U.S. Department of Homeland Security Washington, DC 20229

U.S. Customs and Border Protection

HQ H096537 

July 31, 2019

VES-3-02-OT:RR:BSTC:CCR HQ H297393 SWM

CATEGORY: Carriers

Captain Oriel Blake
Virgin Islands Professional Charter Association, Inc.
6100 Red Hook Quarters, Suite E-21
St. Thomas, Virgin Islands 00802-1344

RE:    Coastwise Transportation of Passengers; 19 U.S.C. § 1434, 1446, 60105; 46 U.S.C. §§ 55101, 55103, 55104, and 60105; 19 C.F.R. §§ 4.3, 4.39, 4.50b, 4.60, 4.80a, 4.84, 101.1; Cruise itineraries; U.S. Virgin Islands; Vessel Entry and Clearance; Sea stores; Ships’ stores; Cruising license; M/Y Altitude Adjustment; M/Y Antillean; M/Y August Maverick; M/Y Cool Breeze; M/Y Deep Blue I; M/Y Dreamsong; M/Y Euphoria; M/Y Feel the Magic; M/Y Firefly; M/Y Floatation Therapy; M/Y Free Ingwe; M/Y Genesis; M/Y Good Vibrations; M/Y Great Adventure; M/Y Hypnautic; M/Y Island Hoppin; M/Y Luar; M/Y My Cherie Amour; M/Y Nana; M/Y Neverland; M/Y Ocean Star; M/Y Oui Cherie; M/Y Paradigm Shift; M/Y Phoenix; M/Y Playtime; M/Y Santa Ana; M/Y Sea Wings II; M/Y Seahome; M/Y Shangri La; M/Y Silver Girl; M/Y Starfish; M/Y Stop Work Order; M/Y Tabula Rosa; M/Y Trinity; M/Y Turquoise Turtle; M/Y Ventana; M/Y Viramar; M/Y White House; and M/Y Yes Dear

Dear Captain Blake:

This letter is in response to your correspondence of April 23, 2018, August 8, 2018, October 31, 2018, and November 29, 2018, on behalf of the Virgin Islands Professional Charter Association, Inc. (“VIPCA”) member vessels identified above, with regard to proposed yacht charter itineraries certain member vessels intend to conduct between the U.S. Virgin Islands and Puerto Rico, as well as related entry and clearance issues and questions regarding cruising licenses and sea stores. Our ruling is set forth below.
FACTS

VIPCA members are charter yacht vessels based in the U.S. Virgin Islands (“USVI”), which are U.S. or foreign-flagged, foreign-built, and uninspected. VIPCA’s members intend to offer new itineraries including port calls in Puerto Rico for the 2019 charter season and beyond. You present the following proposed itineraries for our consideration:

Proposed Itinerary 1: USVI to Puerto Rico

Day 1         Embark Charlotte Amalie, St. Thomas
Day 2         Culebra, Puerto Rico
Day 3        Culebra, Puerto Rico
Days 4-5    Culebrita, Puerto Rico, and Cayo Norte, Puerto Rico
Day 6        Vieques, Puerto Rico
Day 7        Fajardo, Puerto Rico
Day 9        Disembark Fajardo, Puerto Rico

Proposed Itinerary 2: Puerto Rico to Puerto Rico

Day 1         Embark Fajardo, Puerto Rico
Day 2         Culebra, Puerto Rico
Day 3        Culebra, Puerto Rico
Days 4-5    Culebrita, Puerto Rico, and Cayo Norte, Puerto Rico
Day 6        Vieques, Puerto Rico
Day 7        Fajardo, Puerto Rico
Day 9        Disembark Fajardo, Puerto Rico

Proposed Itinerary 3: Puerto Rico to USVI

Day 1         Embark Fajardo, Puerto Rico
Day 2         Vieques, Puerto Rico
Day 3        Vieques, Puerto Rico
Day 4        Culebra, Puerto Rico
Day 5        Culebra, Puerto Rico
Day 6        Culebrita, Puerto Rico, and Cayo Norte, Puerto Rico
Day 7        St. Thomas, USVI
Day 8        Disembark St. Thomas, USVI

Proposed Itinerary 4: USVI to Puerto Rico to USVI

Day 1         Embark Charlotte Amalie, St. Thomas, USVI
Day 2         Culebra, Puerto Rico
Day 3        Culebra, Puerto Rico
Day 4-5    Culebrita, Puerto Rico, and Cayo Norte, Puerto Rico
Day 6        Vieques, Puerto Rico
Day 7        Charlotte Amalie, St. Thomas, USVI
Day 8        Disembark St. Thomas, USVI

ISSUES

Whether the proposed itineraries to transport passengers aboard a non-coastwise-qualified vessel would violate 46 U.S.C. § 55103.

Whether the vessels conducting the voyages as described in the FACTS section must enter and clear when arriving in or departing for the U.S. Virgin Islands from or to Puerto Rico.

Whether ship’s stores retained onboard the non-coastwise-qualified vessels, for consumption onboard during charters, are considered imported merchandise, such that a Customs bond must be posted.

Whether the non-coastwise-qualified passenger vessels as described in the FACTS section should or could obtain cruising licenses to expedite entry and clearance procedures in Puerto Rico and the U.S. Virgin Islands.

LAW AND ANALYSIS

With respect to the itineraries set forth in the FACTS section, you ask whether it will be necessary for the vessels to enter or clear Customs inbound or outbound from the USVI and Puerto Rico, before departing to the next territory. You also inquire whether any bond would be required for ships’ stores and sea stores retained onboard the vessels when they arrive in Puerto Rico. Finally, you ask whether the vessels should seek to obtain cruising licenses to expedite entry and clearance procedures, particularly in Puerto Rico.

ISSUE 1

First, you inquire whether the transportation conducted by VIPCA member vessels pursuant to the itineraries set forth in the FACTS section would violate the coastwise laws, specifically, the Passenger Vessel Services Act (“PVSA”). 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. Pursuant to 46 U.S.C. § 55101(b)(3), the coastwise laws do not apply to the Virgin Islands until the President declares by proclamation that they do. The President has not declared that the coastwise laws shall apply to the Virgin Islands.

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.
(b) Penalty. The penalty for violating subsection (a) is $300 for each passenger transported and landed.

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.

Pursuant to 46 U.S.C. § 55104(b), “[e]xcept as otherwise provided in this section, a vessel not qualified to engage in the coastwise trade may transport passengers between a port in Puerto Rico and another port in the United States.” The regulations promulgated under the authority of § 55104(b) further provide:

An exception to the prohibition in this section is the transportation of passengers between ports in Puerto Rico and other ports in the U.S. on passenger vessels not qualified to engage in the coastwise trade. Such transportation is permitted until there is a finding under 46 U.S.C. 55104 that a qualified U.S.-flag passenger vessel is available for such service.

See also HQ H242538 (Jun. 20, 2013); HQ H186131 (Sept. 28, 2011); HQ H248285 (Dec. 18, 2013). To date, no qualified U.S.-flag passenger vessel service between ports in Puerto Rico and other ports in the U.S. exists. Accordingly, non-coastwise qualified vessels may transport passengers between Puerto Rico and other ports in the U.S.

However, while the exception set forth in section 55104(b) applies to the transportation of passengers between a point in Puerto Rico and a point on the U.S. mainland, it does not apply to the transportation of passengers from one point in Puerto Rico to a second point in Puerto Rico. HQ 113096 (Dec. 16, 1994); HQ 113255 (Oct. 25, 1994). Thus, the transportation of passengers between points in Puerto Rico is prohibited.

Proposed Itinerary 1 provides that passengers will embark in St. Thomas and disembark in Fajardo, Puerto Rico. Transportation of passengers pursuant to this itinerary by the member vessels does not violate the coastwise laws because passengers will not be transported between two coastwise points. Similarly, there is no violation of the coastwise laws implicated by Itinerary 3, in which passengers will embark in Puerto Rico and disembark in St. Thomas. Further, there is no violation of the coastwise laws involved in Itinerary 4, in which passengers will embark and disembark in the USVI, where the coastwise laws do not apply.

However, Proposed Itinerary 2 provides for the transportation of passengers solely between points in Puerto Rico. Even though the point of embarkation and disembarkation is the same point in Puerto Rico, the exception set forth in section 55104 only applies to the transportation of passengers between points in Puerto Rico and other points in the U.S. Therefore, if a non-coastwise-qualified vessel transported passengers pursuant to Proposed Itinerary 4, it would violate 46 U.S.C. § 55103 and 19 C.F.R. § 4.80.

ISSUE 2

Next, you inquire whether the member vessels conducting transportation pursuant to the above-referenced itineraries will be required to make entry or obtain clearance when traveling between Puerto Rico and the USVI. The Master of any vessel, either U.S. or foreign, arriving from a foreign port or any foreign vessel arriving from a domestic port must make formal entry pursuant 19 U.S.C. § 1434(a) and 19 C.F.R. § 4.3(a). With respect to clearance, foreign vessels are required to clear when bound for a foreign port or for another port or place in the United States. 46 U.S.C. § 60105(b) and 19 C.F.R. § 4.60(a). U.S.-flagged vessels must obtain clearance before proceeding from a port or place in the United States to a foreign port or place. 46 U.S.C. § 60105(a) and 19 C.F.R. § 4.60(a)(1). The phrase “foreign port or place” is not defined in the Customs or navigation laws. However, it has been Customs position, based on judicial interpretation, that the term “foreign port or place” means “a port or place exclusively within the sovereignty of a foreign nation.” See HQ 115321 (Apr. 16, 2001) (quoting The Winnie, 65 F.2d 706, 707 (3rd Cir. 1933)).

The CBP Regulations on trade with a noncontiguous territory, set forth at 19 C.F.R. § 4.84(b), provide that:

The master of every foreign vessel arriving at a port in any State or the District of Columbia or in noncontiguous territory of the United States from a port in noncontiguous territory to which the coastwise laws do not apply (e.g., Virgin Islands and American Samoa), or arriving at any port in noncontiguous territory to which the coastwise laws do not apply from any place embraced within the coastwise laws, shall immediately report its arrival and make entry for the vessel within 48 hours after its arrival.

The regulations regarding clearance of foreign-flagged vessels set forth in 19 C.F.R. § 4.84(a) provide:

No foreign vessel will depart from a port in noncontiguous territory of the United States for any other port in noncontiguous territory or for any port in any State or the District of Columbia, nor from any port in any State or the District of Columbia for any port in noncontiguous territory, until a clearance for the vessel has been granted.

With respect to the U.S.-flagged vessels bound by this ruling, 19 C.F.R. § 4.84(d) provides that:

Upon arrival of a vessel of the United States at a port in any State, the District of Columbia, or Puerto Rico from a port in noncontiguous territory other than Puerto Rico, the master must immediately report its arrival and must prepare, produce, and file a Cargo Declaration in the form and manner and at the times specified in §§ 4.7 and 4.9 but will not be required to make entry. If the vessel proceeds directly to another port in any State, the District of Columbia, or Puerto Rico, the master must prepare, produce, and file a Cargo Declaration in the form and manner and at the times specified in § 4.85 but no permit to proceed on the Vessel Entrance or Clearance Statement, CBP Form 1300, will be required for the purposes of this paragraph. No cargo shall be unladen from any such vessel until Cargo Declarations have been filed and a permit to unlade has been issued in accordance with the procedure specified in § 4.30.

First, we note that the USVI is not a “foreign port or place,” as it is a United States insular possession and not exclusively within the sovereignty of a foreign nation. Accordingly, all U.S.-flagged vessels bound by this ruling departing from the USVI must report their arrival in Puerto Rico, but will not be required to make entry and will not be required to obtain a permit to proceed to other ports in Puerto Rico. The U.S.-flagged vessels will not have to clear when leaving Puerto Rico for the USVI.

Further, all foreign-flagged vessels bound by this ruling must formally enter upon their first arrival in Puerto Rico from the USVI. The foreign-flagged vessels will also have to obtain clearance when departing Puerto Rico for the USVI. Additionally, the foreign-flagged vessels will need to clear each port in Puerto Rico when bound for another port in Puerto Rico, pursuant to 19 C.F.R. § 4.84(a).

Finally, we note that the USVI has its own Customs laws. See 19 C.F.R. § 101.1. You may wish to check with the appropriate authorities in the USVI for any questions pertaining to entry and clearance requirements for foreign or U.S.-flagged vessels arriving in or departing from the USVI.

ISSUE 3

You inquire whether sea stores and ships’ stores retained onboard the subject vessels are imported merchandise and therefore, require Customs bonds. Pursuant to 19 U.S.C. § 1446, in pertinent part:

Vessels arriving in the United States from foreign ports may retain on board, without the payment of duty, all coal and other fuel supplies, ships’ stores, sea stores, and the legitimate equipment of such vessels. Any such supplies, ships’ stores, sea stores, or equipment landed and delivered from such vessel shall be considered and treated as imported merchandise.

Pursuant to 19 C.F.R. § 101.1, “In the case of merchandise imported by vessel, ‘date of importation’ means the date on which the vessel arrives within the limits of a port in the United States with intent then and there to unlade such merchandise.”

“Generally, the articles which may be retained on board a vessel free of duty under 19 U.S.C. § 1446, are ‘consumable supplies’ including ‘sea stores,’ and articles consumed in their use, unless purchased for repair purposes.” HQ 112378 (Nov. 30, 1992) (citing T.D. 39340, as modified by T.D. 39507). To conclude whether the articles you submit are “sea stores” and therefore should be able to be retained on board free of duty and without the necessity of posting a bond, we must determine whether the articles fall within the definition of “sea stores” or “ships’ stores” or whether they are instead considered “equipment” that would be subject to duty.

In C.S.D. 80-184 (Jan. 10, 1980), we noted that:

“The term ‘equipments’ relates to more than ‘such articles as are designed for use and used in connection with the ‘navigation, propulsion, operation, or safety of a vessel.’” … “Outfit and equipment …include[s] portable articles necessary or appropriate for the navigation, operation, or maintenance of a vessel, but not permanently incorporated in or permanently attached to its hull or propelling machinery, and not constituting consumable supplies.” …

“Sea stores” are generally defined as “supplies for the consumption, sustenance, and medical needs of the crew and passengers during the voyage.” (28 CCPA 143, at 150, quoting from Southwestern Shipbuilding Co. v. United States, 13 Ct. Cust. App. 74, T.D. 40934 (1925). See also, T.D. 22433 and T.D. 49814(4)). “Ships’ stores” are defined “to embrace those articles which form part of the body, tackle, apparel, or function of a ship,” being necessary for the ship itself,’ as opposed to ‘sea stores’ which are intended for the health and sustenance of the crew or passengers.’ (T.D. 22433, quoting from United States v. Twenty-four Coils of Cordage, 28 Fed. Cases 276 (1832)).”

The subject vessels list the following articles you purport to be “sea stores” or “ships’ stores” that will be retained on board and for consumption aboard the vessel during charters:

Food and beverage
Tools

Dive gear
Scuba tanks

Water toys (kayaks, paddleboard)
Medical/first aid supplies

Cleaning and safety supplies
Spare parts (pumps, belts, filters)

Fuel
Engine oil

Lines and dishes
Toiletries


In C.S.D. 80-184 (Jan. 10, 1980), the Customs Service listed items previously determined to be “equipment” and therefore dutiable as follows: Plates, cups, blankets for passengers and crew, bolts, nuts, packing supplies, towels for glasses, wire steel brooms for cleaning machinery, pot scrubs, envelopes, ink bottles, pillow slips, tablecloths, resin, paint, varnish, light bulbs and fixtures. Previously determined to be “sea stores” and therefore not dutiable, included: Washing soda, kerosene, Freon gas for a refrigerator, food, medicine, cleaning materials, oil, rags, glue, and soap.

Accordingly, to the extent the following items are purchased abroad for consumption by or the medical needs of the crew or passengers onboard the vessel, we conclude that they are “sea stores,” which are non-dutiable so long as they are retained onboard the vessel:

Food and beverage
Medical/first aid supplies

Cleaning and safety supplies
Fuel

Engine oil
Toiletries


Pursuant to C.S.D. 80-184, we find the following articles to be dutiable “equipment” of the vessel:

Tools
Water toys

Dive gear
Scuba tanks

Spare parts
Linens and dishes


Therefore, to the extent that items qualifying as sea stores remain onboard the vessels and are not unladen in Puerto Rico, they are not considered imported merchandise. If, however, the sea stores are unladen, then they should be treated as imported merchandise and must be entered.

Finally, as discussed in the previous section, the USVI has its own Customs laws. See 19 C.F.R. § 101.1. You may wish to check with the appropriate authorities in the USVI for any questions pertaining to importation requirements related to unladen sea stores aboard vessels arriving in the USVI.

ISSUE 4

Finally, you ask whether the member vessels could obtain cruising licenses to expedite entry and clearance required in Puerto Rico or the USVI. Cruising licenses facilitate the movement of qualified foreign yachts in U.S. waters by allowing them to move between U.S. points without making entry, obtaining clearance, or permits to proceed, and without paying various fees at every stop. However, cruising licenses are only available to pleasure vessels that are not engaging in trade. See 19 C.F.R. § 4.94. Because the subject vessels will be engaging in coastwise trade by transporting passengers between U.S. points, the subject vessels would not qualify for cruising licenses.

HOLDING:

Proposed itineraries 1, 3, and 4, as described in the FACTS section, do not violate 46 U.S.C. § 55103 and 19 C.F.R. § 4.80. Proposed itinerary 2, which would transport passengers solely between ports in Puerto Rico, would violate 46 U.S.C. § 55103 and 19 C.F.R. § 4.80.

Foreign-flagged vessels must formally enter upon their first arrival in Puerto Rico from the USVI. Foreign-flagged vessels will also have to obtain clearance when departing Puerto Rico for the USVI. Foreign-flagged vessels will have to clear each port in Puerto Rico when bound for another port in Puerto Rico.

U.S.-flagged vessels departing the USVI must report their arrival in Puerto Rico, but will not be required to make entry or obtain a permit to proceed to another port in Puerto Rico. U.S.-flagged vessels will not have to clear when leaving Puerto Rico for the USVI.

Articles purchased abroad and qualifying as “sea stores” include food and beverage, medical/first aid supplies, cleaning and safety supplies, fuel, engine oil, and toiletries. So long as these articles are retained onboard and the amount or quantity of each is within the reasonable requirements of the vessel, they are non-dutiable and not considered “imported merchandise” for purposes of Customs bond requirements.

Articles qualifying as “equipment” of the vessel include tools, water toys, dive gear, scuba tanks, spare parts, linens, and dishes. These articles, if purchased abroad, are dutiable.

Cruising licenses are not available to the subject vessels as they conduct trade by transporting passengers and are not strictly pleasure vessels.

Sincerely,

Lisa L. Burley
Chief/Supervisory Attorney-Advisor
Cargo Security, Carriers and Restricted Merchandise Branch
Office of Trade, Regulations and Rulings

August 21st, 2019.

 

Dear Captain Blake,

 

CBP regulations provide that ruling letters may be relied on to the extent that the facts and circumstances set forth in the ruling are exactly the same.  Specifically, 19 C.F.R. § 177.9(a) and (b)(4) provide:

 

(a)   A ruling letter issued by the Customs Service under the provisions of this part represents the official position of the Customs Service with respect to the particular transaction or issue described therein and is binding on all Customs Service personnel in accordance with the provisions of this section until modified or revoked.

 

(b)   4.  Carrier rulings. Each ruling letter setting forth the applicability of the navigation laws to a vessel will be applied only with respect to transactions involving operations identical to those set forth in the ruling letter. Each ruling letter setting forth a determination as to whether or not the primary object of a contemplated voyage is coastwise transportation in violation of [46 U.S.C. 55102] will be binding on the United States Customs Service with respect to any transaction identical to the facts and circumstances described in the ruling request and undertaken in reliance on the ruling letter.

 

Thus, member vessels not specifically included in the final ruling may rely on the ruling to the extent they embark on the same itineraries, have the same items as sea stores or equipment, etc.  If a member vessel has different circumstances, it should not rely on the ruling.

 

Best regards,

Sasha

 

Sasha W. McNickle

Attorney-Advisor

U.S. Customs and Border Protection

Office of Trade, Regulations and Rulings, Cargo Security, Carriers and Restricted Merchandise Branch

90 K St., NE, 10th Floor

Washington, D.C. 20229