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HQ H024222

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March 19, 2008

VES-3-02-OT:RR:BSTC:CCI H024222 JLB

CATEGORY: CARRIER

Mr. William H. Northwall
4051 12th St. NE
St. Petersburg, Florida 33703

RE: Coastwise Transportation; 46 U.S.C. § 55103

Dear Mr. Northwall:

This letter is in response to your correspondence dated March 4, 2008, in which you request a ruling on whether your 40-foot, U.S.-built yacht can be occasionally chartered with only its recreation endorsement. Our ruling on your request follows.

FACTS

You own a 40-foot Meridian motor yacht with a recreation endorsement that is U.S.-built and has never been foreign owned. The vessel is based in the Harborage Marina in St. Petersburg, Florida and is overseen by a small company that has your permission to charter the vessel. The vessel is usually chartered only two days or less per month. When chartered, the vessel, with a captain provided, travels along the West coast of Florida from St. Petersburg to Ft. Meyers and essentially remains within the U.S. territorial waters.

ISSUE

Whether the chartered vessel described above is engaging in coastwise trade in violation of 46 U.S.C. § 55103?

LAW AND ANALYSIS

The coastwise passenger statute, former 46 U.S.C. App. § 289 recodified as 46 U.S.C. § 55103, pursuant to P.L. 109-304 (October 6, 2006), states that a vessel shall not transport passengers “between ports or places in the United States to which the coastwise laws apply, either directly or by way of a foreign port,” unless the vessel was built in and documented under the laws of the United States and owned by persons who are citizens of the United States. See also 19 C.F.R. § 4.80(b)(2). Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise-qualified.” The coastwise laws generally apply to points in the territorial sea, which is defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline.

U.S. Customs and Border Protection (“CBP”) has consistently held that a vessel chartered under a bona fide bareboat charter and used only for pleasure purposes is not considered to be used in coastwise trade. A vessel chartered under a charter arrangement other than a bareboat charter (e.g., a time or voyage charter) and used in coastwise transportation, however, would subject the owner of a vessel to penalties under 46 U.S.C. § 55103 unless the vessel is coastwise-qualified. A non-coastwise-qualified vessel chartered under a bareboat charter would also violate the coastwise laws if the bareboat charterer used it in the coastwise trade (e.g., to transport passengers (other than bona fide guests) between coastwise points or entirely within territorial waters). See Headquarters Ruling Letter 109638, dated July 22, 1988; Headquarters Ruling Letter 112120, dated May 26, 1992; Headquarters Ruling Letter 109638, dated July 22, 1988. In this case, the information provided indicates that the chartered vessel is engaging in coastwise trade. There is no indication that the charter is a bona fide bareboat charter, the charter is not purely for pleasure purposes, and coastwise transportation is provided. Consequently, the chartered vessel violates the coastwise laws unless a coastwise endorsement is obtained.

We defer to the U.S. Coast Guard on matters of endorsements since the vessel documentation laws of the United States are administered by that agency. We note, however, since your vessel is engaging in coastwise trade, a coastwise endorsement would be necessary. See Headquarters Ruling Letter 113846, dated May 5, 1997. It appears that your vessel would be entitled to coastwise documentation, pursuant to 46 U.S.C. § 12112(a)(2)(A), since it was built in the United States, is now and has always been owned by a citizen of the United States, and appears to be at least 5 net tons.

HOLDING

The subject chartered vessel is engaging in coastwise trade and will be in violation of 46 U.S.C. § 55103 unless a coastwise endorsement is obtained.

Sincerely,

Glen E. Vereb, Chief

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