VES-3/VES-10-03 CO:R:P:C 109649 PH

Brack J. Jaskey, Esq.
Williams, Kastner & Gibbs
1400 Washington Building
1325 Fourtg Avenue
Post Office Box 21926
Seattle, Washington 98111-0040

RE: Coastwise Transportation in a Foreign-Built Barge of Merchandise Owned by the Barge Owner

Dear Mr. Jaskey:

This in response to your letter of July 12, 1988, in which you request a ruling on the applicability of the coastwise laws to the transportation from Bellingham, Washington, to Ketchikan, Alaska, in a foreign-built barge of merchandise owned by the barge owner.

FACTS:

You state that your client, a construction company, owns a foreign bottom barge. Your client proposes to use this barge to transport some of his equipment from Bellingham, Washington, to Ketchikan, Alaska. The barge would be towed by a United States registered tug. You state that your client neither intends to resell nor in any way distribute the equipment which will be transported. You contend that this transportation of the equip- ment is not violative of 46 U.S.C. App. 883 because the equipment would not be considered "merchandise" for purposes of that statute.

ISSUE:

Does the transportation between points in the United States in a foreign-built vessel of articles owned by the owner of the vessel violate 46 U.S.C. App. 883 when the articles are intended for his use and not for resale or distribution?

LAW AND ANALYSIS:

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, in pertinent part, 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 great- er, 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 transporta- tion, 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 ....

Section 4370 of the Revised Statutes, as amended (R.S. 4370; 46 U.S.C. App. 316(a), the coastwise towing statute), prohibits the towing of any vessel, other than a vessel in distress, by a vessel not documented under the United States flag to engage in the coastwise or Great Lakes trade between ports or places in the United States embraced within the coastwise laws, either directly or by way of a foreign port or place, or for any part of such towing, or such towing between points in a harbor of the United States.

Each of the above laws was recently amended by the Act of June 7, 1988 (Public Law 100-329). Section 883 was amended so that the term "merchandise" includes valueless material and so that it applies to the transportation of "valueless material or any dredged material regardless of whether it has commercial value, from a point or place in the United States or a point or place on the high seas within the Exclusive Economic Zone as de- fined in the Presidential Proclamation of March 10, 1983 [(EEZ)], to another point or place in the United States or a point or place on the high seas within that [EEZ]." Section 883 was also amended so that the penalty for violation of the statute now is forfeiture of the merchandise transported or a monetary amount up to the value thereof, "or the actual cost of the transportation, whichever is greater." Section 316(a) was amended so that it applies to the towing of "any vessel transporting valueless material or any dredged material, regardless of whether it has commercial value, from a point or place in the United States or a point or place on the high seas within the [EEZ] to another point or place in the United States or a point or place on the high seas within that [EEZ]."

The term "merchandise," as used in 46 U.S.C. App. 883, is not defined for purposes of that provision. We have used the definition of "merchandise" found in section 401(c), Tariff Act of 1930, as amended (19 U.S.C. 1401(c)) in our application of section 883. "Merchandise" is defined in section 1401(c) as meaning "goods, wares, and chattels of every description, and [including] merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31."

We have held that baggage which is accompanied by its owner as a passenger aboard a vessel is not "merchandise" for purposes of section 883 and its coastwise transportation is governed by the coastwise statute applicable to passengers (section 8, Act of June 19, 1886, 24 Stat. 81; 46 U.S.C. App. 289) (see Autolog Corp. v. Regan, 731 F.2d 25 (1983), sustaining this position). However, we have never held that cargo which is owned by the owner of a vessel and is transported solely for the use of the owner is not "merchandise" for purposes of section 883. Indeed, we have held that "[i]t is immaterial [for purposes of section 883] that any cargo so transported [i.e., transported between coast- wise points] may be owned by the vessel owner." This position is consistent with the intent of the Congress as shown in its enactment of the so-called sixth proviso to section 883 (the Acts of September 21, 1965, and August 11, 1968; Public Law 89-194, 79 Stat. 823 and Public Law 90-474, 82 Stat. 700, respectively).

Accordingly, the transportation of your client's equipment in his foreign-built barge from Bellingham to Ketchikan would be prohibited by 46 U.S.C. App. 883. The towing of your client's barge from Bellingham to Ketchikan would be prohibited by 46 U.S.C. App. 316(a) unless the towing vessel is documented to engage in the coastwise trade or the Great Lakes trade.

HOLDING:

The transportation between points in the United States in a foreign-built vessel of articles owned by the owner of the vessel and intended for his use and not for resale or distribution does violate 46 U.S.C. App. 883.


Sincerely,

B. James Fritz
Chief
Carrier Rulings Branch