HQ 0224434 - Internal Advice request concerning same condition drawback on imported vessel; 19 U.S.C. 1313(j)(1); Customs ruling HQ 222262 (April 5, 1990). - United States International Trade Commision Rulings

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HQ 224434

June 3, 1993

DRA-4 CO:R:C:E 224434 TLS

CATEGORY: ENTRY

Chief, Drawback Branch
U.S. Customs Service
New York Region
6 World Trade Center
New York, New York 10048-0945

RE: Internal Advice request concerning same condition drawback on imported vessel; 19 U.S.C. 1313(j)(1); Customs ruling HQ 222262 (April 5, 1990).

Dear Madam:

This office has received the above-referenced request for internal advice as provided for under Customs regulations. We have considered the request and made the following decision.

FACTS:

A yacht was imported and then transported to the importer's premises via truck and trailer hitch. Once there, additional equipment was installed on the boat, which includes the mast, rigging, sails, safety equipment, and spare parts for all systems. The additional equipment was not imported with the yacht.

After the installations, the boat was then tested and put through sea trials. It was subsequently sold pursuant to a contract and exported to the purchaser after being examined by a Customs official. The yacht was exported over sea using its own power.

ISSUE:

Whether the yacht qualifies for same condition drawback when additional equipment was installed after importation.

LAW AND ANALYSIS:

The relevant law in this case, 19 U.S.C. 1313(j)(1) and (4), provides for the following:

(1) If imported merchandise, on which was paid any duty, tax, or fee imposed under Federal law because of its importation--
(A) is, before the close of the three-year period beginning on the date of importation- (i) exported in the same condition as when imported,... and
(B) is not used within the United States before such exportation or destruction; then upon such exportation or destruction 99 per centum of the amount of each such duty, tax, and fee so paid shall be refunded as drawback....

(4) The performing of incidental operations (including, but not limited to, testing, cleaning, repacking, and inspecting) on--
(A) the imported merchandise itself in cases to which paragraph (1) applies,... that does not amount to manufacture or production for drawback purposes under the preceding provisions of this section shall not be treated as a use of that merchandise for purposes of applying paragraph (1)(B) or (2)(C). (Emphasis added.)

We have determined in previous cases what constitutes a manufacture or production that would preclude drawback. In one case, drawback was denied because a vehicle was fitted with equipment after importation to prepare it for a particular market. HQ 222262 (April 5, 1990). It was ruled that the equipment installation constituted a change of condition. Customs rulings HQ 222470 (August 20, 1990) and HQ 221415 (February 23, 1990) also found a change of condition under similar circumstances.

In the present case, there is no doubt equipment is being installed after importation. In fact, the equipment that is added on is more essential to the operation of the subject vessel than was the equipment for the vehicle in HQ 222262. This goes beyond incidental operations as allowed under statute. While the imported product might not be identifiable as anything but a yacht, the installation of parts to make it seaworthy violates the same condition requirement. Thus, the assembly alone changes the yacht's condition to the extent that the subject transaction is ineligible for drawback.

For the importer's future information, this type of transaction is well suited for a temporary importation bond (TIB). TIBs are posted in situations like the present where the imported will certainly be exported after alterations have been made. We have enclosed various pamphlets to be passed along to the importer for its future benefit, which explain the TIB process and other procedures in more detail.

HOLDING:

The installation of equipment on the vessel after importation changes its condition, rendering ineligible for drawback under 19 U.S.C. 1313(j)(1).

Sincerely,

John Durant, Director

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