VES-3-07 CO:R:IT:C 112184 JBW
Thomas A. Sands, Esq.
Adams and Reese
4500 One Shell Square
New Orleans, Louisiana 70139
RE: Coastwise; Government Cargo; Army Corps of Engineers;
Barges; 46 U.S.C. App. 883.
Dear Mr. Sands:
This letter is in response to your request for a ruling on
the application of the coastwise laws to the use of foreign-
built barges that transport quarry stone and other materials on
the Mississippi River pursuant to a United States Army Corps of
Engineers contract.
FACTS:
Your client engages in marine construction activities
primarily in the Lower Mississippi Valley. Operating under
contract with the United States Army Corps of Engineers, your
client constructs or rehabilitates stone revetments, dikes,
levees, and similar structures for navigation or flood control.
These construction activities involve the transportation of stone
and other materials on non-self-propelled barges from quarries to
the project sites for emplacement or stockpiling.
The Corps of Engineers typically uses two contracting
procedures to achieve their construction objectives. The normal
procedure is to have the material provided by the construction
contractor. The Corps of Engineers specifies an estimated
quantity and quality of the material that is bid at a unit price.
The contractor is required to obtain the stone, which is tested
by the Corps of Engineers. The materials are transported on the
barges owned by the contractor and are emplaced by the
contractor. The alternative contracting procedure is to have the
Corps of Engineers supply materials acquired by supply contract
to the contractor. It is the opinion of the Director of
Contracting that materials furnished under the latter procedure
would be considered government property, but under the former
procedure the materials would become the property of the
government when placed in the project. Letter of Arthur Lagg,
Director of Contracting, Lower Mississippi Valley Division,
United States Army Corps of Engineers, dated February 17, 1993.
You state that your client wishes to purchase barges
constructed in Mexico to be used for the transportation of stone
and other materials in the above-described activities.
ISSUE:
Whether the transportation of stone or other materials by
foreign-built barge pursuant to a supply or construction contract
issued by the United States Army Corps of Engineers is an
engagement in the coastwise trade that is prohibited by 46 U.S.C.
App. 883.
LAW AND ANALYSIS:
Section 883 of Title 46, United States Code Appendix,
provides, in pertinent part:
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...), between points in the United
States, including Districts, Territories, and
possessions thereof 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....
46 U.S.C. App. 883. The Customs Service has ruled that a point
within the territorial waters of the United States is a point
embraced within the coastwise laws. 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 the
coastline differ.
The Customs Service has ruled that property of the United
States government is not "merchandise" for purposes of the
coastwise laws and thus may be transported between coastwise
points by non-coastwise qualified vessels. C.S.D. 83-86, 17
Cust. B. & Dec. 913, 914-915 (1983). The Mexican-built barges
that your client proposes to use may not be used to transport
merchandise between coastwise points. Whether the barges may be
used for the proposed construction projects depends on whether
the materials transported are deemed government property.
The supply contract procedure used by the Corps of Engineers
for their Lower Mississippi Valley projects involves supplying
the contractors with materials used to accomplish the projects.
Under this scenario, the Corps of Engineers has previously
purchased the materials to be used, and the contractor's
principal responsibility is to move the materials to the work
site for emplacement. The Corps of Engineers exercises all
incidents of ownership over the materials, including exclusive
rights to the possession and disposition of such materials. The
Corps of Engineers acknowledges its ownership of the materials
under this contracting procedure during the course of the
transportation of the materials. We therefore conclude that
materials transported pursuant to this contracting procedure are
government-owned and are not merchandise for purposes of the
coastwise laws. Transportation of the materials would not be
considered an engagement in the coastwise trade in violation of
46 U.S.C. App. 883.
The construction contract procedure used by the Corps of
Engineers requires that the contractors provide the materials
used in the projects. This procedure typically involves
identification by the Corps of Engineers of the quantity and
quality of the materials to by used; however, it is the
responsibility of the contractor to obtain the materials and to
move the materials to the work site for emplacement. Under this
scenario, it appears that the contractor exercises the rights of
ownership over the materials until they are emplaced. Although
usually dedicated to a project, materials may be used for a
variety of governmental or non-governmental projects as
determined by the contractor. Further, acceptance by the
government does not occur until the stone is placed in the
project. We conclude that stone and materials transported
pursuant to this contracting procedure are not government-owned
and are considered merchandise for purposes of the coastwise
laws. Transportation of the materials on non-coastwise qualified
barges would be an engagement in the coastwise trade in violation
of 46 U.S.C. App. 883.
HOLDING:
Stone or materials furnished to contractors for use in Lower
Mississippi River construction projects by the Corps of Engineers
are government-owned and are not considered merchandise under 46
U.S.C. App. 883. Non-coastwise-qualified vessels may be used
for the transportation of such materials. Stone and materials
transported pursuant to a construction contract issued by the
Corps of Engineers are not government-owned and are consdiered
merchandise for purposes of the coastwise laws. Transportation
of the materials on non-coastwise qualified barges would be an
engagement in the coastwise trade in violation of 46 U.S.C. App.
883.
Sincerely,
Acting Chief