Coastwise Transportation; 46 U.S.C. §§ 55102, 55111

HQ H032617 September 26, 2008 VES-3-OT:RR:BSTC:CCI H032617 GG CATEGORY: Carriers Mr. Willem Boelman Dargas Shipping Ltd. 640 Glenmaroon Rd West Vancouver, B.C. V6S1P6, Canada RE: Coastwise Transportation; 46 U.S.C. §§ 55102, 55111 Dear Mr. Boelman: This is in response to your correspondence of July 3, 2008, and subsequent telephonic communications, on behalf of Dargas Shipping, Ltd., in which you inquire about whether the proposed scenarios for the transportation of merchandise constitute a violation of the Jones Act. We are construing your correspondence as a request for a ruling to determine whether the coastwise laws, specifically 46 U.S.C. §§ 55102 and 55111, apply to the factual scenarios you present. Our ruling on this matter is set forth below. FACTS The voyage in question involves the transportation of merchandise on a Canadian unmanned barge from Vancouver, Canada, to Lewiston, Idaho (or alternatively to Clarkston, Washington) via Portland, Oregon, on to Sweetgrass, Montana, and finally to Alberta, Canada. The subject cargo, originating in Vancouver, is ultimately destined for Fort McMurray, Alberta, Canada, but is too wide and high to be able to cross the Rockies in Canada via truck. The cargo must depart and re-enter Canada on a Canadian conveyance pursuant to Canadian laws. Therefore the following scenarios are proposed: Scenario 1: The merchandise is expected to be loaded onto a Canadian trailer in Vancouver, which in turn would be placed on a Canadian unmanned barge. The barge would be towed by a coastwise-qualified tug to the Columbia River in the United States, arriving in Portland. From Portland, the merchandise would be transported (by the Canadian barge and coastwise-qualified tug) under a “T&E” (transportation and exportation) bond to Lewiston, Idaho, or alternatively to Clarkston, Washington, where it would be unloaded. Once the trailer containing the subject merchandise is offloaded, a Canadian truck/tractor would pull/drive the subject trailer and cargo, continuing the land portion of the trip from Lewiston or Clarkston to the border at Sweetgrass, Montana, where the cargo and trailer would be transported to Alberta, Canada. The Canadian truck/tractor would be authorized for such road transport in the U.S. The bond would be split from the U.S. port of entry to Lewiston, and from Lewiston to Sweetgrass. Scenario 2: The cargo would be loaded onto a Canadian tractor-trailer in Vancouver, and placed on a Canadian unmanned barge. The Canadian barge would be towed from Vancouver, British Columbia to Bellingham, Washington using a Canadian-flag tug. The tractor-trailer containing the cargo would then be transferred from the Canadian barge to a coastwise-qualified barge, via a direct “Ro-Ro” (Roll-On/Roll-Off) transfer. The tractor would then be disconnected from the trailer, and would drive to Lewiston, Idaho, or alternatively, to Clarkston, Washington to await the arrival of the subject cargo and trailer. The trailer and cargo would continue the voyage aboard the coastwise-qualified barge, which would be towed from Bellingham, Washington, to Vancouver, Washington, using a coastwise-qualified ocean-going tug. From Vancouver, WA, a coastwise-qualified river push tug would push the barge to Lewiston, or alternatively, to Clarkston. The cargo and trailer would then be discharged in Lewiston or Clarkston, where the Canadian tractor is expected to continue the land portion of the transportation by driving the cargo/trailer to the Sweetgrass, Montana border crossing and then proceeding into Canada. ISSUES 1. Whether the use of a non-coastwise-qualified barge to transport merchandise in the manner described above in Scenario 1, constitutes an engagement in coastwise trade in violation of 46 U.S.C. § 55102? 2. Whether the use of a non-coastwise-qualified barge and tug, to transport merchandise in the manner described above in Scenario 2, constitutes an engagement in coastwise trade in violation of 46 U.S.C. § 55102 and/or § 55111? LAW AND ANALYSIS Generally, the coastwise laws prohibit the transportation of passengers or merchandise between points in the United States embraced within the coastwise laws in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise qualified.” The coastwise law applicable to the transportation of merchandise, the Jones Act, is found in 46 U.S.C. § 55102 (recodified by Pub. L. 109-304, enacted on October 6, 2006) and provides in pertinent part 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—(1) is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and (2) has been issued a certificate of documentation with a coastwise endorsement under chapter 121 of Title 46 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.” See also U.S. Customs and Border Protection (CBP) Regulations, 19 CFR §§ 4.80, 4.80b. 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. 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. 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 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 CFR 4.80b(a). At the outset, we note that based on the facts presented, it is readily apparent that none of the intermediate points, i.e., Portland, Oregon, Vancouver, Washington, Lewiston, Idaho (or alternatively Clarkston, Washington), are the final destination of the cargo. Scenario 1: The water-borne portion of the transportation in question would commence at a foreign location (i.e., Vancouver, Canada), proceed to Portland, and end in Lewiston/Clarkston, on a non-coastwise-qualified barge towed by a coastwise-qualified tug. Since the cargo and trailer in question were laden on the barge in Canada, the prohibitions of the Jones Act would not apply here. A violation of the Jones Act is triggered when a lading takes place at one coastwise point and an unlading at another such point. Here, the merchandise was not laden at a coastwise point. Consequently, the transportation from Canada via Portland to Lewiston/Clarkston would not be considered to be a coastwise movement of merchandise within the meaning of 46 U.S.C. § 55102. Scenario 2: The tow in question, by a non-coastwise-qualified tug of a non-coastwise-qualified barge, would commence at a foreign point (i.e., Vancouver, Canada). Such transportation of cargo from Vancouver, B.C. to Bellingham, Washington does not constitute engagement in coastwise trade within the meaning of 46 U.S.C. § 55102 or § 551111. As noted above, a violation of the Jones Act is triggered when a lading takes place at one coastwise point and an unlading at another. Likewise, the coastwise towing statute is triggered when the tow commences at one coastwise point and is terminated at another such point. Therefore, the contemplated transportation from Canada to Bellingham, Washington, does not give rise to a violation of 46 U.S.C. § 55102 or § 55111. With respect to the transfer of the cargo and trailer from the Canadian barge to a coastwise-qualified barge, to be towed from Bellingham, Washington, to Vancouver, Washington, using a coastwise-qualified tug, there would be no violation of the Jones Act. Additionally, given that a coastwise-qualified tug is utilized, there is no violation of the coastwise towing statute. Similarly, the towing of the coastwise-qualified barge by a coastwise-qualified tug, from Vancouver, Washington, to Lewiston/Clarkston, would also not constitute an engagement in coastwise trade in violation of either 46 U.S.C. § 55102 or § 55111. Parenthetically, we note that section 123.31 of the CBP Regulations provides for shipments of merchandise in transit through the United States, from one contiguous country to another. See 19 CFR § 123.31. Specifically, 19 CFR 123.31(a) provides that “[m]erchandise may be transported in transit across the United States between Canada and Mexico under the procedures set forth in part 18 of this chapter for merchandise entered for transportation and exportation.” Further, “[m]erchandise may be transported from point to point in Canada or in Mexico through the United States in bond in accordance with the procedures set forth in §§ 18.20 to 18.24” of Title 19. See 19 CFR § 123.31(b). With respect to the bond, we note that 19 CFR § 18, which governs transportation in bond and merchandise in transit, is applicable to the present case. Therefore, the contemplated operations described here in Scenarios 1 and 2 may be accomplished so long as the bond provisions are adhered to and in compliance with the referenced CBP Regulations. HOLDINGS 1. The proposed transportation of merchandise (Scenario 1) by a non-coastwise-qualified barge, as described above would not constitute an engagement in coastwise trade in violation of 46 U.S.C. § 55102. 2. The proposed alternative transportation (Scenario 2) of merchandise by a non-coastwise-qualified barge and tug as described above would not constitute an engagement in coastwise trade in violation of 46 U.S.C. § 55102 or § 55111. Sincerely, Glen E. Vereb Chief Cargo Security, Carriers and Immigration Branch