HQ 0109313 - Determination of build of an Zodiac inflatable craft of less than 5 net tons when a part of the craft is built abroad. - United States International Trade Commision Rulings

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HQ 109313

June 2, 1988

VES 3-23/VES 3-02 CO:R:P:C 109313 BEW

CATEGORY: CARRIER

Mr. Robert Johnson
Captain Napali Boat Cruises
P.O. Box 567
Hanalei, Hi 96714

RE: Determination of build of an Zodiac inflatable craft of less than 5 net tons when a part of the craft is built abroad.

Dear Mr. Johnson:

This in response to your letter of December 20, 1987, requesting a ruling that a 23' Zodiac Mark VI HD, HA 598 CP inflatable craft will be considered built in the United States for purposes of the coastwise laws, after the modifications and improvements to the vessel described in the correspondence.

FACTS:

You state that the 23' Zodiac was purchased in 1986 for $10,200 from Zodiac of North America. You state that the 23' Zodiac was transformed by you and a Frederick Hanlon by completing the following reconstructive work:

All above and below water seams were double-taped; the keel was wrapped to provided extra strength; a wide strip of Hypalon material was applied to the area beneath the keel which extends from the bow to the stern to ward off chafing on the bottom of the craft by the keel; a triangular patch was applied to the bottom to strength the area along the transom; the area where the pontoons meet the floor was reinforced by applying two overlapping strips of flange tape the full length of the craft; all areas where the transom meets the pontoons were reinforced with several layers of Hypalon; and the contact areas of the bow board and the pontoons were reinforced with a double flange type of Hypalon.

In addition, you state that the console, gas box and battery box, or "T-box" were constructed of marine ply;
and then "shot" with fiberglass by Lightnin' Fiberglass of

Kauai; that these boxes were mounted onto the deck of the craft using stainless through bolts; the transom was stripped of its finish, the factory made bolt holes were filled with wooden dowels, and a marine epoxy resin was applied; the transom was reshaped in order to accommodate the motors that were to be bolted to the transom. An aluminum mounting plate for the throttle controls and stainless motor-mounting bracket plates were fabricated by Ashby's Metal Service of Kauai.

You enclosed documents and invoices showing that the total cost for the modifications and additions on the hull and superstructure is $15,249.43. In addition, you state the cost of safety equipment and batteries - $1,425.54; the U.S. built motors - $7,000; and freight - $1,187.49, for a total re- construction cost of $24,862.46.

ISSUE:

Is an inflatable foreign-built craft, which has substantial modifications and additions performed on the hull and superstructure in the United States sufficiently substantially modified to be considered a United States-built vessel for purposes of the coastwise laws.

LAW AND ANALYSIS:

Generally, the coastwise laws prohibit the transportation of merchandise or passengers 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. The passenger coastwise law, 46 U.S.C. App. 289, provides that:

No foreign vessel shall transport passengers between ports or places in the United States, either directly or by way of a foreign port, under a penalty of $200 for each passenger so transported and landed.

Pursuant to 46 U.S.C. 12106 and 12110 and their predecessors (46 U.S.C. 65i and 65m and, before them, 46 U.S.C. 11) and consistent with 46 U.S.C. App. 883, the coastwise merchandise law, the Customs Service has consistently held that the prohibition in 46 U.S.C. App. 289 applies to all non- coastwise-qualified vessels. Non-coastwise-qualified vessels include any vessel other than a vessel built in, properly documented under the laws of, and owned by citizens of the United States, with certain exceptions (see 46 U.S.C.

Usually, the United States Coast Guard determines whether a vessel is built in the United States, for purposes of documentation of the vessel, and this determination is followed by Customs for purposes of the requirement that vessels engaging in the coastwise trade must be built in the United States. Vessels which are of less than 5 net tons, as we understand to be true of the Zodiac inflatable craft under consideration, cannot be documented under the United States flag by the Coast Guard.

Qualified vessels of less than 5 net tons are not precluded from engaging in the coastwise trade simply because they cannot be documented under the laws of the United States, however. Section 4.80(a), Customs Regulations (19 CFR 4.80(a)), enumerates the vessels which may engage in the coastwise trade. Subparagraph (a)(2) of this section (i.e., 19 CFR 4.80(a)(2)) provides that no vessel exempt from documentation (e.g., 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 with a coastwise license. As stated above, to be entitled to be documented with a coastwise license a vessel must, among other things, be built in the United States (46 U.S.C. 12106(a)(2)), with an exception inapplicable in this case.

Thus, foreign-built inflatable crafts may not be used in the coastwise trade. Customs has ruled, however, that inflatable boats which, although originally built abroad, have been sufficiently modified or rebuilt in the United States may be considered built in the United States, for purposes of the coastwise laws (Customs ruling No. 107435/106756, dated March 1, 1985). In making it determination as to whether an imported vessel is rebuilt in the United States, Customs considers the alterations and modifications done to the hull and fittings and superstructure the criticial element. Accordingly, we find that the imported Zodiac inflatable craft, after completion of the modifications and alterations to the hull and fittings of the craft described above, will be sufficiently substantially modified to be considered built in the United States, for purposes of the coastwise laws.

HOLDING:

An inflatable foreign-built craft, which has substantial modifications and additions performed on the hull and superstructure in the United States is sufficiently substantially modified to be considered a United States-built vessel for purposes of the coastwise laws.

Sincerely,

Kathryn C. Peterson

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