HQ 113015: Coastwise Trade; Bowaters Act; 46 U.S.C. App. 289, 883 and 883-1

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 113015

                         March 10, 1994

VES-3-CO:R:IT:C 113015 GEV

CATEGORY:  Carriers

Glenn H. Peterson
Manager, Contracts and Insurance
Greenhill Petroleum Corporation
11490 Westheimer, Suite 200
Houston, Texas 77077

RE:  Coastwise Trade; Bowaters Act; 46 U.S.C. App.    289, 883
     and 883-1

Dear Mr. Peterson:

     This is in response to your letter dated January 31, 1994
requesting a ruling as to whether the vessel operations of your
company constitute coastwise trade.  Our ruling on this matter is
set forth below.

FACTS:

     Greenhill Petroleum Corporation ("Greenhill"), a corporation
issued a Certificate of Compliance from the U.S. Coast Guard
pursuant to 46 U.S.C. App.   883-1 to operate vessels in the
coastwise trade permitted by that statute, owns U.S.-built vessels
which are used to provide support services for its oil and gas
exploration and production activities.  These vessels, which are
used only on inland waterways and bays, are needed to inspect and
maintain oil wells on a daily basis.  The vessels are used as
follows:  (1) to transport Greenhill's employees between points
within their own oil fields; (2) to transport Greenhill's
employees, and occasionally third party contractors not charged
for the transportation, between shore points and their own oil
fields; (3) as a quarters barge to house and feed Greenhill's
employees, and third parties who are not charged for these
accommodations, all of whom are working in Greenhill's oil fields;
and (4) to transport Greenhill's equipment, supplies and materials
between shore bases and their own oil fields and between points
within those oil fields. 
                              - 2 -

ISSUE:

     Whether a U.S.-built vessel operated under a Certificate of
Compliance issued pursuant to 46 U.S.C. App.   883-1 may transport
its owner's employees, equipment, supplies, materials, and third
party contractors not charged for such transportation, as described
above, on inland waterways and bays.

LAW AND ANALYSIS:

     Title 46, United States Code Appendix,   883 (46 U.S.C. App.
  883), the merchandise coastwise law 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 United States (i.e., a coastwise-qualified
vessel).  Section 289 of title 46 (46 U.S.C. App. 
  289, the passenger coastwise law) as interpreted by the Customs
Service, prohibits the transportation of passengers between 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).  For purposes of   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))  The connection must be direct and
immediate, not a remote or hypothetical connection or a connection
related only to future voyages.

     The coastwise laws generally apply to points in the
territorial sea, defined as 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.

     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. 
(29 O.A.G. 318 (1912))

     Title 46, United States Code Appendix,   883-1 (the "Bowaters
Act") created a narrow exception for certain corporations which
could not otherwise meet the stringent 75 percent ownership
requirement of 46 U.S.C. App.   802 for vessels- 3 -

to be documented for the coastwise trade.  It allows certain
corporations to document vessels for coastwise trade, provided that
the vessels are only used to carry proprietary cargo owned by
either the corporation or its affiliates.  To qualify as a
"Bowaters corporation" a corporation must be incorporated under
U.S. laws and satisfy five requirements:  a majority of its
officers and directors must be U.S. citizens; at least 90 percent
of its employees must be U.S. residents; it must be engaged
primarily in a manufacturing or mineral industry in the U.S.; the
aggregate book value of the corporation's vessels cannot exceed
ten percent of the aggregate book value of the corporation's
assets; and it must purchase or produce in the U.S. at least 75
percent of the raw materials used or sold in its operations.

     The Bowaters Act also places several restrictions on Bowaters
corporations.  These corporations cannot operate vessels which they
own as common carriers for the carriage of non-proprietary cargo. 
The Bowaters Act further provides that no vessel owned by a
Bowaters corporation "shall engage in the fisheries or in the
transportation of merchandise or passengers for hire between points
in the United States...except as a service for a parent or
subsidiary corporation."  Bowaters corporations are also restricted
in their ability to charter out vessels to other parties.

     In regard to the Greenhill operations in question, it is
apparent that the use of their vessels in transporting their own
employees, equipment, supplies, materials and third party
contractors not charged a fee for such transportation as described
above is in compliance with the provisions of the Bowaters Act. 
Accordingly, these activities do not constitute a violation of 46
U.S.C. App.   883-1.

HOLDING:

     A U.S.-built vessel operated under a Certificate of Compliance
issued pursuant to 46 U.S.C. App.   883-1 may transport its owner's
employees, equipment, supplies, materials, and third party
contractors not charged for such transportation, as described
above, on inland waterways and bays.

                              Sincerely,




                              Arthur P. Schifflin
                              Chief