Coastwise Trade; Passenger; Documentation;

HQ 110407 February 6, 1991 VES 3-05-CO:I:T:C 111407 RAH CATEGORY: CARRIERS Gene Y. Matsuo, Esquire MARKS MURASE & WHITE 400 Park Avenue New York, New York 10022 RE: Coastwise Trade; Passenger; Documentation; Dear Mr. Matsuo: This is in response to your letter of November 19, 1990, requesting a ruling regarding a recreational endorsement for the ownership and operation of four vessels in and around the Hawaiian Islands. In your letter you state that Saiga Corporation, a Japanese corporation, through Saiga Hawaii Corporation, a wholly-owned Hawaiian subsidiary would like to create a membership corporation, Big Island Marine Club, that would be a recreational membership club. Big Island would purchase four vessels, for use limited strictly to the Club's members and their personal guests. The vessels include a fifty-nine foot yacht (net tons 15.2), a small sport fishing boat (net tons-22.4), a pleasure cruiser (net tons--443.98), and a smaller cruiser (net tons-64). The club will be a membership/owner corporation. Privileges to use the club facilities will be limited to individual members (including spouses), and corporate members consisting of only four individuals from the member corporation. The club will be governed by a Board of Governors and Officers elected from the membership and Saiga Hawaii will manage the day-to-day operation of Big Island Marine Club. The four vessels in question will not be available for public use. Each member will have equal access to the vessels and will be allowed to bring guests aboard. Members will sign for all uses and their guests will not be charged any fees for usage of the vessel nor will they be allowed to contribute in any manner to a voyage. You specifically request our advise on the following issues: (1) Recognizing that all the vessels are more than 5 net tons, what documentation is required to build and - 2 - own such vessels? (2) How is the necessary documentation acquired? (3) Is there a requirement that the vessels be built in the United States? (4) Is there a requirement that the crew be of American citizenship? (5) If documentation is required, since the vessels will be used for pleasure purposes only, is it possible to obtain a recreational endorsement? Please be aware that although we will provide you with general information regarding the coastwise laws, the United States Coast Guard is the agency responsible for vessel documentation. You may contact them by writing to: Thomas L. Willis Chief Vessel Documentation Branch U.S.C.G. (G-MVI-6/13) 2100 Second Street, SW., Room 1312 Washington, D.C. 20593-0001 Generally, the coastwise laws (e.g. 46 U.S.C. App. 289, 883 12106 and 12110) 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 and documented under the laws of the United States and owned by persons who are 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. 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. 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. 883, the coastwise merchandise law, the Customs Service has consistently ruled that the prohibition in 46 - 3 - U.S.C. 289 applies to all non-coastwise-qualified vessels. Non- coastwise-qualified vessels include any vessel other than a vessel built in, properly 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)). For purposes of the coastwise laws, "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(a)). The genesis of section 4.50(b) was General Letter 117 (5-20- 16), of the Bureau of Navigation in the Department of Commerce, the predecessor of the Customs Service in interpreting and enforcing the coastwise laws. This General Letter contains the definition of "passenger" set forth in section 4.50(b). The General Letter also holds that wives and children of the officers of a vessel and of a company owning a vessel are not passengers. It holds that if the company owning a vessel is a corporation, members of the board of directors or their families are not passengers but stockholders and members of their families are passengers. Furthermore, Customs Letter 103196 (1-5-78), involved a vessel owned by a yacht club, in which yacht club members were carried on board and used the vessel while in the United States. That vessel was operated from club dues with food and drink purchased by members ashore. In that case, we held that despite the argument that yacht club members could be owners of the vessel by virtue of their membership in the club, they were nevertheless passengers. Accordingly, based on the information provided, the club members of Big Island Marine Club constitute passengers under 19 CFR 4.50(a), and their transportation upon a non-coastwise- qualified vessel is prohibited by 46 U.S.C. App. 289. Officers and members of the board of directors are not passengers and their transportation upon a non-coastwise-qualified vessel would not be prohibited. We hope this information has been informative. Should you have any further questions regarding this matter, please do not hesitate to contact our office. In the interim, we have forwarded a copy of your letter to Mr. Willis, at the United States Coast Guard, concerning your vessel documentation questions. - 4 - This letter addresses only those federal requirements that are administered by the U.S. Customs service. While we are unaware of any other federal or state agency requirements that might pertain to the undertaking you describe, it is possible that such requirements exist. Sincerely, B. James Fritz Chief Carrier Rulings Branch