HQ 112046: Coastwise Trade; Passengers; Foreign-Flag Vessel; Sailing School; 46 U.S.C. App. 289; 46 U.S.C. App. 883

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 112046

                           May 6, 1992

VES-3-02/07-CO:R:IT:C 112046 BEW

CATEGORY:  Carriers

Mr. Leland B. Nelms
Professional Realty
15248 South Tamiami Trail
Fort Myers, Florida 33908

RE:  Coastwise Trade; Passengers; Foreign-Flag Vessel;
     Sailing School; 46 U.S.C. App. 289; 46 U.S.C. App. 883

Dear Mr. Nelms:

     This is in response to your letters of December 18, 1991,
and January 17, 1992, concerning the use of non-coastwise-
qualified vessels, documented with a U.S. registry endorsement,
in the territorial waters of Florida as a sailing school.

FACTS:

     You state that you have a customer in Switzerland who has a
sailing school on Lake Constance, and that he would like to
establish a sailing school in Florida.  You state that he would
like to acquire an existing marina located in South West Florida.
You state that vessels that he will purchase will be under U.S.
Registry.  You state that the operation will not change, but that
he will be adding a 50 plus foot sailboat for the purpose of
teaching sailing.  You state that the students will be paying
clients who will be taught the ins and outs, rules, and
regulations of sailing on an open waterway.  These students will
arrive in Florida either at Fort Lauderdale or Miami
International Airport from Switzerland for a two week stay.
During this time the students will embark on the vessel on the
East coast of Florida and sail to the Southwest area of the Gulf
of Mexico.

ISSUE:

     Whether, under the stated facts, the use of a non-coastwise-
qualified vessel as a sailing school would be in violation of the
coastwise passenger law, 46 U.S.C. App. 289.

LAW AND ANALYSIS:

     Generally, the coastwise laws (e.g., 46 U.S.C. App. 289 and
883, and 46 U.S.C. 12106 and 12110) 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 and documented under the laws of the United
States, and owned by persons who are citizens of the United
States.

     The coastwise law pertaining to the transportation of
merchandise, section 27 of the Act of June 5, 1920, as amended
(41 Stat. 999; 46 U.S.C. App. 883, often called the Jones Act),
provides that:

          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, to be recovered from any
          consignor, seller, owner, importer,
          consignee, agent, or other person or persons
          so transporting or causing said merchandise
          to 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 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 ....

     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.

     "Merchandise" is defined in section 1401(c) of title 19,
United States Code, to include goods, wares, and chattels of
every description, and includes fish, fish products, and fish
packaging materials that are assembled into packages containing
fish.  Section 883 specifically provides that, for purposes of
its provisions, "merchandise" includes valueless material (Pub.L.
100-329; 102 Stat. 588).  The transportation of valueless
material, whether or not it has commercial value, from a point or
place in the United States or point or place on the high seas
within the Exclusive Economic Zone (EEZ) as defined in the
Presidential Proclamation of March 10, 1983, to another point or
place in the United States or a point or place on the high seas
within that EEZ would also be prohibited under the provisions of
section 883.

     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.)  Section 4.80a, Customs Regulations (19 CFR 4.80a)
is interpretive of section 289.

     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 coastwise laws.
However, the transportation of passengers to the high seas
(i.e., beyond U.S. territorial waters) 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.

     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.

     Given the foregoing definition of "passenger", the Customs
Service has held that a person being trained or receiving
instruction in the handling or navigation of a vessel, and whose
presence on board the vessel is necessarily required in order to
receive such training or instruction, is not a "passenger" within
the meaning of the coastwise laws.  Accordingly, if the vessel is
used only for such training it would not be required to have a
license to engage in the coastwise trade (see Customs Letter
Rulings 109850, dated December 27, 1988 and 109287, dated
February 24, 1988).

     We have consistently held that vessel equipment and stores
are not considered "merchandise" for purposes of section 883
when transported in the vessel by which they are used (see
Customs letter rulings 106910, dated July 9, 1984, and 108223,
dated March 13, 1986).

     Therefore, the sole use of a non-coastwise-qualified sailing
vessel in connection with a bona fide instructional course in
sailing and navigation does not constitute coastwise trade within
the meaning of 46 U.S.C. App. 289.  Legitimate equipment and
stores of the sailing school vessel for its use, including
groceries purchased by the students are not considered
merchandise covered by section 883.  However, articles
transported on the vessel between points embraced within the
coastwise laws which are not legitimate stores and equipment of
the vessel are subject to section 883.

     However, all persons being carried in the vessel must be
involved with the operation, navigation, or business of the
vessel.  A person who is carried on board a vessel for
recreational purposes and who pays a fee for such carriage would
be considered a "passenger" and his carriage between places in
the United States or entirely within U.S. waters would be in
violation of the coastwise laws.

HOLDING:

     The sole use of a non-coastwise-qualified sailing vessel in
connection with a bona fide instructional course in sailing and
navigation does not constitute coastwise trade within the meaning
of 46 U.S.C. App. 289.

     Legitimate equipment and ship stores for use of the vessel
and crew may be transported from a coastwise port to other
coastwise points without violating the coastwise laws.  Personal
items, such as groceries, purchased by the students for their use
would be considered ship stores.

                                     Sincerely,




                                     B. James Fritz
                                     Chief
                                     Carrier Rulings Branch