OT:RR:BSTC:CCR
H323382 SMS
Davis R. Maass
Alley, Maass, Rogers & Lindsay, P.A.
340 Royal Poinciana Way, Suite 321
P.O. Box 431
Palm Beach, FL 33480-0431
RE: Coastwise Transportation; Oceanographic Research; 46 U.S.C. §§ 55102 and 55103
Dear Mr. Maass:
This is in response to your January 25, 2022, letter in which you request a ruling on behalf of [ ], (“the Company”) determining if a non-coastwise qualified vessel may be used to conduct certain oceanographic research expeditions without violating 46 U.S.C. §§ 55102 and 55103. Counsel has requested confidential treatment be accorded to certain information submitted in connection with this ruling request. In consideration of the request and sufficient justification presented pursuant to 19 C.F.R. § 177.2(b)(7), this office will not identify the requesting party nor any of the business confidential information provided to U.S. Customs and Border Protection (“CBP”). Our decision follows.
FACTS:
The Company owns a non-coastwise qualified, Marshall Islands-flagged, 54-meter motor yacht (“the Vessel”). The Vessel was built in Netherlands and has never been imported into the United States. The Company proposes to make the Vessel available, at no charge, to Bimini Biological Field Station Foundation, Inc., a Florida nonprofit corporation (“BBFS”) to conduct oceanographic research expeditions and voyages in and around the Florida Keys, in Monroe County, Florida. Specifically, BBFS will conduct shark and ray surveys, including collecting samples and tagging certain species. Counsel also provided several federal and state permit approvals, to conduct the subject research.
The research team of four to six people intends to sleep on board the Vessel, to have ready access to areas that have not been extensively surveyed before. The Company also requests to invite guests, which are explained to be “the beneficial owner and members of his immediate family” to witness the research, who “would not be actively involved” in the research. The supplies on board the Vessel would consist of research equipment, including fishing gear, tags (including electronic tags), data-collection supplies for blood and muscle, and a centrifuge, in addition to the “usual provisions and consumables.” Lastly, Counsel explains the Vessel would dock, load, and unload research equipment in U.S. waters. “The total time from loading to unloading, including research activities, would be about three weeks.” Lastly, the Company does not intend to import the Vessel into the Commerce of the United States, nonetheless Counsel believes the applicable Harmonized Tariff Schedule of the United States (“HTSUS”) classification number of the Vessel would be 8903.33.00.
Based on the above activities, you request confirmation that the proposed Vessel use is not dutiable, and that it does not constitute coastwise trade.
ISSUES:
Whether the proposed operation constitutes an engagement in coastwise trade for purposes of 46 U.S.C. §§ 55102 and 55103.
Whether the proposed use of the vessel in U.S. coastal waters for oceanographic research may be afforded duty-free treatment.
LAW AND ANALYSIS:
Whether the proposed operation constitutes an engagement in coastwise trade for purposes of 46 U.S.C. §§ 55102 and 55103.
Generally, the coastwise laws prohibit the transportation of passengers or merchandise between points in the United States embraced within the coastwise laws in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise qualified.” Specifically, pursuant to 46 U.S.C. § 55102 (“the Jones Act”), a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel has a coastwise endorsement.
The CBP regulations promulgated under the authority of 46 U.S.C. § 55102(a), provide that “[a] coastwise transportation of merchandise takes place. . . when merchandise laden at a point embraced within the coastwise laws (“coastwise point”) is unladen at another coastwise point, regardless of the origin or ultimate destination of the merchandise.” The coastwise laws generally apply to points in the territorial sea, which is 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. Pursuant to 46 U.S.C. § 55102(a), “[m]erchandise, includes (1) merchandise owned by the United States Government, a State, or a subdivision of a State; and (2) valueless material.” As such, any cargo, regardless of its value or ownership, would be considered merchandise for the purpose of 46 U.S.C. § 55102.”
Similarly, the coastwise law applicable to the carriage of passengers, the Passenger Vessel Services Act (“PVSA”), found at 46 U.S.C. § 55103, provides:
Except as otherwise provided in this chapter or chapter 121 of this title, a vessel may not transport passengers between ports or places in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel-
is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and
has been issued a certificate of documentation with a coastwise endorsement under chapter 121 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.
The CBP regulations, promulgated under the authority of 46 U.S.C. § 55103, provide, “[a] passenger within the meaning of this part is any person carried on a vessel who is not connected with the operation of the vessel, her navigation, ownership, or business.”
The Oceanographic Research Vessel Act, as amended, and codified at 46 U.S.C. § 2101 in conjunction with 46 U.S.C. § 50503, makes an exception to allow non-coastwise qualified vessels to engage in certain activities as an “oceanographic research vessel.” Specifically, 46 U.S.C. § 2101, defines an “oceanographic research vessel” as:
a vessel that the Secretary finds is being employed only in instruction in oceanography or limnology, or both, or only in oceanographic or limnological research, including studies about the sea such as seismic, gravity meter, and magnetic exploration and other marine geophysical or geological surveys, atmospheric research, and biological research.
Moreover, 46 U.S.C. § 50503, provides “[a]n oceanographic research vessel (as defined in section 2101 of this title) is deemed not to be engaged in trade or commerce.” Thus, if the proposed Vessel activity as performed by BBFS is employed for oceanographic research, it will not violate the coastwise laws found under 46 U.S.C. §§ 55102 and 55103.
Counsel explains that a research team, immediate family of the beneficial owner, along with research materials and necessary provisions will be aboard the Vessel during the various voyages and expeditions. Thus, we must determine if the merchandise and persons onboard the Vessel are exempted from the above-described coastwise laws.
CBP has held that the use of a vessel to engage in oceanographic research is not a use in the coastwise trade. Recently, in Headquarters Ruling (“HQ”) H287538, dated July 20, 2017, a vessel’s proposed use was for biological, physical, chemical, and marine geophysical oceanographic research expeditions and interdisciplinary ocean-based research projects, including, water sampling, net tows, collection of biological samples from the seafloor, and the taking of various measurements. The vessel would also transport faculty, researchers, and students from the University of Washington’s School of Oceanography, as well as scientists and researchers from other institutions, to conduct the various research, data collection, and sampling activities. In H287538, we held that the proposed biological, physical, chemical, and marine geophysical oceanographic research expeditions and interdisciplinary ocean-based research projects, would not involve either the coastwise transportation of passengers or merchandise under 46 U.S.C. §§ 55102 or 55103. In HQ H008902, dated, May 17, 2007, we found that scientists transported aboard a scientific research vessel to gather data from rocks in the seafloor was not violative of the coastwise laws. In HQ 112122, dated July 22, 1992, we found that transportation of scientists by a survey ship to map the ocean floor was permissible, and in HQ 110399, dated August 23, 1989, our predecessor agency, the U.S. Customs Service, also found that biologists and chemists transported aboard an oceanographic research vessel to collect algae and water samples were not transported in violation of the coastwise laws.
Additionally, in HQ H216579, dated May 15, 2012, CBP held that the retrieval, analysis, and transportation of seabed samples as part of geotechnical science investigations constituted oceanographic research. In HQ H008902, we concluded that the use of the vessel for a scientific ocean-drilling initiative in an international research program that explored the history and structure of the earth as recorded in sediments and rocks beneath the seafloor was considered oceanographic research. We also determined that the transportation of the scientists who worked on the vessel to, from, and between the research sites in United States territorial waters aboard a non-coastwise-qualified vessel would not violate the coastwise laws. We further noted that the transportation of the equipment and supplies necessary for the research, from where they were loaded onto the vessel to the points where they were unloaded from the vessel, would not violate the coastwise merchandise laws.
However, CBP has held that, if such a vessel transported between coastwise points, or provided part of the transportation between coastwise points of, any persons other than the vessel crew and scientists and students engaged in the oceanographic research or any merchandise other than the usual supplies and equipment necessary for that research and/or research specimens or samples, the coastwise laws would be violated. Specifically in HQ 112316, dated July 22, 1992, we explained “that the proposed activities must involve no commercial activity whatsoever, and that any combination of commercial activity with the proposed oceanographic research activities . . . would transform otherwise permissible activities into prohibited coastwise violations.” In HQ 112316, the proposed use of the vessel was to transport collected samples of fish aboard a foreign-built vessel for later sale, which we held “would change the nature of the activity such that transportation of those samples would constitute transportation of merchandise other than the usual supplies and equipment necessary for (oceanographic) research and/or research specimens or samples.” Additionally, in HQ 261304, dated May 21, 2015 a vessel would be used to transport school age children and their teachers. While onboard the vessel, all individuals would receive instruction in the Science, Technology, Engineering, and Mathematics (“STEM”) general curricula. In addition, the individuals onboard would craft scientific hypotheses, conduct experiments, collect, and analyze data, maintain the vessel and engage in navigation and piloting training. In HQ 261304, we found that the sole use of the vessel was not oceanographic research, but a blended use of the vessel that involves building foundational scientific, nautical and vessel maintenance skills. Thus, we held, insofar as the vessel was not solely used for oceanographic research, the transportation of the subject individuals would constitute coastwise trade.
Here, the Vessel will be used by BBFS to conduct shark and ray surveys, including collecting samples and tagging certain species. In addition to the Vessel crew and research team, the Company “would also like to invite guests to witness the research, though they would not be actively involved.”
First, as it relates to persons aboard the Vessel not involved in the research, such as the beneficial owner and immediate family, we determine based on the above, statutory and regulatory language, the beneficial owner, their spouse, and children do not constitute “passengers” under 46 U.S.C. § 55103. Specifically, we note that a beneficial owner may have different standing in different transactions, but generally it is someone recognized in equity as the owner of property even if legal title may belong to someone else, and the use and enjoyment of the property belong to the beneficial owner. In other instances, the beneficial owner may also be the legal title holder, or may hold a portion of the asset, such as 25%, whereas the main title holder may hold 75% of the asset, such as in securities law, the term refers to someone who is a shareholder even though a broker may hold legal title to the shares. Nonetheless, being the beneficial owner of a vessel imparts ownership either in equity or actual title. Thus, under the definition of “passenger” found under 19 C.F.R. § 4.50(b), the beneficial owner is a person who is connected to the ownership of the Vessel, and as discussed supra, as the language of the CBP regulations promulgated under the PVSA makes an exception to persons connected to ownership of the vessel, we find that the “beneficial owner” of the vessel is specifically exempted from the definition of “passenger.”
With regard to the transportation of the owner’s immediate family members, CBP’s longstanding position is that “the spouse and children of a vessel’s owners, officers, and if a corporate owner, members of its board of directors, are not passengers for purposes of the passenger coastwise statute.” Same treatment has been afforded to “any director of the company owning the subject vessel [and] to spouses of corporate officers and directors of the company which owns the vessel.” Thus in this instance we find that the beneficial owner and their spouse and children may travel aboard the Vessel to observe the research activities, and are not considered “passengers” under 19 C.F.R. 4.80(b), thus their transportation does not violate coastwise laws. The request used the phrase “members of his immediate family” to describe the accompanying guests, however we note that the exception afforded here only extends to a spouse and children which we find it not synonymous with the term “immediate family.”
However, we note, CBP has previously held that family members who accompany other persons not connected to the vessel operations and ownership are not remotely connected with the business of the vessel and as such would not be exempt from passenger status. Specifically, in HQ 111871, dated September 11, 1991, the vessel activities under review, included the availability of religious services to persons who wish to partake in such services over religious holidays. Here CBP exempted the clergyman on the vessel for the purpose of directing religious services aboard the vessel from being deemed a passenger as defined in § 4.50(b). However, the clergyman also sought for his wife to accompany him on the voyage, and we determined that, unlike the clergyman, the wife would not be exempt from passenger status. Thus, this exception would only extend to the beneficial owner, their spouse, and children. Any other guests or family, as discussed below, not actively engaged in the oceanographic research program, such as in H287538, would violate coastwise laws, as in HQ 112316, these guests would change the nature of the transportation, and would constitute transportation of passengers other than those connected to the ownership of the vessel or the usual persons needed to conduct the oceanographic research.
Next as it relates to the research team aboard the Vessel, we note that although the above-cited CBP rulings do not determine whether the vessels themselves are oceanographic research vessels under 46 U.S.C. § 2101(24), the use of the vessel or the type of vessel has been a considering factor as to whether the activities aboard those vessels constituted oceanographic research. Specifically, these rulings consider the activities of the individuals transported aboard a vessel alleged to be engaged in oceanographic research. Thus, CBP precedent allows for the use of non-coastwise-qualified vessels to engage in oceanographic research, including the transportation of persons participating in the research from, to, and between research sites in United States territorial waters, whether or not the persons participating in the research temporarily leave the vessels at the research sites, and that such activities would not violate the coastwise laws.
Thus, based on the information provided by you, we conclude that the Vessel will be engaged in marine biology and biological oceanography research, which is included in the Oceanographic Research Vessel Act, as permissible activity. As discussed supra, the use of the Vessel in the proposed research expeditions to conduct ocean-based marine biological research projects are of the sort of activities which we have previously determined to be oceanographic research, and of the type in which a non-coastwise-qualified vessel may engage. Therefore, we find that the proposed use of the Vessel for oceanographic research would not violate the coastwise laws, provided the personnel carried aboard are limited to the Vessel’s owner, spouse, and children; the Vessel’s crew, and scientists and/or persons actively engaged in the oceanographic research. Also, we find that transportation of the usual and customary supplies and equipment necessary for such research, such as fishing gear, tags (including electronic tags), data-collection supplies for blood and muscle, and a centrifuge, would not violate the coastwise laws.
However, we conclude, if any merchandise is transported aboard the Vessel beyond that necessary for the contemplated research, a violation of the coastwise laws would occur, as, the Jones Act prohibits transportation of merchandise, by a non-coastwise-qualified vessel, between distinct points in the United States. As we have found in previous rulings, a Jones Act violation would not occur only if the non-coastwise-qualified vessel returned the merchandise to its original point of lading,. However, in the present case, you state that the non-coastwise-qualified vessel will transport individuals entirely within the Florida territorial sea, and thus, this would be violative of the PVSA, if any “passengers” aboard are not necessary for such research or connected to the ownership of the Vessel. Specifically, CBP has ruled that the transportation of passengers entirely within territorial waters, even where the passengers disembark at their point of embarkation and the vessel touches no other coastwise point, is considered coastwise trade for the purposes of the PVSA.
Whether the proposed use of the vessel in U.S. coastal waters for oceanographic research is afforded duty-free treatment.
In your request, you state that the Company does not intend to import the Vessel and is not offering to sell or charter the Vessel, nor will it receive any consideration in exchange for its proposed use by BBFS. You further explain that the vessel will always remain under the Company’s control. Thus, you request that the use of the Vessel, a “54-meter motor yacht” be considered non-dutiable.
Pursuant to General Note 1, of the HTSUS, all merchandise imported into the United States is subject to duty unless specifically exempted. The imposition of duties and the liability for their payment accrue on the imported merchandise upon its arrival, and entry is required unless specifically excepted. A vessel is considered imported if it is brought into the United States permanently. “‘Unless the contrary clearly applies,’ an importation is ‘the bringing of goods within the jurisdictional limits of the United States with the intention to unlade them.”
Pursuant to 19 C.F.R. § 4.94(d), if vessels that are in the United States under a cruising license are sold or chartered to a resident, a consumption entry must be filed and duties have to be paid; otherwise, the vessel will be subject to seizure or to a monetary claim equal to the value of the vessel. In addition, the offer to sell or charter to a resident would subject a vessel to entry and the payment of duty. Lastly, pursuant to the exceptions listed under 19 C.F.R. § 141.1(b)(2) “vessels not including vessels classified in headings 8903 and 8907 and subheadings 8905.90.10 and 8906.00.10 or in Chapter 98, HTSUS, such as under subheadings 9804.00.35 or 9813.00.35),” are excluded from the requirement of entry.
As you explain, if the Company does not intend to bring its vessel into the United States permanently, i.e., intend to import its vessel, sell, or charter its vessel to a U.S. citizen; the Vessel may be exempted from duty. In determining whether a vessel owner intended to permanently bring its vessel into the U.S., the court in The Astral stated:
Intent is a state of mind which is difficult of precise proof and can only be inferred from acts and circumstances. A person’s intent is usually evidenced by his conduct or statements. Expressions of intent, however, may be used for self-serving purposes. Hence, the court must scrutinize them carefully, together with the conduct of the person making them, and the external circumstances which might tend to confirm or refute them.
Specifically, you state the Vessel will conduct its research over the course of about three weeks. Thus, if as you posit, the Vessel will only remain in the Florida Keys for a limited period, and there is no sell or charter of the Vessel, we find no intent to import the Vessel, and it may be exempt from the assessment of duty.
HOLDINGS:
Under the facts herein presented, and for the reasons explained above, the sole use of the vessel for oceanographic research and ocean-based research projects, would not involve either the coastwise transportation of passengers or merchandise under 46 U.S.C. § 55102 or 46 U.S.C. § 55103. Thus, the transportation of a research team of four to six people, would not violate the Passenger Vessel Services Act, as 46 U.S.C. § 50503, provides an oceanographic research vessel is deemed not to be engaged in trade or commerce. Additionally, the transportation of the Vessel’s beneficial owner, spouse, and children, would not violate the Passenger Vessel Services Act because persons connected with the ownership of the vessel are exempted from the definition of passenger under 19 C.F.R. § 4.50(b). However, transportation of any passengers not actively involved in the research, or connected with the Vessel ownership, would violate the Passenger Vessel Services Act because the oceanographic research exemption only extends to those supplies and passengers necessary to conduct such activities.
Further, the transportation of equipment necessary to conduct the contemplated research, like fishing gear, tags (including electronic tags), data-collection supplies for blood and muscle, and a centrifuge, would not violate the Jones Act, 46 U.S.C. § 55102. However, transportation of any merchandise or passengers aboard the Vessel other than those necessary for such research would result in a violation of the Jones Act, 46 U.S.C. § 55102, and/or the Passenger Vessel Services Act 46 U.S.C. § 55103, and a penalty may be assessed on any merchandise and passengers transported between coastwise points.
Secondly, if there is no intent to import, sell, or charter the proposed Vessel, and its activity is of temporary research use in the United States territorial waters, it will not be deemed imported, and thus it would not be subject to the imposition of duties.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruing letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” If the terms of the import or export contracts vary from the facts stipulated to herein, this decision shall not be binding on CBP as provided for in 19 C.F.R. § 177(b)(1), (2) and (4), and § 177.9(b)(1) and (2).
Sincerely,
W. Richmond Beevers
Chief, Cargo Security, Carriers and Restricted Merchandise Branch
Office of Trade, Regulations and Rulings
U.S. Customs and Border Protection