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HQ 115813

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December 16, 2002

VES-3-02-RR:IT:EC 115813 GEV

CATEGORY: CARRIER

Theodore L. Jones, Esq.
The Law Office of Jones
Post Office Box 65122
Baton Rouge, Louisiana 70896

RE: Coastwise Trade; Passengers; Panama; Nearby Foreign Port; 46 U.S.C. App. § 289; 19 CFR § 4.80a

Dear Mr. Jones:

This is in response to your letter dated October 14, 2002, on behalf of the Republic of Panama (“Panama”), requesting a ruling that its ports be considered “distant foreign ports” for purposes of 19 CFR § 4.80a rather than “nearby foreign ports” as defined in that regulatory provision. Our ruling on this matter is set forth below.

FACTS:

Since the reversion of the Panama Canal to Panama, that country has worked vigorously to foster economic growth and employment opportunities in all areas included in the reversion. Much of the focus of this effort has been on tourism, an industry that is non-pollutant, socially inclusive, and a provider of decent wages. Toward that end, Panama has attracted considerable foreign investment and has built state-of-the-art facilities, on both the Atlantic and Pacific sides of the Canal, to serve the passenger vessel industry.

These and other efforts have resulted in a marked increase in tourism in Panama. In fact, Panama’s figures show that the number of visits to its many attractions increased by 41% between 1999 and 2002. However, the inclusion of Panama’s ports in the term “nearby foreign
port” as defined in § 4.80a(a)(2), Customs Regulations (19 CFR § 4.80a(a)(2)) is preventing Panama from realizing the volume of passenger traffic needed to make its new tourism facilities economically feasible.

Panama estimates that if its ports were designated “distant foreign ports” as that term is defined in § 4.80a(a)(3), Customs Regulations (19 CFR § 4.80a(a)(3)), the number of U.S. passengers visiting Panama would increase by as much as tenfold. Expenditures per passenger in Panama are estimated at $100-$400 per day, or some $259,000.00 per port call. Such an influx obviously would strengthen Panama’s economy and have a corresponding effect on employment in such areas as crafts, meals, transportation, commerce, telecommunications, and services in general.

ISSUE:

Whether ports in Panama are “nearby” or “distant” foreign ports as those terms are defined in 19 CFR § 4.80a(a)(2) and (3), respectively, for purposes of the administration of 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.

The general intent and purpose of this statute was to provide a “legal structure that guarantees a coastwise monopoly to American shipping and thereby promotes the development of the American merchant marine.” Autolog Corp. v. Regan, 731 F.2d 25, 28 (DC Cir. 1984); see also The Granada, 35 F.Supp. 892, 893, 1940 AMC 1601 (DC Pa 1940) (stating that the legislative aim of § 289 was the creation of a practical monopoly of coastwise and domestic shipping business for United States ships).

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.

The aforementioned regulations are found at title 19, Code of Federal Regulations, § 4.80a (19 CFR § 4.80a). These regulations provide guidelines for determining whether the movement of passengers between two coastwise points, with at least one intervening foreign port, is considered coastwise trade. To facilitate such determinations a distinction has been drawn between “nearby foreign ports” and “distant foreign ports”. By visiting at least one “distant foreign port”, a violation of 46 U.S.C. App. § 289 may be avoided on a cruise moving between U.S. ports.

Sections 4.80a(a)(2) and (3), Customs Regulations (19 CFR §§ 4.80a(a)(2) and (3)) define the terms "nearby foreign port" and "distant foreign port", respectively. These definitions are set forth below.

Nearby foreign port means any foreign port in North America, Central America, the Bermuda Islands, or the West Indies (including the Bahama Islands, but not including the Leeward Islands of the Netherlands Antilles, i.e., Aruba, Bonaire, and Curacao). A port in the U.S. Virgin Islands shall be treated as a nearby foreign port.

Distant foreign port means any foreign port that is not a nearby port.

The above foreign port distinction in the Customs Regulations is based solely upon geographic considerations, not nationality, sovereignty, historical or economic considerations. This distinction is such that non-qualified vessels may not easily call at certain ports on voyages whose primary purpose is providing transportation between U.S. ports.

With respect to the ports of Panama, Customs has long-held that any such port is a “nearby foreign port” within the meaning of §4.80a(a)(2). This position is reflected in numerous Customs rulings interpretive of the navigation laws enforced by this agency, including 46 U.S.C. App. § 289. (See, e.g., Customs ruling letters 106662, dated March 16,

1984; 111109, dated July 31, 1990; 112233, dated June 30, 1992; 112324, dated June 30, 1992; 112370, dated July 20, 1992; 226982, dated October 15, 1996; 113957, dated June 10, 1997; 114426, dated August 4, 1998; 114425, dated August 17, 1998; and 112425, dated December 14, 1992) Such rulings further state that to hold otherwise would permit such a deviation from the purpose of the statute as to require enabling legislation.

That Customs has employed a purely geographical criterion by which to administer the aforementioned legal authority is further evidenced by Customs ruling letter 110765, dated February 8, 1990. In that ruling we held that Isla de San Andreas, a colony of Colombia located just off the coast of Nicaragua, is a “nearby foreign port” based on its proximity to a country of Central America, notwithstanding its affiliation with Colombia, a South American country the ports of which are “distant foreign ports”.

Assuming, arguendo, the absence of a need for the aforementioned legislation, you should know that the adoption of the position you proffer would require the revocation of that set forth in the above-listed rulings. Such an action may only occur pursuant to the publication and comment procedures provided in 19 U.S.C. § 1625(c)(1). In view of the fact that the designation of Panama as a “distant foreign port” would run contra to the Congressional intent of 46 U.S.C. App. § 289 as discussed above, we decline to commence with this course of action.

HOLDING:

Ports in Panama are “nearby foreign ports” as defined in 19 CFR § 4.80a for purposes of the administration of 46 U.S.C. App. § 289.

Sincerely,

Georgina Grier

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