HQ 114507 - Coastwise transportation; Waiver of coastwise laws; Third proviso to merchandise transportation statute; Interstate Commerce Commission Termination Act; 46 U.S.C. App., section 883 - United States International Trade Commision Rulings

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HQ 114507

October 26, 1998

VES-3-17-RR:IT:EC 114507 LLB

CATEGORY: CARRIER

Mr. John M. Peterson
Neville, Peterson and Williams
80 Broad Street, 34th Floor
New York, New York 10004

RE: Coastwise transportation; Waiver of coastwise laws; Third proviso to merchandise transportation statute; Interstate Commerce Commission Termination Act; 46 U.S.C. App., section 883

Dear Mr. Peterson:

Reference is made to your letter of October 2, 1998, in which you request that this office issue a ruling regarding the use of a non-coastwise-qualified vessel in the transportation of merchandise between coastwise points. You have requested that certain of the information contained within your submission remain confidential including the identity of your client, the commodity involved, the ports of lading and unlading, and the final destination of the merchandise. You make these requests under the terms of Part 103 of the Customs Regulations (19 CFR Part 103), for the reason that release of the designated details may impact your client adversely in the competitive ocean-carriage bidding process. We accede to your request.

FACTS:

Since 1983, the same routing has been utilized to move merchandise between United States points, in part by use of non-coastwise-qualified vessels and in part by rail movement over Canadian rail trackage. The movements proceeded under the terms of a prior Customs ruling specific to the circumstances. The movement involves the lading of merchandise on to a non-coastwise-qualified vessel at a port on the Gulf Coast of the United States. The vessel transports the cargo to a port in Canada where it is transferred to rail cars. The rail cars, moving in part over rail trackage in Canada, transport the merchandise to its final destination in the Northeast United States. In the present circumstances, all elements of the transaction including geographic locations, the commodity involved, and the rail transportation would remain as before. The water route by which the cargo moves would also remain, but the water carrier would be replaced by a new entity following competitive bidding.
ISSUE:

Whether the legality of continued cargo movements as described in the Facts portion of this ruling, accomplished under the terms of the third proviso to the Jones Act, would be affected by the demise of the Interstate Commerce Commission as a result of enactment of the Interstate Commerce Commission Termination Act.

LAW AND ANALYSIS:

The coastwise law pertaining to the transportation of merchandise, section 27 of the Act of June 5, 1920, as amended (41 Stat. 999; 46 U.S.C. App. 883, often called the Jones Act), provides that:

No merchandise shall be transported by water, or by land and water, on penalty of forfeiture of the merchandise (or a monetary amount up to the value thereof as determined by the Secretary of the Treasury, or the actual cost of the transportation, whichever is greater, to be recovered from any consignor, seller, owner, importer, consignee, agent, or other person or persons so transporting or causing said merchandise to 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 other vessel than a vessel built in and documented under the laws of the United
States and owned by persons who are citizens of the United States...

The coastwise laws generally apply to points in the territorial sea, defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in the internal waters, landward of the territorial sea baseline, in cases where the baseline and the coastline differ. These laws have also been interpreted to apply to transportation between points within a single harbor. Merchandise, as used in section 883, includes any article, including even materials of no value (see the amendment to section 883 by the Act of June 7, 1988, Pub. L. 100-329; 102 Stat. 588).

The third proviso to ?27 of the Merchant Marine Act, 1920, as amended (46 U.S.C. App. 883), provides that:

...this section shall not apply to merchandise transported between points within the continental United States, including
Alaska, over through routes heretofore or hereafter recognized by the Interstate
Commerce Commission for which routes rate tariffs have been or shall hereafter be filed with said Commission when such routes are in part over Canadian rail lines and their own or other connecting water facilities...

Simply stated, prior to January 1, 1996, section 883 would not prohibit the transportation of merchandise so long as all of the conditions of the third proviso were met, those being that:
a) through routes are utilized which have heretofore or are hereafter recognized by the Interstate Commerce Commission;
b) routes rate tariffs have been or shall hereafter be filed with the Interstate Commerce Commission, and have not subsequently been rejected for filing, have become effective according to their terms, and have not been subsequently suspended, or withdrawn by the Commission.
c) the routes utilized are in part over Canadian rail lines and their own or other connecting water facilities.

We have held that "over Canadian rail lines" means simply over rail trackage in Canada, and that "their own or other connecting water facilities" means water facilities covered by a through route regardless of whether those facilities connect directly with the Canadian rail line covered by that through route.

The matter offered for consideration concerns the status of third proviso cargo movements in the wake of enactment of the Interstate Commerce Commission Termination Act. Even though the surviving functions of the Commission have been transferred to the Surface Transportation Board of the Department of Transportation, the fact is that the setting of rates route tariffs is not a surviving function. We are left with a conundrum. The third proviso requires satisfaction of an element which, by law, no longer exists. Further, to settle the matter favorably in this case based solely upon the continued viability of the tariff rates issued prior to termination of the Interstate Commerce Commission, could be seen as a de facto agency repeal of a statutory provision by the suggestion that the proviso might be unavailable to those who lack a preexisting tariff rate issuance.

Ideally it would be acknowledged to be a basic tenet of statutory construction and interpretation that the laws as enacted are meant to be forward-looking and adaptable to evolving circumstances. This notion has application to the present matter in that although the statute specifies the filing of rate tariffs with the Interstate Commerce Commission, mechanistic adherence to that requirement in the present climate of deregulation would lead to an absurd result which cannot be justified. Accordingly, the option for providing indirect transportation between coastwise points of commodities which are exempt from requirements regarding rate tariffs, through the utilization of foreign-flag vessels and Canadian rail trackage, is permissible and is not regarded otherwise merely because tariffs may no longer be filed to cover the movements.

On December 29, 1995, Congress passed the Interstate Commerce Commission Termination Act ("ICCTA"). This legislation, which was effective January 1, 1996, abolished the ICC (see ?? 2 and 101, Pub. L. 104-88) and although it did provide conforming amendments to several sections of the Merchant Marine Act of 1920 (see ? 321, Pub. L. 104-88), nothing in the remainder of the statute or its legislative history specifically addresses the ramifications of the aforementioned abolition on the administration of the Jones Act (? 27 of the Merchant Marine Act of 1920, as amended), including the Third Proviso. However, our review of the legislation in its entirety does yield guidance with respect to this issue. Specifically, we find certain provisions of the legislation instructive in this matter.

Section 201 of Pub. L. 104-88 amended title 49 of the United States Code by adding a new Chapter 7 establishing the Surface Transportation Board (the "Board") within the Department of Transportation. (? 201(a), Pub. L. 104-88, citing 49 U.S.C. ? 701) The statutory amendment provides as follows:

Except as otherwise provided in the ICC Termination Act of 1995, or the amendments made thereby, the Board shall perform all functions that, immediately before the effective date of such Act, were functions of the Interstate Commerce Commission or were performed by any officer or employee of the Interstate Commerce Commission in the capacity as such officer or employee. (? 210(a), Pub. L. 104-88, citing 49 U.S.C. ? 702)

Accordingly, there exists unequivocal statutory support for the proposition that notwithstanding the demise of the ICC, those matters which were within its jurisdiction that were not subsequently eliminated by the ICCTA or the amendments made thereby (e.g., Third Proviso-dependent authorization) are now vested in the Board.

In regard to Third Proviso ruling requests to be considered by Customs subsequent to the effective date of the ICCTA, we note that pursuant to ? 204(a)(2) of the ICCTA, the Board published a final rule in the Federal Register on June 7, 1996, which removed from the Code of Federal Regulations obsolete ICC regulations, including the rail tariff filing requirement. (61 FR 29036) On July 5, 1996, the Board published in the Federal Register as a final rule its new regulations (49 CFR Part 1300, effective August 4, 1996), which require rail carriers to merely disclose their rates and service terms to any person upon formal request, as well as provide advance notice of increases in such rates or a change in such service terms. (61 FR 35139) Notwithstanding the substitution of ICC authorization with the aforementioned Board oversight, the ICCTA is devoid of any indicia that this new regulatory authority should be interpreted other than in pari materia with the Third Proviso.

It is therefore our position that notwithstanding the abolition of the ICC and the failure on the part of the ICCTA to specifically provide for conforming amendments to the Jones Act, the cumulative effect of the ICCTA nonetheless mandates that the Third Proviso remain in force albeit subject to compliance with the requirements of the Board. Further in this regard we note Customs ruling letter 112085, dated March 10, 1992, issued prior to the ICCTA, wherein we held that the legality of a proposed movement of frozen seafood pursuant to the Third Proviso was not thwarted merely because the language therein provides for the filing of a rate tariff and such merchandise was a commodity for which no rate tariff was required under ICC procedures. We believe the same such result would occur were we to disallow the proposed movement now under consideration where, as discussed above, the rail tariff filing requirement has been removed pursuant to the regulations of the Board promulgated pursuant to the ICCTA.

Accordingly, the indirect transportation between coastwise points of commodities which are exempt from requirements regarding rate tariffs, through the utilization of foreign-flag vessels and Canadian rail trackage, is not prohibited merely because no tariffs may be filed to cover the movements.

HOLDING:

Following thorough consideration of the facts presented as well as analysis of the law and applicable precedents, we have determined that the movement of merchandise as proposed under the so-call third proviso of the Jones Act is permissible for the reasons specified in this ruling.

Sincerely,

Jerry Laderberg

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