VES-3-04 CO:R:P:C 110236 BEW

Milton H. Doumit, Jr., Esquire
Ogden Murphy Wallace
Attorneys-at-Law
1601 Fifth Avenue
Seattle, Washington 98101-1626

RE: Use of a foreign-built vessel within the territorial waters of the United States as a "floating hotel" to accommodate workers that are involved in the Alaskan oil clean-up.

Dear Mr. Doumit:

This is in reference to your letter of May 12, 1989, in which you requested a ruling with regard to the application of the Jones Act to the use of a foreign-flag vessel for overnight accommodations for workers involved with the oil spill in the territorial waters of the Prince William Sound area of Alaska.

FACTS:

You state that the S. S. PRINCE GEORGE will be towed from a Canadian port to a point in Prince William Sound area of Alaska, and that the vessel will be used as a "floating hotel" for the workers involved with the oil spill. You state the vessel will not be able to move under its own power without substantial repairs, and that the vessel will either be anchored or moored at a single point in the Prince William Sound prior to taking on guests or passengers. You state the passengers would be tendered to and from the vessel on U.S. registered and coastwise trade- qualified vessels. You state that approximately every three weeks the vessel will be towed from one point of anchorage to another within the Sound. You state that no passengers will remain aboard while the vessel is being towed. You also state that it is possible that the vessel will be initially provisioned in Canada, and that reprovisioning of the vessel would occur from points in Alaska by U.S. registered and coastwise trade- qualified vessel.

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On May 3, 1989, we issued a ruling concerning the subject vessel and its use as a "floating hotel" in the Prince William Sound. In that ruling we held:

1. The use of a foreign-flag vessel as a "floating hotel" for overnight accommodations, if permanently moored or anchored, is not a violation of the coastwise laws. The transportation of the "hotel guest" by a non-coastwise-qualified vessel, such as your foreign-flag vessel, from one point in the territorial waters to another port of place within the Prince William Sound area is a violation of the coastwise laws.

2. The transportation of merchandise or passengers by a coastwise-qualified vessel between coastwise points and the permanently moored or anchored "floating hotel" would not violate the coastwise laws.

ISSUE:

Whether the transportation on a foreign-flag vessel of merchandise which has been laden onto the vessel by a coastwise- qualified vessel is a violation of the coastwise laws when the foreign-flag vessel either moves or is towed within the territorial waters of the U.S. from one anchorage to anchorage.

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.

Under the provisions of 46 U.S.C. App. 289, no foreign vessel shall transport passengers between ports or places in the United States, either directly or by way of a foreign port. The penalty for violating this section of the law is $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 - 3 -

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) a 19 CFR 4.80(a)(2) and (3)).

In interpreting the coastwise laws as applied to the transportation of passengers, we have ruled that the carriage of passengers entirely within territorial waters, even though they disembark at their point of embarkation and the vessel touches no other point, is considered coastwise trade subject to the coastwise laws. The transportation of passengers to the high seas or foreign waters and back to the point of embarkation, often called a "voyage to nowhere," is not considered coastwise trade, assuming the passengers do not go ashore, even temporarily, at another coastwise point.

A point in United States territorial waters is considered a point in the United States embraced within the coastwise laws but a point beyond those waters, even if it is within the United States Exclusive Economic Zone (EEZ), is not considered to be such a point, with certain exceptions inapplicable in this context (see, e.g., the Outer Continental Shelf Lands Act of 1958, as amended; 43 U.S.C. 1333, and the amendments to 46 U.S.C. App. 883 regarding the transportation of valueless or dredged material effected by Public Law 100-329).

The territorial waters of the United States consist of the belt, 3 nautical miles wide, adjacent to the coast of the United States and seaward of the territorial sea baseline. The recent Presidential Proclamation (dated December 27, 1988) proclaiming a 12 nautical mile territorial sea extended the jurisdiction of the United States only for international purposes and did not extend or change existing federal and state laws. The territorial waters of the United States continue to be 3 nautical miles wide, for purposes of the applicability of the coastwise laws.

The vessel under consideration, as a foreign-flag vessel, would be precluded from engaging in the coastwise trade. Under the circumstances stated above, you may not use the vessel in the coastwise trade if, as is true in this case, it is not qualified to engage in the coastwise trade. As noted above, 46 U.S.C. App. 883 and 289, prohibits the transportation between points in the United States of merchandise and passengers in a non-coastwise-qualified vessel.

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"Passenger," for purposes of this provision, 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)). However, a foreign-built vessel not qualified to engage in the coastwise trade which is permanently moored, can be used as a bed and breakfast inn or other non-maritime use without violating the statute. No law or regulation administered by the United States Customs Service would preclude the use of the subject vessel as a permanently moored lodging facility since it would not be considered engaged in transportation. The subject persons would however, be considered passengers and their transportation on the vessel within the inland harbor or territorial waters of the United States would be a violation of the coastwise laws.

Under the provisions of section 4.80b, of the Customs Regulations (19 CFR 4.80b) a coastwise transportation of merchandise takes place, within the meaning of the coastwise laws, when the merchandise laden at a point embraced with the coastwise laws ("coastwise point") is unladen at another coastwise point regardless of the origin or ultimate destination of the merchandise. The transportation of merchandise to reprovision the vessel from the dock to the S.S. PRINCE GEORGE on a non-coastwise-qualified vessel would be a violation of the coastwise laws. Merchandise which is transported on a coastwise- qualified vessel and laden on the S.S. PRINCE GEORGE vessel within the territorial waters of the U.S. may remain on the vessel when the vessel moves either under its own power or by tow without violating the coastwise laws. If the merchandise which is laden on the S.S. PRINCE GEORGE is transported on the S.S. PRINCE GEORGE and unladen at a point within the territorial waters, under section 4.80(b) a transportation of the merchandise will have taken place. Under these circumstances, the transportation of the merchandise (reprovisions) would be a violation of the coastwise laws.

Title 46, United States Code, section 316(a) (46 U.S.C. 316(a), the coastwise towing law), 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. It is the position of the Customs Service that this provision does not prohibit the continuous towing by the same foreign-flag (or otherwise non-coastwise-qualified) tug of a - 5 -

vessel engaged solely in foreign trade on a voyage from a foreign port to a United States port or ports, or from a United States port or ports to a foreign port, merely because both tug and towed vessel stop at other United States ports to load export cargo or unload import cargo (see Treasury Decision 70-223(19)).

If a non-coastwise qualified towing vessel is used to tow the vessel from its Canadian port to its point of anchorage in the Prince William Sound you would not be in violation of the towing statute (46 U.S.C. App 316(a)). The use of a non- coastwise-qualified vessel to tow the vessel when its moves from its original point of anchorage to subsequent points would be a violation of the coastwise towing statute.

HOLDING:

The use of a foreign-flag vessel as a "floating hotel" for overnight accommodations, if permanently moored or anchored, is not a violation of the coastwise laws. The transportation of merchandise and/or the "hotel guest" by a non-coastwise-qualified vessel, such as your foreign-flag vessel, from one point in the territorial waters to another port or point within the Prince William Sound area is a violation of the coastwise laws.

The transportation of merchandise or passengers by a coastwise-qualified vessel between coastwise points and the permanently moored or anchored "floating hotel" would not violate the coastwise laws.

The transportation of merchandise which has been laden on a foreign-flag vessel within the territorial waters would not be a violation of the coastwise laws if the merchandise so laden is not unladed from the vessel at a port or point within the territorial waters.

A non-coastwise qualified towing vessel may not be used to tow a foreign-flag vessel from it original point of anchorage to a subsequent point within the territorial waters of the United States.

Sincerely,

B. James Fritz
Chief
Carrier Rulings Branch


CO:R:P:C:BEWhiting:5/19/89