VES-3-17-RR:IT:EC 114507 LLB
Mr. John M. Peterson
Neville, Peterson and Williams
80 Broad Street, 34th Floor
New York, New York 10004
RE: Coastwise transportation; Waiver of coastwise laws; Third
proviso to merchandise transportation statute; Interstate
Commerce Commission Termination Act; 46 U.S.C. App., section
883
Dear Mr. Peterson:
Reference is made to your letter of October 2, 1998, in
which you request that this office issue a ruling regarding the
use of a non-coastwise-qualified vessel in the transportation of
merchandise between coastwise points. You have requested that
certain of the information contained within your submission
remain confidential including the identity of your client, the
commodity involved, the ports of lading and unlading, and the
final destination of the merchandise. You make these requests
under the terms of Part 103 of the Customs Regulations (19 CFR
Part 103), for the reason that release of the designated details
may impact your client adversely in the competitive ocean-carriage bidding process. We accede to your request.
FACTS:
Since 1983, the same routing has been utilized to move
merchandise between United States points, in part by use of non-coastwise-qualified vessels and in part by rail movement over
Canadian rail trackage. The movements proceeded under the terms
of a prior Customs ruling specific to the circumstances. The
movement involves the lading of merchandise on to a non-coastwise-qualified vessel at a port on the Gulf Coast of the
United States. The vessel transports the cargo to a port in
Canada where it is transferred to rail cars. The rail cars,
moving in part over rail trackage in Canada, transport the
merchandise to its final destination in the Northeast United
States. In the present circumstances, all elements of the
transaction including geographic locations, the commodity
involved, and the rail transportation would remain as before.
The water route by which the cargo moves would also remain, but
the water carrier would be replaced by a new entity following
competitive bidding.
ISSUE:
Whether the legality of continued cargo movements as
described in the Facts portion of this ruling, accomplished under
the terms of the third proviso to the Jones Act, would be
affected by the demise of the Interstate Commerce Commission as a
result of enactment of the Interstate Commerce Commission
Termination Act.
LAW AND ANALYSIS:
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...
The coastwise laws generally apply to points in the
territorial sea, defined as the belt, three nautical miles wide,
seaward of the territorial sea baseline, and to points located in
the internal waters, landward of the territorial sea baseline, in
cases where the baseline and the coastline differ. These laws
have also been interpreted to apply to transportation between
points within a single harbor. Merchandise, as used in section
883, includes any article, including even materials of no value
(see the amendment to section 883 by the Act of June 7, 1988,
Pub. L. 100-329; 102 Stat. 588).
The third proviso to 27 of the Merchant Marine Act, 1920,
as amended (46 U.S.C. App. 883), provides that:
...this 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, prior to January 1, 1996, section 883 would
not prohibit the transportation of merchandise so long as all of
the conditions of the third proviso were met, those being that:
a) through routes are utilized which have heretofore or are
hereafter recognized by the Interstate Commerce Commission;
b) routes rate tariffs have been or shall hereafter be filed
with the Interstate Commerce Commission, 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 Commission.
c) the routes utilized are in part over Canadian rail lines
and their own or other connecting water facilities.
We have held that "over Canadian rail lines" means simply
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.
The matter offered for consideration concerns the status of
third proviso cargo movements in the wake of enactment of the
Interstate Commerce Commission Termination Act. Even though the
surviving functions of the Commission have been transferred to
the Surface Transportation Board of the Department of
Transportation, the fact is that the setting of rates route
tariffs is not a surviving function. We are left with a
conundrum. The third proviso requires satisfaction of an element
which, by law, no longer exists. Further, to settle the matter
favorably in this case based solely upon the continued viability
of the tariff rates issued prior to termination of the Interstate
Commerce Commission, could be seen as a de facto agency repeal of
a statutory provision by the suggestion that the proviso might be
unavailable to those who lack a preexisting tariff rate issuance.
Ideally it would be acknowledged to be a basic tenet of
statutory construction and interpretation that the laws as
enacted are meant to be forward-looking and adaptable to evolving
circumstances. This notion has application to the present matter
in 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. Accordingly,
the option for providing 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 permissible
and is not regarded otherwise merely because tariffs may no
longer be filed to cover the movements.
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 certain
provisions 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) The 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 support for
the proposition that notwithstanding the demise of the ICC, those
matters which were 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 remain in force albeit subject to compliance with
the requirements of the Board. Further in this regard 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. We
believe the same such result would occur were we to disallow the
proposed movement now 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.
HOLDING:
Following thorough consideration of the facts presented as
well as analysis of the law and applicable precedents, we have
determined that the movement of merchandise as proposed under the
so-call third proviso of the Jones Act is permissible for the
reasons specified in this ruling.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch