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HQ 115360

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May 29, 2001

VES-3-02-RR:IT:EC 115360 GEV

CATEGORY: CARRIER

Patz Turner
601 N. Atlantic Avenue #708
New Smyrna Beach, Florida 32169

RE: Coastwise Trade; Passengers; Condominiums; 46 U.S.C. App. § 289

Dear Ms. Turner:

This is in response to your letter, on behalf of the Residents’ Committee of THE WORLD OF RESIDENSEA, a new residential cruise vessel currently under foreign construction. Your letter enclosed various information pertaining to the vessel, including the deck layout, sales material, several photos of the ship under construction, and the 2002 cruise itinerary. You inquire as to whether the owners of residences on board the vessel are subject to the provisions of the passenger coastwise law. The ruling you seek is set forth below.

FACTS:

The above-referenced vessel is being constructed in Norway and Sweden as an ocean-going luxury resort and cruise ship. It will be Bahamian-flagged and although its homeport will be Nassau, it will continually circumnavigate the globe, making stops from 1 to 3 nights at various ports, allowing those on board to visit inland for day trips, sightseeing and other side trips as might be available. When completed it will have 110 apartments that will be sold to resident owners for their exclusive use. Those apartments, with the common areas on board, will comprise approximately 86% of the area of the ship. In addition, 88 guest suites comprising approximately 14% of the ship will be constructed for rental purposes for fare paying passengers.

The apartments will be purchased pursuant to the terms of executed Residence Agreements which will contractually confer the following to the purchaser: (1) Residency Rights for exclusive use and occupancy; (2) rights to use and occupy certain common areas of the vessel as described in the Residence Agreements; and (3) membership in the Club, which will offer recreational and social facilities, activities and services on board the vessel. These rights will be conferred for a period of fifty years after the date of delivery of the vessel, unless terminated earlier, and are subject to renewal provisions. Sales prices for Residency Rights to apartments will range from approximately $2,000,000 to $6,840,000 per apartment depending on its square footage. In addition to this sales price, purchasers of the Residency Rights will pay a pro-rata share of the annual maintenance cost of operating the vessel. Furthermore, the Residents’ Committee, on whose behalf you are writing, will function much like a condo association and will approve the operating budget and itinerary of the vessel.

You state that you have purchased the Residency Rights to Apartment #1007 on board THE WORLD OF RESIDENSEA and that this will be your full-time residence for the next 10 or more years. You would like to leave the vessel when it docks in various United States ports to visit relatives, and return to the vessel when it leaves port to continue on its itinerary.

ISSUE:

Whether the purchasers of Residency Rights to apartments aboard THE WORLD OF RESIDENSEA pursuant to a Residence Agreement are “passengers” within the meaning of 19 CFR § 4.50(b) so that their transportation between coastwise points would violate 46 U.S.C. App. § 289.

LAW AND ANALYSIS:

The U.S. Customs Service enforces various navigation laws which deal with the use of vessels in what is recognized as coastwise trade. Included among these laws is the Act of June 19, 1886, as amended (24 Stat. 81; 46 U.S.C. App. § 289, sometimes called the coastwise passenger law), which 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.

Pursuant to § 4.50(b), Customs Regulations (19 CFR § 4.50(b)), the word "passenger," for purposes of the above-cited statute, is defined as "...any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business."

Customs has consistently interpreted the prohibition set forth in 46 U.S.C. App. § 289 to apply to all vessels except United States-built, owned, and properly documented vessels (see 46 U.S.C. § 12106, 12110; and 46 U.S.C. App. § 883). Furthermore, Customs has promulgated regulations pursuant to 46 U.S.C. App. § 289. These regulations may be found in title 19, Code of Federal Regulations, § 4.80a.

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 internal waters, landward of the territorial sea baseline, in cases where the baseline and coastline differ.

With respect to the purchasers of Residency Rights as discussed above, upon reviewing the documentation submitted it is our position that they would be sufficiently connected to the business of the vessel so as not to be considered “passengers” within the meaning of 19 CFR § 4.50(b). Furthermore, in those cases such as yours where the purchasers will maintain the apartments as their full-time residences, when they get on and off the vessel at various coastwise points they will not be considered to “embark” and “disembark” as those terms are defined in § 4.80a(a)(4), Customs Regulations (19 CFR § 4.80a(a)(4)) which, as noted above, is interpretive of 46 U.S.C. App. § 289. Consequently, they will not be considered to have been transported coastwise for purposes of that statute.

Accordingly, the transportation of these individuals between coastwise points would not be violative of 46 U.S.C. App. § 289. It should be noted, however, that the same rationale does not apply to renters of these apartments, nor to those persons renting the 88 guest suites on board the vessel.

HOLDING:

The purchasers of Residency Rights to apartments aboard THE WORLD OF RESIDENSEA pursuant to a Residence Agreement are
not “passengers” within the meaning of 19 CFR § 4.50(b) so that their transportation between coastwise points would not violate 46 U.S.C. App. § 289.

Sincerely,

Larry L. Burton
Chief
Entry Procedures and Carriers Branch

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