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HQ 116520





November 3, 2005

VES-3-02/06/14-RR:BSTC:CCI 116520 rb

CATEGORY: CARRIER

James F. McDonough, Jr.
Evans, Osborne & Kreizman, LLC
1500 Lawrence Avenue
Ocean, NJ 07712

RE: Applicability of coastwise laws to proposed uses of foreign-built submarine; 46 U.S.C. App. 289; 19 CFR 4.50(b); 46 U.S.C. App. 883

Dear Mr. McDonough:

In your letter of August 2, 2005, on behalf of your client, Mr. Gregory Kokes, you request a ruling principally as to whether a time charterer’s personnel carried aboard a foreign-built submarine for the performance of certain operations would violate the coastwise laws. Our ruling in this matter follows.

FACTS:

A foreign-built submarine commanded and manned by three or four crew members is to be time-chartered. The vessel may be used solely for demonstration rides, where personnel of a potential time charterer are transported on such rides for purposes of evaluation, after which the personnel would leave the vessel at the point of their initial embarkation. In other instances, the vessel, using its crew and/or a time charterer’s personnel, may engage in the following: environmental and hydrographic studies as part of marine research; precision sea floor mapping for cable and pipe route surveys; inspections of submerged structures including cable and pipelines; marine construction work and intervention; sonar testing and participation in anti-submarine warfare exercises for the United States Navy; marine archaeology and recovery efforts; and underwater filming.

ISSUE:

Whether any of the various activities under “FACTS” constitute coastwise trade, thereby requiring the use of a coastwise-qualified vessel.

LAW AND ANALYSIS:

Generally speaking, the coastwise trade consists of the transportation of passengers or merchandise between points in the United States embraced within the coastwise laws (E.g., Headquarters ruling (HQ) 106983, of September 26, 1984). Under 46 U.S.C. App. 883, the coastwise transportation of merchandise (comprising “goods, wares, and chattels of every description,” 19 U.S.C. 1401(c)) is prohibited in any other than a coastwise-qualified vessel, i.e., a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States. Also, in concert with 46 U.S.C. 12106 and 12110, the requirement that passengers likewise be transported coastwise in a coastwise-qualified vessel has long and consistently been applied as well to 46 U.S.C. App. 289 (E.g., HQ 109815, dated December 5, 1988); under 19 CFR 4.50(b), a “passenger” is defined as “any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business.”

In applying the coastwise laws, Customs (now Customs and Border Protection (CBP)) has ruled that a point in United States territorial waters is considered a point embraced within the coastwise laws; and that the coastwise laws typically apply to points in the territorial sea, defined as the belt, three (3) 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 the coastline differ (T.D. 78-440). Also, under the Outer Continental Shelf Lands Act (43 U.S.C. 1333(a), as amended), the coastwise laws are extended to fixed structures, artificial islands, drilling platforms, including mobile rigs, and similar structures, during the period in which they are secured to or submerged onto the seabed of the OCS for exploration, development or production purposes (see, e.g., HQ 115799, dated September 30, 2002).

Regular Crew of Vessel

Those persons commanding and crewing the vessel would clearly not be passengers for coastwise purposes, and their transportation aboard the vessel in furtherance of any of the activities described in this case would not constitute coastwise trade (see, e.g., HQ 112982, of January 12, 1994).

Demonstration Rides

Ordinarily, a vessel transporting persons, other than its regular crew, exclusively within U.S. territorial waters is thereby engaged in coastwise trade, even if it embarks and disembarks such persons at the same coastwise point (T.D. 22275). But, as to the carriage of a potential time charterer’s personnel aboard the vessel on demonstration rides where such personnel embark and disembark at the same point, it is well established that such a vessel is not used in the coastwise trade even though the ride is entirely within U.S. territorial waters; the persons so transported are not considered to be passengers under these conditions (E.g., HQ 108194, of February 27, 1986; HQ 108996, of July 24, 1987).

Research; Studies; Surveys; Undersea Mapping

Furthermore, the use of a vessel for research activities is not coastwise trade (HQ 109815, supra (use of submersible for research/exploration)). This being so, the use of a non-coastwise qualified vessel to transport persons participating in such research to, from, and between research sites in United States territorial waters, whether or not the persons participating in the research temporarily leave the vessel at the research sites, would not violate the coastwise laws, as such persons would be sufficiently connected with the business of the vessel so as not to be passengers under section 289; and, for the same reason, any supplies and equipment carried aboard the vessel and necessary for the research would not be merchandise under section 883 (ibid.).

However, if such research activities included the transportation between coastwise points of any persons other than vessel crew or other persons engaged in the research, or of any materials other than the usual supplies and equipment necessary for that research, the coastwise laws would be violated, as such other persons and materials would be passengers and merchandise, respectively, under sections 289 and 883 (ibid.).

Hence, within the foregoing parameters, the coastwise laws would not be violated by the carriage of a charterer’s personnel aboard the submarine to conduct either: environmental and hydrographic studies as part of marine research (HQ 113461, of June 8, 1995 (technicians aboard vessel to acquire oceanographic data for various surveys pertaining to the nature of the offshore marine environment)); or precision sea floor mapping for cable and pipe route surveys (HQ 112122, dated July 22, 1992 (scientists on chartered vessel to survey and map ocean floor over the route of a planned telecommunications cable)).

Inspections; Installation; Construction; Repairs

In addition, it has long been the position of Customs (now CBP) that the transportation of equipment, supplies and materials used on or from the transporting vessel in effecting such services as inspections and/or installations of, and/or repairs to, offshore or sub-sea structures, including the laying and repair of pipelines, is not coastwise trade, provided such articles are necessary for the accomplishment of the vessel’s mission, and are usually carried on board as a matter of course; and the carriage aboard the vessel of crew members, and personnel such as divers and technicians, as well as construction personnel to accomplish the aforementioned services performed on or from the vessel likewise
does not constitute coastwise trade (E.g., HQ 113838, of February 25, 1997 (involving, inter alia, inspection/maintenance/repair of oil and gas pipelines and production platforms; and installation of pipelines and wellheads); accord, HQ 115771, of August 19, 2002 (pipeline repairs)).

Thus, within the above-noted parameters, the transportation of a charterer’s personnel, along with equipment, supplies, and materials, aboard the submarine, as necessary to inspect submerged structures, including cable and pipelines, and/or to engage in construction activities, that are performed with such equipment and by such personnel on or from the subject vessel would not violate the coastwise laws; the equipment and supplies as well as the personnel so transported would under these circumstances be connected to the business of the vessel so as not to be merchandise or passengers under the coastwise laws (HQ 113838, supra).

Sonar Testing (Scientific Research and Investigation)

Where a private laboratory under contract with the United States Navy had explicitly conducted sonar testing, and wanted to conduct certain other scientific research, investigations and testing with the use of a non-coastwise-qualified vessel that would carry special electronic gear as well as scientists and technicians to operate and maintain this instrumentation, it was determined, in HQ 102388, dated December 14, 1976, that the “the sole use of the vessel as described in conducting the research and testing is not a use of the vessel in the coastwise trade [so that]...[t]he transportation of the special electronic gear to conduct the scientific investigations and the scientists and technicians to operate and maintain the scientific instrumentation would not be a use of the vessel in the coastwise trade.”

Consequently, the same result as with oceanographic research activity generally, as previously discussed, would obtain in this case in relation to the contemplated sonar testing (see “Research; Studies; Surveys; Undersea Mapping,” supra). However, it is unclear what if any additional activities/operations are specifically intended by “participation in anti-submarine warfare exercises for the United States Navy.” Therefore, beyond use in sonar testing, and other such scientific research, investigation and testing, as already mentioned, further consideration of the question of “anti-submarine warfare exercises” in this context would not be feasible without a more detailed description of the activities entailed thereby, in order to ensure that such endeavors would not encompass any conveyance of passengers or merchandise between coastwise points.

Marine Archaeology and Recovery Efforts

Employing a vessel with attendant equipment and personnel to conduct underwater archeological surveys (see HQ 113461, supra) and/or related research/exploration (see, HQ 109815, supra) (e.g., to locate underwater sites), and the use of the vessel in this connection for transporting personnel from shore to a dive site (e.g., another coastwise point), or as a base/platform for the diving, or for maneuvering a remotely-operated vehicle, and for berthing such personnel would not be coastwise trade (HQ 115381, dated June 15, 2001 (locating and recovering treasure trove from sunken Spanish galleon in coastwise waters)). Such personnel would again be engaged under the circumstances in furtherance of the business of the vessel so as to have a “nexus sufficient for them to be considered other than passengers” under section 289 (ibid.); and, for the same reason, equipment transported to the coastwise dive, or work, site in support of the vessel’s mission would not be merchandise under section 883 (ibid.).

By contrast, any archeological artifacts or treasure trove recovered from a coastwise point in the course of such an expedition would comprise merchandise for purposes of section 883; and, hence, the lading and transportation of a recovered artifact or any treasure from a coastwise point and its unlading at another coastwise point would have to be effected in a coastwise-qualified vessel (ibid.; and see HQ 106983, supra). Of course, if the point where an artifact or treasure is recovered and from which it is transported is not a coastwise point, the vessel would not be engaged in the coastwise trade (HQ 113156, of July 8, 1994). (Parenthetically, it is observed that, to the extent such recovery may represent salvaging operations, a “foreign vessel,” as provided in 46 U.S.C. App. 316(d), is precluded, with limited exceptions, from engaging in such operations in certain waters.)

Underwater Filming

With reference to the making of a film or movie using a non-coastwise-qualified vessel not owned by the company making it, Customs (CBP) has held that the mere carriage of technicians aboard a vessel for this purpose does not amount to a sufficiently direct and immediate nexus to the vessel’s operation, ownership, navigation or business to conclude that they would be other than passengers; and, thus, their transportation for such an endeavor between two coastwise points, or entirely within U.S. territorial waters and back to the initial point of embarkation, would be a violation of section 289 (see HQ 112982, supra). However, the carriage of these passengers, while engaged in filming, from a United States point to a point on the high seas and their return to the original point of embarkation (a “voyage to nowhere,” see 29 Op. Atty. Gen. 318 (1912)) would not violate section 289, as this is not considered to be coastwise trade (see Bureau Letter MA 212, dated July 3, 1957).

With respect to the cameras, film, and other equipment used in filming, such articles would be treated as merchandise under section 883 and could not be laden at one coastwise point, and transported to and unladed at another such point; these implements may, however, be transported on board for purposes of filming provided their point of lading and unlading is the same (HQ 112982, supra).

HOLDINGS:

Those persons commanding and crewing the vessel would not be passengers for coastwise purposes, and their transportation aboard the vessel in furtherance of any of the activities described in this case would not constitute coastwise trade.

Within the limitations prescribed under “LAW AND ANALYSIS,” the vessel would not be engaged in coastwise trade, and a time charterer’s personnel aboard the vessel would not be passengers, when involved in: demonstration rides (for a potential charterer); environmental or hydrographic studies as part of marine research; precision sea floor mapping for cable and pipe route surveys; inspections of submerged structures including cable and pipelines; marine construction work and intervention; sonar testing; and marine archaeology involving research, surveys and exploration. Also, “anti-submarine warfare exercises” would not constitute coastwise trade, provided of course that any specific activities related thereto do not encompass the coastwise transportation of passengers or merchandise.

However, the recovery, in the course of a marine archeological expedition, of any archeological artifact and/or treasure from a coastwise site and its transportation to and unlading at another such site would be coastwise trade, requiring the use of a coastwise-qualified vessel. Also, with respect to the making of an underwater film or movie, a time charterer’s technicians engaged in such a purpose while being transported from one coastwise point to another, or entirely within U.S. territorial waters and back to the initial point of embarkation, would be passengers being carried in the coastwise trade in violation of section 289; and the cameras, film, and other equipment used in filming would be treated as merchandise under section 883, so that they could not be laden at one coastwise point, and transported to, and unladed at, another such point.

Sincerely,

Glen E. Vereb

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