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HQ 112111

July 14, 1992

VES-3-02/07-CO:R:IT:C 112111 MLR

CATEGORY: CARRIER

David McCreary
President
New York Boardsailing, Inc.
1000 East Shore Drive
Ithaca, New York 14850

RE: 46 U.S.C. app. 289; 46 U.S.C. app. 883; Coastwise Trade; Passengers; Foreign-Flag Vessel; Sailing School; EAST WIND

Dear Mr. McCreary:

This is in reference to your letter of February 11, 1992, concerning the use of non-coastwise-qualified vessel on Cayuga Lake as a sailing school.

FACTS:

In your letter, you state that you intend to use a foreign- built sailing vessel to offer sailing instruction on Cayuga Lake near Ithaca, New York. You do not plan to transport passengers from one port to another, merely to sail out from and return to your marina facility. You also do not plan to transport cargo of any type.

You are planning to have the vessel inspected and documented by the U.S. Coast Guard, as per their regulations governing Cayuga Lake, a USCG designated "navigable" lake. You also state that, depending on the number of persons on the vessel, you will have the properly licensed captain as per USCG regulations.

ISSUE:

Whether, under the stated facts, the use of a non-coastwise- qualified vessel as a sailing school would be in violation of the coastwise laws, 46 U.S.C. app. 289, and 46 U.S.C. app. 883.

LAW AND ANALYSIS:

Generally, the coastwise laws (e.g., 46 U.S.C. app. 289 and 883, and 46 U.S.C. 12106 and 12110) 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 and documented under the laws of the United States, and owned by persons who are citizens of the United States.

The coastwise law pertaining to the transportation of merchandise, section 27 of the Act of June 5, 1920, as amended (41 Stat. 999; 46 U.S.C. app. 883, often called the Jones Act), provides that:

No merchandise shall be transported by water, or by land and water, on penalty of forfeiture of the merchandise (or a monetary amount up to the value thereof as determined by the Secretary of the Treasury, or the actual cost of the transportation, whichever is greater, to be recovered from any consignor, seller, owner, importer, consignee, agent, or other person or persons so transporting or causing said merchandise to 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 other vessel 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 ....

"Merchandise" is defined in section 1401(c) of title 19, United States Code, to include goods, wares, and chattels of every description, and includes fish, fish products, and fish packaging materials that are assembled into packages containing fish. Section 883 specifically provides that, for purposes of its provisions, "merchandise" includes valueless material (Pub.L. 100-329; 102 Stat. 588). The transportation of valueless material, whether or not it has commercial value, from a point or place in the United States or point or place on the high seas within the Exclusive Economic Zone (EEZ) as defined in the Presidential Proclamation of March 10, 1983, to another point or place in the United States or a point or place on the high seas within that EEZ would also be prohibited under the provisions of section 883.

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.

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.) Section 4.80a, Customs Regulations (19 CFR 4.80a) is interpretive of section 289.

In its administration of 46 U.S.C. app. 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 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. It should be noted that the carriage of fishing parties for hire, even if the vessel proceeds beyond territorial waters and returns to the point of the passenger's embarkation, is considered coastwise trade.

In interpreting the coastwise laws, Customs has ruled that a point in United States territorial waters is considered a point embraced within the coastwise laws. The coastwise laws generally apply to points in the territorial sea, defined as the belt, three (3) nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline, in cases where the baseline and the coastline differ.

Given the foregoing definition of "passenger", the Customs Service has held that a person being trained or receiving instruction in the handling or navigation of a vessel, and whose presence on board the vessel is necessarily required in order to receive such training or instruction, is not a "passenger" within the meaning of the coastwise laws. Accordingly, if the vessel is used only for such training it would not be required to have a license to engage in the coastwise trade (see Customs Letter Rulings 109850, dated December 27, 1988 and 109287, dated February 24, 1988).

Therefore, the sole use of a non-coastwise-qualified sailing vessel in connection with a bona fide instructional course in sailing and navigation does not constitute coastwise trade within the meaning of 46 U.S.C. app. 289. Legitimate equipment and stores of the sailing school vessel for its use, including groceries purchased by the students are not considered merchandise covered by section 883. However, articles transported on the vessel between points embraced within the coastwise laws which are not legitimate stores and equipment of the vessel are subject to section 883.

However, all persons being carried in the vessel must be involved with the operation, navigation, or business of the vessel. A person who is carried on board a vessel for recreational purposes and who pays a fee for such carriage would be considered a "passenger" and his carriage between places in the United States or entirely within U.S. waters would be in violation of the coastwise laws.

HOLDING:

The sole use of a non-coastwise-qualified sailing vessel in connection with a bona fide instructional course in sailing and navigation does not constitute coastwise trade within the meaning of 46 U.S.C. app. 289.

Legitimate equipment and ship stores for ongoing and present use of the vessel and crew may be transported from a coastwise port to other coastwise points without violating the coastwise laws. Personal items, such as groceries, purchased by the students for their use would be considered ship stores.

This letter addresses only those federal requirements that are administered by the United States Customs Service. While we are unaware of any federal or state agency requirements that might pertain to the undertaking you describe, it is possible that such requirements exist.

Sincerely,

B. James Fritz

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