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HQ 112787

July 16, 1993

VES-12-02 CO:R:IT:C 112787 JBW

CATEGORY: CARRIER

Mr. James P. Walsh
Davis Wright Tremaine
701 Pennsylvania Avenue, N.W.
Suite 600
Washington, D.C. 20004-2608

RE: Vessel Importation; Pleasure; United States Citizen; Intent; Cruising.

Dear Mr. Walsh:

This letter is in response to your inquiry, dated June 30, 1993, in which you request our ruling on the dutiable status of the yacht CALIXE.

FACTS:

The yacht CALIXE is a vessel owned by Confresi Bay Limited (CBL), a corporation organized under the laws of the Island of Guernsey. The stock of CBL is owned by two other Guernsey corporations, Anka Limited and Topaz Investments Limited. The stock of those two corporations is held in trust for Craig McCaw, a resident of the State of Washington. The vessel is documented under the laws of the Commonwealth of the Bahamas.

The home port of the yacht is Antibes, France. However, the beneficial owner of the yacht intends to bring the yacht to California for approximately one week in July, 1993. The yacht will then sail to Vancouver, British Columbia, for part of July and August and to the State of Washington for part of August. The yacht will then be sailed to Antibes. While in United States waters, the yacht will be used exclusively for the pleasure of the beneficial owner; it will not be used for commercial purposes nor will it engage in trade.

ISSUE:

Whether a vessel owned by a foreign corporation for the benefit of a United States citizen that is brought into the United States for temporary pleasure cruising is an importation, thus requiring the payment of duty.

LAW AND ANALYSIS:

United States law requires that all goods imported into the customs territory of the United States be subject to duty or exempt from duty as provided for in the Harmonized Tariff Schedule of the United States (HTSUS). General Note 1, HTSUS. From this language, an item must be deemed "imported" for tariff purposes before duty liability arises. American Customs Brokerage Co., Inc. A/C Astral Corp v. United States, 72 Cust. Ct. 245, 253, C.D. 4546, 375 F. Supp. 1360, 1365-66 (1974)("The Astral").

The Customs Service has determined that a pleasure vessel owned by a foreign corporation the primary asset of which is the vessel or the primary business of which relates to the use of the vessel is considered owned by a resident of the United States if a substantial portion of the capital stock is owned by one or more residents of the United States. Headquarters Ruling Letter 110970, dated July 17, 1990. In the present case, the yacht is owned by a foreign corporation for a United States resident in whom the stock of the corporation is owned in trust. The Customs Service will therefore impute the ownership of the yacht to the United States resident for purposes of establishing liability for duty.

A yacht purchased abroad and brought into the United States by a United States resident is presumed, in the absence of evidence to the contrary, to be brought into the United States for use here "permanently" so that it would be classifiable as imported merchandise and thus subject to duty. The Astral, 72 Cust. Ct. at 253-54, 375 F. Supp. at 1366; Estate of Lev H. Pritchard v. United States, 43 C.C.P.A. 85, 88 , C.A.D. 612 (1956). This presumption can be overcome by satisfactory evidence establishing that the yacht owner did not intend to bring the yacht into this country permanently. The Astral, 72 Cust. Ct. at 254, 375 F. Supp. at 1366.

The Customs Court in The Astral examined the factors under which a vessel, which is brought into the United States by a United States resident, is considered imported. In that case, a United States resident had brought into United States waters a foreign- built and documented pleasure yacht for warranty repairs and an extended shakedown cruise. Although the vessel was kept in the United States principally to ascertain whether the repairs were properly performed, the court noted that the vessel was used by the owner for pleasure purposes. Nevertheless, the court concluded that the vessel was not imported for tariff purposes.

The court in The Astral noted the difficulty of divining the intent of an owner bringing a yacht into the United States:

Intent is a state of mind which is difficult of precise proof and can only be inferred from acts and circumstances. A person's intent is usually evidenced by his conduct or statements. Expressions of intent, however, may be used for self-serving purposes. Hence, the court must scrutinize them carefully, together with the conduct of the person making them, and the external circumstances which might tend to confirm or refute them.

The Astral, 72 Cust. Ct. at 254, 375 F. Supp. at 1366-67 (citations omitted). In determining that the owner did not intend to bring his yacht permanently into the United States, the court stated that the owner brought the vessel into the United States for repairs in the only qualified repair yard available, that design features demonstrated that the vessel would cruise in the Mediterranean, that the owner intended to change his residence to Europe, and that the voyage of the vessel finally terminated in the Mediterranean. 72 Cust. Ct. at 256, 375 F. Supp. at 1368. The court stated that pleasure use by the owner did not change the essential nature of the shakedown cruise following the repairs. Id. While determining that such use did not constitute an intent to permanently bring the vessel into the United States, the issue of pleasure cruising by a United States resident that is unrelated to repairs was not before the court.

For duty liability to arise, we must find that the owner intended to bring the yacht permanently into the United States. The term permanent is defined to mean "continuing or enduring in the same state, status, place, or the like, without fundamental or marked change...not temporary or transient." Websters New International Dictionary 1824 (2d ed. 1953). The term temporary is defined to mean "lasting for a time only; existing for a limited time...." Id. at 2598. From these definitions, the time that a vessel is kept in the United States is a significant factor in evaluating the owner's intent to permanently bring the vessel into the United States. Other factors that may be relevant are: (1) the regularity that the vessel is used in the United States, (2) the frequency that the vessel calls at particular ports in the United States, and (3) the registry and regular berth of the vessel.

The proposed use of the CALIXE leads us to conclude that the present intention of the owner is not to bring the vessel permanently into the United States. The yacht will remain in the United States for two to three weeks. The registry is Bahamian, and the regular berth of the vessel is France. There is no indication that the owner will use the yacht in the United States for any purpose other than a temporary cruise. Consequently, the yacht would not be considered imported for tariff purposes at this time.

As to the contemplated immediate arrival, we note that this ruling is based on representations as to the use of the vessel. An application for a cruising license requires a statement of the waters in which the yacht will cruise and the length of time that the vessel will remain in the United States. 19 C.F.R. 4.94(c) (1993). Requests not conforming to the guidelines established above will result in the vessel being assessed duty. Sale or chartering of the yacht to United States residents will also result in duty liability.

HOLDING:

The yacht CALIXE, brought into the United States for temporary pleasure cruising by a United States resident, would not be considered imported for tariff purposes.

Sincerely,

Acting Chief
Carrier Rulings Branch

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