VES-10-03-RR:IT:EC 226658 GEV

Kevin P. Callahan
Alaska Cargo Transport, Inc.
6700 W. Marginal Way S.W.
Seattle, Washington 98106

RE: Towing; Registry-endorsed tug; Coastwise-endorsed barge; Guam; Midway; Continuous Tow; 46 U.S.C. App.  316(a); 46 U.S.C.  12105(b); T.D. 70-223(19)

Dear Mr. Callahan:

This is in response to your letter dated December 27, 1995, requesting a ruling regarding 46 U.S.C. App.  316(a). The ruling you request is set forth below.

FACTS:

Your company is contemplating the use of a U.S.-flag towing vessel (i.e., tug) endorsed by the U.S. Coast Guard (USCG) with a registry endorsement pursuant to 46 U.S.C.  12105. The vessel it would tow is a U.S.-flag barge endorsed by the USCG with a coastwise endorsement pursuant to 46 U.S.C.  12106. You inquire as to the applicability of the towing statute (46 U.S.C. App.  316(a)) in the following scenarios:

1. The voyage originates in Mexico; the vessels are fully-loaded and you wish to discharge cargo in two or more U.S. ports without picking up any additional cargo;

2. The voyage originates in Mexico where the vessels are again fully-loaded; they depart for a U.S. port where the barge is fully discharged of cargo. This voyage is then completed. However, you then wish to tow the barge to a different U.S port to pick up cargo; after loading the cargo, the vessels would then proceed to Mexico for discharge;

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3. The voyage originates in Mexico where the vessels are loaded with cargo, part of which is destined for one U.S. port and the remainder is destined for another U.S. port. After discharging part of the cargo in the first U.S. port, you wish to pick up cargo in that first U.S. port which is destined for Mexico. After discharging cargo in the second U.S. port, the vessels would sail to Mexico; and,

4. The voyage originates in Guam or Midway where the vessels are loaded with cargo and sail for Seattle, the vessels' home port. You would like to stop in Hawaii and pick up lashing, dunnage, and perhaps, empty containers to transport same back to Seattle. The vessels, dunnage, lashing and containers are all owned by corporations which are affiliated through common ownership.

5. Presenting the same factual situation as in question 4, may part or all of the cargo be discharged in Hawaii?

ISSUE:

Whether the towing of a coastwise-qualified barge by a non-coastwise-qualified tug as described in any of the above scenarios constitutes a violation of 46 U.S.C. App.  316(a).

LAW AND ANALYSIS:

Title 46, United States Code Appendix,  316(a) (46 U.S.C. App.  316(a), the coastwise towing statute) prohibits the use of any vessel not having in force a certificate of documentation endorsed for the coastwise or Great Lakes trades (46 U.S.C. 12106, 12107, respectively) to tow any vessel other than a vessel in distress, from any point or place embraced within the coastwise laws of the United States to another such port or place, either directly or by way of a foreign port or place, or for any part of such towing.

Title 46, United States Code Appendix,  883 (46 U.S.C. App.  883), the coastwise merchandise statute 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 United States (i.e., a coastwise-qualified vessel). Pursuant to title 19, United States Code,  1401(c) (19 U.S.C.  1401(c)), the word "merchandise" is defined as "...goods, wares and chattels of every description, and includes merchandise the importation of which is prohibited."

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Points embraced within the coastwise laws include all points within the territorial waters of the United States, including points within a harbor. The territorial waters of the United States consist of the territorial sea, defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline, in cases where the baseline and coastline differ.

Pursuant to 46 U.S.C.  877, the coastwise laws are applicable to island territories and possessions of the United States. However, as provided in 46 U.S.C.  12105(b), a vessel for which a registry endorsement is issued may be employed in foreign trade or trade with Guam, American Samoa, Wake, Midway, or Kingman Reef.

In regard to the interpretation of 46 U.S.C. App.  316(a), it is the position of the Customs Service that this provision is to be construed consistently with 46 U.S.C. App.  883. (Treasury Decision (T.D.) 70-223(19)) Consequently, Customs has held that  316(a) does not prohibit the continuous towing by the same foreign-flag (or other non-coastwise-qualified) tug of a vessel engaged 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 the tug and towed vessel stop at other United States ports to load export cargo or unload import cargo. (Customs ruling 110236 citing T.D. 70-223(19))

As applied to the five scenarios you propose, Customs interpretation of 46 U.S.C. App.  316(a) yields the following results:

The first scenario would not result in a violation of 46 U.S.C. App.  316(a) inasmuch as the the tow would begin at a non-coastwise point (Mexico) and proceed from there to United States ports for the purpose of unloading import cargo (i.e., akin to the loading of cargo at a foreign port and its subsequent unloading at U.S. ports which, if done by a single non-coastwise-qualified vessel, does not constitute a violation of 46 U.S.C. App.  883). The tug in this scenario is deemed to be engaged in foreign trade as discussed in T.D. 70-223(19).

The second scenario also does not result in a violation of 46 U.S.C. App.  316(a). As with the first scenario discussed above, the tow would originate at a non-coastwise port (Mexico). On the inbound leg the tug would be merely towing the barge from a foreign port to a United States port for the purpose of unloading import cargo. The outbound leg would be a tow from a different United States port where export cargo is to be loaded to a foreign port. With respect to the tow of the empty barge from the U.S. port of complete discharge to a different U.S. port to lade the aforementioned export cargo, Customs has held that such a tow by a non-coastwise-qualified tug is not prohibited by 46 U.S.C. App.  316(a), "...provided, that the entire tow from the foreign port to the United States point of discharge to the point of loading and then foreign is one continuous tow and the movement between [coastwise points] is for no other purpose than to tow the barge to the [second coastwise point] for the lading of the export cargo." (Customs ruling 109974 PH, dated February 24, 1989)

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In view of the fact that the tow in question would be continuous (i.e., the same tug would be used throughout this movement), the tow to the second U.S. port would be for no other purpose than for the loading of export cargo, and subsequent to such loading the vessels would sail to Mexico, the subject tug is deemed not to be in violation of 46 U.S.C. App.  316(a) and is engaged in foreign trade as discussed in T.D. 70-223(19).

The third scenario would also be an engagement in foreign trade notwithstanding the towing between different U.S. ports in view of the fact that the tow would begin in a foreign port, only foreign-laden cargo would be unladen at U.S. ports (i.e., the unloading of import cargo) and only U.S.-laden cargo would be unladen at foreign ports (i.e., loading of export cargo). Again, the use of the tug is solely in foreign trade pursuant to T.D. 70-223(19).

The fourth scenario involves towing between various points all of which are embraced within the coastwise laws (see discussion of Guam and Midway, above). Pursuant to 46 U.S.C.  12105(b), a U.S.-flag tug with a registry endorsement may tow a barge from Guam or Midway to Seattle via Hawaii. (Customs rulings 113196 GOB, dated August 16, 1994, and 113298 GOB, dated December 29, 1994). Consequently, this scenario does not constitute a violation of 46 U.S.C. App.  316(a).

For the reasons stated above, the fifth scenario you pose also does not give rise to a violation of 46 U.S.C. App.  316(a).

Parenthetically, we note that in each of the five scenarios under consideration you state that "...the vessels are...loaded..." (Emphasis added) Furthermore, the fourth and fifth scenarios address the transportation of merchandise between points embraced within the coastwise laws. While the points of loading and unloading of merchandise are determinative as to whether there is a movement in the coastwise trade, such factors are of no consequence for purposes of the administration of 46 U.S.C. App.  316(a), the statute which is the focus of your ruling request. You should know, however, that if in fact the subject barge is coastwise documented, its transportation of cargo between any of the coastwise points under consideration would not give rise to a violation of 46 U.S.C. App.  883. With respect to the tug, if in fact you contemplate using it not only for towing but also for the actual transportation of cargo on board it, since it is registry-endorsed pursuant to 46 U.S.C.  12105(b), of the scenarios you pose only the movement of merchandise loaded on it at Hawaii and unloaded in Seattle would give rise to a violation of 46 U.S.C. App.  883. - 5 -

HOLDING:

The towing of a coastwise-qualified barge by a non-coastwise-qualified tug as described in any of the above scenarios does not constitute a violation of 46 U.S.C. App.  316(a).

Sincerely,

William G. Rosoff
Chief
Entry and Carrier Rulings Branch