46 U.S.C. § 55102; 46 U.S.C. § 55103; Coastwise Transportation.

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H293727 April 12, 2018 VES-3-02-OT:RR:BSTC:CCR H293727 ASZ CATEGORY: Carriers John E. Holloway Troutman Sanders LLP 222 Central Park Avenue, Suite 2000 Virginia Beach, Virginia 23462 RE: 46 U.S.C. § 55102; 46 U.S.C. § 55103; Coastwise Transportation. Dear Mr. Holloway: This letter is in response to your correspondence dated January 8, 2018 and subsequent e-mails to this office, on behalf of your client [], in which you inquire about whether your client’s use of a non-coastwise-qualified vessel as part of a technology demonstration project constitutes a violation of 46 U.S.C. § 55102 or 46 U.S.C. § 55103. Our decision follows. FACTS [] intends to bareboat charter a foreign-built and foreign-flagged vessel to operate in United States waters as part of a Department of Defense (“DoD”) sponsored technology demonstration project. The vessel will be used to demonstrate prototype solutions that address the autonomous operation of larger Unmanned Vehicle technology for DoD. The vessel will arrive in Louisiana in [], and testing is anticipated to begin in [] and will take place until []. The vessel will remain in Louisiana for the duration of the program and operate in the adjacent territorial waters of the Gulf of Mexico for testing purposes only. Once the vessel arrives in Louisiana, certain program-related autonomy and automation systems, which demonstrate the capabilities sought by DoD, will be installed on the vessel. These items include, inter alia, sensors, radar, and computing systems required to perform autonomous navigation and machinery systems monitoring. In addition, monitoring and recording equipment, as well as communications equipment needed for the safe operation of the testing activities, will be carried onboard the vessel. You state that all items installed, integrated, or hand-carried onboard the vessel, if removed from the vessel, will be unladen at the same berth at the same U.S. port at which those items were laden onto the vessel. The vessel will transport the captain, the crew, and a team of engineers and technicians who will monitor and record the automation system’s performance against the autonomy program’s objectives. In addition, the vessel will transport DoD representatives who will observe the capabilities of the vessel as part of the technology demonstration project and monitor vessel testing procedures, activities, and results. The crew members, engineering and technical personnel, and DoD representatives may embark and disembark the vessel at different ports. ISSUE Whether the proposed use of a non-coastwise qualified vessel constitutes an engagement in coastwise trade for purposes of 46 U.S.C. § 55102 and/or 46 U.S.C. § 55103? 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. Pursuant to 46 U.S.C. § 55102(a), “[m]erchandise, includes (1) merchandise owned by the United States Government, a State, or a subdivision of a State; and (2) valueless material.” As such, any cargo, regardless of its value or ownership, would be considered merchandise for the purpose of 46 U.S.C. § 55102. The U.S. Customs and Border Protection (“CBP”) regulations promulgated under the authority of 46 U.S.C. § 55102(a), provide in pertinent part: A coastwise transportation of merchandise takes place, within the meaning of the coastwise laws, when merchandise laden at a point embraced within the coastwise laws (“coastwise point”) is unladen at another coastwise point, regardless of the origin or ultimate destination of the merchandise. 19 C.F.R. § 4.80b(a). Similarly, the coastwise law applicable to the carriage of passengers is found in 46 U.S.C. § 55103 which provides: (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- (1) is wholly owned by citizens of the United States for purposes of engaging in coastwise trade; and (2) 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. Section 4.80(b)(2) of the CBP regulations provides: The penalty imposed for the unlawful transportation of passengers between coastwise points is $300 for each passenger so transported and landed on or before November 2, 2015, and $762 for each passenger so transported and landed after November 2, 2015 (46 U.S.C. § 55103, as adjusted by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015). The CBP regulations, promulgated under the authority of 46 U.S.C. § 55103, provide, “[a] passenger within the meaning of this part is any person carried on a vessel who is not connected with the operation of the vessel, her navigation, ownership, or business.” A. Transportation of Merchandise under 46 U.S.C. § 55102 As stated above, the Jones Act prohibits a non-coastwise-qualified vessel from transporting merchandise between points in the United States to which the coastwise laws apply, either directly or via a foreign port. In the present case, you state that certain program-related autonomy and automation systems, monitoring and recording equipment, and communications equipment will be installed, integrated, or hand-carried onboard the vessel. You assert that all items to be installed, integrated, or hand-carried onboard the vessel, if removed from the vessel, will be unladen at the same berth in the same U.S. port at which they were laden onto the vessel. Insofar as all items carried onboard the vessel will be unladen at the same berth in the same U.S. port at which those items were laden, no coastwise transportation, as defined in 19 CFR § 4.80b(a), will have occurred. Accordingly, the proposed operation described above does not constitute an engagement in the coastwise trade for purposes of 46 U.S.C. § 55102. B. Transportation of Passengers under 46 U.S.C. § 55103 With regard to the captain and crew of the vessel, they would not be passengers for coastwise purposes. HQ 116520 (Nov. 3, 2005). With regard to the engineers and technicians, you state that they will monitor and record the automation system’s performance against the autonomy program’s objectives. In accordance with previous Headquarters rulings, workmen, technicians, or observers transported by vessel between ports of the United States are not classified as “passengers”, within the meaning of 46 U.S.C. § 55103 and 19 C.F.R. § 4.50(b), if they are required to be onboard to contribute to the accomplishment of the operation or navigation of the vessel during the voyage or are onboard because of a necessary vessel ownership or business interest during the voyage. HQ 101699 (Nov. 5, 1975); see HQ 116721 (Sept. 25, 2006)(quoting HQ 101699). Furthermore, the shipboard activities engaged in by such aforementioned individuals while traveling on a non-coastwise-qualified vessel between coastwise ports must be “directly and substantially” related to the operation, navigation, ownership, or business of the vessel itself in order for such individuals to not be considered as passengers under these provisions of law. Inasmuch as the engineers and technicians will be carried onboard the vessel to carry out the vessel’s autonomy program objectives, the coastwise transportation of the engineers and technicians in question would not be in violation of 46 U.S.C. § 55103. With regard to the DoD representatives, ordinarily, a vessel transporting persons, other than its regular crew, exclusively within U.S. territorial waters is thereby engaged in coastwise trade, even if it embarks and disembarks such persons at the same coastwise point. However, you state that the DoD representatives will embark the vessel on demonstration rides to observe the capabilities of the vessel. We have previously ruled that the use of a vessel solely for the purpose of demonstration in which persons who are transported on demonstration rides embark and disembark at the same point is not coastwise trade, even if the ride is entirely within U.S. territorial waters. Such persons are not considered “passengers” for the purpose of 46 U.S.C. § 55103. However, those rulings have been limited to demonstration rides originating and terminating at the same point because the transportation of persons between different points is itself evidence of a purpose other than the demonstration of a vessel. HQ 111011 (July 27, 1990) (determining that prospective buyers of a vessel’s design who are taken on rides for the purpose of selling the design are not considered “passengers,” provided that they embark and disembark at the same point) and HQ 116520 (Nov. 3, 2005) (holding that the carriage of a potential time charterer’s personnel aboard a vessel on demonstration rides, where such personnel embark and disembark at the same point, does not constitute coastwise trade). Accordingly, the DoD representatives who are carried onboard the vessel for the purpose of embarking on demonstration rides are not passengers under 46 U.S.C. § 55103, provided that they embark and disembark at the same coastwise point. HOLDING The proposed use of a non-coastwise-qualified vessel as part of a technology demonstration project does not constitute an engagement in coastwise trade for purposes of 46 U.S.C. § 55102, provided all items transported aboard the vessel are laden and unladen at the same coastwise point. The engineers and technicians that will be transported aboard the vessel are not “passengers” within the meaning of 46 U.S.C. § 55103. Therefore, the coastwise transportation of such individuals would not be in violation of 46 U.S.C. § 55103. The DoD representatives participating in demonstration rides are not “passengers” within the meaning of 46 U.S.C. § 55103, provided that they embark and disembark at the same coastwise point. Sincerely, Lisa L. Burley Chief/Supervisory Attorney-Advisor Cargo Security, Carriers and Restricted Merchandise Branch Office of International Trade, Regulations and Rulings U.S. Customs and Border Protection