HQ 116373 - Determination of build of vessel less than 5 net tons partially built abroad; 46 U.S.C. App. § 289; 46 U.S.C. § 12102; 19 CFR 4.80(a) - United States International Trade Commision Rulings

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HQ 116373

February 9, 2005

VES 3-19:RR:IT:EC 116373 TLS

CATEGORY: CARRIER

Mr. Brian Wesley
President
The Great Little Boat Company
110-174 Wilson Street
Victoria, British Columbia, Canada V9A 7N7

RE: Determination of build of vessel less than 5 net tons partially built abroad; 46 U.S.C. App. § 289; 46 U.S.C. § 12102; 19 CFR 4.80(a)

Dear Mr. Wesley:

This in response to your letter of December 3, 2004, requesting a ruling that a 20-foot “small passenger ferry” will be considered built in the United States for purposes of the coastwise laws, after final construction stages are completed in Canada as described in the correspondence. You also inquire about the coastwise eligibility of a vessel that will be partially owned by a foreign company.

FACTS:

You state that the vessel at issue, which is in the development stage at this point, will have the following characteristics:

An overall length of 20 feet;
An overall width of eight feet;
An approximate weight of 2,300 pounds;
A “usual” capacity of 12 passengers and a Master Will be under four (4) net tons; and
Will be only designed for passengers and will not carry cargo.

You further state that the vessel has been designed in the United States and will be constructed in the United States, with certain exceptions. You plan to have the final stage of construction completed in Canada, which will include interior finishing, exterior branding, drive system installation, and instrumentation installation. You plan to construct the hull and superstructures in the United States, which will constitute the first phase of construction, and subsequently ship those components to Canada for completion. You estimate the cost of the construction in the United States to be $40,000 and the cost of the construction in Canada to be $20,000. You plan to manufacture several of these vessels for sale to United States citizens who will use them in passenger service within United States coastal waters.

You have also submitted an outline of the work that will be done during the final phase of construction, which you describe as follows:

A INTERIOR FINISHING

This stage of the construction process includes the installation of the helm and driver station. The passenger seating is built and installed. Budget cost: $4000 See images USC 1 AND USC 2

B INSTRUMENTATION

Includes the construction of the driver station including a wiring harness and standard instrumentation package supplied by the motor manufacturer. Budget cost: $2500 See image USC 3

C EXTERIOR BRANDING

Includes the installation of canvas door coverings, a rub rail and customized logos and paint scheme designed to maintain brand image. Budget cost $2000. See image USC 4 AND USC 5

D DRIVE SYSTEM
Includes the installation of the drive system including the drive shaft component parts and engine (typically a 12 hp diesel supplied by Perkins-Caterpillar-a US manufacturer) Budget cost $11500

ISSUE:

Whether a vessel of less than 5 net tons, which has had its hull and superstructure built in the United States, with the final construction phase completed in Canada as described above, is considered a United States-built vessel for purposes of the coastwise laws.

LAW AND ANALYSIS:

Generally, the coastwise laws prohibit the transportation of merchandise or passengers 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. The passenger coastwise law, Title 46, United States Code Appendix, section 289 (46 U.S.C. App. § 289), 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 $300 for each passenger so transported and landed.

Pursuant to 46 U.S.C. §§ 12106 and 12110 and their predecessors (46 U.S.C. §§ 65i and 65m and, before them, 46 U.S.C. § 11) and consistent with 46 U.S.C. App. § 883, the coastwise merchandise law, U.S. Customs and Border Protection (CBP) has consistently held that the prohibition in 46 U.S.C. App. § 289 applies to all non-coastwise-qualified vessels. Non-coastwise-qualified vessels include any vessel other than a vessel built in, properly documented under the laws of, and owned by citizens of the United States, with certain exceptions. See 46 U.S.C. § 12106(a)(2)(B) and sections 4.80(a)(2) and (3), CBP Regulations (19 CFR 4.80(a)(2) and (3)).

Typically, the U.S. Coast Guard determines whether a vessel is built in the United States, for purposes of documentation of the vessel, and this determination is followed by CBP for purposes of the requirement that vessels engaging in the coastwise trade must be built in the United States. However, vessels which are of less than five (5) net tons, as you claim will be true of the small passenger ferry at issue here, cannot be documented under the United States flag by the U.S. Coast Guard. See 46 CFR 67.9(a).

Notwithstanding section 67.9(a), qualified vessels of less than 5 net tons are not precluded from engaging in the coastwise trade simply because they cannot be documented under the laws of the United States. Section 4.80(a), CBP Regulations (19 CFR 4.80(a)), enumerates the vessels which may engage in the coastwise trade. Subparagraph (a)(2) of this section provides that no vessel exempt from documentation, specifically no vessel of less than 5 net tons, shall transport any passengers or merchandise between United States coastwise points unless the vessel is owned by a citizen of the United States and is entitled to or, except for its tonnage, would be entitled to be documented with a coastwise license. As stated above, to be entitled to be documented with a coastwise license a vessel must, among other things, be built in the United States. See also 46 U.S.C. § 12106(a)(2).

Thus, foreign-built vessels may not be used in the coastwise trade, regardless of their dimensions. In making a determination as to whether a vessel is built in the United States, CBP considers the construction done both in the United States and any foreign country, with construction of the hull and superstructure being the critical elements in this case.

Upon reviewing the information you have provided, we find that such vessels, as described herein, will be sufficiently constructed in the United States to be considered United States-built vessels.

Regarding your inquiry about whether a vessel that is partially foreign-owned can be coastwise-qualified, 19 CFR 4.80(a), promulgated pursuant to 46 U.S.C. App. § 802, requires that any vessel engaging in the coastwise trade be owned by a U.S. citizen. In regard to corporate ownership, the aforementioned authority provides that there must be at least 75 percent United States-citizen ownership in the vessel. If these requirements are met, then a vessel that is deemed to be U.S.-built may be eligible for a coastwise endorsement. We note, however, that citizenship requirements pertaining to coastwise documentation are within the purview of the U.S. Coast Guard (as are build requirements for vessels 5 net tons or greater). We suggest you contact that agency at the following address:

U.S. Coast Guard
National Vessel Documentation Center
2039 Stonewall Jackson Drive
Falling Water, West Virginia 25419

HOLDING:

A vessel of less than 5 net tons, which has had its hull and superstructure built in the United States, with the final construction phase completed in Canada as described above, is considered a United States-built vessel for purposes of the coastwise laws.

Sincerely,

Glen E. Vereb
Chief

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