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HQ 109629

July 21, 1988

VES-3-17 CO:R:P:C 109629/109464 PH


Gerard S. Doyle, Jr., Esq.
Sea-Land Corporation
Attorney for Sea-Land Service, Inc.
Post Office Box 800
Iselin, New Jersey 08830

RE: Coastwise Transportation of Cranes to be Used in Loading and Discharging Vessels - Sixth Proviso to 46 U.S.C. App. 883

Dear Mr. Doyle:

This in response to your letters of July 5 and 15, 1988, in which you request a ruling on the applicability of the coastwise laws to the transportation in a Dutch-flag vessel of container handling cranes from Long Beach, California, to Elizabeth, New Jersey. Our ruling of April 20, 1988 (File: VES-3-17 CO:R:P:C 109464 PH), in response to a letter dated April 13, 1988, from Stuart R. Breidbart, Esq., of your company also concerned this matter.


In his April 13 letter, Mr. Breidbart stated that your company owns two shore-side container handling cranes located in a California port. He stated that these cranes are specially designed to load and discharge marine cargo containers from cellular containerships and are useful for no other purpose.

Mr. Breidbart stated that your company needs to relocate the cranes to its port facility in New Jersey to handle an increased volume of cargo which will move through that facility. This relocation was to be effected by the removal of the cranes from their present location, the loading of them onto a special pur- pose chartered "heavy lift" vessel, and the transportation of the cranes on that vessel to the New Jersey facility. There the cranes would be discharged and erected next to other cranes now in service at the facility. All of the cranes were be used to load and discharge cargo of your company moving in the trades between the United States and Europe, Asia, and Central America. In addition, Mr. Breidbart stated, the facility was to be used to load and discharge your company's vessels operating between New Jersey and Puerto Rico, although this cargo represents less than 10 percent of the cargo being loaded and discharged at the New Jersey facility.

Mr. Breidbart stated that the cranes at your company's New Jersey facility are used to stevedore the vessels of your company and those of its terminal service customers. Your company is the sole operator of the cranes now at the facility and would contin- ue to be the sole operator of the cranes when the cranes from California are erected at the New Jersey facility.

Mr. Breidbart stated that the two cranes would take up the entire capacity of, and be the only cargo on the carrying vessel. He stated that the vessel would have to ballast down to clear the Bayonne Bridge in New Jersey and that there is no United States- flag or other vessel which can pass under the bridge with the cranes on board.

Mr. Breidbart stated that the vessel used to transport the cranes was to be a Dutch-flag and owned heavy lift vessel. The vessel owner would voyage charter the vessel to your company and your company would be responsible for all land-side engineering preparation in connection with the loading of the cranes in Cali- fornia. Your company would also be responsible for routing the vessel in its transit to the New Jersey facility and would oversee the discharge of the cranes.

In your July 5 letter, you state that all facts in the April 13 letter remain the same "[e]xcept for the change from 'voyage charter' to 'bareboat (demise) charter', the change in timing and the planned foreign commerce aspects of the operations."

You describe the charter arrangement under which the vessel will be chartered as a "bareboat charter party" and you enclose a copy of the charter party. You state that under the terms of the charter, the owner is relieved of the responsibility to crew, op- erate, navigate, and manage the vessel and those responsibilities become those of your company. You state that your company may use the vessel as it wishes, that it will use the vessel to carry its cranes at no charge, and that it will seek to defray the charter hire and operating costs by soliciting cargoes for carriage for the voyage to Rotterdam, where the vessel will be returned to the owner. Under the terms of the bareboat charter, a "BARECON 'A' Standard Bareboat Charter":

The Vessel shall during the Charter period be in the full possession and at the absolute disposal for all purposes of the Charterers and under their complete control in every respect. The Charterers shall at their own expense and by their own procurement man, victual, navigate, operate, supply, fuel and repair the Vessel whenever required during the Charter period and they shall pay all charges and expenses of every kind and nature whatsoever incidental to their use and operation of the Vessel under this Charter, including any foreign general municipality and/or state taxes. The Master, officers and crew of the Vessel shall be the servants of the Charterers for all purposes whatsoever, even if for any reason appointed by the Owners.

Your July 15, 1988, letter is in response to our inquiry of July 11. In our letter, we asked you to describe the actual use of the cranes under consideration, specifically whether "the cranes will handle any domestic cargo, including that destined to or coming from Puerto Rico." You state, in your July 15 letter, that: "The cranes in question will be erected on the Berth to handle only foreign trade." You note that: "The cranes in question could physically be shifted to load or discharge domestic cargo [but] Sea-Land has no present plans to use the cranes for domestic cargo operation because the Federal Aviation Administration (FAA) has advised Sea-Land not to shift the cranes to the Slip [vessels which carry Puerto Rican trade cargo berth exclusively at this Slip], because they [i.e., the cranes] would then be in the flight path for Newark International Airport."


May cranes used to load and unload the cargo of the owner of the cranes moving in foreign trade be transported from California to New Jersey in a Dutch-flag vessel which is chartered under a "BARECON 'A' Standard Bareboat Charter" by the owner of the cranes from the vessel owner?


Title 46, United States Code Appendix section 883 (46 U.S.C. App. 883), often called the Jones Act, provides, in part, that no merchandise shall be transported between points in the United States embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any vessel other 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. The Act of September 21, 1965 (Public Law 89-194, 79 Stat. 823), added the so-called sixth proviso to section 883 and the Act of August 11, 1968 (Public Law 90-474, 82 Stat. 700), amended this proviso. Under the sixth proviso:

... Upon such terms and conditions as the Secretary of the Treasury by regulation may prescribe, and, if the transporting vessel is of foreign registry, upon a finding by the Secretary of the Treasury, pursuant to information obtained and furnished by the Secretary of State, that the government of the nation of registry extends reciprocal privileges to vessels of the United States, this section shall not apply to the transporta- tion by vessels of the United States not qualified to engage in the coastwise trade, or by vessels of foreign registry, of ... (e) stevedoring equipment and material, if such equipment and material is owned or leased by the owner or operator of the transporting vessel, or is owned or leased by the stevedoring compa- ny contracting for the lading or unlading of that ves- sel, and is transported without charge for use in the handling of cargo in foreign trade.

Section 4.93, Customs Regulations (19 CFR 4.93), lists the nations the vessels of which are entitled to the privileges provided for by the proviso. The Netherlands is listed as having been found to extend reciprocal privileges in respect to the articles listed under paragraph (e) of the proviso. We have ruled that cranes used in the loading and unloading of cargo in foreign trade may qualify for the exemption for stevedoring equipment and material in the sixth proviso to 46 U.S.C. App. 883.

In order to qualify for the exemption for stevedoring equipment and material in the sixth proviso, the cranes under consideration must be:

(1) (a) owned or leased by the owner or operator of the transporting vessel; or

(b) owned or leased by the stevedoring company contracting for the lading or unlading of that vessel; and

(2) ... transported without charge for use in the handling of cargo in foreign trade.

As we stated in our April 20, 1988, ruling, a bareboat or demise charterer may be considered an "owner or operator" of a transporting vessel, for purposes of the sixth proviso, but a time or "slot" charterer would not be so considered. We held that the Dutch-flag vessel under consideration, to be voyage chartered to your company, could not transport the cranes under the sixth proviso because your company would not be considered the "owner or operator," of the vessel and the cranes would not be transported without charge.

It is generally settled law that, "To create a demise [or bareboat charter] the owner of the vessel must completely and exclusively relinquish 'possession, command, and navigation' there of to the demisee ... It is therefore tantamount to, though just short of, an outright transfer of ownership. However, anything short of such a complete transfer is a time or voyage charter party or not a charter party at all." (Guzman v. Pichirilo, 369 U.S. 698, 699-670 (1962); see also, Leary v. United States, 81 U.S. 607, 611 (1871), and 2B Benedict on Admiralty (1978 Ed.), 3- 9 through 3-13, Test for Demise Charter.)

On the basis of the foregoing authorities (see, also, 2B Benedict, 4-9 et seq., in which the "BARECON 'A' Standard Bareboat Charter" which is to be used in this case is set forth as a bareboat charter), we conclude that the charter agreement under which your company will charter the Dutch-flag vessel under consideration, as described in your July 5, 1988, letter and accompanying materials, is a bareboat or demise charter. The cranes to be transported are owned by your company which, as bareboat or demise charterer of the Dutch-flag vessel, would be considered the "owner or operator" of the vessel, for purposes of the sixth proviso. The cranes are to be transported by your company without charge and, according to your July 15, 1988, letter, are "to handle only foreign trade."


Pursuant to the sixth proviso of 46 U.S.C. App. 883, a Dutch-flag vessel would not be prohibited by section 883 from transporting from California to New Jersey cranes used to load and unload the cargo of the owner of the cranes moving in foreign trade when the vessel is chartered under a "BARECON 'A" Standard Bareboat Charter" by the owner of the cranes from the vessel owner, assuming that the charter agreement is as described in the ruling request and accompanying materials and this ruling.


B. James Fritz

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