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HQ 114204

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January 23, 1998

VES-3-RR:IT:EC 114204 CC

CATEGORY: CARRIER

R.H. Dickerman
President
Dickerman Overseas Contracting Co.
1800 Admiral Court
Kissimmee, FL 34744

RE: Amphibious vehicles; Vessels; Place of build; Coastwise trade; Passenger transportation; 46 U.S.C. App. ? 289

Dear Mr. Dickerman:

This is in response to your letter of December 22, 1997, requesting that we rule that certain foreign-built amphibious vehicles rebuilt in the U.S. qualify for use as vessels in domestic passenger transportation.

FACTS:

You state that your company is importing amphibious trucks from England at a cost of approximately $6000 each. The vehicles have been in storage for approximately 10 years and require extensive mechanical work prior to being placed in service. Your company mechanics strip virtually very major mechanical component from the hull, including engine, transmission, transfer case, etc. After the mechanical work is completed, the vehicle is shipped to a subcontractor for additional work, such as installing additional seats.

You have enclosed a summary of expenses, which states the following costs for the vehicles: original purchase price from England --- $6000; re-manufacture cost --- $68,220.98; retail sales price --- $200,000. You have included invoices and photos of the vehicles in their condition as received from England and after they have been remanufactured.

ISSUE:

Whether, following refurbishment in the United States, the imported vehicles under consideration may lawfully be used to provide passenger transportation between points embraced within the coastwise laws.

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).

Pursuant to 46 U.S.C. ? 12106 and ? 12110, the Customs Service has consistently held that the prohibition in 46 U.S.C. App. ? 289 applies to all non-coastwise qualified vessels. Such vessels include any vessel other than a vessel built in, properly documented under the laws of, and owned by citizens of the United States, with certain exceptions (see 46 U.S.C.

In its administration of 46 U.S.C. App. ? 289, the Customs Service has ruled that the carriage of passengers entirely within territorial waters, even though the passengers disembark at their point of embarkation and the vessel touches no other coastwise point, is considered coastwise trade subject to the coastwise laws. However, the transportation of passengers to the high seas (i.e., beyond the 3 mile territorial sea) and back to the point of embarkation, assuming the passengers do not go ashore, even temporarily, at another United States point, often called a "voyage to nowhere," is not considered coastwise trade. 29 O.A.G. 318 (1912).

In Headquarters Ruling (HQ) 114171, dated November 24, 1997, we ruled on a similar case, the importation of amphibious vehicles refurbished in the United States. In that ruling, we stated the following:

Normally, the process of documenting a vessel is completed by the United States Coast Guard. For the purpose of documentation and the issuance of a coastwise license, the Coast Guard first makes a determination that a vessel measures at least 5 net tons and has been built in the United States. However, vessels measuring less than 5 net tons cannot be documented under the United States flag by the United States Coast Guard. In the case of such vessels, the United States Customs Service determines questions on certain qualifications which are germane to the vessel's activities. In particular, the Customs Service must determine whether vessels of less than 5 net tons have been built in the United States for purposes of the coastwise laws.

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. Section 4.80(a), Customs Regulations (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.

We have carefully reviewed the documentation you have submitted, and have determined that the amphibious vehicles under consideration are very similar to those of HQ 114171. In addition, the value added to the refurbished vehicles is similar to the value added to the vehicles in HQ 114171. (The value added, comparing purchase price to retail sales price, is 33 times the purchase price for these vehicles; in HQ 114171 the retail price was approximately 40 times the purchase price of the vehicles.) Consequently, in application of HQ 114171, we find that the amphibious vehicles are considered to be of United States manufacture.

HOLDING:

The refurbished amphibious vehicles are considered to be of United States manufacture and may be utilized in domestic passenger transportation activities.

Sincerely,

Jerry Laderberg
Chief
Entry Procedures and Carriers

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