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HQ 116295

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September 20, 2004

VES-3-06/3-23 RR:IT:EC 116295

CATEGORY: CARRIER

William H. Welte
Welte & Welte, P.A.
13 Wood Street
Camden, ME 04843-2036

RE: Coastwise Transportation of Shellfish; 46 U.S.C. App. 883

Dear Mr. Welte:

Under cover of your letter of August 18, 2004, on behalf of your client, Drisko Lobster, Inc., you forwarded a memorandum urging that we reverse Headquarters ruling (HQ) 116268, of July 14, 2004, which concluded that your client’s vessels were unlawfully engaged in the coastwise transportation of merchandise under 46 U.S.C. App. 883. Our ruling follows.

FACTS:

A Maine company operates 2 foreign (Canadian)-built, state-registered vessels, each of which is under 5 net tons, in a shellfish (lobster)-buying business. In this business, the company purchases, lades and transports such shellfish on its vessels from outlying Maine islands to the port of Rockland, Maine, where the lobsters are landed.

ISSUE:

Whether the subject lading, transportation and landing constitutes the unlawful coastwise transportation of merchandise under 46 U.S.C. App. 883, since the vessels are foreign-built.

LAW AND ANALYSIS:

The coastwise transportation of merchandise is governed by 46 U.S.C. App. 883. Section 883, in pertinent part, reads as follows:

No merchandise...shall be transported by water...on penalty of forfeiture of the merchandise (or a monetary amount...) between points in the United States, including Districts, Territories, and possessions thereof embraced within the coastwise laws...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...

Under 19 CFR 4.80b(a), a coastwise transportation of merchandise pursuant to section 883 occurs when merchandise laden at one point embraced within the coastwise laws (“coastwise point”) is unladen at another coastwise point. The coastwise laws apply to any point in the territorial waters of the United States, defined as the belt, 3 nautical miles wide, adjacent to the coast of the United States and seaward of the territorial sea baseline (T.D. 78-440, 12 Cust. Bull. 954 (1978)). “Thus, the internal waters of a State of the United States have been held to be subject to section 883" (Customs Service Decision (C.S.D.) 84-15, 18 Cust. Bull. 858, 860 (1984)). And “merchandise” under section 883 refers to “goods, wares, and chattels of every description” (19 U.S.C. 1401(c)).

To be qualified for the coastwise transportation of merchandise, a vessel must be documented with a coastwise endorsement, which would require, inter alia, that it be U.S.-built (46 U.S.C. 12106(a)(2)(A)). However, while a vessel under 5 net tons is not eligible for such documentation (46 U.S.C. 12102(a)), the vessel must be entitled, except for its tonnage, to be so documented (19 CFR 4.80(a)(2)). Hence, irrespective of its tonnage, a foreign-built vessel would be ineligible to engage in the coastwise transportation of merchandise under section 883.

Manifestly, therefore, the company is in violation of section 883 in effecting the coastwise transportation of its shellfish in its foreign-built vessels, as described.

The Company’s Basic Contentions

Nevertheless, the company believes that, in solely transporting its shellfish coastwise, it is engaged in the fisheries, and cannot be considered as illegally involved in the “coastwise trade.” In support of its position, the company relies very heavily on an abstracted Bureau letter, T.D. 56382(6), which reaffirmed a Customs practice of allowing vessels under 5 net tons, owned in the United States, whether U.S.- or foreign-built, to engage in the American fisheries, including fishing in United States territorial waters. The company is convinced that the fisheries theretofore included solely transportation activities, which, it maintains, were later codified in the Commercial Fishing Industry Vessel Anti-Reflagging Act of 1987 (Anti-Reflagging Act of 1987) (Pub. L. 100-239) (46 U.S.C. 12101(a)(1)). Also, the company contends that in transporting its own shellfish, it is not carrying cargo “for hire,” and cannot be engaged in “trade,” let alone “coastwise trade.”

Coastwise Transportation

However, counsel for the company is unable to identify a single ruling or decision under which the company’s vessels would have been explicitly recognized as being engaged in “fishing” or in the “fisheries,” as referenced in T.D. 56382(6), when conveying its shellfish from various Maine Islands to a Maine port.

On the other hand, notably, several months before issuing the February 26, 1965, Bureau letter that was abstracted as T.D. 56382(6), Customs (now Customs and Border Protection (CBP)) had occasion to rule on a coastwise transportation under section 883 virtually identical to that under review in the instant case. Specifically, in Bureau letter dated August 5, 1964, an undocumented Canadian-built vessel over 5 net tons was purchased by an individual for use in transporting his own lobsters from his lobster pound on Maine’s Matinicus Island to nearby Maine ports. In agreement with local customs authorities who had advised that the vessel could not be used as desired because of its foreign build, Customs ruled that:

Section 883 provides for the forfeiture of merchandise transported between points in the United States in a foreign-built vessel. The transportation of lobsters from Matinicus Island to other ports in Maine by the [vessel], even though no freight may be earned by the vessel, thus is a transportation prohibited by statute, and the lobsters would be subject to seizure and forfeiture when landed at their destination.

Bureau letter of August 5, 1964, MS 217.3 S. Accord, e.g., C.S.D. 80-46, 14 Cust. Bull. 801, 803 (1980) (section 883 precludes the use of a foreign-built barge from lading fish or fish products at one coastwise point, and transporting them to, and unlading them at, another coastwise point); and C.S.D. 81-125, 15 Cust. Bull. 982 (1981). And, as indicated, foreign-built vessels, whatever their size, are precluded from transporting merchandise coastwise (19 CFR 4.80(a)(2)).

Fisheries; The Anti-Reflagging Act of 1987

Under the Anti-Reflagging Act of 1987, supra, in harmony with the definition of “fishing vessel” in the Fishery Conservation and Management Act (FCMA) (16 U.S.C. 1802(17)(B)), the term “fisheries” was expanded beyond solely catching-related activities to subsume the processing, storing and transporting (except in foreign commerce) of fish and related fishery resources in the 3-mile territorial waters of the United States and in the U.S. Exclusive Economic Zone (EEZ) (the zone between 3 miles and 200 miles from the baseline from which the territorial sea of the United States is measured) (46 U.S.C. 12101(a)(1)). The primary purpose of this legislation was to “harmonize” fisheries and maritime law, by imposing similar strictures on the documentation and construction of fish processing and fish tender vessels operating in the fisheries trade “as are imposed on vessels engaged in coastwise transportation under the shipping laws” (H. Rep. No. 100-423, reprinted in, 1987 U.S. Code Cong. & Admin. News 3245; and id., at 3248-3249). In thus harmonizing fisheries law with the prevailing requirements concerning coastwise transportation under the shipping laws, it is axiomatic that there was no legislative intent whatever to undermine or interfere with the continued application of the coastwise laws in this regard. Indeed, as expressly confirmed in the legislative history of the Anti-Reflagging Act:

Further, the Committee does not intend, by inclusion of fish tender operations within the definition of fisheries, to eliminate any requirements that are applicable under the coastwise laws to fish tender vessels engaged in the coastwise trade.

Ibid., at 3254 (emphasis added). Against this backdrop, then, parenthetically, even if the company’s vessels were to be employed in the fisheries under 46 U.S.C. 12101(a)(1) (which its vessels are not, as correctly concluded in HQ 116268; and see “fish tender vessel” as defined in 46 U.S.C. 2101(11c)), the vessels would, nevertheless, still be prohibited, in the course of such employment, from performing any “coastwise” transportation under section 883 (and see C.S.D. 82-144, 16 Cust. Bull. 966, 969 (1982) (should a foreign-built fish processing vessel engaged in processing crab transport the crab from a catching vessel in United States territorial waters to a United States port, this would violate the coastwise laws, notwithstanding that fish processing is “fishing” as defined in the FCMA)).

In short, section 883 governs the coastwise transportation of merchandise, unless such transportation/merchandise is specifically exempted therefrom (compare, e.g., section 883, proviso 10 (Pub. L. 97-389, § 504 (1982)) (supplies aboard U.S. documented fish processing vessels, that were needed and used aboard such vessels for processing or assembling fishery products not to be treated as “merchandise” under section 883)).

Section 883 Not Limited to Transportation “For Hire”

The company briefly contends that in transporting its own shellfish, it is not carrying cargo “for hire,” and is not engaged in “trade,” let alone “coastwise trade.” However, as illustrated in Bureau letter of August 5, 1964, supra, section 883 is not restricted to coastwise transportation “for hire” (see also C.S.D. 80-46, supra, at 802, 803 (section 883 simply prohibits a non-coastwise-qualified vessel from engaging in the coastwise transportation of merchandise; to be merchandise under section 883, material need only have some value to the owner of which he would be deprived by forfeiture); and see International Raw Materials, Ltd. v. Baker, No. 87-2005 (E.D. Pa. May 20, 1988), 22 Cust. B. & Dec., No. 25 (June 22, 1988), 19, at 23 n.7 (the provision of section 883 in question does not speak of “trade;” rather, it regulates the coastwise “transportation” of merchandise)). Moreover, although coastwise transportation under section 883 is customarily referred to as “coastwise trade,” such a characterization accorded to a statute likewise cannot constrict its plain meaning (compare Railroad Trainmen v. Baltimore & O.R.R., 331 U.S. 519, 528-529 (1947) (recognizing that headings and titles of statutes are nothing more than a reference guide and cannot limit the plain meaning of the statutory language)). Consequently, absent the enactment of a private bill passed by Congress that would exempt the company’s vessels from section 883, the company’s use of its vessels under the present circumstances is in violation of the coastwise laws. It is observed that such private legislation was sought for the vessel involved in Bureau letter of August 5, 1964, supra.

HOLDING:

The company’s lading and transportation of its shellfish (lobsters) on its foreign-built vessels from various Maine Islands, and their subsequent landing at a Maine port, constitutes the unlawful coastwise transportation of merchandise under 46 U.S.C. App. 883, which is prohibited to such vessels due to their foreign build.

EFFECT ON OTHER RULINGS:

HQ 116268 is reaffirmed.

Sincerely,

Larry L. Burton

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