Coastwise; Government Cargo; Army Corps of Engineers; Barges; 46 U.S.C. App. 883.

HQ 112184 May 13, 1993 VES-3-07 CO:R:IT:C 112184 JBW CATEGORY: Carriers Thomas A. Sands, Esq. Adams and Reese 4500 One Shell Square New Orleans, Louisiana 70139 RE: Coastwise; Government Cargo; Army Corps of Engineers; Barges; 46 U.S.C. App. 883. Dear Mr. Sands: This letter is in response to your request for a ruling on the application of the coastwise laws to the use of foreign- built barges that transport quarry stone and other materials on the Mississippi River pursuant to a United States Army Corps of Engineers contract. FACTS: Your client engages in marine construction activities primarily in the Lower Mississippi Valley. Operating under contract with the United States Army Corps of Engineers, your client constructs or rehabilitates stone revetments, dikes, levees, and similar structures for navigation or flood control. These construction activities involve the transportation of stone and other materials on non-self-propelled barges from quarries to the project sites for emplacement or stockpiling. The Corps of Engineers typically uses two contracting procedures to achieve their construction objectives. The normal procedure is to have the material provided by the construction contractor. The Corps of Engineers specifies an estimated quantity and quality of the material that is bid at a unit price. The contractor is required to obtain the stone, which is tested by the Corps of Engineers. The materials are transported on the barges owned by the contractor and are emplaced by the contractor. The alternative contracting procedure is to have the Corps of Engineers supply materials acquired by supply contract to the contractor. It is the opinion of the Director of Contracting that materials furnished under the latter procedure would be considered government property, but under the former procedure the materials would become the property of the government when placed in the project. Letter of Arthur Lagg, Director of Contracting, Lower Mississippi Valley Division, United States Army Corps of Engineers, dated February 17, 1993. You state that your client wishes to purchase barges constructed in Mexico to be used for the transportation of stone and other materials in the above-described activities. ISSUE: Whether the transportation of stone or other materials by foreign-built barge pursuant to a supply or construction contract issued by the United States Army Corps of Engineers is an engagement in the coastwise trade that is prohibited by 46 U.S.C. App. 883. LAW AND ANALYSIS: Section 883 of Title 46, United States Code Appendix, provides, in pertinent part: No merchandise shall be transported by water, or by land and water, on penalty of forfeiture of the merchandise (or a monetary amount up to the value thereof as determined by the Secretary of the Treasury, or the actual cost of the transportation, whichever is greater...), between points in the United States, including Districts, Territories, and possessions thereof embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States.... 46 U.S.C. App. 883. The Customs Service has ruled that a point within the territorial waters of the United States is a point embraced within the coastwise laws. The territorial waters of the United States consist of the territorial sea, 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, in cases where the baseline and the coastline differ. The Customs Service has ruled that property of the United States government is not "merchandise" for purposes of the coastwise laws and thus may be transported between coastwise points by non-coastwise qualified vessels. C.S.D. 83-86, 17 Cust. B. & Dec. 913, 914-915 (1983). The Mexican-built barges that your client proposes to use may not be used to transport merchandise between coastwise points. Whether the barges may be used for the proposed construction projects depends on whether the materials transported are deemed government property. The supply contract procedure used by the Corps of Engineers for their Lower Mississippi Valley projects involves supplying the contractors with materials used to accomplish the projects. Under this scenario, the Corps of Engineers has previously purchased the materials to be used, and the contractor's principal responsibility is to move the materials to the work site for emplacement. The Corps of Engineers exercises all incidents of ownership over the materials, including exclusive rights to the possession and disposition of such materials. The Corps of Engineers acknowledges its ownership of the materials under this contracting procedure during the course of the transportation of the materials. We therefore conclude that materials transported pursuant to this contracting procedure are government-owned and are not merchandise for purposes of the coastwise laws. Transportation of the materials would not be considered an engagement in the coastwise trade in violation of 46 U.S.C. App. 883. The construction contract procedure used by the Corps of Engineers requires that the contractors provide the materials used in the projects. This procedure typically involves identification by the Corps of Engineers of the quantity and quality of the materials to by used; however, it is the responsibility of the contractor to obtain the materials and to move the materials to the work site for emplacement. Under this scenario, it appears that the contractor exercises the rights of ownership over the materials until they are emplaced. Although usually dedicated to a project, materials may be used for a variety of governmental or non-governmental projects as determined by the contractor. Further, acceptance by the government does not occur until the stone is placed in the project. We conclude that stone and materials transported pursuant to this contracting procedure are not government-owned and are considered merchandise for purposes of the coastwise laws. Transportation of the materials on non-coastwise qualified barges would be an engagement in the coastwise trade in violation of 46 U.S.C. App. 883. HOLDING: Stone or materials furnished to contractors for use in Lower Mississippi River construction projects by the Corps of Engineers are government-owned and are not considered merchandise under 46 U.S.C. App. 883. Non-coastwise-qualified vessels may be used for the transportation of such materials. Stone and materials transported pursuant to a construction contract issued by the Corps of Engineers are not government-owned and are consdiered merchandise for purposes of the coastwise laws. Transportation of the materials on non-coastwise qualified barges would be an engagement in the coastwise trade in violation of 46 U.S.C. App. 883. Sincerely, Acting Chief