VES-4-03-CO:R:P:C 109638 GV
Mr. Sture Devemark
S.B. Devemark & Associates
22160 Marylee Street
Woodland Hills, California 91367
RE: Use of foreign-built yacht for commercial charter
alternatively bareboat charter
Dear Mr. Devemark:
This is in reference to your letter of July 9, 1988,
requesting an opinion relative to the use of a foreign-built
yacht for commercial charter or alternatively for bareboat
charter.
You propose to use a 52-foot Taiwanese-built yacht for
commercial charter operations or alternatively for bareboat
charter. The yacht would be based in Ventura or Oxnard harbor
for a day cruise or maximum one week cruise to areas
approximately ten to thirty miles outside the U.S. coast.
ISSUE:
Whether the chartering of a Tiawanese-built yacht for day
or week cruises to areas approximately ten to thirty miles
outside the U.S. coast would be prohibited by 46 U.S.C. App.
289 or 883.
LAW AND ANALYSIS:
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 Unites States (i.e., a
coastwise-qualified vessel). Section 289 of title 46 (46
U.S.C. App. 289), which appears to be more applicable to your
proposal, prohibits the transportation of passengers between
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points in the United States embraced within the coastwise laws,
either directly or by way of a foreign port, in a non-
coastwise-qualified vessel (see above). We note that for
purposes of section 289, "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" (19 CFR 4.50(b)).
In interpreting the coastwise laws (i.e., 46 U.S.C. App.
289, 883) Customs has ruled that a point in the United States
territorial waters is a point in the United States embraced
within the coastwise laws. The territorial waters of the
United States consist of the territorial sea, defined as the
belt, 3 nautical miles wide, adjacent to the coast of the
United States and seaward of the territorial sea baseline.
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 the
coastwise laws. However, the transportation of passengers to
the high seas (i.e., beyond the 3 mile territorial sea) 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.
The Customs Service has consistently held that when a
vessel is chartered under a bona fide bareboat charter, the
bareboat charterer is treated as the owner of the vessel for
the period of the charter, and, because the owners are not
considered "passengers" for purposes of the coastwise laws, the
charterer is not proscribed by the coastwise laws from using
the vessel during the charter for pleasure purposes only. A
vessel chartered under a charter arrangement other than a
bareboat charter (e.g., a time or voyage charter) and used in
coastwise transportation (see discussion above on the carriage
of passengers entirely in territorial waters or to the high
seas or foreign waters) would be subject to penalties under the
coastwise laws. A vessel chartered under a bareboat charter
would also be subject to penalties if the bareboat charterer
used it in the coastwise trade (e.g., to transport passengers
(other than bona fide guests) between coastwise points or
entirely within territorial waters).
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In our review of charter arrangements to determine whether
or not they are bareboat charters we have generally held that:
The nature of a particular charter arrangement is a
question of fact to be determined from the circum-
stances of each case. Under a bareboat charter or
demise charter the owner relinquishes complete man-
agement and control of the vessel to the charterer.
On the other hand, if the owner retains a degree of
management and control, however slight, the charter
is a time or voyage charter, and the vessel is deemed
to be engaged in trade. The crux of the matter is
whether complete management and control have been
wholly surrendered by the owner to the charterer so
that for the period of the charter the charterer is
in effect the owner. Although a charter agreement on
its face may appear to be a bareboat or demise
charter, the manner in which its covenants are
carried out and the intention of the respective
parties to relinquish or to assume complete
management and control are also factors to be
considered.
Although it would appear that your proposal is more in the
nature a time or voyage charter as opposed to a bareboat
charter, until such time as a copy of a particular charter
agreement is submitted, we are unable to determine whether it
is a bareboat charter for purposes of the coastwise laws. We
have ruled that even when a charter is described as a bareboat
one, the actual circumstances of the charter arrangement
control in the determination of whether it is a bareboat
charter for purposes of the coastwise laws. In addition, even
if the charter arrangement is considered a bareboat or demise
charter, if the guests carried on the vessel are considered
"passengers" the transportation will be prohibited by the
coastwise laws.
Accordingly, the determination as to whether your proposed
operation may take place under the auspice of a bareboat
charter or otherwise is relevant only with regard to the
transportation of passengers within territorial waters. In
view of your statement that the cruises in question will extend
beyond the 3 mile United States territorial sea, such cruises
would not be prohibited by the coastwise laws provided the
passengers point of embarkation and disembarkation is the same
point and the passengers do not go ashore, even temporarily, at
another United States point (i.e., a "voyage to nowhere"). We
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reiterate, however, that the carriage of fishing parties for
hire, even if the vessel proceeds beyond territorial waters and
returns to the point of the point of the passengers'
embarkation, is considered coastwise trade and may not take
place aboard the subject vessel.
HOLDING:
The chartering (bareboat or otherwise) of a Taiwanese-built
yacht for day or week cruises to areas approximately ten to
thirty miles outside the U.S. coast would not be prohibited by
46 U.S.C. App. 289 and 883 provided the passengers embark and
disembark at the same point and do not go ashore, even
temporarily, at another United States point (i.e., a voyage to
nowhere) and the vessel at no time engages in the carriage of
fishing parties for hire.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch
CO:R:P:C:GVereb:eav:7/21/88