HQ 112120: Use of a foreign-built auxiliary sailing catamaran for bareboat charters in the waters of the United States

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 112120

                          May 26, 1992

VES 3-13-CO:R:IT:C  112120 BEW

CATEGORY:  Carriers

LTC. Peter H. Satterlee
U.S. Army (Ret.)
107 Via Amalfi
New Smyrna Beach, FLorida 32169

RE:  Use of a foreign-built auxiliary sailing catamaran for
     bareboat charters in the waters of the United States 

Dear LTC. Satterlee:

     This is in reference to your letter of March 1, 1992, in
which you request a ruling on whether you may use a foreign-
built sailing catamaran for the purposes of coastwise trade, to
wit, chartering for day sailing, or weekly/monthly chartering
within U.S. waters.  You also inquire as to whether the subject
vessel must be documented with the United States Coast Guard for
coastwise trade. 

FACTS:

     You state that the boat is a 1973 35' English-built sailing
catamaran, registered in the State of Delaware.  You state that
the vessel was imported by Symons Sailing, Inc., and sold new in
1974 to the original owner; and that your purchased the vessel
from the original owner in 1991.

ISSUE:

     May a foreign-built pleasure sailing catamaran vessel be
bareboat chartered in the U.S. without violating the coastwise
statutes.

LAW AND ANALYSIS:

     You should be aware that foreign-flag or foreign-built
vessels are prohibited from engaging in the coastwise trade. 
Generally, the coastwise laws (e.g., 46 U.S.C. App. 289 and 883,
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 penalty for violating this section of the law is
$200 for each passenger so transported and landed.  
     A "passenger" is defined in section 4.50(b) of the Customs
Regulations (19 CFR 4.50(b)), as "any person carried on a vessel
who is not connected with the operation of such vessel, her
navigation, ownership, or business".  The family and legitimate
guests of the owner or bareboat charterer of a vessel used for
pleasure purposes are not considered passengers.

     Customs has consistently ruled that a yacht chartered under
a bona fide bareboat charter and used only for pleasure purposes
is not considered to be used in the coastwise trade.  However, a
pleasure vessel chartered under a charter agreement other than a
bareboat charter (e.g., a time or voyage charter) and used in the
U.S. waters is considered to be used in trade.

     In 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
          circumstances of each case.  Under a bareboat charter
          or a 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
          complete management and control have been wholly
          surrendered by the owner to the charterer so that for
          the period of time 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.

     The Customs Service has also ruled, for purposes of the
coastwise law, that a charter agreement which permits the owner
to act as master or as a member of the crew, or which permits the
owner to accompany the vessel during its charter period, would
not be considered a bona fide bareboat charter.

     When a vessel is chartered under a charter arrangement other
than a bareboat charter (e.g., a time or voyage charter) and is
used in coastwise transportation, the owner of the vessel is
subject to penalties under the coastwise laws.  The charterer of
a vessel chartered under a bareboat charter would also be subject
to penalties if the vessel is used for other than pleasure  purposes or if the actions of the parties negated the terms of
the bareboat charter agreement (e.g. if his "guests" paid for or
contributed to the expenses of the trip).

     The Customs Service has consistently held that when a vessel
is chartered under a bona fide bareboat charter, the charterer is
treated as the owner of the vessel for the period of the charter
and, because owners are not considered "passengers," for purposes
of the coastwise laws, the charterer is not prohibited by the
coastwise laws from using the vessel during the charter for
pleasure purposes only, including the transportation of family
and guests. 

     Accordingly, a bareboat charterer may transport family and
guests from one port in the United States to a another port
without violating the coastwise laws. 

     This ruling addresses only those federal requirements which
are administered by the Customs Service.  Questions relating to
the vessel's registration and documentation, and vessel safety
requirements should be directed to the United States Coast Guard
at the following address:

          Mr. Thomas Willis
          Chief, Vessel Documentation
          U.S. Coast Guard (GMVI-6/13)
          2100 Second Street., SW (Room 1312)
          Washington, D.C. 20593-0001
 
     A copy of your letter and our reponse are being referred to
that office for their information.

HOLDING:

     A foreign-built sailing catamaran, or other pleasure vessel
may be bareboat chartered for pleasure use without violating the
coastwise statutes provided under the charter agreement the owner
relinquishes complete management and control of the vessel to the
charterer.

                                     Sincerely,




                                     B. James Fritz
                                     Chief
                                     Carrier Rulings Branch

cc:  District Directors of Customs, Miami and Tampa
     Tom Willis, USCG