Passenger for Hire or charter boat: What’s the difference?

Q: I am one of a group of volunteer boat operators who donate time to a nonprofit organization that owns several boats. The mission of the organization is to take at-risk kids out on whale watching trips and other excursions, teach them basic seamanship skills and introduce them to our local marine environment. Our boats were donated to the organization and none of the boat operators are licensed captains, because we do not view this as a commercial passenger service. We were recently advised that our interpretation of these excursions may not be correct, and in fact we may need to hire licensed captains to run the boats. Can you shed some light on how the law works in this area?

A: This is a timely question. In recent years the Coast Guard has increased its scrutiny of “illegal” charter operations, and they are very “by the book” in their enforcement of the relevant regulations.

Generally speaking a licensed master is required for any boat that is carrying any passengers or cargo for hire. When considering the licensed operation of a yacht we must therefore look for the definition of a “passenger for hire.”

Federal law (Title 46 U.S. Code, sec. 2101) defines a passenger for hire as “a passenger for whom consideration is contributed as a condition of carriage on the vessel, whether directly or indirectly flowing to the owner, charterer, operator, agent, or any other person having an interest in the vessel.” A “passenger” is basically anyone aboard who does not have any crew responsibilities or any responsibilities relating to the operation of the boat. The statute further defines “consideration” as “an economic benefit, inducement, right, or profit including pecuniary payment accruing to an individual, person, or entity, but not including a voluntary sharing of the actual expenses of the voyage, by monetary contribution or donation of fuel, food, beverage, or other supplies.”

The definition is fairly straightforward, until we get to the last half-sentence. The sharing of the boat’s operating expenses. I have discussed this issue with many nonprofit organizations over the past few years, and the problem centers on the word “voluntary.” A “voluntary” sharing of expenses would be something along the lines of a passenger telling the owner “here – let me help,” and handing him or her twenty dollars. The payment is not a condition for allowing him or her aboard for the voyage.

A passenger for hire is therefore someone who cannot participate in the voyage without paying or contributing something. This includes the sharing of expenses. If a passenger is required to share expenses, it is not “voluntary,” and that person becomes a passenger for hire.

The stakes in this discussion can be high. An excursion that does not carry any passengers for hire is simply a recreational boat out for a day-sail. It is not subject to the operator licensing requirements, construction guidelines, passenger limits or equipment requirements that regulate the charter industry.

Most vessels that carry passengers for hire in the U.S. must comply with a strict set of Coast Guard regulations, they must pass a rigorous Coast Guard inspection (this is not the courtesy inspection conducted by the Coast Guard Auxiliary), and the boat must be issued a Certificate of Inspection from the Coast Guard. If it is not issued a Certificate of Inspection, it will be limited to six or fewer passengers for hire (often referred to as a “six-pack” charter). But even a six-pack charter must be operated by a licensed captain, and the boat must be built in the United States. A foreign built vessel may not legally carry passengers for hire in this country unless the owner obtains a waiver of the restriction through to the Small Vessel Waiver Program administered by the United States Maritime Administration (“MARAD”).

This analysis seems unnecessary for a nonprofit organization working with donated boats and volunteer operators. But the regulations do not distinguish between different types of organizations, and a nonprofit with an admirable purpose will be evaluated under the same lens as a for-profit commercial operation.

It all comes down to one simple question: Are the passengers allowed aboard the boat even if nobody pays their way or contributes to the operating expenses? If the answer is “no – they are not allowed aboard,” we are looking at a charter boat.

David Weil is licensed to practice law in the state of California and as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.

 David Weil is the managing attorney at Weil & Associates (weilmaritime.com) in Long Beach. He is an adjunct professor of Admiralty Law at Loyola University Law School, a member of the Maritime Law Association of the United States and is former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-438-8149 or at dweil@weilmaritime.com.

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