VES 3-02 CO:R:IT:C 112317 BEW
Mr. Ted Rosenthal
President
Windships Navigation Company
266528 Gallows Bay
St. Croix, United States Virgin Islands 00824
RE: Coastwise trade; passengers; non-coastwise-qualified vessel;
foreign-flag vessel; USCG Certificate of Inspection; Virgin
Islands; "voyage to nowhere"; entry and clearance
procedures.
Dear Mr. Rosenthal:
This is in reference to your letter of June 29, 1992, and
our ruling dated July 1, 1992, concerning the transportation of
passengers for hire on the S/V ELINOR, a non-coastwise-qualified
sailing schooner. We have modified our ruling as set forth
below:
FACTS:
You state that you operate a foreign-flag vessel, the S/V
ELINOR, in the U.S. Virgin Islands through VI Schooner, LTD. You
state that even though the Virgin Islands is exempt from the
coastwise laws, your vessel holds a current Certificate of
Inspection from the United States Coast Guard to carry passengers
for hire in the Virgin Islands.
You state that the vessel is currently underway to the Tall
Ships events in New York, where she will represent St. Croix.
You state that you will be carrying on board the first St. Croix
based Tall Ships Sail Training class composed entirely of youth
from St. Croix. You state that to help pay the cost of the trip
and to expand the program, you would like to use the vessel for
voyages to nowhere. The passengers will embark on the vessel and
disembark from the vessel at each of the following ports where
"voyages to nowhere" are to originate:
New York City Boston, MA
Newport, RI Baltimore, MD
Cambridge, MD Ocean City, MD
Norfolk, VA Wilmington, NC
Charleston, SC Savannah, GA
St. Augustine, FL Miami, FL
Key West, FL
ISSUE:
Are there any restrictions imposed by U.S. law on the
operation of a foreign-flag vessel which has a U.S. Coast Guard
Certificate of Inspection for the carriage of passengers in the
Virgin Islands, in the carriage of passengers for hire on voyages
to nowhere operating out of ports in the United States?
LAW AND ANALYSIS:
Generally, the coastwise laws prohibit the transportation of
merchandise or passengers 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. The passenger coastwise law, 46
U.S.C. App. 289, 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 penalty of $200 for each passenger so
transported and landed.
Pursuant to 46 U.S.C. 12106 and 12110 and their predecessors
(46 U.S.C. 65i and 65m and, before them, 46 U.S.C. 11) and
consistent with 46 U.S.C. App. 883, the coastwise merchandise
law, the Customs Service has consistently held that the
prohibition in 46 U.S.C. App. 289, applies to all non-coastwise-
qualified vessels. Non-coastwise-qualified vessels include any
vessel other than a vessel built in, properly documented under
the laws of, owned by citizens of the United States, and never
sold foreign with certain exceptions (46 U.S.C. 12106(a)(2)(B),
and 19 CFR 4.80(a)(2) and (3)).
For purposes of the coastwise laws, a vessel "passenger" is
defined as "... any person carried on a vessel who is not
connected with the operation of such vessel, her navigation,
ownership, or business." (Section 4.50(b), Customs Regulations.)
In interpreting the coastwise laws as applied to the
transportation of passengers, we have ruled that the carriage of
passengers entirely within territorial waters, even though they
disembark at their point of embarkation and the vessel touches no
other point, is considered coastwise trade subject to the
coastwise laws. The transportation of passengers to the high seas or foreign waters and back to the point of embarkation,
often called a "voyage to nowhere," is not considered coastwise
trade, assuming the passengers do not go ashore, even
temporarily, at another coastwise point. We have ruled that the
carriage of fishing parties for hire, even if the vessel proceeds
beyond territorial waters and returns to the point of the
passengers' original embarkation, is considered coastwise trade
subject to the coastwise laws.
In interpreting the coastwise laws, Customs has ruled that a
point in United States territorial waters is considered a point
embraced within the coastwise laws. The coastwise laws generally
apply to points in the territorial sea, defined as the belt,
three (3) 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.
A non-coastwise-qualified vessel with a U.S. Coast Guard
Certificate of Inspection would be precluded from engaging in the
coastwise trade. The subject vessel could be used to transport
passengers from a point in the United States, to the high seas
beyond territorial waters and back to the same point, assuming
that the vessel touched at no other coastwise point during the
transportation. However, the vessel would be prohibited from
carrying passengers on such a voyage if the passengers
disembarked from the vessel at another coastwise point.
With regard to vessel entry, the Omnibus Budget
Reconciliation Act of 1990, effective November 5, 1990,
amended 46 U.S.C. App. 121 to increase the amount of tonnage
taxes assessed "Upon vessels which shall be entered in the United
States from any foreign port or place..." (emphasis added)
Furthermore, this new legislation provides that vessels departing
a U.S. port and returning to the same port, without going to
another port or place, except vessels of the U.S., recreational
vessels, and barges, as those terms are defined in 46 U.S.C.
2101, will pay tonnage tax at the rate of 9 cents per ton, not to
exceed in the aggregate of 45 cents per ton per year for the next
five fiscal years. Therefore, foreign vessels on "voyages to
nowhere" which were previously not liable for the payment of
tonnage tax, as of November 5, 1990, such liability now exists.
Under this new law foreign vessels on "voyages to nowhere" are
now required to enter and pay tonnage taxes.
In addition, passenger vessels making 3 or more trips a week
between a U.S. port and a foreign port (including cruises to
nowhere) are exempt from the payment of the commercial vessel
user fees set forth in section 24.22 of the Customs Regulations
(19 CFR 24.22) (see Part II Section (A)(IV) User Fee Handbook (HB
53000-07), dated July 1992). Passengers who depart the United
States and return on the same vessel without docking in a foreign
port are also exempt from the passenger processing fee set forth
in section 24.22 of the Customs Regulations (19 CFR 24.22)(see
Part II Section (E)(IV) User Fee Handbook (HB 53000-07), dated
July 1992). Department of Agriculture (APHIS) fees run parallel
to user fees. Vessels on "voyages to nowhere" however, are not
exempt from the payment of Harbor Maintenance Fees (see 19 CFR
24.24).
Title 19, United States Code, section 1433, provides that
immediately upon the arrival at any port or place in the United
States or Virgin Islands of: (1) any vessel from a foreign port
or place; (2) any foreign vessel from a domestic port; or (3) any
vessel of the United States carrying bonded merchandise, or
foreign merchandise for which entry has not been made, the master
of the vessel shall report the arrival at the nearest Customs
facility. The report of arrival shall be in accordance with the
procedures in section 4.2, Customs Regulations, as amended by
T.D.87-150.
The master of any foreign vessel arriving in a United States
port, whether from a foreign port or another United States port,
is required to make vessel entry under title 19, United States
Code, section 1435 (19 U.S.C. 1435), and section 4.3 of the
Customs Regulations (19 CFR 4.3). Such vessels are also required
to clear when bound for a foreign port, and must have a permit to
proceed from one United States port to another.
Under 46 U.S.C. App. 91, any vessel bound to a foreign port
is required to obtain clearance from Customs (see 19 CFR 4.60-
4.75). However, under the provisions of section 4.60(e) no
vessel shall be cleared for the high seas except, a vessel bound
to another vessel on the high seas to-
(1) transship export merchandise which it has transported
from the U.S. to the vessel on the high seas; or
(2) Receive import merchandise from the vessel on the high
seas and transport the merchandise to the U.S.
Under the provisions of section 91, vessels that are being used
solely for "voyages to nowhere" are not required to clear when
departing from the port of embarkation.
In conclusion, your vessel would not have to clear when it
departs the United States for a "voyage to nowhere", but you will
have to report your arrival and enter and pay tonnage taxes when
you return to the port of embarkation.
HOLDING:
The transportation of passengers to the high seas or foreign
waters and back to the point of embarkation, often called a
"voyage to nowhere," is not considered coastwise trade, assuming
the passengers do not go ashore, even temporarily, at another
coastwise point.
Under the provisions of 19 U.S.C. 1433 a foreign-flag vessel
arriving in the United States from a "voyage to nowhere" on the
high seas is required to immediately report its arrival.
A foreign-flag vessel upon arriving from a "voyage to
nowhere" on the high seas is required to make entry and pay
tonnage taxes when it returns to the port of embarkation.
Passenger vessels making 3 or more trips a week between a
U.S. port and a foreign port (including cruises to nowhere) are
exempt from the payment of the commercial vessel user fees set
forth in 19 CFR 24.22. Passengers who depart the United States
and return on the same vessel without docking in a foreign port
are also exempt from the passenger processing fee set forth in
section 19 CFR 24.22. Department of Agriculture (APHIS) fees run
parallel to user fees, and are not owed.
Vessels on "voyages to nowhere" however, are not exempt from
the payment of Harbor Maintenance Fees set forth in 19 CFR 24.24.
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch
cc: Regional Commissioners of Customs
Northeast Region
New York Region