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HQ 110160

April 10, 1989

VES-3-CO:R:P:C 110160 LLB


Mr. Lawrence E. Birke
Group Vice President
URS Consultants
3131 Elliott Avenue, Suite 300
Seattle, Washington 98121

RE: Applicability of the coastwise trade laws to the transportation of passengers between Seattle, Washington, and Vancouver or Victoria, Canada, on a non-coastwise qualified vessel.

Dear Mr. Birke:

This is in response to your letter of April 3, 1989, in which you ask that we rule on the applicability of the coastwise passenger statute to the transportation of paying passengers on a foreign-built, U.S.-flag vessel, between Seattle, Washington, and alternative points in Canada.


You intend to purchase a boat in Canada which was built in that country in 1977 and is currently documented under the laws of Canada. You propose to use the vessel to transport paying passengers between Seattle, Washington, and either Victoria or Vancouver, Canada. There would be no intervening stops in the United States, including the territorial waters. The U.S. Coast Guard has indicated that it will document the vessel upon its arrival, presumably with a registry.


Are there any restrictions imposed by U.S. law on the operation of a foreign-built vessel in the carriage of passengers between a coastwise point and points in Canada. Further, what duty consequences may arise from the importation of a vessel.


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 2
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 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, owned by citizens of the United States, and never sold foreign with certain exceptions (46 U.S.C. 12106(a)(2)(B) and 19 CFR 4.80(a)(2 and (3)).

In its interpretation of 289, the Customs Service has 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. Transportation of passengers from a point in the United States to the high seas or foreign waters and back to the point of original embarkation, often called a "voyage to nowhere," is not considered coastwise trade. For purposes of the coastwise laws, a vessel "passenger" is defined as "... any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business." (Section 4.50(b), Customs Regulations.)

Clearly, the carriage of passengers from the U.S. to Canada is not coastwise trade. You do not state whether the passengers will terminate their voyage in Canada, or will return to the U.S. on your vessel. If your itinerary calls for the carriage of those same persons back to the U.S., you must return them to the same point in Seattle at which they originally boarded your vessel for the trip to Canada. Passengers disembarking at a point in the U.S. other than the point of embarkation would have been transported in violation of 289.

You do not describe the vessel you intend to purchase. Customs duties attach at the time merchandise is brought into the United States. The Supreme Court has determined that it is the condition of articles when they are brought into the United States that controls their classification for duty purposes, not what they become after they are brought into this country (United States v. Citroen, 223 U.S. 407 (1911)). Commercial vessels are 3
specifically exempted from duty under the Harmonized Tariff schedule of the United States (Chapter 89). Pleasure vessels, however, are assessed duty at the rate of 1.5 percent ad valorem, based upon their value as determined at the time of arrival. If the vessel you are purchasing is a commercial vessel (passenger vessel, cargo vessel, fishing vessel, tug boat, etc.) it will be exempt from duty. If the vessel is a yacht or pleasure boat, it will be assessed duty, notwithstanding the fact that you intend to use it in a commercial venture.


The subject vessel may be used to transport passengers one way between the U.S. and Canada, or on a round-trip between the U.S. and Canada, so long as passengers embark and disembark at the same point in the U.S., without violating 289. The duty consequences concerning the vessel depend upon its configuration, as outlined above.


B. James Fritz

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