may impose this protective measure to the former Canal Zone. By virtue of the Panama Canal Treaty, the United States may make and enforce all rules pertaining to the passage of vessels through the Canal and other rules with respect to navigation and maritime matters. Panama Canal Treaty, September 7, 1977, United States-Panama, art. III, para. 2(c), 33 U.S.T. 39, 51, T.I.A.S. 10030. The Annex does permit the Panama Canal Commission (an executive agency of the United States Government, established by section 1101 of the Panama Canal Act of 1979, Pub. L. 96-70, 93 Stat. 456, codified at 22 U.S.C. 3611), to perform various functions, one being dredging of the Canal channel, terminal ports and adjacent waters. Annex, para. 3(s), 33 U.S.T. 39, 112, T.I.A.S. No. 10030. However, the Panama Canal Treaty: Implementation of Article III, provides that the Republic of Panama shall exercise all jurisdictional rights over vessels within the land and water areas of the Ports of Balboa and Cristobal. Art. V, para. 2(a), 33 U.S.T. 141, 151, T.I.A.S. No. 10031. Further, the Panama Canal Treaty provides that the law of the Republic of Panama shall apply in the areas made available for the use of the United States. Art. IX, para. 1, 33 U.S.T. 39, 61, T.I.A.S. No. 10030. Article XI gives the Republic of Panama plenary jurisdiction over the former Canal Zone. 33 U.S.T. 39, 71, T.I.A.S. No. 10030.

Reading the Treaty provisions together with the historical background of the dredging statute (without determining whether the Canal Zone is or was a "territory" or "possession" of the United States, or the ramifications of the Treaty), we find that the Treaty gives the Republic of Panama enough jurisdiction over the former Canal Zone so that the protective dredging statute may not be applied to this area.

In support of this conclusion, several courts have stated that the Canal Zone is to be regarded as a foreign country where matters of commerce are concerned. United States v. Matthews, 427 F.2d 992 (5th Cir. 1970). Also, in Luckenbach S.S. Co. v. United States, the Supreme Court held that ports in the Canal zone (i.e., Balboa and Cristobal) are to be considered as "foreign ports" within the meaning Rev. St. 4009 (39 USCA 654), relating to the Post Office Department. 280 U.S. 173 (1930). Both courts cited title 19, United States Code, section 126 (19 U.S.C. 126), as an example that it was Congress' intent that the Canal Zone be regarded as a foreign country where matters of commerce are concerned. (Section 126 provides that all laws affecting imports of articles, goods, wares, and merchandise and entry of persons into the United States from foreign countries shall apply to articles, goods, wares, and merchandise and persons coming from the Canal Zone, Isthmus of Panama, and seeking entry into any State or Territory of the United States or the District of Columbia.)

This letter addresses only those federal requirements that are administered by the U.S. Customs Service. While we are unaware of any other federal or state agency requirements that might pertain to the undertaking you describe, it is possible that such requirements exist.

HOLDING:

I. Ports and places in the former Panama Canal Zone are not embraced within the coastwise laws of the United States (i.e., 46 U.S.C. app. 289 and 883).

II. The use of a foreign-built dredge for dredging in the former Panama Canal Zone does not constitute "dredging in the United States," within the purview of 46 U.S.C. app. 292.

Sincerely,

B. James Fritz

Previous Ruling Next Ruling