Foreign-built Yacht; Documentation.

HQ H230237 September 14, 2012 VES-12-02-OT: RR: BSTC:CCI H230237 WRB Category: Carriers Ms. Sherry Thackeray Principal, SLM, LLC. 1000 Johnnie Dodds Blvd. #103-219 Mount Pleasant, SC 29464 Re: Foreign-built Yacht; Documentation. Dear Ms. Thackeray: This letter is in response to your August 9, 2012, correspondence, in which you request a ruling regarding the proposed use of a foreign-built yacht. Our ruling on this matter is set forth below. FACTS The facts, as you have provided them in your e-mails and supporting documentation, are that the subject vessel, the S/V SHENANIGANS (the “vessel”), is a fiberglass-hulled, 2005 Fountaine Pajot Bahia 46-foot sailing catamaran, built in France. The vessel measures 15 net registered tons, and is 46 feet in length, 24 feet, 1 inch on the beam, with a draft of 4 feet, 3 inches. Your certificate of documentation indicates that the vessel is currently documented in the United States, with a recreation endorsement. You state that this vessel will serve as your live-aboard home, although you intend to operate the vessel as a charter vessel in order to generate additional income. You further state that such employment as a charter vessel would be limited to approximately 20% of the vessel’s time yearly. The intended commercial use would be only for pleasure cruising of paying clients to and from the same slip in the same marina as the registered dock location. The Maritime Administration of the Department of Transportation has determined the vessel to be eligible for a waiver of the U.S.-build requirement of the Coastwise Trade Laws, as authorized by Pub. L. 105-383, Title V, entitled “Administrative Process for Jones Act Waivers” as part of the Small Vessel Waiver Program, making the vessel eligible for coastwise endoresement. However, you inquire as to whether the vessel may engage in the proposed charter service with a registry endorsement, because your vessel financing company declines to provide financing for the vessel if documented coastwise out of a desire to prevent the vessel being bareboat chartered. ISSUE Whether a non-coastwise-qualified vessel with recreational and registry endorsements may engage in the service described above without violating the coastwise trade laws, 46 U.S.C. § 55102 and 46 U.S.C. § 55103, in order to comply with the requirements of your vessel financing company. 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 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. The coastwise law applicable to the carriage of passengers is found in 46 U.S.C. § 55103 (recodified by Pub. L. 109-304, enacted on October 6, 2006) and provides that: (a) In General. Except as otherwise provided in this chapter or chapter 121 of this title, a vessel may not transport passengers between ports or places in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel- is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and has been issued a certificate of documentation with a coastwise endorsement under chapter 121 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement. (b) Penalty. The penalty for violating subsection (a) is $300 for each passenger transported and landed. The CBP Regulations promulgated pursuant to 46 U.S.C. § 55103 are found at 19 CFR §§ 4.80 and 4.80a. Section 4.80(a)(2), CBP Regulations (19 CFR § 4.80(a)(2)) provides that no vessel exempt from documentation (i.e., of less than 5 net tons) shall transport any passengers or merchandise between United States coastwise points unless the vessel is owned by a citizen of the United States and is entitled to or, except for its tonnage, would be entitled to be documented for the coastwise trade. Section 4.80a(b), CBP Regulations (19 CFR § 4.80a(b)) provides in pertinent part that: The applicability of the coastwise law (46 U.S.C. § 55103) to a vessel not qualified to engage in the coastwise trade (i.e., either a foreign-flag vessel or a U.S.-flag vessel that is foreign-built or at one time has been under foreign flag) which embarks a passenger at a coastwise port is as follows: (1) If the passenger is on a voyage solely to one or more coastwise ports and the passenger disembarks or goes ashore temporarily at a coastwise port, there is a violation of the coastwise law. (2) If the passenger is on a voyage to one or more coastwise ports and a nearby foreign port or ports (but at no other foreign port) and the passenger disembarks at a coastwise port other than the port of embarkation, there is a violation of the coastwise law. (3) If the passenger is on a voyage to one or more coastwise ports and a distant foreign port or ports (whether or not the voyage includes a nearby foreign port or ports) and the passenger disembarks at a coastwise port, there is no violation of the coastwise law provided the passenger has proceeded with the vessel to a distant foreign port. A coastwise port is a “port in the U.S., its territories, or possessions embraced within the coastwise laws.” 19 CFR § 4.80a(a)(1). A “nearby foreign port” is defined as “any port in North America, Central America, the Bermuda Islands, or the West Indies (including the Bahama Islands, but not including the Leeward Islands of the Netherlands Antilles, i.e., Aruba, Bonaire, and Curacao).” 19 CFR § 4.80a(a)(2). A “distant foreign port” is defined as “any foreign port that is not a nearby foreign port.” 19 CFR § 4.80a(a)(3). In its administration of 46 U.S.C. § 55103, U.S. Customs and Border Protection has consistently ruled that the carriage of passengers entirely within territorial waters, even though the passengers disembark at their point of embarkation and the vessel touches no other coastwise point, is considered coastwise trade subject to the coastwise laws. However, the transportation of passengers to the high seas (i.e. beyond U.S. territorial waters) and back to the point of embarkation, assuming the passengers do not go ashore, even temporarily, at another United States point, often called a “voyage-to-nowhere,” is not considered coastwise trade. See HQ H014892, dated Aug. 17, 2007; HQ 113379 , dated Mar. 23, 1995; and, 29 Opinions of the Attorney General 318; see also HQ H027231, dated May 2, 2008); and, HQ H021838, dated Jan. 24, 2008. In HQ 109543, dated September 9, 1988, we remarked that the use of a yacht to transport business “guests” would be considered an engagement in trade (coastwise trade if the passengers were transported between coastwise points). In that matter, we held that business guests, such as insurance brokers, business and financial customers, and other contacts of the corporate charterers of a foreign-flag vessel were “passengers” for purposes of the coastwise laws, and their transportation between coastwise points or on a “voyage to nowhere” solely in United States territorial waters would be prohibited. In HQ 113304, dated January 11, 1995 we determined that the existing or potential clients of a yacht’s corporate owner were passengers within the meaning of the coastwise passenger law and 19 CFR 4.50(b). Accordingly, we ruled that those individuals could not be transported from one coastwise point to another coastwise point as was proposed. Also, in HQ W115072, dated May 17, 2002, we determined that individuals transported aboard a foreign-flag pleasure vessel during fund-raising events of political and charitable organizations were not directly and substantially connected with the operation, navigation, ownership or business of the vessel. Thus, such individuals were considered passengers even though no direct monetary consideration was given to the vessel owner. Accordingly, we held that, for those individuals, cruises entirely within U.S. territorial waters, cruises between U.S. ports, and cruises between U.S. ports via nearby foreign ports would be prohibited. HOLDING The use of a non-coastwise-qualified yacht with recreational and registry endorsements as described in the Facts section above would not violate the coastwise trade laws, 46 U.S.C. § 55102 and 46 U.S.C. § 55103, provided that the passengers are transported to the high seas beyond U.S. territorial waters and back to the point of embarkation, and that they do not go ashore, even temporarily, at another United States point. However, the carriage of passengers entirely within territorial waters, even though the passengers disembark at their point of embarkation and the vessel touches no other coastwise point, would be considered coastwise trade subject to the coastwise laws, requiring a coastwise endorsement. Sincerely, George Frederick McCray Supervisory Attorney-Advisor/Chief Cargo Security, Carriers and Immigration Branch Office of International Trade, Regulations & Rulings U.S. Customs and Border Protection