The Jones Act, 46 U.S.C § 55102, provides that the transportation of merchandise between United States points is reserved for U.S.- built, owned, and documented vessels.
The Passenger Vessel Services Act, (PVSA), 46 U.S.C. § 55103 (b), places the same restrictions on the coastwise movement of people. It is this act that prohibits vessels that do not have a Coastwise Endorsement from allowing passengers to board at one U.S. port and debark at another U.S. port. The applicable to the U.S. Customs and Border Protection (CBP) regulation regarding penalties for violating the PVSA is found in 19 C.F. R. Section 4.80, which provides that “[t]he penalty imposed for the unlawful transportation of passengers between coastwise points is $300.00 for each passenger landed on or before November 2, 2015 and $778.00 for each passenger so transported and landed after November 2, 2015 (46 U.S.C. 55103, as adjusted by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015).
Restrictions are placed on a Certificate of Documentation when the Documented vessel is foreign-built. According to federal law, commercial endorsements such as Coastwise (charter and passenger vessels) can only be granted to vessels built entirely within the United States, unless a Maritime Administration (MARAD) waiver is granted. For US flag yachts that are owned by a US Citizen but were not built in the US, the MARAD Waiver offers the yacht owner an opportunity to apply for and obtain a waiver to the Jones Act restrictions placed on any commercial use of foreign built yachts in US waters.
To be eligible for a Small Vessel Waiver, the vessel must:
- be owned by a U.S. citizen or organization,
- be at least three years old,
- intend to carry passengers only,
- carry no more than 12 passengers at a time when in service, and
- satisfy a series of separate U.S. Coast Guard requirements.
The application fee is $500.
A MARAD Waiver is only required, however, if your foreign-built vessel engages in coastwise transportation. In order for an activity to constitute coastwise trade or transportation, there must be a transportation between “coastwise points.” In other words, coastwide trade or transportation has not occurred if the vessel and its passengers leave and return to the same port. This is known as a “cruise to nowhere”.
A “cruise to nowhere” is the transportation of passengers from a U.S. point to the high seas or foreign waters and back to the same point from which the passengers embarked, assuming the passengers do not go ashore, even temporarily, at another U.S. point. See 29 O.A.G. 318 (1912). A “cruise to nowhere” is not considered coastwise transportation.
The CBP takes the position that any vessel that leaves from a United States port and returns to the same port without calling on a foreign port or place, has not departed the United States. Thus, a foreign-built vessel which carries paying passengers out for fishing, sightseeing, or whale-watching trip, and returns to the same port, without going ashore anywhere else, does not need a MARAD waiver for its charter operations.
Mike Wales is a California-licensed attorney and co-owner of AGL Yacht Sales, Inc., along with his wife Leilani Wales, CYPB, a licensed, bonded, and certified professional Yacht Broker. You may contact Mike at mwales@waleslaw.com or at 619.493.1700.