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HQ H006047

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February 2, 2007

VES-3-07/VES-5-19-RR:BSTC:CCI H006047 rb

CATEGORY: CARRIER

Mr. Peter Aljian
Marine Operations Manager
Turkon America Inc.
100 Plaza Drive
Secaucus, NJ 07094

RE: Coastwise trade; Transshipment of cargo; Casualty; 19 U.S.C. 55102; 19 CFR 4.34(a)

Dear Mr. Aljian:

In your letter of January 29, 2007, with attachments, transmitted electronically, you request that containers of inward foreign cargo destined for Newport News, VA, and Savannah, GA, that were unladen in Newark, NJ, from your vessel, M/V KASIF KALKAVAN, due to rudder failure, be authorized for lading and shipment to their intended destinations aboard your next vessel, M/V SELMA KALKAVAN, scheduled to arrive in Newark on February 5, 2007. Our decision follows.

FACTS:

A non-coastwise-qualified vessel (registered in the Marshall Islands) arrived in Newark, NJ, suffering rudder failure and in need of repairs which, it has been estimated, would take a minimum of three weeks to complete in drydock. Consequently, containers of inward foreign cargo, destined for Newport News, VA, and Savannah, GA, were unladen from the vessel in Newark. The carrier requests that Customs and Border Protection (CBP) allow these containers of cargo to be reladen for transshipment to these manifested destination ports aboard the carrier’s next scheduled vessel, also registered in the Marshall Islands, that is due to arrive in Newark on February 5, 2007.

ISSUE:

Whether the subject containers of inward foreign merchandise that were unladen in Newark may be reladen and transshipped to their manifested ports of destination aboard the carrier’s next scheduled vessel, without violating the coastwise merchandise law (46 U.S.C. 55102).

LAW AND ANALYSIS:

Under 46 U.S.C. 55102 (recodified from former 46 U.S.C. App. 883; Pub. L. 109-304, October 6, 2006), no merchandise may be transported by water, or by land and water, between points within the United States embraced within the coastwise laws, either directly or by way of a foreign port, or for any part of the transportation, in any other vessel than a vessel which is built in and documented under the laws of the United States with a coastwise endorsement, and which is owned by persons who are citizens of the United States.

The question presented in this case concerns the subsequent coastwise transportation of prematurely landed cargo. In this context, as prescribed in 19 CFR 4.34(a), cargo that is “prematurely landed and left behind” by an importing vessel “through error or emergency” may be reladen on the next available vessel owned or chartered by the owner of the importing vessel for transportation to its originally intended destination, provided that the importing vessel have “actually entered” the port of destination of the prematurely landed cargo.

Most notably, under § 4.34(a), the vessel upon which the cargo may be reladen could be a non-coastwise-qualified vessel. As such, § 4.34(a) in effect constitutes an exception to the coastwise merchandise statute (see Customs Bureau Letter of December 28, 1956, MA 192-18.4, to Collector, Tampa, FL (“Section 4.34...has been held to be an exception to the coastwise prohibition”)). However, the coastwise laws, including section 55102, are highly protectionist provisions that are intended to create a “coastwise monopoly” for domestic shippers and crews in order to protect and develop the American merchant marine, shipbuilding, seamen, etc. (see Headquarters ruling (HQ) 116630, of March 27, 2006, and cases cited therein).

Against this backdrop, it is quite clear that the terms and conditions of § 4.34(a) must be strictly construed, which they properly have been given the prevailing administrative precedent in this matter. To this end, specifically, in HQ 112551, of January 13, 1993, which is closely comparable to the instant case, a foreign vessel with inward foreign cargo destined for Newark, NJ, Norfolk, VA, and Charleston, SC, arrived in Newark, and, while there, suffered a fire on board which rendered the vessel unseaworthy. As a result, it was requested that Customs (now Customs and Border Protection (CBP)) permit the containers of inward foreign cargo manifested for Norfolk and Charleston to be reladen aboard other non-coastwise-qualified vessels apparently owned or chartered by the owner of the importing vessel for delivery to the manifested destinations. In denying this request under § 4.34(a), HQ 112551 rightly recognized the implicit meaning of the term “emergency” therein:

The regulations [§ 4.34(a)] require, however, that the importing vessel actually enter the port for which the prematurely discharged cargo was manifested. Id. Thus, the ‘error or emergency’ referenced in the regulation relates to the cargo involved, not the vessel.

Emphasis added. Hence, the “emergency” inherently envisioned in § 4.34(a) that occasions the premature landing of inward foreign cargo must perforce pertain to the cargo itself, rather than to any emergency, or casualty, experienced by the vessel, such as the fire in HQ 112551. As indicated, this construction of the regulation is quite axiomatic, in view of the coincident requirement in § 4.34(a) that the prematurely landed cargo be “left behind” by the importing vessel which must thereafter have “actually entered” the intended port of destination of the cargo.

Similarly, in HQ 111278, of September 25, 1990, certain European members of the North Atlantic Treaty Organization (NATO) had pledged to make available a number of their commercial vessels to supplement U.S. Government vessels for the deployment of U.S. forces. However, it was expected that some of these ships would have to prematurely land their inward foreign cargo in the United States when they were diverted to military service. In rejecting the application of § 4.34(a) in such an instance, HQ 111278 likewise observed that:

The ‘error or emergency’ referenced in section 4.34 relates to the cargo involved, not the vessel... [and]...[a]t the outset we note that the NATO ‘emergency’ in question pertains to the foreign-flag vessels in question, not the cargo they are carrying.

Accord, HQ 115486, of September 14, 2001 (“[T]he emergency contemplated under § 4.34(a) pertains to the cargo being transported which is not the case in the facts presented”) (failure of vessel’s turbocharger).

Accordingly, in the case at hand, the importing vessel entered Newark with rudder failure, and was to go into drydock for a minimum of three weeks for repairs. In this situation, the company seeks authority to relade its inward foreign cargo on another non-coastwise-qualified “sister” vessel for delivery to the manifested destination ports (Newport News and Savannah). Thus, the emergency involved herein is to the vessel itself (rudder failure), as opposed to the cargo.

Also, it is plainly not anticipated in this respect that the importing vessel, which is disabled and in drydock, will have “actually entered” the ports of destination of the prematurely landed cargo, as also required. In other words, it would be the importing vessel, given its disabled condition, that would be “left behind” by the cargo under these circumstances, as opposed to the cargo being ”left behind by the importing vessel,” as expressly mandated in § 4.34(a).

In short, there would be a decided failure in this case to comply with the terms and conditions of the governing regulation, § 4.34(a), that might have otherwise permitted the cargo legally to be carried on another non-coastwise-qualified vessel to the initially manifested ports of destination.

HOLDING:

Under the facts presented, the subject containers of inward foreign merchandise that were unladen in Newark may not be reladen aboard the carrier’s next scheduled vessel and transshipped to their intended ports of destination, without violating the coastwise merchandise law (46 U.S.C. 55102). Section 4.34(a) is not applicable herein because the emergency relates to the importing vessel, and not to the cargo, and the importing vessel, disabled with rudder failure and in drydock, will not have actually entered the ports of destination for which the cargo was originally manifested.

Sincerely,

/S/ Glen E. Vereb

Glen E. Vereb

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