HQ 112049: Coastwise Trade; Passengers; Voyage to Nowhere; 46 U.S.C. App. 289

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 112049

                        February 10, 1992

VES-3-CO:R:IT:C 112049 GEV

CATEGORY:  Carriers

Bruce N. Durham
Lieutenant Commander
Senior Investigating Officer
United States Coast Guard
433 Ala Moana Boulevard
Honolulu, Hawaii 96813-4909

RE:  Coastwise Trade; Passengers; Voyage to Nowhere;
     46 U.S.C. App. 289

Dear Lieutenant Commander Durham:

     This is in response to your letter dated December 16, 1991,
enclosing files on two vessels regarding their use, or proposed
use, by foreign interests in Hawaiian waters.  Our ruling on this
matter is set forth below.

FACTS:

     The MASA is a U.S.-built vessel used to transport passengers
on cruises in waters off the coast of the island of Oahu, Hawaii.
Specifically, the passengers embark at Keehi Lagoon for scenic
cruises to Diamond Head.  The passengers usually stay on the
vessel for the duration of the round trip cruise and disembark at
Keehi Lagoon, the point of embarkation.  However, this same
vessel may transport passengers from Keehi Lagoon to either Ala
Wai Harbor or Honolulu Harbor where they disembark.

     In regard to the above vessel, the following documentation
has been submitted:  (1) a copy of the vessel's Certificate of
Documentation issued by the U.S. Coast Guard (USCG) endorsed with
a registry endorsement and indicating U.S. corporate ownership;
(2) a copy of navigation chart no. 19357 marking both the 3-mile
U.S. territorial sea for the area in which the vessel operates
and the actual course of the vessel as observed by the USCG; (3)
a copy of a letter from the law firm retained to represent the
alleged owner of the subject vessel, dated July 17, 1990, to the
State of Hawaii Department of Transportation/Harbors Division
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indicating that the vessel is owned by a Japanese citizen who is
leasing the vessel to the U.S. corporation designated the sole
owner of the vessel on the USCG certificate of documentation; (4)
a copy of USCG form 1258 ("Application for Documentation or for
Surrender, Replacement, or Redocumentation") indicating the
registry endorsement and U.S. corporate ownership; and (5) a copy
of the State of Hawaii "Application for Vessel Registration and
Certificate of Number" indicating the vessel is owned by a
Japanese alien and that its principal use is for pleasure.

     The KAHUWAI MISTRESS is registered for pleasure with the
State of Hawaii but not yet documented by the USCG.  The vessel
is used for daily charters by hotel guests.

     In regard to this second vessel, the following documentation
was submitted:  (1) a copy of the State of Hawaii "Application
for Vessel Registration and Certificate of Number" indicating
the vessel is owned by a U.S. corporation and that its principal
use is for pleasure; (2) a copy of the articles of incorporation
for Kahuwai Bay Charter, Inc., of Honolulu, Hawaii, the U.S.
corporate owner denoted as such on the aforementioned state
registration; (3) a letter from the State of Hawaii Department of
Transportation/Harbors Division, to the USCG, Honolulu, dated
October 29, 1991, stating that although the vessel is state-
registered for pleasure it is used to carry guests of a Japanese-
owned hotel who charter the vessel on a daily basis; (4) a letter
from the State of Hawaii Department of Transportation/Harbors
Division, dated September 30, 1991, to the hotel's general
manager discussing the use of vessels by the hotel's guests; and
(5) a copy of a facsimile transmission from the State of Hawaii
Department of Transportation/Harbor Division, dated December 6,
1991, to the USCG, Honolulu, transmitting various communications
regarding this matter.

ISSUES:

     1.  Whether the transportation of passengers between U.S.
points constitutes coastwise trade within the purview of 46
U.S.C. App. 289.

     2.  Whether the transportation of passengers solely within
the 3-mile U.S. territorial sea, even though the passengers
disembark at their point of embarkation without going ashore at
any other coastwise point, constitutes a "voyage to nowhere"
thereby obviating the applicability of 46 U.S.C. App. 289.

     3.  Whether the use of a vessel for charter party fishing
constitutes coastwise trade within the purview of 46 U.S.C. App.
289.

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LAW AND ANALYSIS:

     Title 46, United States Code Appendix, section 289 (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 (i.e., any vessel that is not built in
and documented under the laws of the United States, and owned by
persons who are citizens of the United States).  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))
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 (29 O.A.G.
318 (1912)).  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 passengers' embarkation,
is considered coastwise trade (T.D. 55193(2)).

     In interpreting the coastwise laws, Customs has ruled that a
point in 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,
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.

     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 the 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
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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).

     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.

     Notwithstanding the contradictory evidence regarding the
ownership of the two vessels in question (a matter totally
within the jurisdiction of the USCG to which Customs will defer),
we note that in neither case does there appear to be an issue
pertaining to a bareboat charter.  Therefore, assuming, arguendo,
that neither vessel meets the necessary U.S. ownership
requirements for a coastwise endorsement pursuant to 46 U.S.C
12106, we hold as follows.

     In regard to the first vessel in question (MASA), its use to
transport passengers from Keehi Lagoon to Ala Harbor or Honolulu
Harbor constitutes coastwise trade pursuant to 46 U.S.C. App.
289.  Accordingly, the vessel must be coastwise-qualified as
required by that statute (i.e., U.S.-built, owned and
documented).

     As for the alleged use of the MASA on a "voyage to nowhere"
which would render inapplicable the requirements of 46 U.S.C.
App. 289, the USCG observations of the actual course of the
vessel as delineated on navigation chart 19357 show that the
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vessel is operating well within U.S. territorial waters and is
not proceeding to the high seas as is required (see discussion
above).  Accordingly, the vessel is not transporting passengers
on a valid "voyage to nowhere"  and therefore is in violation of
46 U.S.C. App. 289.

     The analysis set forth above also applies to the second
vessel in question (KAHUWAI MISTRESS).  The use of the vessel to
transport hotel guests between points within U.S. territorial
waters is coastwise trade and therefore it must be coastwise-
qualified.  If it is used on a "voyage to nowhere" (which is not
apparent from the evidence submitted) it must meet the
requirements discussed above.

     Finally, we note that the hiring of either vessel in
question for charter party fishing is coastwise trade regardless
of whether the vessel proceeds beyond U.S. territorial waters and
returns to the passengers' point of embarkation.  Accordingly, a
vessel with only a registry endorsement would be prohibited from
engaging in such activity.

HOLDINGS:

     1.  The transportation of passengers between U.S. points
constitutes coastwise trade within the purview of 46 U.S.C. App.
289.

     2.  The transportation of passengers solely within the 3-
mile U.S. territorial sea, even though the passengers disembark
at their point of embarkation without going ashore at any other
coastwise point, does not constitute a "voyage to nowhere"
thereby obviating the applicability of 46 U.S.C. App. 289.

     3.  The use of a vessel for charter party fishing,
regardless of whether the vessel proceeds beyond the 3-mile U.S.
territorial sea and returns to the passengers' point of
embarkation, constitutes coastwise trade within the purview of 46
U.S.C. App. 289.

                                   Sincerely,




                                   B. James Fritz
                                   Chief
                                   Carrier Rulings Branch