HQ 111259
September 7, 1990
VES-3-02-CO:R:P:C 111259 GEV
CATEGORY: Carriers
Gerald O. Rennerts
President
American Hydrolines, Inc.
7308 - 187th Street
Flushing, New York 11366
RE: Coastwise Trade; Passengers; 46 U.S.C. App. 289, 883;
Dutiability
Dear Mr. Rennerts:
Thank you for your letter of August 8, 1990, regarding your
proposed use of a hydrofoil in the coastwise trade. Our ruling
on this matter is set forth below.
FACTS:
In the process of developing new, high speed ship
configurations in the United States, Hydro-Lance Engineering,
Inc. of Canoga Park, California, has recently tested a prototype
consisting of two long, narrow, cylindrical floating structures
(hydrofoils) with a cargo or passenger deck suspended approx-
imately 30 ft. above on a separate structure. Consequently, the
vessel will be inherently stable in rough seas and waves will
break below the main deck.
In an effort to develop the above prototype, American
Hydrolines, Inc. proposes to use the hull of the Russian-built
hydrofoil KOMETA. This hull (essentially the passenger section
of the vessel) would be stripped of its hydrofoils and engines,
and appended to the much larger Hydro-Lance structures described
above.
ISSUES:
1. Whether the use in the coastwise trade of a hydrofoil
consisting of a Russian-built hull is prohibited by 46 U.S.C.
App. 289 and 883.
2. Whether the hull of a Russian-built hydrofoil is subject
to duty upon importation into the United States pursuant to the
Harmonized Tariff Schedule of the United States Annotated.
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LAW AND ANALYSIS:
Title 46, United States Code Appendix, section 883 (46
U.S.C. App. 883, the coastwise merchandise statute 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 of 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).
Title 46, United States Code Appendix, section 289 (46
U.S.C. App. 289, the passenger coastwise statute), prohibits the
transportation of passengers between points embraced within the
coastwise laws of the United States, either directly or by way of
a foreign port, in a non-coastwise-qualified vessel. Pursuant to
section 4.50(b), Customs Regulations (19 CFR 4.50(b)) a
"passenger" for purposes of section 289 is defined as "any person
carried on a vessel who is not connected with the operation of
such vessel, her navigation, ownership or business."
Points embraced within the coastwise laws include all points
within the territorial waters of the United States, including
points within a harbor. The territorial waters of the United
States consist of the territorial sea, defined as the belt, 3
nautical miles wide, adjacent to the coast of the United States
and seaward of the territorial sea baseline.
In regard to the first issue under consideration, whether
the incorporation of a Russian-built hull in the subject
hydrofoil would render it non-coastwise-qualified is a
determination of the U.S. Coast Guard (USCG). This
determination, made by the USCG for vessels 5 net tons or
greater, is dependent upon whether that agency considers the
vessel to be "built in the United States" as that term is defined
in section 67.09-3, Coast Guard Regulations (46 CFR 67.09-3). We
suggest you contact the USCG regarding this matter.
As to the question of dutiability contained in the second
issue under consideration, subheading 8901.10.00, Harmonized
Tariff Schedule of the United States Annotated (HTSUSA), provides
for "...Cruise ships, excursion boats and similar vessels
principally designed for the transport of persons; ferry boats of
all kinds..." This subheading designates a free rate of duty.
It is our position that the hull stripped of its hydrofoils
and engines will be classified under this provision. General
Rule of Interpretation (GRI) 2.(a) of the HTSUSA provides that
any reference in a heading to an article shall be taken to
include a reference to that article incomplete or unfinished,
provided that as entered, the incomplete or unfinished article
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has the essential character of the complete or finished article.
In this case the hull without the hydrofoils and engines has the
essential character of the vessels described in subheading
8901.10.00, HTSUSA.
HOLDINGS:
1. Whether the use in the coastwise trade of a hydrofoil
consisting of a Russian-built hull is prohibited by 46 U.S.C.
App. 289 and 883 is determined by whether the U.S. Coast Guard
considers the vessel to be "built in the United States" as that
term is defined in section 67.09-3, Coast Guard Regulations (46
CFR 67.09-3).
2. The hull of a Russian-built hydrofoil is considered a
vessel upon importation into the United States subject to duty-
free treatment pursuant to Subheading 8901.10.00, HTSUSA.
Sincerely,
Stuart P. Seidel
Director, Regulatory Procedures
and Penalties Division