Determination of build of an Zodiac inflatable craft of less than 5 net tons when a part of the craft is built abroad.

HQ 109666 October 4, 1988 VES 3-23/VES 3-02 CO:R:P:C 109666 BEW CATEGORY: CARRIERS Mr. Mark O'Dell Garden Island Inflatables 2970 C Waapa Road Lihue, Kauai, Hawaii 96766 RE: Determination of build of an Zodiac inflatable craft of less than 5 net tons when a part of the craft is built abroad. Dear Mr. O'Dell: This in response to your letter of July 15, 1988, requesting a ruling that a 23' Zodiac Mark VI HD, HA 828 CP inflatable craft will be considered built in the United States for purposes of the coastwise laws, after the modifications and improvements to the vessel described in the correspondence. FACTS: You state that the 23' Zodiac was purchased for $14,280 from Zodiac of North America. You state that the 23' Zodiac was extensively redesigned by completing the following reconstructive work: All seams have been reinforced, the transom was removed, fiberglassed, reinstalled with heavier duty mounts and watersealed off. The thrust board was removed, the underlying seams reinforced, and heavy duty mounting pads were added to the boat; The thrust board was fiberglassed and heavy duty mounts were built for it, the thrust board was reinstalled and watersealed off; Both bow boards were removed, fiberglassed and surfaced with an anti-skid surface; - 2 - The bottom of the transom was triple reinforced to prevent sand abrasion; and The speed tubes were dismantled and all structural attachment points for the speed tubes were reinforced. In addition, you state that a fiberglass console was built in Hawaii and installed in the craft, along with twin 70 HP Johnson engines and American steering products You enclosed documents and invoices showing that the total cost for the modifications and additions on the hull and superstructure is $13,674,52. In addition, you state the cost the U.S. built motors - $6,954; and trailer - 2,380, for a total reconstruction cost of $22,928.52. ISSUE: Is an inflatable foreign-built craft, which has substantial modifications and additions performed on the hull and superstructure in the United States sufficiently substantially modified to be considered a United States-built vessel for purposes of the coastwise laws. LAW AND ANALYSIS: Generally, the coastwise laws 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, documented under the laws of, and owned by citizens of the United States. The passenger coastwise law, 46 U.S.C. App. 289, 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 and landed. Pursuant to 46 U.S.C. 12106 and 12110 and their predecessors (46 U.S.C. 65i and 65m and, before them, 46 U.S.C. 11) and consistent with 46 U.S.C. App. 883, the coastwise merchandise law, the Customs Service has consistently held that the prohibition in 46 U.S.C. App. 289 applies to all non- coastwise-qualified vessels. Non-coastwise-qualified vessels include any vessel other than a vessel built in, properly - 3 - documented under the laws of, and owned by citizens of the United States, with certain exceptions (see 46 U.S.C. 12106(a)(2)(B) and 19 CFR 4.80(a)(2) and (3)). Usually, the United States Coast Guard determines whether a vessel is built in the United States, for purposes of documentation of the vessel, and this determination is followed by Customs for purposes of the requirement that vessels engaging in the coastwise trade must be built in the United States. Vessels which are of less than 5 net tons, as we understand to be true of the Zodiac inflatable craft under consideration, cannot be documented under the United States flag by the Coast Guard. Qualified vessels of less than 5 net tons are not precluded from engaging in the coastwise trade simply because they cannot be documented under the laws of the United States, however. Section 4.80(a), Customs Regulations (19 CFR 4.80(a)), enumerates the vessels which may engage in the coastwise trade. Subparagraph (a)(2) of this section (i.e., 19 CFR 4.80(a)(2)) provides that no vessel exempt from documentation (e.g., of less than 5 net tons) shall transport any passengers or merchandise between United States coastwise points unless the vessel is owned by a citizen of the United States and is entitled to or, except for its tonnage, would be entitled to be documented with a coastwise license. As stated above, to be entitled to be documented with a coastwise license a vessel must, among other things, be built in the United States (46 U.S.C. 12106(a)(2)), with an exception inapplicable in this case. Thus, foreign-built inflatable crafts may not be used in the coastwise trade. Customs has ruled, however, that inflatable boats which, although originally built abroad, have been sufficiently modified or rebuilt in the United States may be considered built in the United States, for purposes of the coastwise laws (Customs ruling No. 107435/106756, dated March 1, 1985, copy enclosed). In making it determination as to whether an imported vessel is rebuilt in the United States, Customs considers the alterations and modifications done to the hull and fittings and superstructure the critical element. Accordingly, we find that the imported Zodiac inflatable craft, after completion of the modifications and alterations to the hull and fittings of the craft described above, will be sufficiently substantially modified to be considered built in the United States, for purposes of the coastwise laws. - 4 - HOLDING: An inflatable foreign-built craft, which has substantial modifications and additions performed on the hull and superstructure in the United States is sufficiently substantially modified to be considered a United States-built vessel for purposes of the coastwise laws. Sincerely, B. James Fritz Chief Carrier Rulings Branch Enclosure CO:R:P:C:BEWhiting:9/30/88