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HQ 109764


November 18, 1988

VES 12-02 CO:R:P:C DHR

CATEGORY: CARRIER

TARIFF NO.: General Headnote 5 (g), Tariff Schedules of the United States
Item 8901.10.00 Harmonized System
Tariff Schedules

Mr. Dale G. Vander Yacht
Border Brokerage Company
Post Office Box B
Blaine, Washington 98230

RE: Tariff classification of a two-person submarine and the applicability of the coastwise laws to its use in the United States.

Dear Mr. Yacht:

Your inquiry of May 25,1988, addressed to our New York office concerning the tariff classification of two-man submarines and the application of the coastwise laws to their operation has been referred to the Carrier Rulings Branch for a direct reply to you.

FACTS:

It is proposed to import Canadian-built two-man submarines. The craft is self-propelled by a battery-driven electric motor and is referred to by the manufacturer, Adventure Vehicle Dynamics, Inc., of British Columbia, as a "Sport Sub".

The advertising literature for the submarine makes reference to a Sport Sub pilot requiring training in its operation plus having to have scuba certification. The literature also refers to the revenue which can be generated by the Sport Sub's making 6 to 8 excursion dives per day. The letter of inquiry represents that the craft would generally be used for hire, whereby an operator would take a person for a ride and return to the point of departure.

ISSUES:

1. Whether the Sport Sub is subject to duty.

2. Whether the operation of the Sport Sub, as described in the letter of inquiry, would be in violation of the coastwise laws.

3. Could the craft engage in coastwise trade if the hull were manufactured in the United States.

LAW AND ANALYSIS:

Section 401, Tariff Act of 1930, as amended (19 U.S.C. 1401), defines the term "vessel" as "every description of water craft or other contrivance used, or capable of being used, as a means of transportation in water." The Sport Subs are deemed to be "vessels" as that term is used in the statutes.

General Headnote 5 (g), Tariff Schedules of the United States (TSUS) provides that vessels which are not yachts or pleasure vessels within the purview of the Schedules are not articles subject to the provisions of the Schedules.

Item 8901.10.00, Harmonized System Tariff Schedules of the United States (effective January 1, 1989 ) provides that vessels such as the craft under consideration used for the transportation of persons are free of duty.

The Customs Service has ruled that vessels which carry passengers solely within United States territorial waters are engaged in coastwise trade, even where the passengers disembark from the vessel at the United State point of embarkation. It follows that vessels which traverse waters outside the United States during the course of a round trip from a United States point are not engaged in coastwise trade. Pursuant to the provisions of section 12102, title 46, United States Code, only a vessel which is built in the United States can be documented to engage in the coastwise trade. The United States Coast Guard is the agency responsible for the documentation of vessels.

HOLDING:

1. The Sub Sport two-man submarines, if brought in for use as described in your letter, would not be subject to the assessment of duty. If, however, it should later be determined that the crafts are suitable for use and are being used by either the owner or operator for pleasure purposes, the Customs Service would be constrained to review the issue of whether they are subject to the payment of duty under either the TSUS or the Harmonized System.

2. The dutiable status of the Sport Sub would not affect the applicability of the coastwise laws to its proposed operation.

3. Whether the Sport Sub would be considered U.S.-built if the hull were manufactured in the United States and thus be entitled to engage in the coastwise trade would be a matter for determination by the United States Coast Guard.

Sincerely,

B. James Fritz
Chief,

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