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HQ 113038

March 11, 1994

VES-10-03/VES-13-CO:R:IT:C 113038 GOB

CATEGORY: CARRIER

Mr. Bob Farahi
President
Sea World Processors, Inc.
3840 Baker Lane
Reno, NV 89509

RE: 46 U.S.C. App. 289, 316, 883; Towing; 19 U.S.C. 1466; Vessel Repair

Dear Mr. Farahi:

This is in response to your letter dated March 4, 1994 to this office.

FACTS:

You ask "whether there is any problem with the provisions of the Jones Act or any duty payable as a result of" the following proposed activity:

Sea World Processors, Inc., an Alaska corporation, owns a U.S. registered ferry called Muskegon Clipper, Official Number 252908. We would like to take the vessel to Vancouver, B.C. in Canada for removal of the existing super structure and installation of temporary fittings needed for ocean towing.

The vessel will be in Canada for no more than 60 days, at which time it will be towed to a shipyard in Houston, Texas for installation of a new super structure and other renovation work.

ISSUES:

Whether the proposed activity is prohibited by any of the coastwise laws. Whether there is any duty liability.

LAW AND ANALYSIS:

Coastwise Laws

Generally, the coastwise laws prohibit the transportation of passengers or merchandise 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 coastwise law applicable to the carriage of passengers is found in 46 U.S.C. App. 289 and 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 a penalty of $200 for each passenger so transported and landed.

46 U.S.C. App. 883, the coastwise merchandise statute often called the "Jones Act", provides in part that no merchandise shall 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 vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States.

46 U.S.C. App. 316(a) prohibits the use of a non-coastwise- qualified vessel to tow any vessel, other than a vessel in distress, between ports or places in the United States embraced within the coastwise laws, either directly or by way of a foreign port, or to do any part of such towing, or to tow any such vessel between points in a harbor of the United States.

The coastwise laws generally apply to points in the territorial sea, which is defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline.

We note that you do not state whether the subject vessel was built in the United States.

The facts which you present do not involve the coastwise transportation of passengers or merchandise. Accordingly, the proposed activity is not prohibited by 46 U.S.C. App. 289 and 883.

The proposed activity does not involve the towing of a vessel between ports or places in the United States embraced within the coastwise laws. The proposed towing is from Canada to Houston, Texas, and perhaps from Alaska to Canada. Accordingly, the towing does not have to be performed by a coastwise-qualified vessel.

Liability under 19 U.S.C. 1466

19 U.S.C. 1466 provides for the payment of duty at a rate of fifty percent ad valorem on the cost of foreign repairs to vessels documented under the laws of the United States to engage in foreign
or coastwise trade, or vessels intended to be employed in such trade.

Based on the facts which you present, it would appear that the work to be performed in Canada is more in the nature of a modification to the vessel than a repair to the vessel. Modifications are not subject to the vessel repair duty. However, modifications still must be declared. 19 CFR 4.14(b)(1) states in part:

Upon first arrival of the vessel in the United States, the owner or master shall declare on Customs Form 226 all equipment, parts, or materials purchased, and all repairs made, outside the United States. Except as provided in 4.14(a)(2)(iii)(B), the declaration is required regardless of the dutiable status of such items or expenses.

Pursuant to 19 CFR 4.14(b)(2), the Customs Form 226 must be filed within five working days after arrival of the vessel.

We emphasize that our comment that the proposed work in Canada appears to be more in the nature of a modification to the vessel than a repair to the vessel is merely an informal comment based on extremely limited facts. A formal determination as to the dutiable status of the work will be made by Customs after filing of the Customs Form 226.

HOLDINGS:

1. The proposed activity is not prohibited by any of the coastwise laws.

2. The foreign shipyard work must be declared on Customs Form 226.

Sincerely,

Arthur P. Schifflin
Chief

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