HQ 109638: Use of foreign-built yacht for commercial charter alternatively bareboat charter

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                       HQ 109638

                                     July 22, 1988

            VES-4-03-CO:R:P:C  109638 GV

            CATEGORY:  Carriers

            Mr. Sture Devemark
            S.B. Devemark & Associates
            22160 Marylee Street
            Woodland Hills, California 91367

            RE:  Use of foreign-built yacht for commercial charter
                 alternatively bareboat charter

            Dear Mr. Devemark:


                 This is in reference to your letter of July 9, 1988,
            requesting an opinion relative to the use of a foreign-built
            yacht for commercial charter or alternatively for bareboat
            charter.

                 You propose to use a 52-foot Taiwanese-built yacht for
            commercial charter operations or alternatively for bareboat
            charter.  The yacht would be based in Ventura or Oxnard harbor
            for a day cruise or maximum one week cruise to areas
            approximately ten to thirty miles outside the U.S. coast.

            ISSUE:

                 Whether the chartering of a Tiawanese-built yacht for day
            or week cruises to areas approximately ten to thirty miles
            outside the U.S. coast would be prohibited by 46 U.S.C. App.
            289 or 883.

            LAW AND ANALYSIS:

                 Title 46, United States Code Appendix, section 883 (46
            U.S.C. App. 883) 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 Unites States (i.e., a
            coastwise-qualified vessel).  Section 289 of title 46 (46
            U.S.C. App. 289), which appears to be more applicable to your
            proposal, prohibits the transportation of passengers between











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            points in the United States embraced within the coastwise laws,
            either directly or by way of a foreign port, in a non-
            coastwise-qualified vessel (see above).  We note that for
            purposes of section 289, "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" (19 CFR 4.50(b)).

                 In interpreting the coastwise laws (i.e., 46 U.S.C. App.
            289, 883) Customs has ruled that a point in the United States
            territorial waters is a point in the United States embraced
            within the coastwise laws.  The territorial waters of the
            United States consist of the territorial sea, defined as the
            belt, 3 nautical miles wide, adjacent to the coast of the
            United States and seaward of the territorial sea baseline.

                 In its administration of 46 U.S.C. App. 289, the Customs
            Service has ruled that the carriage of passengers entirely
            within territorial waters, even though the passengers disembark
            at their point of embarkation and the vessel touches no other
            coastwise point, is considered coastwise trade subject to the
            coastwise laws.  However, the transportation of passengers to
            the high seas (i.e., beyond the 3 mile territorial sea) and
            back to the point of embarkation, assuming the passengers do
            not go ashore, even temporarily, at another United States
            point, often called a "voyage to nowhere," is not considered
            coastwise trade.  It should be noted that the carriage of
            fishing parties for hire, even if the vessel proceeds beyond
            territorial waters and returns to the point of the passenger's
            embarkation, is considered coastwise trade.

                 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, the
            charterer is not proscribed by the coastwise laws from using
            the vessel during the charter for pleasure purposes only.  A
            vessel chartered under a charter arrangement other than a
            bareboat charter (e.g., a time or voyage charter) and used in
            coastwise transportation (see discussion above on the carriage
            of passengers entirely in territorial waters or to the high
            seas or foreign waters) would be subject to penalties under the
            coastwise laws.  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).













                                         - 3 -


                 In our review of charter arrangements to determine whether
            or not they are bareboat charters we have generally held that:

                      The nature of a particular charter arrangement is a
                      question of fact to be determined from the circum-
                      stances of each case.  Under a bareboat charter or
                      demise charter the owner relinquishes complete man-
                      agement 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 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.

                 Although it would appear that your proposal is more in the
            nature a time or voyage charter as opposed to a bareboat
            charter, until such time as a copy of a particular charter
            agreement is submitted, we are unable to determine whether it
            is a bareboat charter for purposes of the coastwise laws.  We
            have ruled that even when a charter is described as a bareboat
            one, the actual circumstances of the charter arrangement
            control in the determination of whether it is a bareboat
            charter for purposes of the coastwise laws.  In addition, even
            if the charter arrangement is considered a bareboat or demise
            charter, if the guests carried on the vessel are considered
            "passengers" the transportation will be prohibited by the
            coastwise laws.

                 Accordingly, the determination as to whether your proposed
            operation may take place under the auspice of a bareboat
            charter or otherwise is relevant only with regard to the
            transportation of passengers within territorial waters.  In
            view of your statement that the cruises in question will extend
            beyond the 3 mile United States territorial sea, such cruises
            would not be prohibited by the coastwise laws provided the
            passengers point of embarkation and disembarkation is the same
            point and the passengers do not go ashore, even temporarily, at
            another United States point (i.e., a "voyage to nowhere").  We














                                         - 4 -


            reiterate, however, that the carriage of fishing parties for
            hire, even if the vessel proceeds beyond territorial waters and
            returns to the point of the point of the passengers'
            embarkation, is considered coastwise trade and may not take
            place aboard the subject vessel.

            HOLDING:

            The chartering (bareboat or otherwise) of a Taiwanese-built
            yacht for day or week cruises to areas approximately ten to
            thirty miles outside the U.S. coast would not be prohibited by
            46 U.S.C. App. 289 and 883 provided the passengers embark and
            disembark at the same point and do not go ashore, even
            temporarily, at another United States point (i.e., a voyage to
            nowhere) and the vessel at no time engages in the carriage of
            fishing parties for hire.

                                              Sincerely,




                                              B. James Fritz
                                              Chief
                                              Carrier Rulings Branch


















            CO:R:P:C:GVereb:eav:7/21/88