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HQ 114407

July 23, 1998

VES-3-17-RR:IT:EC 114407 GEV


William N. Myhre, Esq.
Preston Gates Ellis & Rouvelas Meeds LLP
1735 New York Avenue, N.W.
Suite 500
Washington, D.C. 20006-5209

RE: Coastwise Trade; Third Proviso to 46 U.S.C. App. ? 883

Dear Mr. Myhre:

This is in response to your letter dated June 30, 1998, on behalf of Sunmar Shipping, Inc. ("Sunmar"), requesting an expedited ruling regarding the proposed transportation of frozen fish between a coastwise point in Alaska and another coastwise point in the continental United States to be accomplished in part by non-coastwise-qualified vessels operated by Sunmar and in part over Canadian rail lines. Our ruling in this matter is set forth below.


For over 15 years Sunmar has been operating foreign-flag refrigerated transport vessels carrying frozen and chilled seafood products from the North Pacific fishing grounds to ports in Europe, often calling at ports in eastern Canada en route. Sunmar proposes to expand this service by the addition of a call at Dutch Harbor, Alaska, to load frozen fish products for discharge at the Bayside Food Terminal in the St. Stephen area of New Brunswick, Canada or Shelburne, Nova Scotia. On discharge, the frozen fish are transferred by pallet to railcars under control of the New Brunswick Southern Railroad for movement to St. John, Newfoundland. In St. John, the railcars/product are transferred to the Canadian Pacific Railroad for further movement over Canadian rail lines to the U.S./Canadian border crossing at McAdam Junction, New Brunswick/Calais, Maine. Canadian Pacific then hauls them across Maine to Montreal, Quebec, and then onward to Albany, New York. In Albany, the railcars transfer to Conrail for delivery to New Bedford, Massachusetts. Products landed at Shelburne, Nova Scotia, will follow the same routing from St. John's onward. The total journey is estimated to require eight to ten days.


Whether the transportation of frozen fish indirectly between coastwise points, in part via both foreign-flag vessel and rail trackage in Canada, as described above, is in accord with the Third Proviso to 46 U.S.C. App. ? 883.


Title 46, United States Code Appendix, ? 883 (46 U.S.C. App. ? 883, the coastwise merchandise statute, often called the "Jones Act"), provides in pertinent part that no merchandise shall be transported between points 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 (i.e., a coastwise-qualified vessel).

The Third Proviso to 46 U.S.C. App. ? 883 provides that:

[T]his section shall not apply to merchandise transported between points within the continental United States, including
Alaska, over through routes heretofore or hereafter recognized by the Interstate Commerce Commission for which routes rate tariffs have been or shall hereafter be filed with said Commission when such routes are in part over Canadian rail lines and their own or other connecting water facilities.

Simply stated, the prohibition against using a non-coastwise-qualified vessel set forth in Proviso are met, that is:
a) through routes are utilized which have heretofore or are hereafter recognized by the Interstate Commerce Commission ("ICC");
b) routes rate tariffs have been or shall hereafter be filed with the ICC, and have not subsequently been rejected for filing, have become effective according to their terms, and have not been subsequently suspended, or withdrawn by the ICC; and
c) the routes utilized are in part over Canadian rail lines and their own or other connecting water facilities.

The Customs Service has held that "over Canadian rail lines" means over rail trackage in Canada, and that "their own or other connecting water facilities" means water facilities covered by a through route regardless of whether those facilities connect directly with the Canadian rail line
covered by that through route. Customs has issued numerous rulings over the years interpreting the Third Proviso as set forth above. (See, e.g., Headquarters ruling letter 113141, dated June 29, 1994.)

On December 29, 1995, Congress passed the Interstate Commerce Commission Termination Act ("ICCTA"). This legislation, which was effective January 1, 1996, abolished the ICC (see ?? 2 and 101, Pub. L. 104-88) and although it did provide conforming amendments to several sections of the Merchant Marine Act of 1920 (see ? 321, Pub. L. 104-88), nothing in the remainder of the statute or its legislative history specifically addresses the ramifications of the aforementioned abolition on the administration of the Jones Act (? 27 of the Merchant Marine Act of 1920, as amended), including the Third Proviso. However, our review of the legislation in its entirety does yield guidance with respect to this issue. Specifically, we find the following sections of the legislation instructive in this matter.

Section 201 of Pub. L. 104-88 amended title 49 of the United States Code by adding a new Chapter 7 establishing the Surface Transportation Board (the "Board") within the Department of Transportation. (? 201(a), Pub. L. 104-88, citing 49 U.S.C. ? 701) This statutory amendment provides as follows:

Except as otherwise provided in the ICC Termination Act of 1995, or the amendments made thereby, the Board shall perform all functions that, immediately before the effective date of such Act, were functions of the Interstate Commerce Commission or were performed by any officer or employee of the Interstate Commerce Commission in the capacity as such officer or employee. (? 210(a), Pub. L. 104-88, citing 49 U.S.C. ? 702)

Accordingly, there exists unequivocal statutory authority for the premise that notwithstanding the demise of the ICC, those matters within its jurisdiction that were not subsequently eliminated by the ICCTA or the amendments made thereby (e.g., Third Proviso-dependent authorization) are now vested in the Board.

In regard to Third Proviso ruling requests to be considered by Customs subsequent to the effective date of the ICCTA, we note that pursuant to ? 204(a)(2) of the ICCTA, the Board published a final rule in the Federal Register on June 7, 1996, which removed from the Code of Federal Regulations obsolete ICC regulations, including the rail tariff filing requirement. (61 FR 29036) On July 5, 1996, the Board published in the Federal Register as a final rule its new regulations (49 CFR Part 1300, effective August 4, 1996), which require rail carriers to merely disclose their rates and service terms to any person upon formal request, as well as provide advance notice of increases in such rates or a change in such service terms. (61 FR 35139) Notwithstanding the substitution of ICC authorization with the aforementioned Board oversight, the ICCTA is devoid of any indicia that this new regulatory authority should be interpreted other than in pari materia with the Third Proviso.

It is therefore our position that notwithstanding the abolition of the ICC and the failure on the part of the ICCTA to specifically provide for conforming amendments to the Jones Act, the cumulative effect of the ICCTA nonetheless mandates that the Third Proviso remains in force albeit subject to compliance with the requirements of the Board. Further in this regard, however, we note Customs ruling letter 112085, dated March 10, 1992, issued prior to the ICCTA, wherein we held that the legality of a proposed movement of frozen seafood pursuant to the Third Proviso was not thwarted merely because the language therein provides for the filing of a rate tariff and such merchandise was a commodity for which no rate tariff was required under ICC procedures. The rationale for this position was that, "...although the statute specifies the filing of rate tariffs with the Interstate Commerce Commission, mechanistic adherence to that requirement in the present climate of deregulation would lead to an absurd result which cannot be justified." Id. We believe the same such result would occur were we to disallow the proposed movement under consideration where, as discussed above, the rail tariff filing requirement has been removed pursuant to the regulations of the Board promulgated pursuant to the ICCTA.

Accordingly, the indirect transportation between coastwise points of commodities which are exempt from requirements regarding rate tariffs, through the utilization of foreign-flag vessels and Canadian rail trackage, is not prohibited merely because no tariffs may be filed to cover the movements.


The transportation of frozen fish indirectly between coastwise points, in part via both foreign-flag vessel and rail trackage in Canada, as described above, is in accord with the Third Proviso to 46 U.S.C. App. ? 883.


Jerry Laderberg

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