HQ H026282 - Coastwise Transportation; 46 U.S.C. § 55102; Coastwise Towing; 46 U.S.C. § 55111 - United States International Trade Commision Rulings

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HQ H026282

May 13, 2008

VES-3-01-OT:RR:BSTC:CCI H026282 JLB

CATEGORY: CARRIER

Mr. Jorge Blasini
Jiménez, Graffam & Lausell
P.O. Box 366104
San Juan, Puerto Rico 00936-6104

RE: Coastwise Transportation; 46 U.S.C. § 55102; Coastwise Towing; 46 U.S.C. § 55111

Dear Mr. Blasini:

This letter is in response to your correspondence dated April 16, 2008, in which you inquire about whether your client’s proposed scenarios to lade cargo at either the U.S. Virgin Islands or a foreign port, on a foreign-flagged barge, with partial unlading occurring at a U.S. port with subsequent unlading of remaining cargo at another U.S. point constitutes a violation of the Jones Act, 46 U.S.C. § 55102 and the coastwise towing statute, 46 U.S.C. § 55111. Our ruling on your request follows.

FACTS

You represent Harbor Bunkering Corporation (“HBC”), a Puerto Rican corporation, which is in the business of vessel refueling. While HBC owns coastwise-qualified tugs and tank barges used in vessel refueling operations within the port of San Juan, Puerto Rico, the corporation has been contemplating the use of a foreign-flagged, foreign-built tank barge to transport fuel oil from either St. Croix, U.S. Virgin Islands or St. Eustatius, Netherlands Antilles to Puerto Rican ports. You proposed three scenarios involving the use of this foreign-flagged tank barge, they are described below.

The first scenario [hereto referred to as scenario (A)] entails the subject foreign-flagged tank barge, being towed by a coastwise-qualified tug, to lade fuel oil cargo at either St. Croix, U.S. Virgin Islands or St. Eustatius, Netherland Antilles. The barge will then partially discharge its cargo at the port of Guayanilla, which is located in the southern coast of Puerto Rico. Subsequently, the barge will continue its voyage to the port of San Juan, which is located on the north coast of Puerto Rico, where the remaining fuel oil cargo would be lightered to smaller coastwise-qualified tank barges. While this transfer to the smaller coastwise-qualified tank barges is occurring in San Juan, the foreign-flagged tank barge would remain stationary at its berth and essentially act as a storage facility. The smaller coastwise-qualified barges, towed by coastwise-qualified tugs, would then perform vessel refueling of U.S.-flagged and foreign-flagged vessels in the San Juan port.

The second scenario [hereto referred to as scenario (B)] involves the use of the subject foreign-flagged tank barge, towed by a coastwise-qualified tug, to perform the same voyage as in scenario (A). However, instead of lightering all the remaining fuel oil cargo at the San Juan port to the smaller coastwise-qualified tank barges, the subject foreign-flagged tank barge will only discharge part of its remaining fuel oil. The foreign-flagged tank barge will then, in addition to the smaller coastwise-qualified tank barges, serve as a refueling barge for the U.S.-flagged and foreign-flagged vessels within the Port of San Juan.

As to the final scenario [hereto referred to as scenario (C)], this scenario is similar to scenario (A), except that the towing of the foreign-flagged tank barge will be undertaken by a foreign-flagged, foreign-built tug instead of the coastwise-qualified tug used in scenarios (A) and (B). The foreign-flagged tug will tow the foreign-flagged tank barge loaded with fuel oil cargo at St. Croix, U.S. Virgin Islands or St. Eustatius, Netherlands Antilles for unlading at Puerto Rican ports.

ISSUE

Whether any of the scenarios described above constitute a violation of 46 U.S.C. § 55102 or 46 U.S.C. § 55111?

LAW AND ANALYSIS

The Jones Act, former 46 U.S.C. App. § 883 recodified as 46 U.S.C. § 55102, pursuant to P.L. 109-304 (October 6, 2006), states that “a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via 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, 4.80b). 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.

Pursuant to 19 U.S.C. § 1401(c), the word "merchandise" is defined as "goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31.” For purposes of the Jones Act, merchandise also includes “valueless material.” See 46 U.S.C. § 55102(a)(2).

The coastwise towing statute, former 46 U.S.C. App. § 316(a) recodified as 46 U.S.C. § 55111, pursuant to P.L. 109-304 (October 6, 2006), provides that except when towing a vessel in distress, only a coastwise-qualified vessel may do any part of any towing between coastwise points.

Pursuant to 46 U.S.C. § 55101(a), the coastwise laws apply to the island territories and possessions of the United States, such as Puerto Rico. See also 46 U.S.C. § 55104 pertaining to the transportation of passengers between Puerto Rico and other ports in the United States. The coastwise laws are inapplicable to the Virgin Islands, however, until the President declares by proclamation. See 46 U.S.C. § 55101(b)(4). Since the President of the United States has not so declared, the coastwise laws, including 46 U.S.C. §§ 55102 and 55111, are inapplicable to the U.S. Virgin Islands. See Headquarters Ruling Letter H006044, dated January 30, 2007; Headquarters Ruling Letter 112901, dated October 20, 1993; Headquarters Ruling Letter 115090, dated July 14, 2000.

Scenario (A):

U.S. Customs and Border Protection (“CBP”) Regulations promulgated under the authority of 46 U.S.C. § 55102 provide that a coastwise transportation of merchandise takes place when merchandise laden at a coastwise point is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a). In accordance with this regulation, CBP has held that merchandise, transported on a foreign-flagged, foreign-built vessel, can be laden at a foreign port and then partially unladen at a U.S. port with the remaining merchandise onboard unladen at another U.S. port or point without violating 46 U.S.C. § 55102. See Headquarters Ruling Letter 111403, dated November 20, 1990. Similarly, in scenario (A), when a foreign-flagged tank barge, under tow from a coastwise-qualified tug, transports fuel oil from the foreign port of St. Eustatius, Netherlands Antilles to Puerto Rico with partial unloading of the cargo at one Puerto Rican port and the remaining cargo unladen at another Puerto Rican port, there is no violation of 46 U.S.C. § 55102.

For purposes of this ruling we assume the subject merchandise is not being unladen, even temporarily, before it is permanently unladen at the second Puerto Rican port.

With respect to cargo laden in the U.S. Virgin Islands, it is important to note that, as discussed above, 46 U.S.C. § 55102 is inapplicable to the transportation of merchandise by a foreign-flagged vessel between the U.S. Virgin Islands and Puerto Rico. Consequently, the subject tank barge may lade the fuel oil cargo at St. Croix and partially unlade this cargo at a Puerto Rican port while unlading the remaining cargo at another Puerto Rican port without violating the coastwise laws, specifically 46 U.S.C. § 55102.

Under the proposed scenario, however, the remaining fuel oil cargo will not merely be unladed at the port but will be lightered to smaller coastwise-qualified tank barges at the port of San Juan. These smaller barges, under tow by coastwise-qualified tugs, will engage in vessel refueling at the port. Meanwhile, the subject foreign-flagged tank barge will remain stationary at its berth while the unlading is occurring and will serve as a stationary storage facility. Its only movements will be those necessary for the safety of the vessel.

If acting merely as a storage facility for the foreign-lade oil cargo, there would be no violation of 46 U.S.C. § 55102. However, if the barge is used for the storage of any U.S.-laden cargo, CBP has consistently held that a foreign-flagged vessel may be used as a storage facility in U.S. territorial waters provided that the vessel remains stationary. The coastwise laws are not violated if the vessel is being loaded or unloaded and must be moved to another location because of stress of weather or other reason involving the vessel's safety, so long as the vessel is subsequently returned to the same point to continue its loading or unloading, and loads or unloads no merchandise at any other U.S. point. See, e.g., Headquarters Ruling Letter 112879, dated October 1, 1993; Headquarters Ruling Letter 110127, dated April 5, 1989. If the vessel is not secured or otherwise moves while in use, then such operations would be a violation of the coastwise laws. See Headquarters Ruling Letter 115844, dated October 30, 2002.

It is also important to note that although the foreign-flagged tank barge is not engaging in coastwise trade while it is operating as a stationary storage facility, since the vessel is anchored within the U.S. territorial waters, it becomes a coastwise point and therefore, any vessel transporting passengers or merchandise between the barge and another coastwise point must be coastwise-qualified. See Headquarters Ruling Letter 113942, dated June 27, 1997; Headquarters Ruling Letter 112695, dated August 31, 1993. In this case, that requirement is fulfilled given that the smaller barges that are lightering the fuel oil from the subject foreign-flagged barge and engaging in vessel refueling in the Port of San Juan are coastwise-qualified. In Headquarters Ruling Letter 115591, dated February 25, 2002, CBP held that there is no violation of 46 U.S.C. § 55102 if a foreign-flagged vessel traveling from a foreign port anchors off the coast of a U.S. port and while that vessel is stationary, its cargo is lightered to coastwise-qualified vessels. See also Headquarters Ruling Letter 115962, dated July 7, 2003. Accordingly, the use of the foreign-flagged tank barge in the scenario described above is not in violation of 46 U.S.C. § 55102. Additionally, given that a coastwise-qualified tug is utilized, there is no violation of the coastwise towing statute, 46 U.S.C. § 55111.

Scenario (B):

This scenario only differs from scenario (A) in that the foreign-flagged tank barge will not completely unlade the remaining cargo to the smaller coastwise-qualified tank barges in the port of San Juan but will retain a portion of the fuel oil to serve as a refueling barge for U.S.-flagged and foreign-flagged vessels in different points in the port of San Juan.

As discussed above, a violation of the Jones Act, 46 U.S.C. § 55102 only occurs when merchandise laden at a coastwise point is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a). Accordingly, as long as the cargo is foreign-laden, a foreign-flagged vessel may unlade the cargo at any U.S. point since there would be no transportation between two or more coastwise points. Consequently, no violation of 46 U.S.C. § 55102 occurs when the subject tank barge lades fuel oil in St. Eustatius, Netherlands Antilles or St. Croix, U.S. Virgin Islands, partially discharges the cargo at a Puerto Rican port, unlades part of the remaining cargo to smaller coastwise-qualified tank barges and then acts as a refueling vessel unlading the remaining fuel oil cargo to vessels in the port of San Juan.

Scenario (C):

This scenario is identical to scenario (A) except that a foreign-flagged, foreign-built tug will be used to tow the foreign-flagged barge instead of the coastwise-qualified tug used in scenarios (A) and (B). As stated above, the coastwise towing statute, 46 U.S.C. § 55111, provides that except when towing a vessel in distress, only a coastwise-qualified vessel may do any part of any towing between coastwise points.

In interpreting 46 U.S.C. § 55111, CBP has taken the position that the statute is to be construed consistently with the Jones Act, 46 U.S.C. § 55102. Thus, CBP has held that 46 U.S.C. § 55111 does not prohibit the continuous towing of a vessel engaged in foreign trade by the same foreign-flagged tug on a voyage from a foreign port to a U.S. port, merely because both the tug and towed vessel stop at other U.S. ports to load export cargo or unload import cargo. See Treasury Decision (T.D.) 70-223 (19); Headquarters Ruling Letter 227065, dated September 16, 1996; Headquarters Ruling Letter 226658, dated April 22, 1996. A towing is held to be continuous so long as the vessels in question are not unlinked and so long as there is no change to the towing vessel. See Headquarters Ruling Letter 113092, dated December 6, 1994; Headquarters Ruling Letter 227065, dated September 16, 1996.

In this case, the towing in question will commence at St. Croix, U.S. Virgin Islands or St. Eustatius, Netherlands Antilles and will terminate at Puerto Rico. Assuming that the same foreign-flagged tug would be used, a continuous tow exists and the towing operations proposed are not in violation of 46 U.S.C. § 55111. With respect to the towing operations commenced at St. Croix, 46 U.S.C. § 55111 is inapplicable, as discussed above. Given that the facts in Scenario (C) are the identical to those in Scenario (A) with the exception of the foreign-flagged tug, this scenario is not in violation of 46 U.S.C. § 55102.

HOLDING

The transportation of merchandise by a foreign-flagged barge as described in the above scenarios does not constitute a violation of 46 U.S.C. § 55102. With respect to 46 U.S.C. § 55111, no violation exists in any of the above scenarios as long as a continuous tow exists in scenario (C).

Sincerely,

Glen E. Vereb, Chief

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