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HQ 112120

May 26, 1992

VES 3-13-CO:R:IT:C 112120 BEW

CATEGORY: CARRIER

LTC. Peter H. Satterlee
U.S. Army (Ret.)
107 Via Amalfi
New Smyrna Beach, FLorida 32169

RE: Use of a foreign-built auxiliary sailing catamaran for bareboat charters in the waters of the United States

Dear LTC. Satterlee:

This is in reference to your letter of March 1, 1992, in which you request a ruling on whether you may use a foreign- built sailing catamaran for the purposes of coastwise trade, to wit, chartering for day sailing, or weekly/monthly chartering within U.S. waters. You also inquire as to whether the subject vessel must be documented with the United States Coast Guard for coastwise trade.

FACTS:

You state that the boat is a 1973 35' English-built sailing catamaran, registered in the State of Delaware. You state that the vessel was imported by Symons Sailing, Inc., and sold new in 1974 to the original owner; and that your purchased the vessel from the original owner in 1991.

ISSUE:

May a foreign-built pleasure sailing catamaran vessel be bareboat chartered in the U.S. without violating the coastwise statutes.

LAW AND ANALYSIS:

You should be aware that foreign-flag or foreign-built vessels are prohibited from engaging in the coastwise trade. Generally, the coastwise laws (e.g., 46 U.S.C. App. 289 and 883, 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 penalty for violating this section of the law is $200 for each passenger so transported and landed. A "passenger" is defined in section 4.50(b) of the Customs Regulations (19 CFR 4.50(b)), as "any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business". The family and legitimate guests of the owner or bareboat charterer of a vessel used for pleasure purposes are not considered passengers.

Customs has consistently ruled that a yacht chartered under a bona fide bareboat charter and used only for pleasure purposes is not considered to be used in the coastwise trade. However, a pleasure vessel chartered under a charter agreement other than a bareboat charter (e.g., a time or voyage charter) and used in the U.S. waters is considered to be used in trade.

In 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 circumstances of each case. Under a bareboat charter or a 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 complete management and control have been wholly surrendered by the owner to the charterer so that for the period of time 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.

The Customs Service has also ruled, for purposes of the coastwise law, that a charter agreement which permits the owner to act as master or as a member of the crew, or which permits the owner to accompany the vessel during its charter period, would not be considered a bona fide bareboat charter.

When a vessel is chartered under a charter arrangement other than a bareboat charter (e.g., a time or voyage charter) and is used in coastwise transportation, the owner of the vessel is subject to penalties under the coastwise laws. The charterer of a vessel chartered under a bareboat charter would also be subject to penalties if the vessel is used for other than pleasure purposes or if the actions of the parties negated the terms of the bareboat charter agreement (e.g. if his "guests" paid for or contributed to the expenses of the trip).

The Customs Service has consistently held that when a vessel is chartered under a bona fide bareboat charter, the charterer is treated as the owner of the vessel for the period of the charter and, because owners are not considered "passengers," for purposes of the coastwise laws, the charterer is not prohibited by the coastwise laws from using the vessel during the charter for pleasure purposes only, including the transportation of family and guests.

Accordingly, a bareboat charterer may transport family and guests from one port in the United States to a another port without violating the coastwise laws.

This ruling addresses only those federal requirements which are administered by the Customs Service. Questions relating to the vessel's registration and documentation, and vessel safety requirements should be directed to the United States Coast Guard at the following address:

Mr. Thomas Willis
Chief, Vessel Documentation
U.S. Coast Guard (GMVI-6/13)
2100 Second Street., SW (Room 1312)
Washington, D.C. 20593-0001

A copy of your letter and our reponse are being referred to that office for their information.

HOLDING:

A foreign-built sailing catamaran, or other pleasure vessel may be bareboat chartered for pleasure use without violating the coastwise statutes provided under the charter agreement the owner relinquishes complete management and control of the vessel to the charterer.

Sincerely,

B. James Fritz

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