46 USC 55102: Coastwise Vessel Rules, Penalties, and Waivers

46 USC 55102 is the federal statute that reserves domestic waterborne cargo movement to American vessels. It bars any vessel from carrying merchandise between two points in the United States, directly or by way of a foreign port, unless the vessel is wholly owned by U.S. citizens and holds a coastwise endorsement on its certificate of documentation. Violators face forfeiture of the cargo or a monetary penalty equal to the cargo’s value or the actual transportation cost, whichever is greater.¹

What the Statute Requires

Two conditions have to be met before a vessel can lawfully carry cargo between U.S. coastwise points. It must be wholly owned by U.S. citizens for coastwise-trade purposes, and it must hold a certificate of documentation with a coastwise endorsement (or be exempt from documentation while still qualifying for one).¹

“Merchandise” is defined broadly. It reaches goods owned by the federal government, state governments, and their subdivisions, and it even reaches valueless material. Customs and Border Protection reads the term to cover commercial cargo, supplies, and equipment used in offshore operations.¹

Where the Rule Reaches

The coastwise laws apply throughout U.S. navigable waters, including the territorial sea out to 12 nautical miles under Presidential Proclamation 5928.² Shipments between the mainland and non-contiguous places like Hawaii, Puerto Rico, and Guam are covered. So are inland routes on the Great Lakes and the Mississippi.

The Outer Continental Shelf Lands Act extends coastwise jurisdiction to artificial islands and structures tied to resource extraction on the continental shelf.³ Sending equipment from shore to an offshore drilling platform is treated the same as moving cargo between two seaports.

What Makes a Vessel Coastwise-Qualified

Three overlapping requirements sit behind a coastwise endorsement: where the vessel was built, who owns it, and how it is documented.

Built in the United States

The vessel generally must have been built in the United States. Coast Guard regulations recognize a narrow set of alternatives: certain forfeited or captured vessels, wrecked vessels, and vessels purchased from the Secretary of Transportation by U.S. citizens.⁴ Anything else foreign-built needs a specific legislative fix.

Owned by U.S. Citizens

“Wholly owned” is the statutory standard. Partnerships and associations that are exempt from documentation must show at least 75% U.S.-citizen ownership.⁵ Corporate applicants have to disclose their state of incorporation, the citizenship of the CEO and board chair, the number of alien directors relative to a quorum, and ownership percentages on Coast Guard Form CG-1258. LLCs list their members, partnerships list their general partners, and trusts have to show that every trustee is a U.S. citizen.⁶

Documented With a Coastwise Endorsement

Documentation runs through the Coast Guard’s National Vessel Documentation Center. The coastwise endorsement authorizes unrestricted coastwise trade, dredging, towing, and other domestic employment.⁴

Foreign Repairs Can Cost a Vessel Its Status

A U.S.-built vessel can permanently lose coastwise eligibility if it undergoes major work in a foreign shipyard. For steel vessels, the National Vessel Documentation Center applies a two-part test to decide whether foreign work counts as a “rebuild.”

The major component test looks at separately built units added to the vessel; any unit weighing more than 1.5% of the vessel’s steelweight can trigger a rebuild finding. The considerable part test presumes a rebuild when work on the hull or superstructure exceeds 7.5% of steelweight. Since 2017, the NVDC applies these thresholds cumulatively across the vessel’s lifetime, so past foreign repairs eat into the allowance available for future work abroad.

A repair that looks small on its own can push a vessel past the cumulative threshold when earlier foreign work is added in. A lost coastwise endorsement is essentially unrecoverable; no amount of later domestic work restores it.

Routing Through a Foreign Port Doesn’t Fix It

The statute reaches any movement of merchandise between two U.S. coastwise points by water, even when the voyage stops at a foreign port. CBP’s consistent position is that a foreign detour does not launder a domestic-to-domestic shipment out of the statute.¹

One real exception exists. If the goods are manufactured or processed into a genuinely new and different product at the non-coastwise point, the onward shipment of that new product to a U.S. port is not coastwise transportation.⁷ Repackaging or minor handling doesn’t clear that bar. The cargo has to actually become something else.

CBP has also concluded that a point outside U.S. territorial waters is not a “coastwise point,” so moving an object from international waters to a U.S. port doesn’t trigger the statute. That reading came up when the agency considered whether recovering rocket boosters from the ocean required a coastwise-qualified vessel and decided it did not, because the recovery site sat beyond the territorial sea.⁸

Penalties

Merchandise moved in violation of 55102 is subject to seizure and forfeiture to the federal government. As an alternative, CBP can assess a monetary penalty equal to the value of the merchandise or the actual cost of the transportation, whichever is greater.¹ On a high-value shipment, the fine can far exceed any savings from using a non-qualified vessel.

A separate penalty covers vessels that should be documented but aren’t. Operating an undocumented vessel that should carry a coastwise endorsement draws a civil penalty of $1,659 for each port entered without documentation. If that vessel is carrying foreign merchandise or untaxed domestic alcohol, both the vessel and the cargo are subject to seizure.⁵

False statements in vessel documentation or during enforcement can add civil exposure under the False Claims Act, which allows penalties plus three times the government’s damages. The FCA does not require proof of intent to defraud, but knowing misrepresentations are enough.⁹

Waivers and Exemptions

Several routes around the standard rule exist, each narrow.

Emergency Waivers Under 46 USC 501

Under 46 USC 501, the Secretary of Defense can request a waiver of the coastwise laws when needed for national defense, and the Department of Homeland Security acts on the request.¹⁰ These waivers are temporary and vessel-specific. During Hurricanes Harvey and Irma in 2017, DHS issued waivers allowing foreign-flagged vessels to move petroleum products to affected areas for a seven-day period.¹¹

Small Vessel Waiver Program

The Maritime Administration’s Small Vessel Waiver Program lets foreign-built vessels carry passengers in coastwise trade. It sits under 46 USC 55103, the passenger vessel services statute, not the merchandise rule in 55102, so it does not authorize any cargo movement. To qualify, the vessel must be owned by a U.S. citizen, at least three years old, limited to 12 passengers at a time, and compliant with Coast Guard requirements. The waiver reaches only the U.S.-build requirement; every other coastwise qualification still applies.¹²

Other Exemptions

Government-operated vessels in disaster relief may get temporary authorization when no qualified U.S. vessels are available. Fishing vessels operate under a separate fishery endorsement with its own regulatory framework. Offshore supply vessels supporting military operations or energy production may qualify for exemptions tied to national security provisions, evaluated case by case.

How Enforcement Works

CBP leads enforcement, working with the Coast Guard and the Department of Transportation. Compliance work includes cargo inspections, document audits, electronic vessel tracking, and tips.

When CBP suspects a violation, it issues a Notice of Penalty describing the alleged infraction and the proposed fine. The recipient can respond and file a petition for mitigation, arguing for a reduced penalty based on the circumstances. If the violation is confirmed, CBP can impose the monetary penalty, seize the cargo, or push for revocation of the vessel’s coastwise endorsement. A final CBP determination can be challenged in the U.S. Court of International Trade, which has jurisdiction over customs and trade enforcement.

Repeated or intentional violations rarely draw mitigation. Voyages structured to skirt the statute, whether by routing through a foreign port without a real commercial reason or by misrepresenting cargo origins, tend to draw the full penalty, and the combination of forfeiture, a monetary penalty that can exceed the cargo’s value, and potential FCA exposure makes noncompliance expensive.

1
Office of the Law Revision Counsel. 46 USC 55102 – Transportation of Merchandise
2
Ronald Reagan Presidential Library. Proclamation 5928 – Territorial Sea of the United States
3
Federal Energy Regulatory Commission. Outer Continental Shelf Lands Act
4
eCFR. 46 CFR 67.19 – Coastwise Endorsement
5
eCFR. 19 CFR 4.80 – Vessels Entitled to Engage in Coastwise Trade
6
U.S. Coast Guard. Application for Initial, Exchange, or Replacement of Certificate of Documentation (Form CG-1258)
7
eCFR. 19 CFR 4.80b – Coastwise Transportation of Merchandise
8
U.S. Customs and Border Protection. HQ H332920 – Coastwise Transportation; 46 USC 55102
9
U.S. Department of Justice. The False Claims Act
10
Office of the Law Revision Counsel. 46 USC 501 – Waiver of Navigation and Vessel-Inspection Laws
11
Department of Homeland Security. Waiver of Compliance with Navigation Laws
12
Maritime Administration. Small Vessel Waiver Program