HQ 110727: Use of vessels with restrictive "Coastwise-Bowaters Only" endorsement to assist in a construction project abroad

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 110727 LLB

                         June 7, 1990

VES-3-24-CO:R:P:C 110727 LLB

CATEGORY:  Carriers

Mr. Bruce A. King
Bogle and Gates
Two Union Square
601 Union Street
Seattle, Washington  98101-2322

RE:  Use of vessels with restrictive "Coastwise-Bowaters
     Only" endorsement to assist in a construction project
     abroad


Dear Mr. King:

     Reference is made to your letter of January 15, 1990, in
which you request a ruling on whether any regulatory or statutory
provision exists which is enforced by Customs, which would in any
way impinge upon the use of vessels with a bowaters endorsement
in a foreign-based construction project.

FACTS:

     A marine construction company which has been issued a
certificate under section 883-1 of title 46, United States Code
Appendix (46 U.S.C. App. 883-1), proposes to utilize certain of
its barges (including crane, pile driving, and flat barge
configurations) to assist in a construction project in a foreign
country.  The crane barges and pile driving barges have their
apparatus permanently attached.  The flat barges will be used as
either stationary work platforms or staging barges for various of
the construction activities.  Certain of the barges will have
mobile equipment placed aboard in the United States, which
equipment will remain aboard the barges during the entire
overseas project, and which will be unloaded at the same location
in the United States at which it was originally laden.  It is
stated that none of the vessels will be used to transport any
passengers or any cargo, whether owned by the section 883-1
citizen or otherwise.

     The incoming letter includes a request for a ruling that
several marine activities are not considered to be included in
the rubric of the coastwise laws.  These include dredging, and
vessels used as crane hoists, pile drivers, stationary storage
facilities, and staging platforms.  These matters appear to be
hypothetical in nature and not related to the contemplated
operation which is to be accomplished at an unspecified foreign
location.  Section 177.7(a), Customs Regulations (19 CFR
177.7(a), provides, in pertinent part:

          ...no ruling letter will be issued with
          regard to transactions or questions which
          are essentially hypothetical in nature...

Accordingly, we cannot respond to this general request.  The
ruling request also asks that Customs grant confidential
treatment to the ruling request and to any ruling issued in
response.  The Customs Regulations are specific on this point,
providing in section 177.2(b)(7) (19 CFR 177.2 (b)(7)), that:

          Information which is claimed to constitute
          trade secrets or privileged or confidential
          commercial or financial information regarding
          the business transactions of private parties
          the disclosure of which would cause
          substantial harm to the competitive position
          of the person making the request (or of
          another interested party), must be identified
          clearly and the reasons such information
          should not be disclosed, including, where
          applicable, the reasons the disclosure of the
          information would prejudice the competitive
          position of the person making the request (or
          of another interested party) must be set
          forth.

In the absence of such justification, submitted in writing, we
could not comply with the request for confidentiality.  In this
case the record was supplemented by a letter of May 1, 1990,
which properly set forth the necessary elements for a grant of
confidentiality.

ISSUE:

     Whether any statutes or regulations administered by the
Customs Service will impinge upon the operation by a corporation
certified pursuant to 46 U.S.C. App. 883-1, involving that
company's barges in a foreign-based construction project.


LAW AND ANALYSIS:

     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,
in pertinent part, 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 ....

     We have long held that "points embraced within the coastwise
laws" includes points within a harbor.  Further, there is no rule
applied by Customs which would permit any minimal degree of
movement so as to create the fiction of non-transportation.  In
relating the statute and its interpretation to the circumstances
here under consideration, in order to avoid a violation of the
statute it will be necessary to unlade the portable construction
equipment at the same location in the United States at which it
was originally laden prior to departure from this country.

     The Act of September 2, 1958 (72 Stat. 1736, often called
the Bowaters Act), titled "An Act to amend section 27 of the
Merchant Marine Act of 1920," added a new section 27A immediately
following section 27.  This Act provides, in pertinent part,
that:

          Notwithstanding any other provision of law, a
          corporation incorporated under the laws of the
          United States ... shall be deemed to be a citizen
          of the United States for the purposes of and
          within the meaning of that term as used in
          sections 316, 808, 835 and 883 of this title, and
          the laws relating to the documentation of vessels,
          if it is established by a certificate filed with
          the Secretary of the Treasury [now the Coast
          Guard] ... that [certain conditions relating to
          the corporation are satisfied] but no vessel owned
          by any such corporation shall engage in the
          fisheries or in the transportation of
          merchandise or passengers for hire between
          points in the United States ... embraced
          within the coastwise laws, except as a
          service for a parent or subsidiary
          corporation and except when such vessel is
          under demise or bareboat charter at
          prevailing rates for use otherwise than in
          the domestic noncontiguous trades from any
          such corporation to a common or contract
          carrier subject to chapter 12 of Title 49,
          which otherwise qualifies as a citizen under
          section 802 of this title, and which is not
          connected, directly or indirectly, by way of
          ownership or control of such corporation.

                        *       *       *

          Vessels built in the United States and owned by a
          corporation meeting the conditions hereof which
          are non-self-propelled or which, if self-
          propelled, are of less than five hundred gross
          tons shall be entitled to documentation under the
          laws of the United States, and except as
          restricted by this section, shall be entitled to
          all the other benefits and privileges and shall be
          subject to the same requirements, penalties, and
          forfeitures as may be applicable in the case of
          vessels built in the United States and otherwise
          documented or exempt from documentation under the
          laws of the United States.

                        *       *       *

          ... If any vessel shall transport merchandise for
          hire in violation of this section, such
          merchandise shall be forfeited to the United
          States ....

As can be noted, there is nothing within the wording of section
883-1 which would prevent the use of vessels operated by an
entity issued a certificate under that section, in a foreign-
based project.



     Section 101.1(k), Customs Regulations (19 CFR 101.1(k)),
provides, in pertinent part:

          'Exportation' means a severance of goods from
          the mass of things belonging to this country
          with the intention of uniting them to the
          mass of things belonging to some foreign
          country.

     We understand that the portable construction equipment will
be laden in the United States, used abroad without being taken
from the carrying barges, and returned to this country to be
unladen.  We are unable to state whether this proposed use
provides an indication that the equipment will be severed from
the goods of this country with the intent that it join those of
another, because we do not know the particulars of the intended
use or the duration of time that the equipment will be used
abroad.  This is relevant to the matters at hand because if the
equipment were considered to be exported during the period of its
foreign use, it would be subject to consumption entry and payment
of any applicable duties under the Harmonized Tariff Schedule of
the United States upon it return to this country.

     Section 4.64, Customs Regulations (19 CFR 4.64) provides, in
its entirety:

          No clearance shall be granted to any
          documented vessel bound to a foreign port or
          place unless it has a Certificate of
          Documentation with a registry or, if
          departing for Canada, a Great Lakes license
          endorsement.

     This language was added to the Customs Regulations by
Treasury Decision 83-214 (T.D. 83-214), the purpose of which was
to conform the Customs Regulations to changes in the law effected
by the Vessel Documentation Act of 1980.  Treasury Decision 83-
214 amended section 4.64, Customs Regulations, so that clearance
is denied to a documented vessel bound to a foreign port or place
unless it is documented with a registry or, if departing for
Canada via the Great Lakes, a Great Lakes license endorsement,
instead of under registry or a frontier enrollment and license
as previously provided.

     Although this change was consistent with the documentation
scheme created by the Vessel Documentation Act of 1980, it failed
to recognize the revocation of section 4337 of the revised
statutes (46 U.S.C. 278).  As a result of the revocation of
section 4337, there is no authority for denying clearance to a
vessel which is engaged or will engage in the coastwise trade and
which is documented with a Certificate of Documentation with a
coastwise endorsement only, when that vessel is bound to a
foreign port or place, as would be true of the vessels under
consideration.

     Although vessels with coastwise or limited coastwise
endorsements on their certificates of documentation may not be
denied clearance for foreign voyages, their actual employment in
such trade is thrown into jeopardy by virtue of section 12110 of
title 46, United States Code (46 U.S.C. 12110), subsection (c) of
which provides:

          When a vessel is employed in a trade not
          covered by the certificate of documentation
          issued for that vessel ... the vessel and its
          equipment are liable to seizure by and
          forfeiture to the United States Government.

     Even though there is no impediment to foreign clearance
imposed by section 4.64 of the Customs Regulations, actual
operation of the vessels in service for which a registry
endorsement is utilized could result in their seizure and
forfeiture.  Problems posed by 46 U.S.C. 12110 may be avoided,
however, by obtaining a dual endorsement on each vessel's
certificate of documentation, one being the present limited
coastwise endorsement, and the other being a registry
endorsement.

     In summarizing the foregoing provisions of statute and
regulation, we find that under the coastwise merchandise statute
(section 883), the portable cranes and other equipment loaded
aboard the barges in the United States must, if a violation of
law is to be avoided, be unladen at precisely the same spot where
placed aboard.  Given the regulatory definition of the word
"exportation" as discussed above, mobile equipment would not be
considered exported during the period it is abroad and thus there
would not be any duty consequences upon its eventual return to
the United States.  Finally, even though vessels operated by a
section 883-1 certified corporation are not restricted by the
terms of the statute from overseas use and may be cleared for
foreign voyages by Customs while carrying a restrictive coastwise
endorsement, their use abroad while documented solely for that
trade may subject the vessels to seizure and forfeiture.
Forfeiture liability may be avoided by the simple expedient of
obtaining a dual endorsement for registry trade on vessel
documentation prior to departure from the United States

HOLDING:

     The barges in question may lade and unlade construction
equipment at the same point in the U.S., with an intervening use
in foreign territorial waters.  Depending upon the particulars
and duration of its foreign use, the equipment may be subject to
import duties upon its return to this country.  The operator,
utilizing a certificate of compliance under 46 U.S.C. 883-1, may
use the vessels abroad, but unless registry endorsements are
obtained for all certificates of documentation, the vessels are
subject to seizure and forfeiture.

                                Sincerely,




                                B. James Fritz
                                Chief
                                Carrier Rulings Branch