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HQ 114198

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December 19, 1997

VES-4-02-RR:IT:EC 114198 CC

CATEGORY: CARRIER

Matthew Ruane
P.O. Box 148
24 Union Street
St. Helier, Jersey JE4 8QL
England

RE: Cruising License; 19 CFR ? 4.94; "Sovereign Sea"

Dear Mr. Ruane:

This is in response to your facsimile transmission of December 17, 1997, concerning your request that a vessel be issued a cruising license.

FACTS:

You state that the British Registered Yacht "Sovereign Sea" is a pleasure vessel currently en-route to the United States from the Caribbean. You state that the yacht is operating under a bareboat charter agreement with Charter Yachts (UK) Limited, and currently has on board a skipper, crew, and two "charter guests." You ask whether the yacht may obtain a cruising permit.

ISSUE:

Whether the subject yacht may be issued a cruising license.

LAW AND ANALYSIS:

46 U.S.C. App. ? 289, the passenger coastwise law, prohibits the transportation of passengers between points embraced within the coastwise laws of the United States, either directly or by way of a foreign port, in a non-coastwise-qualified vessel (i.e., any vessel not built in and documented under the laws of the United States and owned by persons who are citizens of the United States). For purposes of 46 U.S.C. App. ? 289, the term 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." 19 CFR ? 4.50(b).

Concerning bareboat charters, the Customs Service has consistently held that when a vessel is chartered under a bona fide bareboat charter, the bareboat charterer is treated as the owner of the vessel for the period of the charter, and, because the owners are not considered "passengers" for the purposes of the coastwise laws, the charterer is not proscribed by the coastwise laws from using the vessel during the charter for pleasure purposes only. A vessel chartered under a charter arrangement other than a bareboat charter (e.g., a time or voyage charter) and used in coastwise transportation would be subject to penalties under the coastwise laws. A vessel chartered under a bareboat charter would also be subject to penalties if the bareboat charterer used it in the coastwise trade (e.g., to transport passengers (other than bona fide guests) between coastwise points or entirely within territorial waters).

In our review of charter arrangements to determine whether or not they are bareboat charters, we have generally held the following:

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 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 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.

We have insufficient information before us to determine whether bona fide bareboat charters exists in the factual situation you have presented.

Concerning the entry and clearance of foreign registered pleasure vessels, the applicable law and regulations require a master of any foreign vessel arriving in a United States port, whether from a foreign port or another United States port, to make an immediate report of arrival (19 U.S.C. ? 1433, 19 CFR ? 4.2), and to make vessel entry (19 U.S.C. ? 1434, 19 CFR

46 U.S.C. App. ? 104 authorizes the issuance of cruising licenses to exempt pleasure vessels of foreign registry from these formal entry and clearance procedures. That exemption, however, is limited to pleasure vessels of countries that extend reciprocal privileges to United States pleasure vessels. Countries that have satisfied this reciprocity requirement are listed in section 4.94(b) of the Customs Regulations (19 CFR ? 4.94(b)). Great Britain is listed in 19 CFR ? 4.94(b); therefore, vessels of British registry may be issued a cruising license. Please be aware that a cruising license does not exempt the master or owner of a foreign vessel from the requirement that a report of arrival be made immediately upon arrival at a port in the United States. 19 U.S.C. ? 1433.

The regulations restrict the issuance of a cruising license to a period of one year. 19 CFR
? 4.94(c). In addition, that regulation states that a cruising license shall be granted subject to the condition that the vessel shall not engage in trade or violate the laws of the United States in any respect.

HOLDING:

If a bona fide bareboat charter exists and the guests on board are bona fide guests and not passengers, then the subject vessel may be issued a cruising license pursuant to 19 CFR ? 4.94.

Sincerely,

Jerry Laderberg
Chief
Entry Procedures and Carriers

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