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HQ 114030

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July 23, 1997

VES-3/3-02-RR:IT:EC 114030 GOB

Steven J. Jevnisek
Maintenance Administrator
Great Lakes Dredge & Dock Company
2122 York Road
Oak Brook, IL 60521-1930

RE: Coastwise trade; 46 U.S.C. App. 289, 883; 19 CFR 4.50(b); Merchandise; Passengers

Dear Mr. Jevnisek:

FACTS:

This is in response to your letter of July 11, 1997, in which you inquire with respect to the applicability of the coastwise laws to the following activity:

The vessels in question are a few small crew launches and a survey boat. The crew launches sail only between a dock where they pick up workers and the Dredge to which they transports [sic] the workers. Though it may occasionally carry crew or equipment to or from the Dredge, the survey boat is mainly to do depth surveys of the dredged channel. These small boats are the lifelines of the Dredge they support. Nothing goes to or from the Dredge unless these vessels carry it. ...
While the crew persons are not necessarily connected with the operation or navigation of the vessel, they are employees of the same company that owns the vessel as well as the Dredge they are being transported to or from. They are, therefore, associated also with the business of the vessel inasmuch as it is the business of the vessel to transport them to and from the Dredge, and without these vessels, there would be no dredge to transport them to or from. The dredge and her support vessels have a symbiotic relationship.

The equipment carried aboard these vessels consists entirely of consumable ships stores, and replacement parts for engines or other machinery. It is my opinion that these consumables and replacement parts would not constitute "merchandise" since they are being transported by one asset of the end product user to another asset of the end product user.

ISSUE:

The applicability of 46 U.S.C. App. 289 and 883 to the proposed activity.

LAW AND ANALYSIS:

Statutory and Regulatory Background

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. A vessel that is built in, documented under the laws of, and owned by citizens of the United States, and which obtains a coastwise endorsement from the U.S. Coast Guard, is referred to as "coastwise qualified."

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.

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. The first proviso to 46 U.S.C. App. 883, as amended by Public Law 104-324, states:

Provided, That no vessel of more than 200 gross tons having at any time acquired the lawful right to engage in the coastwise trade, either by virtue of having been built in, or documented under the laws of the United States, and later sold foreign in whole or in part, or placed under foreign registry, shall hereafter acquire the right to engage in the coastwise trade...

The term "merchandise," as used in 46 U.S.C. App. 883, is not defined for the purpose of that provision. We have used the definition in 19 U.S.C. 1401(c), which defines "merchandise," in pertinent part, as "goods, wares, and chattels of every description..."

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.

Section 4.50(b), Customs Regulations (19 CFR 4.50(b)) states as follows:

A passenger within the meaning of this part is any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business.

Merchandise Issue - 46 U.S.C. App. 883

We assume that the crew launches and the survey boat are not coastwise-qualified. (If they are coastwise-qualified, they could engage in the proposed activity.)

We also assume that the dredge is located within three miles of the coastline. As such, it is a coastwise point.

The same principles apply to the crew launches and the survey boat.

The facts indicate that certain of the vessels "may occasionally carry ... equipment to or from the Dredge... The equipment carried aboard these vessels consists entirely of consumable ships stores, and replacement parts for engines or other machinery."

The crew launches and the survey boat may transport their own vessel equipment, i.e., equipment used on the crew launches and survey boat. This vessel equipment is not considered merchandise for the purpose of 46 U.S.C. App. 883, but is equipment of the transporting vessels, i.e., the crew launches and the survey boat.

Similarly, the crew launches and survey boat may transport consumable ships stores which are consumed on the crew launches and survey boat.

However, the crew launches and the survey boat may not transport equipment for use on the dredge, nor may they transport consumables to be used on the dredge. These items are merchandise within the meaning of 46 U.S.C. App. 883. Equipment to be used on the dredge is not vessel equipment of the transporting crew launch or survey boat.

The fact that the items being transported are owned by the owner of the transporting vessel and the destination vessel is immaterial to the result that the items are merchandise for the purpose of 46 U.S.C. App. 883. We held thusly in Ruling 109649 dated August 1, 1988.

Passenger Issue - 46 U.S.C. App. 289

As above, we assume that the crew launches and survey boat are not coastwise-qualified, and that the dredge is located within three miles of the coastline.

In C.S.D. 79-467, we stated:

... a service vessel which transports supplies, equipment, or workers between points embraced within the coastwise laws ... would be considered as operating in the coastwise trade and must meet the statutory requirements entitling it to engage in such trade.

In Ruling 110967 dated April 12, 1990, where we held that a non-coastwise-qualified hoverbarge may not be operated in the coastwise transportation of employees of the company operating the vessel, we stated:

Persons on commercial (non-pleasure) vessels are considered passengers unless they enjoy some status which ties them intimately to the operation, navigation, ownership, or business of the vessel. This means that it is not sufficient that they might have some direct link to a business which may, as part of its enterprise, find it necessary to operate a vessel. For example, the employees of a construction firm whose owner happens to utilize a vessel in the course of business, would be considered passengers when transported point to point. This is so because, although they have a direct relationship with the company, they have no such connection with the vessel. [Emphasis in original.]

The facts in Ruling 110967 are very similar to the facts herein. In Ruling 110967, a U.S. citizen who would own and operate the foreign-built hovercraft, proposed to transport his own employees and their equipment to and from coastwise work sites ashore. As stated above, in Ruling 110967, we held that this activity was prohibited by the coastwise laws.

Based on the statutory and regulatory framework, and in light of the above authorities, we determine that the crew launches and survey boat may not transport the workers from a U.S. point to the dredge. The workers are "passengers" within the meaning of 46 U.S.C. App. 289 and 19 CFR 4.50(b).

Individuals on the survey boat who engage in depth surveys of the dredged channel may engage in such activity. They are not "passengers."

HOLDING:

The proposed transportation of equipment and/or materials, which are not equipment of the transporting vessel and are not consumable ships stores to be consumed on the transporting vessel, is prohibited by 46 U.S.C. App. 883.

The proposed transportation of workers from a U.S. point to the dredge, as described above, is prohibited by 46 U.S.C. App. 289.

Sincerely,

Jerry Laderberg,
Acting Chief,

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