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HQ 110196


August 28, 1989

VES 3-02 CO:R:P:C 110196 BEW

CATEGORY: CARRIER

Mr. Kenneth Herrick
Post Office Box 646
Petersburg, Arkansas 99833

RE: Transportation of passengers between United States ports or places and the high seas on a foreign-built vessel

Dear Mr. Herrick:

This is in reference to your letter of April 19, 1989, concerning the transportation of passengers between ports or places in the United States territorial waters and the high seas on your foreign-built vessel.

FACTS:

You state that you purchased an Ablin 25 Deluxe, vessel Hull No. AMN 02071 0375, made in Sweden from the original owner in November 1979. You state that the vessel is a configuration Motorsailer with aft cabin, and weighs less than 5 net tons. You state that the vessel has been extensively remodeled from the "wheele-house" roof to the main engine replacement. You state that the value of the vessel has doubled from its original purchase price. You state that you wish to list your business as a "Charter for State Licensing purposes," and ask to what extent can you transport passengers in conjunction with your photography and video business.

ISSUE:

Whether the transportation of passengers on a foreign-built vessel between a port or place in the United States and the high seas, and return to the point of original embarkation is a violation of the coastwise laws.

LAW AND ANALYSIS:

Generally, the coastwise laws (e.g., 46 U.S.C. App. 289 and 883, and 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.

Under the provisions of 46 U.S.C. App. 289, no foreign vessel shall transport passengers between ports or places in the United States, either directly or by way of a foreign port. The penalty for violating this section of the law is $200 for each passenger so transported and landed.

In the process of documenting a vessel, and issuing a coastwise license, the United States Coast Guard makes the determination whether a vessel of at least 5 net tons is a vessel built in the United States. Coast Guard determines whether the vessel was U. S. built for its documentation purposes. Customs honors the Coast Guard's determination. As this vessel is under five net tons and not eligible for such Coast Guard determination Customs must make the determination for purposes of the coastwise laws. Coast Guard's determination normally would be followed by Customs for the purposes of the requirement that vessels engaging in the coastwise trade be built in the U.S.

Of course, qualified vessels of less than 5 net tons are not precluded from engaging in the coastwise trade simply because they cannot be documented under the laws of the United States, however. Section 4.80(a), Customs Regulations (19 CFR 4.80(a)), enumerates the vessels which may engage in the coastwise trade. Subparagraph (a)(2) of this section (i.e., 19 CFR 4.80(a)(2)) provides that no vessel exempt from documentation (e.g., of less than 5 net tons) shall transport any passengers or merchandise between United States coastwise points unless the vessel is owned by a citizen of the United States and is entitled to or, except for its tonnage, would be entitled to be documented with a coastwise license. As stated above, to be entitled to be documented with a coastwise license a vessel must, among other things, be built in the United States (46 U.S.C. 12106(a)(2)), with an exception inapplicable in this case.

The Customs Service has adopted the provisions in section 67.09-3, Coast Guard Regulations (46 C.F.R. 67.09-3), as - 3 -
guidelines for its determination of whether a vessel that is exempt from documentation because it is less than 5 net tons, such as you vessel, may be considered built in the United States and, therefore, may be used in the coastwise trade. Section 67.09-3 states that:

A vessel is considered built in the United States if:

(a) All major components of its hull and superstructure are fabricated in the United States; and

(b) the vessel is assembled entirely in the United States.

Under section 67.09-5, Coast Guard Regulations, a vessel is considered foreign built if it does not meet the requirements of section 67.09-3.

Customs considers the alterations and modifications done to the hull and fittings and superstructure of the vessel in the United States the crucial factor in making its determination as to whether an imported vessel was rebuilt in the United States. See Customs Ruling Letter 109050 BEW (11/4/87). Customs also takes into account the value added to the vessel in the United States. See Customs Ruling Letter 108906 BEW (6/15/87).

You state that your vessel has doubled in value from its original purchase price. With your request you did not submit documentation or sufficient evidence to sustain a finding that hull and fittings and superstructure of your vessel has been sufficiently substantially modified to be considered rebuilt in the United States. In order for us to determine whether your vessel is considered re-built in the United States, you must submit evidence and documentation showing that substantial alterations and modifications to the hull and fitting and superstructure have been made to the vessel.

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.

A point in United States territorial waters is considered a point in the United States embraced within the coastwise laws but a point beyond those waters, even if it is within the United States Exclusive Economic Zone (EEZ), is not considered to be such a point, with certain exceptions inapplicable in this context (see, e.g., the Outer Continental Shelf Lands Act of 1958, as amended; 43 U.S.C. 1333, and the amendments to 46 U.S.C. App. 883 regarding the transportation of valueless or dredged material effected by Public Law 100-329).

The territorial waters of the United States consist of the belt, 3 nautical miles wide, adjacent to the coast of the United States and seaward of the territorial sea baseline. The recent Presidential Proclamation (dated December 27, 1988) proclaiming a 12 nautical mile territorial sea extended the jurisdiction of the United States only for international purposes and did not extend or change existing federal and state laws. The territorial waters of the United States continue to be 3 nautical miles wide, for purposes of the applicability of the coastwise laws. The vessel under consideration, as a foreign-built vessel, would be precluded from engaging in the coastwise trade. The 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 and was not engaged in charter party fishing. However, the vessel would be prohibited from carrying passengers on such a voyage if the passengers disembarked the vessel at a coastwise port subject to the coastwise laws of the United States. This is so because on such a voyage the passengers would be transported between ports or places in the United States (see 46 U.S.C.289).

HOLDING:

The transportation by a non-coastwise-qualified vessel, such as your foreign-built vessel, 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.

The transportation of passengers or merchandise by a non- coastwise-qualified vessel, such as your foreign-built vessel, from one point or port to another point or port within the territorial waters of the U.S. is a violation of the coastwise laws.

Sincerely,

B. James Fritz

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