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HQ 116382

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January 25, 2005

VES-3-17-RR:IT:EC 116382 GOB

CATEGORY: CARRIER

Walter H. Lion, Esq.
McLaughlin & Stern, LLP
260 Madison Avenue
New York, NY 10016

RE: Coastwise Trade; 46 U.S.C. App. 883; Sixth Proviso

Dear Mr. Lion:

This letter is in reply to your letter of December 22, 2004, with respect to the request of the parties to the “East Coast North America to West Coast South America and Caribbean Cooperative Working Agreement” (the “Vessel Sharing Agreement” or the “VSA”).

FACTS:

By letters of September 23, 2002 (HQ 115732) and February 21, 2003 (HQ 115891), this office advised that we considered that the VSA, as then drafted, did not convey the status of joint vessel operational agreement on the parties such that the Sixth Proviso to 46 U.S.C. App. 883 would be applicable. We cited certain language which seemed to indicate that the VSA “could be interpreted as a slot or space charter agreement which . . . would not fulfill minimal statutory ownership or operational requirements of a valid vessel sharing agreement.”

In your letter of December 22, 2004 you state that you have amended the language which we cited in our earlier letters. More specifically, the language in sections 5.1, 5.2, and 5.3 has been revised.

ISSUE:

Whether, for the purpose of the Sixth Proviso to 46 U.S.C. App. § 883, the parties to the VSA should be treated as one owner/operator.

LAW AND ANALYSIS:

Title 46, United States Code Appendix, section 883 (46 U.S.C. App. § 883), commonly called the Jones Act, provides, in part, that no merchandise shall 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 vessel other than a vessel built in and documented under the laws of the United States and owned by citizens of the United States. Section 883 was amended by the Act of September 21, 1965 (Pub. L. 89-194, 79 State. 823), which added the Sixth Proviso, and by the Act of August 11, 1968 (Pub. L. 90-474, 82 State. 700), which amended that proviso.

The 1965 Act exempted from the provisions of section 883 the coastwise transportation of empty cargo vans, empty lift vans, and empty shipping tanks in non-coastwise-qualified United States-flag vessels or foreign-flag vessels, on a reciprocal basis, when the vans and tanks are owned or leased by the owner or operator of the transporting vessels and are being transported for use in the carriage of cargo in foreign trade. The 1968 Act added equipment for use with cargo vans, lift vans, and empty shipping tanks, empty barges specifically designed for carriage aboard a vessel, and certain empty instruments of international traffic to the articles included within the sixth proviso. These articles and the articles covered by the 1965 Act were required by the 1968 Act to be owned or leased by the owner or operator of the transporting vessel and transported for his use in handling his cargo in foreign trade.

The 1968 Act also added stevedoring equipment and material to the articles included within the Sixth Proviso. To qualify for the exemption from section 883 under the Sixth Proviso, the stevedoring equipment and material must be owned or leased by the owner or operator of the transporting vessel or owned or leased by the stevedoring company contracting for the lading or unlading of the vessel and the stevedoring equipment and material must be transported without charge for use in the handling of cargo in foreign trade.

The key issue in our analysis of cases under the Sixth Proviso of 46 U.S.C. App. § 883 frequently involves the degree of operational control of the vessel.

In HQ 116276, dated August 26, 2004, a ruling involving the Sixth Proviso to 46 U.S.C. App. 883, we stated:

In reviewing prior VSAs, we note that there are several factors under which the agreements are formed and the parties are governed which indicate that the members shared the operational control of the designated vessels. For example, the VSA members would jointly agree upon when, where and which vessels they would operate. They would also agree to cooperate in such matter as insurance, leases, sailing schedules, port calls, rate policies and the terms of service contracts, among other things. In addition, in other cases, the parties also pooled shore-side chassis and made them available for any of the members’ containers.

In Headquarters Ruling Letter 114560, dated January 14, 1999, we stated that the above factors will be considered together with generally accepted principles and that, if possible, the law should be interpreted in a dynamic and forward-looking manner which takes into account changes and evolving practices which were not contemplated at the time of a statutory enactment.

Based upon the revisions made to the VSA to address the concerns we raised previously, we believe that the VSA sufficiently demonstrates that the parties may be treated as one owner/operator for the purpose of the Sixth Proviso to 46 U.S.C. App. § 883.

Therefore, the parties to the VSA may transport each others’ containers aboard their vessels provided that the other requirements of the Sixth Proviso to 46 U.S.C. App. § 883 and section 4.93, Customs and Border Protection (“CBP”) Regulations (19 CFR 4.93) are complied with.

HOLDING:

The parties to the VSA may be treated as one owner/operator for the purpose of the Sixth Proviso to 46 U.S.C. App. 883. Therefore, the parties may transport each others’ containers aboard their vessels provided that the other requirements of the Sixth Proviso to 46 U.S.C. App. § 883 and section 4.93, CBP Regulations (19 CFR 4.93) are complied with.

Sincerely,

Glen E. Vereb
Chief

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