HQ 111657: Coastwise; Fishing Party; Pleasure Vessel; Voyage to Nowhere; Bareboat; Puerto Rico; 46 U.S.C. App. 289; 46 U.S.C. App. 289c.

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 111657

                         August 9, 1991

VES-3-02/4-04   CO:R:IT:C  111657  JBW

CATEGORY:   Carriers

Mr. Jorge Bermdez-Torregrosa
Cuevas, Kuinlam & Bermdez
Banco de Ponce Building, Suite 903
268 Muoz Rivera Avenue
Hato Rey, Puerto Rico 00918-2592

RE:  Coastwise; Fishing Party; Pleasure Vessel; Voyage to
     Nowhere; Bareboat; Puerto Rico; 46 U.S.C. App. 289; 46
     U.S.C. App. 289c.

Dear Mr. Bermdez:

     This letter is in response to your letter of April 17, 1991,
in which you request a ruling on the carriage of fishing parties
in a boat operating with a recreational endorsement in the
territorial waters of Puerto Rico.

FACTS:

     It is proposed that a vessel, operating with a recreational
endorsement from the United States Coast Guard, carry passengers
in the territorial waters of Puerto Rico for the purpose of sport
fishing.

ISSUE:

     Whether the carriage of passengers for sport fishing within
the territorial waters of Puerto Rico constitutes an engagement
in the coastwise trade.

LAW AND ANALYSIS:

     The coastwise passenger law 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 a penalty of $200 for each passenger so
          transported.

46 U.S.C. App. 289.  The Customs Service has consistently
interpreted this proscription to apply to any vessel except a
United States built, owned, and properly documented vessel. See
46 U.S.C.A. 12106 & 12110 (West Supp. 1990), 46 U.S.C. App.
289, and 19 C.F.R. 4.80(a) (1991).  The territorial waters of
the United States are defined to include 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.  Headquarters Ruling Letter 111275, dated November 13,
1990.

     In interpreting the coastwise laws as applied to the
transportation of passengers, 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 point, is considered
coastwise trade subject to the coastwise laws.  E.g.,
Headquarters Ruling Letter 110990, dated May 21, 1990.  However,
the transportation of passengers to the high seas or foreign
waters and back to the precise point of embarkation, often called
a "voyage to nowhere," is not considered coastwise trade.  Id.
An important corollary to this rule is that a "voyage to nowhere"
assumes the passengers do not leave the vessel, even temporarily,
at another United States point.  Id.  Furthermore, the carriage
of fishing parties for hire, even if the vessel proceeds beyond
territorial waters and returns to the point of the passengers'
embarkation, is considered coastwise trade.  Headquarters Ruling
Letter 111051, dated August 16, 1990.

     Based on the foregoing provisions and interpretations, the
use of the vessel in question to transport passengers for sport
fishing would constitute an engagement in the coastwise trade.
This conclusion applies regardless of whether the vessel stays
within or goes beyond the territorial waters of Puerto Rico.  A
vessel engaged in such activity would be required to have a
coastwise endorsement.  Notwithstanding these restrictions,
United States law provides that passengers may be transported
between ports in Puerto Rico and other ports in the United States
on passenger vessels not qualified to engage in the coastwise
trade, subject to the condition that no qualified United States
passenger vessels are available for such service, as determined
by the Secretary of Transportation.  46 U.S.C. App. 289c.

     We note for your information that a vessel with a
recreational endorsement may be chartered in a manner that is
consistent with the coastwise laws.  The Customs Service has 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,
19 C.F.R. 4.50(b) (1991), the charterer is not proscribed by the
coastwise laws from using the vessel during the charter for
pleasure purposes only.  Headquarters Ruling Letter 109638, dated
July 22, 1988.  A vessel chartered under a charter arrangement
other than a bareboat charter (e.g., a time or voyage charter)
and used in coastwise transportation would be subject to
penalties under the coastwise laws.  Id.  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).  Id.

     The United States Supreme Court stated:

          To create a demise [or bareboat charter] the
          owner of the vessel must completely and
          exclusively relinquish "possession, command,
          and navigation" thereof to the demisee.... It
          is therefore tantamount to, though just
          short of, an outright transfer of ownership.
          However, anything short of such a transfer is
          a time or voyage charter party or not a
          charter party at all.

Guzman v. Pichirilo, 369 U.S. 698, 699-670 (1962); see also,
Leary v. United States, 81 U.S. 607, 611 (1871), 2B Benedict on
Admiralty 52 (6th ed. 1990).

     In our review of charter arrangements to determine whether
they are bareboat charters for Customs purposes, we have held, in
addition to the above-described principles, 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 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 the 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.

Headquarters Ruling Letter 109638 (emphasis added).  In that
regard, it is well established that a vessel may be demised
complete with captain if he is subjected to the orders of the
demisee during the period of the demise.  Guzman, 369 U.S. at
701.  Furthermore, the Customs Service has held that the mere
fact that the crew is furnished to the charterer would not render
the agreement a time charter provided the charterer had full
authority to hire, discharge, or replace the crew.  See
Headquarters Ruling Letter 108278, dated April 2, 1988.

     A bareboat charter agreement conforming to these guidelines
will permit a vessel with recreational endorsement to be
chartered for pleasure purposes.  We note, however, that this
ruling is advisory and suggest that your client submit a copy of
the bareboat charter agreement if this option is exercised.


HOLDING:

     The use of a vessel to transport passengers for sport
fishing in the territorial waters of Puerto Rico constitutes an
engagement in the coastwise trade.



                              Sincerely,



                              B. James Fritz
                              Chief
                              Carrier Rulings Branch