HQ 114281 - 46 U.S.C. App. 289; 19 CFR 4.50(b); Coastwise transportation of passengers; Voyage to nowhere; Charter - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1998 HQ Rulings > HQ 114268 - HQ 114493 > HQ 114281

Previous Ruling Next Ruling
HQ 114281

March 10, 1998

VES-3-02-RR:IT:EC 114281 GOB

CATEGORY: CARRIER

Will Wrightson
Wellington Management Company, LLP
75 State Street
Boston, MA 02109

RE: 46 U.S.C. App. 289; 19 CFR 4.50(b); Coastwise transportation of passengers; Voyage to nowhere; Charter

Dear Mr. Wrightson:

This is in response to your letter of February 18, 1998.

FACTS:

You are considering investing in a New Zealand-built 12 meter sailboat (the "vessel"). You wish to be able to charter the vessel to paying customers out of Newport, Rhode Island, where there is an agency which specializes in America's Cup vessels of the 12 meter design. You indicate that such a charter may start from and end at the same point.

You inquire with respect to the applicability of the coastwise laws and any exemptions thereto.

ISSUES:

The applicability of the coastwise laws to the above-stated facts.

LAW AND ANALYSIS:

Statutory and Regulatory Framework

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 coastwise law applicable to the carriage of passengers is found in 46 U.S.C. App. 289 (sometimes called the "Passenger Vessel Act" and the "coastwise passenger statute") 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.

In interpreting the coastwise laws as applied to the transportation of passengers, the Customs Service has ruled that the carriage of passengers entirely within territorial waters, which include the internal waterways of the United States, even though the passengers disembark at their point of embarkation and the vessel touches no other point, is considered coastwise trade subject to the coastwise laws. However, the transportation of passengers to the high seas or foreign waters 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. In such a situation, the vessel may not stop at a point in territorial waters other than the place where the passengers boarded the vessel.

The first of these positions, regarding transportation of passengers entirely within territorial waters on a voyage in which they embark and disembark at the same coastwise point, is based on a 1900 decision, Treasury Decision 22275. Our rulings have consistently followed this position.

The second of these positions, regarding the transportation of passengers from a point in the United States to the high seas or foreign waters and back to the same point, is based on a 1912 opinion of the Attorney General (29 Opinions of the Attorney General 318). We have consistently followed this position as well.

Charter of Vessel

Customs 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" within the meaning of 46 U.S.C. App. 289 and 19 CFR 4.50(b), the charterer is not prohibited by 46 U.S.C. App. 289 from using the vessel during the charter for pleasure purposes only. A pleasure vessel chartered under a bareboat charter would be in violation of 46 U.S.C. App. 289 if the bareboat charterer used the vessel to transport individuals other than bona fide guests; such individuals would be considered "passengers."

A vessel chartered under a charter arrangement other than a bareboat charter, e.g., a time or voyage charter, is considered to be transporting "passengers," and is subject to the prohibition of 46 U.S.C. App. 289. A time charter has been defined as a specific and express contract by which the owner lets a vessel or some particular part thereof to another person for a specified time or use; the owner continues to operate the vessel, contracting to render services by his master and crew to carry goods loaded on the vessel, and the master and crew remain servants of the owner. Atlantic Banana Co, v. M. V. "Calanca", 342 F.Supp. 447, 453 (D.C. N.Y.). It has also been described as a lease of a vessel under which the owner provides a captain and crew who remain subject to owner's control. Gillentine v. McKeand, 426 F.2d 717, 719 (C.A. Mass.).

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, 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 coastwise trade. The key fact is whether complete management and control have been 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 may on its face appear to be a bareboat or demise charter, the manner in which its covenants are carried out and the intention of the parties to relinquish or assume complete management and control are factors to be considered.

In general, we are unable to determine whether a specific charter is a bareboat charter without reviewing the actual agreement. As indicated above, however, a charter will only be considered a bona fide bareboat charter if the owner relinquishes complete management and control of the vessel to the charterer.

Analysis

46 U.S.C. App. 883 does not appear to be applicable to the factual situation which you present because it would appear that you do not propose to transport merchandise aboard the vessel. Equipment of the vessel is not considered merchandise for this purpose.

46 U.S.C. App. 289 is applicable to the factual situation which you present because it appears that you propose to transport passengers.

As stated above, 46 U.S.C. App. 289 prohibits the transportation of passengers within territorial waters even when the passengers disembark from the vessel at the point of embarkation.

However, also as stated above, the vessel may engage in a "voyage to nowhere" without violating 46 U.S.C. App. 289. A voyage to nowhere involves the transportation of passengers to the high seas (beyond the three-mile limit) or foreign waters and back to the point of embarkation, assuming the passengers do not go ashore, even temporarily, at another United States point.

Thus, the vessel may engage in a "voyage to nowhere."

We are unable to express an opinion as to whether the vessel would be involved in a bona fide bareboat charter. In order for that to be the case, the vessel owner must relinquish complete management and control of the vessel to the charterer. The presented facts indicate that you wish to charter the vessel to paying customers by using an agency which specializes in America's Cup 12 meter vessels. These facts may suggest that the proposed charter is not a bona fide bareboat charter.

The only provision for waiver of the coastwise laws is when such action is deemed necessary in the interest of national defense. That is not the case here.

HOLDINGS:

As described above, 46 U.S.C. App. 289 is applicable to the proposed use of the vessel.

The vessel may be used for "voyages to nowhere" without violating 46 U.S.C. App. 289.

Sincerely,

Jerry Laderberg
Chief,
Entry Procedures and Carriers

Previous Ruling Next Ruling