HQ 0112317 - Coastwise trade; passengers; non-coastwise-qualified vessel; foreign-flag vessel; USCG Certificate of Inspection; Virgin Islands; "voyage to nowhere"; entry and clearance procedures. - United States International Trade Commision Rulings

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HQ 112317

July 24, 1992

VES 3-02 CO:R:IT:C 112317 BEW

CATEGORY: CARRIER

Mr. Ted Rosenthal
President
Windships Navigation Company
266528 Gallows Bay
St. Croix, United States Virgin Islands 00824

RE: Coastwise trade; passengers; non-coastwise-qualified vessel; foreign-flag vessel; USCG Certificate of Inspection; Virgin Islands; "voyage to nowhere"; entry and clearance procedures.

Dear Mr. Rosenthal:

This is in reference to your letter of June 29, 1992, and our ruling dated July 1, 1992, concerning the transportation of passengers for hire on the S/V ELINOR, a non-coastwise-qualified sailing schooner. We have modified our ruling as set forth below:

FACTS:

You state that you operate a foreign-flag vessel, the S/V ELINOR, in the U.S. Virgin Islands through VI Schooner, LTD. You state that even though the Virgin Islands is exempt from the coastwise laws, your vessel holds a current Certificate of Inspection from the United States Coast Guard to carry passengers for hire in the Virgin Islands.

You state that the vessel is currently underway to the Tall Ships events in New York, where she will represent St. Croix. You state that you will be carrying on board the first St. Croix based Tall Ships Sail Training class composed entirely of youth from St. Croix. You state that to help pay the cost of the trip and to expand the program, you would like to use the vessel for voyages to nowhere. The passengers will embark on the vessel and disembark from the vessel at each of the following ports where "voyages to nowhere" are to originate:

New York City Boston, MA
Newport, RI Baltimore, MD
Cambridge, MD Ocean City, MD
Norfolk, VA Wilmington, NC
Charleston, SC Savannah, GA
St. Augustine, FL Miami, FL
Key West, FL
ISSUE:

Are there any restrictions imposed by U.S. law on the operation of a foreign-flag vessel which has a U.S. Coast Guard Certificate of Inspection for the carriage of passengers in the Virgin Islands, in the carriage of passengers for hire on voyages to nowhere operating out of ports in the United States?

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), and 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 non-coastwise-qualified vessel with a U.S. Coast Guard Certificate of Inspection 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.

With regard to 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, foreign vessels on "voyages to nowhere" which 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. In addition, passenger vessels making 3 or more trips a week between a U.S. port and a foreign port (including cruises to nowhere) are exempt from the payment of the commercial vessel user fees set forth in section 24.22 of the Customs Regulations (19 CFR 24.22) (see Part II Section (A)(IV) User Fee Handbook (HB 53000-07), dated July 1992). Passengers who depart the United States and return on the same vessel without docking in a foreign port are also exempt from the passenger processing fee set forth in section 24.22 of the Customs Regulations (19 CFR 24.22)(see Part II Section (E)(IV) User Fee Handbook (HB 53000-07), dated July 1992). Department of Agriculture (APHIS) fees run parallel to user fees. Vessels on "voyages to nowhere" however, are not exempt from the payment of Harbor Maintenance Fees (see 19 CFR 24.24).

Title 19, United States Code, section 1433, provides that immediately upon the arrival at any port or place in the United States or Virgin Islands of: (1) any vessel from a foreign port or place; (2) any foreign vessel from a domestic port; or (3) any vessel of the United States carrying bonded merchandise, or foreign merchandise for which entry has not been made, the master of the vessel shall report the arrival at the nearest Customs facility. The report of arrival shall be in accordance with the procedures in section 4.2, Customs Regulations, as amended by T.D.87-150.

The master of any foreign vessel arriving in a United States port, whether from a foreign port or another United States port, is required to make vessel entry under title 19, United States Code, section 1435 (19 U.S.C. 1435), and section 4.3 of the Customs Regulations (19 CFR 4.3). Such vessels are also required to clear when bound for a foreign port, and must have a permit to proceed from one United States port to another.

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 clear when it departs the United States for a "voyage to nowhere", but you will have to report your arrival and enter and pay tonnage taxes when you return to the port of embarkation.
HOLDING:

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.

Under the provisions of 19 U.S.C. 1433 a foreign-flag vessel arriving in the United States from a "voyage to nowhere" on the high seas is required to immediately report its arrival.

A foreign-flag vessel upon arriving from a "voyage to nowhere" on the high seas is required to make entry and pay tonnage taxes when it returns to the port of embarkation.

Passenger vessels making 3 or more trips a week between a U.S. port and a foreign port (including cruises to nowhere) are exempt from the payment of the commercial vessel user fees set forth in 19 CFR 24.22. Passengers who depart the United States and return on the same vessel without docking in a foreign port are also exempt from the passenger processing fee set forth in section 19 CFR 24.22. Department of Agriculture (APHIS) fees run parallel to user fees, and are not owed.

Vessels on "voyages to nowhere" however, are not exempt from the payment of Harbor Maintenance Fees set forth in 19 CFR 24.24.

Sincerely,

B. James Fritz

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