VES-3-02/3-04 CO:R:IT:C 112021 JBW
Barbara Ehrich Locke, Esquire
Holland & Knight
1200 Brickell Avenue
P. O. Box 015441
Miami, Florida 33101
RE: Coastwise; Passengers; Floating Hotel; Bareboat Charter;
Pleasure Use; 46 U.S.C. App. 289; 19 C.F.R. 4.80.
Dear Ms. Locke:
This letter is in response to your request that we rule on
the application of the coastwise laws to the use of a foreign -
built vessel as a "floating hotel."
FACTS:
Your clients operate a local fishing charter service that
takes customers fishing in the back waters of the Florida
Everglades. Because of the inaccessibility of the fishing sites,
your clients wish to use a Canadian-built houseboat to provide
overnight lodging for their customers. The houseboat will also
serve as a stationary site from which day fishing trips will be
conducted. You state that the houseboat will remain anchored
while the customers are on board. The customers will not be
transported by the houseboat. You state that all other
transportation of the customers will be on coastwise-qualified
vessels.
ISSUES:
(1) Whether the use of an anchored, foreign-built houseboat
for overnight lodging of guests is prohibited by 46 U.S.C. App.
289.
(2) Whether a foreign-built houseboat may be chartered or
leased to third persons for their pleasure use.
LAW AND ANALYSIS:
The coastwise passenger law provides that:
No foreign vessel shall transport passengers
between ports or places in the United States
either directly or by way of a foreign port,
under a penalty of $200 for each passenger so
transported.
46 U.S.C. App. 289. The Customs Service has consistently
interpreted this proscription to apply to any vessel except a
United States built, owned, and properly documented vessel. See
46 U.S.C.A. 12106 & 12110 (West Supp. 1991), 46 U.S.C. App.
289, and 19 C.F.R. 4.80(a) (1991). The territorial waters of
the United States are defined to include 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 the coastline
differ. Headquarters Ruling Letter 111275, dated November 13,
1990.
The Customs Service has determined that a vessel not
qualified for the coastwise trade may be used as a hotel without
violating the coastwise statute provided the vessel remains
stationary by mooring or anchoring while the passengers are on
board. Headquarters Ruling Letter 111423, dated January 9, 1991;
Headquarters Ruling Letter 110542, dated November 21, 1989. Any
movement by the vessel from its stationary location with
passengers on board would constitute a violation of 46 U.S.C.
App. 289. From these rules, we determine that the proposed use
of the subject vessel would not constitute a violation of the
coastwise laws provided that it remains anchored while the
customers are on board.
You raise two collateral issues regarding the intended use
of the foreign-built vessel. First, you ask whether the vessel
must be under United States documentation, in addition to Florida
documentation, to be used as a floating hotel. The enforcement
jurisdiction of the Customs Service extends to the use of the
vessel in the coastwise trade. We determined in the previous
paragraph that the intended use of the houseboat would not
constitute an engagement in the coastwise trade. Therefore, the
nature of the vessel's document would not be of concern to the
Customs Service. This ruling does not address issues within the
purview of other governmental agencies, e.g., the United States
Coast Guard for issues relating to vessel documentation, safety,
and inspection requirements. If you wish to contact the Coast
Guard about these matters, you may communicate with your local
Coast Guard office or Coast Guard Headquarters at the following
address:
Thomas Willis
Chief, Vessel Documentation
U.S. Coast Guard (GMVI-6/13)
2100 Second Street, S.W. (Room 1312)
Washington, D.C. 20593-001
Second, you ask whether we know of any prohibition on the
use of the houseboat in a brochure advertising the package
charter. The advertisement of this proposed service would not
affect our conclusion regarding the legality of the use of the
houseboat as a stationary hotel. See C.S.D. 84-53, 18 Cust. B. &
Dec. 969, 972 (1984).
Finally, you ask whether the foreign-built houseboat may be
chartered or leased to third persons for their pleasure use. The
Customs Service has consistently held that when a vessel is
chartered under a bona fide bareboat charter, the bareboat
charterer is treated as the owner of the vessel for the period of
the charter, and, because the owners are not considered
"passengers" for purposes of the coastwise laws, 19 C.F.R.
4.50(b) (1991), the charterer is not proscribed by the coastwise
laws from using the vessel during the charter for pleasure
purposes only. Headquarters Ruling Letter 109638, dated July 22,
1988. A vessel chartered under a charter arrangement other than
a bareboat charter (e.g., a time or voyage charter) and used in
coastwise transportation would be subject to penalties under the
coastwise laws. Id. A vessel chartered under a bareboat charter
would also be subject to penalties if the bareboat charterer used
it in the coastwise trade (e.g., to transport passengers other
than bona fide guests between coastwise points or entirely
within territorial waters). Id.
The United States Supreme Court stated:
To create a demise [or bareboat charter] the
owner of the vessel must completely and
exclusively relinquish "possession, command,
and navigation" thereof to the demisee.... It
is therefore tantamount to, though just
short of, an outright transfer of ownership.
However, anything short of such a transfer is
a time or voyage charter party or not a
charter party at all.
Guzman v. Pichirilo, 369 U.S. 698, 699-670 (1962); see also,
Leary v. United States, 81 U.S. 607, 611 (1871), 2B Benedict on
Admiralty 52 (6th ed. 1990).
In our review of charter arrangements to determine whether
they are bareboat charters for Customs purposes, we have held, in
addition to the above-described principles, that:
The nature of a particular charter
arrangement is a question of fact to be
determined from the circumstances of each
case. Under a bareboat charter or demise
charter the owner relinquishes complete
management and control of the vessel to the
charterer. On the other hand, if the owner
retains a degree of management and control,
however slight, the charter is a time or
voyage charter, and the vessel is deemed to
be engaged in trade. The crux of the matter
is whether the complete management and
control have been wholly surrendered by the
owner to the charterer so that for the period
of the charter the charterer is in effect the
owner. Although a charter agreement on its
face may appear to be a bareboat or demise
charter, the manner in which its covenants
are carried out and the intention of the
respective parties to relinquish or to assume
complete management and control are also
factors to be considered.
Headquarters Ruling Letter 109638 (emphasis added). In that
regard, it is well established that a vessel may be demised
complete with captain if he is subjected to the orders of the
demisee during the period of the demise. Guzman, 369 U.S. at
701. Furthermore, the Customs Service has held that the mere
fact that the crew is furnished to the charterer would not render
the agreement a time charter provided the charterer had full
authority to hire, discharge, or replace the crew. See
Headquarters Ruling Letter 108278, dated April 2, 1988.
A bareboat charter agreement conforming to these guidelines
will permit a non-coastwise qualified vessel to be chartered for
pleasure purposes. We note, however, that this ruling is
advisory and suggest that your client submit a copy of the
bareboat charter agreement when one is available.
Finally, the current status and use of the houseboat were
not identified in your letter. You should be aware, however,
that a yacht purchased abroad and brought into the United States
by a United States resident is presumed, in the absence of
evidence to the contrary, to be brought into the United States
for use here "permanently" so that it would be classifiable as
imported merchandise and thus subject to duty. The Astral, 72
Cust. Ct. at 253-54, 375 F. Supp. at 1366; Estate of Lev H.
Pritchard v. United States, 43 C.C.P.A. 85, 88 , C.A.D. 612
(1956). The houseboat may be subject to duty upon entry into the
United States.
HOLDINGS:
(1) The Customs Service has determined that a vessel not
qualified for the coastwise trade, which is moored or anchored,
may be used as a hotel without violating the coastwise statute,
provided the vessel is not moved from its moored or anchored
position with passengers aboard.
(2) The coastwise laws do not prohibit a charterer from
chartering a foreign-registered vessel under a bona fide bareboat
charter provided that the vessel is used for pleasure purposes
only.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch