Dimitri P. Georgantas

January 25, 2019

World Shipping Law Forum

Athens, Greece

• A cabotage law

• Restricts “coastwise transportation” of “merchandise” in U.S. territorial waters to certain vessels

• To qualify, a vessel must be:

1) U.S.-built2) U.S.-flagged3) ≥75% U.S.-owned4) ≥75% U.S.-crewed

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Severe Consequences for Failure to Comply:

1. Seizure/forfeiture of merchandise; or

2. Payment of an amount equal to the value of the merchandise (as

determined by the U.S. government) or the actual cost of the

transportation, whichever is greater.

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• Almost anything…

• Statutory definition: “goods, wares, and chattels of every

description”

• Exceptions

• Vessel equipment

• Baggage and personal effects of crew

• Sea stores

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Coastwise transportation takes place when merchandise

loaded at a U.S. point subject to U.S. coastwise laws is

offloaded at another U.S. coastwise point, regardless of

the origin or ultimate destination of the merchandise.

U.S. coastwise points encompass the territorial waters of

the United States and most of its island territories and

possessions (e.g., Puerto Rico), but not American

Samoa, the Northern Mariana Islands, and the U.S.

Virgin Islands.

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New and Different Product

◦ Merchandise manufactured or processed into a “new and different product” at an intermediate location not subject to the coastwise laws (e.g., processing fuel oil into gasoline at a foreign facility)

Prematurely Landed Merchandise

◦ Very narrow exception:

For inward foreign cargo “prematurely landed and left behind” by importing vessel “through error or emergency”.

Such cargo may be reladen on the next available vessel owned/chartered by the owner of the importing vessel for transportation to the originally intended destination, provided that the importing vessel “actually entered” the port of destination of the prematurely landed cargo.

Importantly, the error or emergency must pertain to the cargo itself, rather than to the vessel.

Empty Cargo Containers, Stevedoring Equipment, etc.

◦ Foreign-flag nation of vessel must grant reciprocal privileges to U.S. vessels, and the items must be owned or leased by the owner or operator of the transporting vessel and are transported for his use in handling the cargo in foreign trade.

◦ Stevedoring equipment must be owned/leased by the owner or operator of the transporting vessel, or owned/leased by the stevedoring company contracting for the lading or unlading of that vessel, and is transported without charge for use in the handling of cargo in foreign trade.

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Waiver Authority

◦ General standard for granting a waiver is that doing so is “necessary in the interest of national defense”

Two Types of Waivers

1. Waivers requested by the Secretary of Defense

Granted Automatically

2. Waivers granted by the Secretary of the Department of Homeland Security

Discretionary

Past Waivers

◦ 2017 (Hurricanes Irma, Harvey & Maria); 2012 (Hurricane Sandy); 2011 (Libya conflict); 2005 (Hurricanes Katrina and Rita); 1989 (Exxon Valdez cleanup)

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1. Applicant submits waiver request to U.S. Customs and Border Protection (CBP)

2. CBP forwards the request to the following: Department of Transportation, Maritime Administration (MARAD); Department of Homeland Security; Department of Defense (to establish the national security standard); and Department of Energy (if the request is energy related)

3. MARAD (on its own and through consultations with the U.S. domestic maritime industry and Department of Homeland Security) evaluates whether there are U.S.-flag vessels available to satisfy the requested transportation. MARAD must find there are no available U.S.-flag vessels.

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Getting a Waiver Is DIFFICULT – A major natural disaster or national crisis event is typically necessary. But workarounds can be available:

Scenario #1: Bulk carrier overloaded and aground at the dock. Cargo must be offloaded to refloat vessel, but terminal lacks operational capability to accept return of cargo from vessel.

Solution: Cargo offloaded onto U.S.-flag barges brought alongside vessel.

Scenario #2: Tanker takes liquid cargo in Houston. Cargo found to be off-spec shortly after vessel sails. Vessel needs to offload cargo.

Solution: Vessel returns to original site of loading (same terminal, same berth) and offloads cargo.

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Dimitri P. Georgantas

Royston Rayzor

1600 Smith Street, Suite 5000

Houston, Texas 77002

Telephone: 713.224.8380

Email: dimitri.georgantas@roystonlaw.com

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