H331733

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H331733 January 22, 2024 VES-3-02-OT:RR:BSTC:CCR H331733 DMK CATEGORY: Carriers Mr. Gianfranco Di Costanzo NauticALL Yacht Management 1535 SE 17th Street Fort Lauderdale, FL 33316 RE: Coastwise Trade; Passengers; Bareboat Charter Agreement; 46 U.S.C. §§ 55102 & 55103. Dear Mr. Di Costanzo: This letter is in response to your April 5, 2023, ruling request seeking approval of a bareboat charter agreement. Our decision follows. FACTS The following facts are from your April 5, 2023, ruling request and supporting information. The subject vessel, the M/Y CETACEA (the “Vessel”), is a Dutch-built and Marshall Islands-registered yacht owned by CETACEA ASSET MANAGEMENT LLC, a Marshall Islands corporation. The owner of the Vessel seeks to make the vessel available for recreational bareboat charters in United States waters. It is anticipated that the Vessel will be involved in travel between U.S. ports. You have provided a proposed bareboat charter agreement, charterer’s certification, and captain’s guidelines, required to be followed as part of the bareboat charter agreement. Consequently, you seek our determination regarding the operation of the Vessel pursuant to the provided charterparty agreement. More particularly, you seek a determination as to whether the operation of the Vessel pursuant to the attached charterparty agreement would violate the coastwise laws. It must be noted that the scope of our ruling is limited to this particular vessel and the proposed use pursuant to the provided draft charter agreement. ISSUE Whether the charterparty agreement submitted for our review is a valid bareboat charter agreement for purposes of the Jones Act, 46 U.S.C. § 55102, and the Passenger Vessel Services Act, 46 U.S.C. § 55103. LAW AND ANALYSIS Generally, the coastwise laws prohibit the transportation of passengers or merchandise 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. Such a vessel, after it has obtained a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise qualified.” The coastwise laws generally apply to points in the territorial sea, which is 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.0F The coastwise law applicable to the carriage of passengers is found at 46 U.S.C. § 55103, which provides: (a) In General. Except as otherwise provided in this chapter or chapter 121 of this title, a vessel may not transport passengers between ports or places in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel- (1) is wholly owned by citizens of the United States for purposes of engaging in coastwise trade; and (2) has been issued a certificate of documentation with a coastwise endorsement under chapter 121 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement. Section 4.50(b) of the Customs and Border Protection (“CBP”) Regulations provide: A passenger within the meaning of this part is any person carried on a vessel who is not connected with the operation of the vessel, her navigation, ownership, or business. In its administration of 46 U.S.C. § 55103, CBP 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 the coastwise laws. However, the transportation of passengers to the high seas (i.e., beyond the three-mile territorial waters limit) 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 passenger’s embarkation, is considered coastwise trade. Treasury Decision (T.D.) 55193(2). With respect to chartering, maritime law recognizes three types of charterparties. For example, the United States District Court for the Eastern District of Pennsylvania remarked in Dougherty v. Navigazione San Paolo, S.P.A.: Under general maritime principles, there are three types of charter parties: the voyage charter, the time charter, and the demise or bareboat charter. In a voyage charter the ship is engaged to carry a full cargo on a single voyage. The owner retains all control over the vessel. In a time charter the ship's carrying capacity is taken by the charterer for a fixed time for the carriage of goods on as many voyages as can fit into the charter period. Again, the owner retains all control for management and navigation. In a demise or bareboat charter, the charterer takes over full control of the ship and becomes the owner pro hac vice. The charterer thus assumes control of management and navigation.1F The United States Supreme Court described the characteristics of a demise or bareboat charter, saying: To create a demise [or bareboat charter] the owner of the vessel must completely and exclusively relinquish “possession, command, and navigation” thereof to the demisee.... It is therefore tantamount to, though just short of, an outright transfer of ownership. However, anything short of such a transfer is a time or voyage charter party or not a charter party at all. Guzman v. Pichirilo, 369 U.S. 698, 699-670 (1962); see also, Leary v. United States, 81 U.S. 607, 611 (1871); 2B Benedict on Admiralty § 52 (6th Ed. 1990). Accordingly, CBP has consistently held that when a vessel is chartered under a bona fide bareboat charter, the bareboat charterer is treated as the owner pro hac vice 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 prohibited by the coastwise laws from using the vessel during the period of the charter for pleasure purposes only. A non-coastwise-qualified 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 laws. A non-coastwise-qualified 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). Customs Ruling HQ 226808 (June 7, 1996), citing Customs Ruling HQ 106049 (April 26, 1983); see also, HQ H300963 ( November 7, 2018), HQ 116183 (April 5, 2004). In our review of charterparties to determine whether they constitute bona fide bareboat charters for CBP purposes, we have held, in addition to the above-described principles, that: The nature of a particular charter arrangement is a question of fact to be determined from the circumstances of each case. Under a bareboat charter or demise charter the owner relinquishes complete management 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 

of the subject charter agreement leads us to conclude that although some of the covenants contained therein suggest that the owner is directing some actions and not relinquishing total control of the vessel, they do not preclude a determination that the subject charter agreement is a valid bareboat charter agreement. Consequently, we find that the subject charter agreement is a valid bareboat charter agreement for purposes of the coastwise laws administered by CBP. HOLDINGThe charter agreement submitted for our review is a valid bareboat charter agreement for purposes of the coastwise laws. Operation of the Vessel herein pursuant to the subject charter agreement would not be a violation of the coastwise laws.Sincerely,W. Richmond BeeversChief, Cargo Security, Carriers and Restricted Merchandise BranchOffice of Trade; Regulations and RulingsU.S. Customs and Border Protection